Registration of Securities Issued in a Business-Combination Transaction — Form S-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-4 Registration Statement 175 859K
2: EX-5.1 Opinion of Swidler Berlin Shereff Friedman, LLP 2 14K
3: EX-10.24 Credit Facilities 3 16K
4: EX-10.28 Consulting Agreement 4 20K
5: EX-10.29 Termination of Option 1 9K
6: EX-10.30 Employment Agreement Between Steven Bogen and the 14 60K
Fresh Juice Company, Inc.
7: EX-10.31 Employment Agreement Between Steven M. Bogen and 14 61K
the Fresh Juice Company, Inc.
8: EX-10.32 Agreement Between Natural Juice Company and Fresh 8 23K
Juice, Inc.
9: EX-10.33 Agreement of Lease 38 133K
10: EX-10.34 Article One Basic Terms 38 131K
11: EX-23.2 Consent of Pricewaterhousecoopers LLP 1 7K
12: EX-23.3 Consent of Kpmg Peat Marwick LLP 1 8K
13: EX-23.4 Consent of Steven Bogen 1 7K
14: EX-23.5 Consent of Ladenburg Thalmann & Co. Inc. 1 8K
As filed with the Securities and Exchange Commission on December 24, 1998
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SARATOGA BEVERAGE GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
5149
(Primary Standard Industrial Classification Code Number)
14-1749554
(I.R.S. Employer Identification No.)
11 GEYSER ROAD
SARATOGA SPRINGS, NEW YORK 12866
(518) 584-6363
(Address, including ZIP code, and telephone number,
including area code, of registrant's principal executive offices)
----------
ROBIN PREVER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
11 GEYSER ROAD
SARATOGA SPRINGS, NEW YORK 12866
(518) 584-6363
(Name, address, including ZIP code, and telephone
number, including area code, of agent for service)
----------
Copies to:
CHARLES I. WEISSMAN, ESQ. JOHN F. KUNTZ, ESQ.
SWIDLER BERLIN SHEREFF FRIEDMAN, LLP BOURNE, NOLL & KENYON
919 THIRD AVENUE 382 SPRINGFIELD AVENUE
NEW YORK, NEW YORK 10022 SUMMIT, NEW JERSEY 07902
(212) 758-9500 (908) 277-2200
----------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective and
the satisfaction or waiver of all other conditions to the merger described in
the Restated Agreement and Plan of Merger dated as of October 13, 1998, by and
among Saratoga Beverage Group, Inc., Rowale Corp. and The Fresh Juice Company,
Inc.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________
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CALCULATION OF REGISTRATION FEE
=========================================================================================================================
PROPOSED
TITLE OF EACH PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
=========================================================================================================================
Class A Common Stock, par
value $0.01 per share............... 2,133,553 (2) $5,400,556.03(3) $1,501.35
-------------------------------------------------------------------------------------------------------------------------
Less: amounts previously paid
under Schedule 14A.................. $(3,292.94)
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Amount payable with this filing..... None
=========================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee.
(2) Not applicable.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) under the Securities Act of 1933, as amended,
based on the average of the bid and asked prices, as of December 21, 1998,
of the common stock of The Fresh Juice Company, Inc. to be received by the
Registrant in exchange for the securities registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
----------
SARATOGA BEVERAGE GROUP, INC.
11 GEYSER ROAD
SARATOGA SPRINGS, NEW YORK 12866
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 27, 1999
To all stockholders of Saratoga Beverage Group, Inc.:
A special meeting of stockholders of Saratoga Beverage Group, Inc.
will be held at Saratoga's principal executive offices, 11 Geyser Road,
Saratoga Springs, New York on January 27, 1999 at 10:00 a.m., local time, for
the following purposes:
To consider and vote upon a proposal to approve the restated agreement
and plan of merger, dated as of October 13, 1998, by and among Saratoga, Rowale
Corp., a wholly owned subsidiary of Saratoga and The Fresh Juice Company, Inc.
and related transactions, including the issuance of up to 2,133,553 shares of
Saratoga's Class A common stock in the merger. The agreement provides for the
merger of Rowale with and into Fresh Juice with Fresh Juice being the surviving
corporation. In the merger, Fresh Juice stockholders will receive for each
share of Fresh Juice common stock, $2.244 in cash and 0.33 shares of Saratoga's
Class A common stock. The merger and related transactions are more completely
described in the accompanying joint proxy statement and prospectus and in the
restated agreement and plan of merger attached as Appendix A to the
accompanying joint proxy statement and prospectus.
No other business may properly come before the special meeting, or any
adjournment(s) or postponement(s) thereof.
All stockholders who own shares of Saratoga's Class A common stock on
December 16, 1998 may vote at the special meeting, or any adjournment(s) or
postponement(s) thereof.
By order of the board of directors,
Gayle J. Henderson
Secretary
December 28, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE SARATOGA SPECIAL MEETING, YOU
SHOULD COMPLETE, SIGN AND DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE
BOARD OF DIRECTORS OF SARATOGA, AND RETURN IT TO SARATOGA IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE THE
SARATOGA SPECIAL MEETING BY:
O WRITING TO THE SECRETARY OF SARATOGA;
O SIGNING AND MAILING A LATER DATED PROXY; OR
O ATTENDING THE SARATOGA SPECIAL MEETING AND VOTING IN PERSON.
YOU CANNOT REVOKE A PROXY BY ATTENDING THE SARATOGA SPECIAL MEETING WITHOUT
DOING ONE OF THE THREE THINGS ABOVE.
THE FRESH JUICE COMPANY, INC.
280 WILSON AVENUE
NEWARK, NEW JERSEY 07105
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 27, 1999
To all stockholders of The Fresh Juice Company, Inc.:
A special meeting of stockholders of The Fresh Juice Company, Inc.
will be held at Fresh Juice's offices at 280 Wilson Avenue, Newark, New Jersey,
on January 27, 1999 at 10:00 a.m., local time, for the following purposes:
To consider and vote upon a proposal to approve the restated agreement
and plan of merger, dated as of October 13, 1998, by and among Fresh Juice,
Saratoga Beverage Group, Inc., and Rowale Corp., a wholly owned subsidiary of
Saratoga and related transactions. The agreement provides for the merger of
Rowale with and into Fresh Juice with Fresh Juice being the surviving
corporation. In the merger, Fresh Juice stockholders will receive for each
share of Fresh Juice common stock, $2.244 in cash and 0.33 shares of Saratoga's
Class A common stock. The merger and related transactions are more completely
described in the accompanying joint proxy statement and prospectus and in the
restated agreement and plan of merger attached as Appendix A to the
accompanying joint proxy statement and prospectus.
No other business may properly come before the special meeting, or any
adjournment(s) or postponement(s) thereof.
All stockholders who own shares of Fresh Juice common stock on
December 18, 1998 may vote at the special meeting, or any adjournment(s) or
postponement(s) thereof.
By order of the board of directors,
Steven M. Bogen
Co-Chairman of the Board of Directors
Chief Executive Officer and Secretary
December 28, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE FRESH JUICE SPECIAL MEETING, YOU
SHOULD COMPLETE, SIGN AND DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE
BOARD OF DIRECTORS OF FRESH JUICE, AND RETURN IT TO FRESH JUICE IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE THE
FRESH JUICE SPECIAL MEETING BY:
O WRITING TO THE SECRETARY OF FRESH JUICE;
O SIGNING AND MAILING A LATER DATED PROXY; OR
O ATTENDING THE FRESH JUICE SPECIAL MEETING AND VOTING IN PERSON.
YOU CANNOT REVOKE A PROXY BY ATTENDING THE FRESH JUICE SPECIAL MEETING WITHOUT
DOING ONE OF THE THREE THINGS ABOVE.
JOINT PROXY STATEMENT/PROSPECTUS
SARATOGA BEVERAGE GROUP, INC. THE FRESH JUICE COMPANY, INC.
We are furnishing this document to you in connection with the merger
of The Fresh Juice Company, Inc. and a wholly owned subsidiary of Saratoga
Beverage Group, Inc. After the merger, Fresh Juice will be a wholly owned
subsidiary of Saratoga. In the merger, each share of Fresh Juice common stock
will receive
o $2.244 in cash and
o 0.33 shares of Saratoga Class A common stock
Fresh Juice stockholders will receive a total of approximately $14.3 million in
cash and 2,133,553 shares of Saratoga Class A common stock, representing
approximately 40.2% of the total economic interest of Saratoga and
approximately 28.9% of the total voting power of Saratoga immediately after the
merger. On December 21, 1998, the closing sales price of the Saratoga Class A
common stock, which has a trading symbol of TOGA, as reported by the Nasdaq
SmallCap Market, was $2.0625 per share.
Special meetings of stockholders of Saratoga and Fresh Juice will be
held on January 27, 1999. At the special meetings, stockholders will be asked
to approve the merger and related transactions. The boards of directors of
Saratoga and Fresh Juice have approved the merger and related transactions and
recommend that you vote for the merger and related transactions.
We anticipate that Saratoga and Fresh Juice will mail this document
and the accompanying proxy card and other materials to you on or about December
28, 1998. This document also serves as a prospectus of Saratoga under the
Securities Act of 1933 for the issuance of up to 2,133,553 shares of Saratoga
Class A common stock.
WE URGE YOU TO READ CAREFULLY THE "RISK FACTORS" SECTION BEGINNING ON
PAGE 23 WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH THESE SECURITIES AND
THE MERGER, TOGETHER WITH THIS DOCUMENT, BEFORE YOU MAKE YOUR INVESTMENT
DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this document is December 24, 1998.
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TABLE OF CONTENTS
PAGE
SUMMARY .........................................................................................................5
Parties to the merger....................................................................................5
The Saratoga meeting.....................................................................................6
The Fresh Juice meeting..................................................................................6
The merger...............................................................................................7
Certain other terms of the merger agreement.............................................................10
Saratoga summary historical financial data..............................................................12
Fresh Juice summary historical consolidated financial data..............................................15
Summary unaudited pro forma consolidated financial data.................................................17
Comparative per share data..............................................................................22
RISK FACTORS.....................................................................................................23
Risk factors relating to the merger.....................................................................23
Fixed conversion ratio does not reflect changes in stock prices before the closing.............23
Net operating loss carryforwards of the combined company may be severely limited...............23
Risk factors related to Saratoga........................................................................24
Risk of problems with Saratoga's natural springs outside of Saratoga's control.................24
Noncompliance with government regulation could restrict sales of Saratoga's products...........24
The holders of Class B common stock will have substantial voting power after the
merger................................................................................25
Saratoga relies on a limited number of distributors...........................................25
Risk factors related to Fresh Juice.....................................................................25
Effect on Fresh Juice of lack of availability of raw materials.................................25
Risks associated with perishable products......................................................26
Noncompliance with government regulation could restrict sales of Fresh Juice's products........26
Effect of unenforceability of patents and proprietary protection...............................26
IMPORTANT INFORMATION............................................................................................27
THE SARATOGA SPECIAL MEETING.....................................................................................28
Time, place and date....................................................................................28
Purpose of the Saratoga meeting.........................................................................28
Record date; voting rights; proxies.....................................................................28
Solicitation of proxies.................................................................................29
Quorum ...............................................................................................29
Approval assured; required vote.........................................................................29
THE FRESH JUICE SPECIAL MEETING..................................................................................30
Time, place and date....................................................................................30
Purpose of the Fresh Juice meeting......................................................................30
Record date; voting rights; proxies.....................................................................30
Solicitation of proxies.................................................................................30
Quorum ...............................................................................................31
Approval nearly assured; required vote..................................................................31
THE MERGER.......................................................................................................32
Form of the merger......................................................................................32
Merger consideration....................................................................................32
Background of the merger................................................................................33
Recommendation of the Saratoga board of directors and the Fresh Juice board of directors;
reasons for the merger.........................................................................37
Opinion of Fresh Juice financial advisor................................................................41
Interests of certain persons in the merger..............................................................47
Effective time; effect of the merger....................................................................51
Manner and basis of converting Fresh Juice common stock.................................................52
Dissenters' rights of appraisal.........................................................................52
2
TERMS OF THE MERGER AGREEMENT....................................................................................56
Representations and warranties..........................................................................56
Certain covenants.......................................................................................57
Conditions to completion of the merger..................................................................59
Termination of the merger agreement.....................................................................61
Extension and waiver....................................................................................64
Amendment...............................................................................................64
Fees and expenses.......................................................................................64
Resale restrictions.....................................................................................64
Governmental and regulatory approvals...................................................................65
Voting agreement........................................................................................65
Financing...............................................................................................67
Federal income tax consequences.........................................................................68
Accounting treatment....................................................................................69
Saratoga summary historical financial data..............................................................70
Fresh Juice summary historical consolidated financial data..............................................73
Summary unaudited pro forma consolidated financial data.................................................75
Comparative per share data..............................................................................80
MARKET PRICE DATA AND DIVIDEND POLICY............................................................................81
Saratoga ...............................................................................................81
Fresh Juice.............................................................................................82
DESCRIPTION OF SARATOGA CAPITAL STOCK............................................................................83
Saratoga Class A common stock...........................................................................83
Saratoga Class B common stock...........................................................................83
Saratoga preferred stock................................................................................83
Transfer agent and registrar............................................................................84
DESCRIPTION OF FRESH JUICE CAPITAL STOCK.........................................................................84
Fresh Juice common stock................................................................................84
Fresh Juice preferred stock.............................................................................84
COMPARISON OF RIGHTS OF HOLDERS OF
SARATOGA COMMON STOCK AND FRESH JUICE COMMON STOCK......................................................85
Voting Rights...........................................................................................85
Appraisal/dissenters' rights............................................................................85
Amendment of charter....................................................................................86
Power to adopt, amend or repeal by-laws.................................................................86
Special meetings of stockholders........................................................................86
Action by stockholders by written consent in lieu of a meeting..........................................87
Number of directors.....................................................................................87
Removal of directors....................................................................................87
Filling board vacancies.................................................................................88
LEGAL MATTERS....................................................................................................88
EXPERTS ........................................................................................................88
OTHER MATTERS....................................................................................................89
Year 2000 compliance....................................................................................89
Saratoga.......................................................................................89
Fresh Juice....................................................................................90
Other proposals.........................................................................................91
WHERE YOU CAN FIND MORE INFORMATION..............................................................................92
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS................................................................92
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................93
3
APPENDIX A - Restated agreement and plan of merger
APPENDIX B - Opinion of Ladenburg Thalmann & Co. Inc.
APPENDIX C - Jeffrey Heavirland option cancellation letter
APPENDIX D - Section 262 of the Delaware General Corporation Law
4
SUMMARY
We have prepared this summary to assist you in your review of this
document. We have highlighted in this summary information which we believe is
important for your review. However, we have not included all of the information
that may be important to you. You should carefully read this entire document,
including the specific risks described in the "Risk factors" section beginning
on page 23 and the other documents to which we refer. For more information
about the two companies, see "Important information" on page 27 and "Where you
can find more information" on page 92.
PARTIES TO THE MERGER
Saratoga Beverage Group, Inc..... Saratoga bottles, markets and distributes
spring and mineral water products and
packages beverage products for others.
Saratoga's product line currently
includes: sparkling essence-flavored
spring water products, non-carbonated
spring water and non-carbonated spring
water with flavors. All of Saratoga's
products are marketed as premium domestic
bottled water primarily under the
proprietary brand name "Saratoga." The
Saratoga brand name has been in existence
for 125 years.
Saratoga was incorporated in Delaware on
May 5, 1993. The principal executive
offices of Saratoga are located at 11
Geyser Road, Saratoga Springs, New York
12866, and the telephone number is (518)
584-6363.
The Fresh Juice Company, Inc. Fresh Juice produces, markets and sells
fresh squeezed and frozen fresh squeezed
orange juice, grapefruit juice, fresh
fruit smoothies and other noncarbonated
beverages nationally under the brand names
"Just Pik't(R)", "Fresh Pik't(R)",
"Florida Pik't(R)", "Ultimate(R)" and
"Hansen's(R)". The majority of the juice
produced by Fresh Juice is fresh squeezed
orange juice.
Fresh Juice was incorporated in New York
on July 15, 1985 and relocated its state
of incorporation to Delaware in 1986. The
principal executive offices of Fresh Juice
are located at 280 Wilson Avenue, Newark,
New Jersey 07105, and its telephone number
is (973) 465-7100.
5
THE SARATOGA MEETING
Time, place, date and purpose.... We will hold the Saratoga special meeting
at Saratoga's principal executive offices,
11 Geyser Road, Saratoga Springs, New York
on January 27, 1999 at 10:00 a.m., local
time, to approve the merger and related
transactions.
Record date; required vote....... You may vote at the Saratoga special
meeting if you owned shares of Saratoga
common stock as of the close of business
on December 16, 1998, the Saratoga record
date. To approve the merger and related
transactions, a majority of Saratoga's
common stock must vote for the merger and
related transactions. Holders of Class A
common stock of Saratoga are entitled to 1
vote per share owned by them. Holders of
Class B common stock of Saratoga are
entitled to 5 votes per share owned by
them.
The directors and executive officers of
Saratoga can cast approximately 22.1% of
the votes at the Saratoga special meeting.
We expect that they will vote all of their
shares of Saratoga common stock in favor
of the merger and related transactions.
Approval assured................. Saratoga has sufficient votes to assure
the approval of the merger and related
transactions. Holders of 56.8% of the
voting power of the outstanding shares of
Saratoga common stock have agreed to vote
their shares in favor of the merger and
related transactions under the terms of a
voting agreement.
THE FRESH JUICE MEETING
Time, place, date and purpose.... We will hold the Fresh Juice special
meeting at Fresh Juice's offices at 280
Wilson Avenue, Newark, New Jersey, on
January 27, 1999 at 10:00 a.m., local
time, to approve the merger and related
transactions.
Record date; required vote....... You may vote at the Fresh Juice special
meeting if you owned shares of Fresh Juice
as of the close of business on December
18, 1998, the Fresh Juice record date. To
approve the merger and related
transactions, a majority of Fresh Juice's
common stock must vote for the merger and
related transactions. Holders of Fresh
Juice common stock are entitled to 1 vote
per share of Fresh Juice common stock
owned by them.
The directors and executive officers of
Fresh Juice can cast approximately 46.3%
of the votes at the Fresh Juice special
meeting. We expect that the directors and
executive officers of Fresh Juice, except
for one director, will vote all of their
shares in favor of the merger and related
transactions.
Approval nearly assured.......... Holders of 41.6% of the outstanding shares
of Fresh Juice common stock have agreed to
vote their shares in favor of the merger
and related transactions under the terms
of a voting agreement.
6
THE MERGER
Conversion of Fresh Juice
common stock..................... In the merger, each of the outstanding
shares of Fresh Juice common stock not
held by Fresh Juice or Saratoga and with
respect to which dissenters' rights have
not been properly asserted under Delaware
law shall have the right to receive
o $2.244 per share in cash and
o 0.33 shares of Saratoga Class A
common stock
For example, a holder of 1,000 shares of
Fresh Juice common stock will receive
$2,244.00 in cash and 330 shares of
Saratoga Class A common stock.
In the merger, certain options and
warrants to purchase Fresh Juice common
stock will be canceled and exchanged for a
number of shares of Saratoga Class A
common stock equal to:
o 0.33,
o multiplied by the difference between
$3.35 and the exercise price of
such options and warrants,
o divided by $1.106, and
o multiplied by the number of shares of
Fresh Juice common stock subject to
such options and warrants
For example, a holder of options to
purchase 1,000 shares of Fresh Juice
common stock at an exercise price of $3.00
will receive 104 shares of Saratoga Class
A common stock. Certain options held by
Jeffrey Heavirland, a director and
executive officer of Fresh Juice, will be
canceled at the closing of the merger in
exchange for a lump sum payment. With
respect to Mr. Heavirland, see "The
merger--Interests of certain persons in
the merger--Jeffrey Heavirland" on page
49.
The number of shares of Saratoga common stock outstanding on the record dates
for voting and expected to be outstanding after the merger are as follows:
Shares
Record Date Outstanding Record Holders
----------- ----------- --------------
Saratoga December 16, 1998 3,169,094 1,628
Fresh Juice December 18, 1998 6,467,731 1,098
Post-merger 5,491,248
7
Conditions to the merger......... The completion of the merger depends on a
number of conditions being met. These
conditions include:
o the listing of the Saratoga Class A
common stock issuable in the merger on
the Nasdaq SmallCap Market;
o completion of the financing of the
cash consideration as contemplated by
the merger agreement;
o the amendments to employment
agreements entered into among Steven
Bogen, Fresh Juice and Saratoga and
among Steven Smith, Fresh Juice and
Saratoga shall both be in effect; and
o not more than 5% of shares of Fresh
Juice common stock held by Fresh Juice
stockholders have properly exercised
and perfected their rights of
appraisal under Delaware law.
See "Terms of the merger
agreement--Conditions to completion of the
merger" on page 59.
Recommendations of the
Saratoga board and the Fresh
Juice board...................... The Saratoga board of directors and the
Fresh Juice board of directors each
recommends that you vote FOR the merger
and related transactions. See "The
merger--Recommendations of the Saratoga
board of directors and the Fresh Juice
board of directors; reasons for the
merger" on page 37.
Opinion of financial advisors.... Saratoga. Among the other factors
considered in deciding to approve the
merger, the Saratoga board of directors
has received the opinion of its financial
advisor, Schroders & Co., that the
consideration of $3.75 per share,
comprised of $3.1875 in cash and 0.15
shares of Saratoga Class A common stock,
was fair to the Saratoga stockholders from
a financial point of view and subsequent
analyses performed by Schroders. SARATOGA
DID NOT ASK SCHRODERS TO UPDATE ITS
OPINION, DATED JUNE 29, 1998, GIVEN THE
CONSIDERABLE INCREMENTAL COST OF OBTAINING
AN UPDATED OPINION AND SARATOGA'S BELIEF,
BASED IN PART UPON FINANCIAL ANALYSIS
PERFORMED BY SCHRODERS, THAT THE REVISED
TERMS OF THE TRANSACTION WERE MORE
FAVORABLE TO THE SARATOGA STOCKHOLDERS.
Fresh Juice. Among the other factors
considered in deciding to approve the
merger, the Fresh Juice board of directors
has received the opinion of its financial
advisor, Ladenburg Thalmann & Co. Inc.,
that the merger consideration was fair to
the Fresh Juice stockholders from a
financial point of view. We have attached
this opinion to the back of this document
as Appendix B. You should read the opinion
carefully to understand the procedures
followed, assumptions made, matters
considered and limitations on the review
undertaken by Ladenburg in rendering its
opinion. See "The merger--Opinion of Fresh
Juice financial advisor" on page 41.
8
Interests of certain persons in
the merger....................... You should be aware that the following
executive officers and directors of Fresh
Juice will be entitled to certain
severance and termination benefits and
other payments upon consummation of the
merger that are different than your
interest.
o Steven Bogen, Chief Executive Officer
of Fresh Juice and Co-Chairman of the
Fresh Juice board of directors
o Steven Smith, President of Fresh Juice
and Co-Chairman of the Fresh Juice
board of directors
o Jeffrey Heavirland, a director and
executive officer of Fresh Juice
After the merger, Saratoga will reimburse
each present and former officer and
director of Fresh Juice for certain losses
or liabilities arising after or related to
the merger.
In addition, each non-employee member of
the Fresh Juice board of directors will be
paid an annual retainer of $2,625 if the
merger is completed, in lieu of options to
purchase Fresh Juice common stock.
Each of the Fresh Juice board of directors
and the Saratoga board of directors was
aware of these benefits and considered
them, among other things, in making their
respective decisions. See "The
merger--Interests of certain persons in
the merger" on page 47.
9
CERTAIN OTHER TERMS OF THE MERGER AGREEMENT
Dissenters' rights of
appraisal........................ Fresh Juice stockholders are entitled to
have the fair value of their stock
appraised by a court and paid to them in
cash. To do this, the holders of Fresh
Juice common stock must follow these
required procedures:
o You must deliver a written demand for
appraisal to Fresh Juice on or before
the vote is taken at the Fresh Juice
special meeting, which will be held on
January 27, 1998 at 10:00 a.m., local
time.
o You must not vote in favor of or
abstain from voting on the merger.
o You must hold such shares of Fresh
Juice common stock from the date of
the making of the demand through the
closing of the merger.
If you follow the required formalities,
your shares will not be converted into the
right to receive cash and Saratoga Class A
common stock in the merger. Instead, your
only right will be to receive the
appraised value of your shares in cash as
determined by a court.
Saratoga stockholders are not entitled to
appraisal rights in connection with the
merger.
See "The merger--Dissenters' rights of
appraisal" on page 52.
Termination...................... The merger agreement may be terminated at
any time prior to the closing of the
merger for certain reasons, including:
o failure to obtain required approvals;
o failure to obtain the approval of
either the Fresh Juice stockholders or
the Saratoga stockholders;
o a material breach of the merger
agreement by either Saratoga or Fresh
Juice; or
o the merger is not completed on or
before the later of the 30th day after
the mailing of this document to Fresh
Juice stockholders, or if later, five
days after the Fresh Juice special
meeting.
See "Terms of the merger
agreement--Termination of the merger
agreement--Grounds for termination" on
page 61.
10
Termination fees................. If the merger is not completed for the
following reasons, among others:
o the Fresh Juice stockholders failed to
approve the merger and related
transactions; and
o the Bogen agreement and Smith
agreement are not in effect;
then Fresh Juice shall pay Saratoga
$1,500,000.
If the merger is not completed because the
Saratoga stockholders failed to approve
the issuance of shares of the Saratoga
Class A common stock, among other reasons,
then Saratoga shall pay Fresh Juice
$750,000.
See "Terms of the merger
agreement--Termination of the merger
agreement--Termination fees" on page 62.
Federal income tax consequences .. For each holder of Fresh Juice common
stock, the merger will be a taxable
transaction for federal income tax
purposes and probably also will be a
taxable transaction under applicable
state, local and other income tax laws.
Determining the particular tax
consequences of the merger to Fresh Juice
stockholders can be difficult. Fresh Juice
stockholders should consult their own tax
advisor for a full understanding of the
merger's consequences. See "Terms of the
merger--Federal income tax consequences"
on page 68.
Accounting treatment............. We expect that the merger will qualify as
a purchase under generally accepted
accounting principles which means that the
purchase price will be allocated by
Saratoga among the assets and liabilities
of Fresh Juice at their fair market value.
The remaining amount of the purchase price
will be allocated by Saratoga to
intangible assets.
11
SARATOGA SUMMARY HISTORICAL FINANCIAL DATA
We have set forth selected historical financial data for Saratoga
below, for the periods and at the dates indicated. The historical consolidated
financial data for each of the years in the five-year period ended December 31,
1997 is derived from Saratoga's historical consolidated financial statements
that have been audited and reported upon by PricewaterhouseCoopers LLP,
independent public accountants. The historical consolidated financial data for
each of the nine-month periods ended September 30, 1997 and September 30, 1998
have not been audited. Such data reflects all adjustments, consisting solely of
normal recurring adjustments, which are, in the opinion of management,
necessary for a fair presentation of such data for the interim periods to which
they relate. You should be aware that results for interim periods cannot be
used to project the results of any other interim period or for the year as a
whole. You should read the information in the table in conjunction with
Saratoga's historical financial statements and the notes to the financial
statements and other financial information regarding Saratoga provided with
these materials.
SARATOGA SUMMARY HISTORICAL FINANCIAL DATA
[Enlarge/Download Table]
YEAR ENDED
----------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1994 1995 1996 1997
------------ ------------ ------------ ------------ ------------
REVENUE
Total revenue.......... $3,643,742 $6,235,408 $3,265,314 $4,374,825 $6,270,691
Cost of goods sold,
exclusive of depreciation
and amortization and
equipment lease expense 2,659,417 4,633,071 2,395,464 2,749,121 3,762,549
OPERATING EXPENSES:
Marketing and sales.... 1,941,853 1,853,344 601,887 489,701 388,709
General and administrative
expense................ 1,480,052 1,676,937 992,138 906,885 1,044,960
Depreciation, amortization
and equipment lease expense 270,623 319,998 338,714 442,143 393,876
Write-off of Sample
Goodwill............... -- 222,000 -- -- --
------------ ------------ ------------ ------------ ------------
Operating (loss)
income................. (2,708,203) (2,469,852) (1,062,889) (213,025) 680,597
OTHER INCOME (EXPENSE):
Commission income..... -- -- 121,196 75,490 126,735
Interest income........ 50,746 49,586 21,215 4,969 52,259
Interest expense....... (33,090) (31,850) (1,334) (14,893) (47,004)
Net loss on disposal of
equipment.............. (48,500) (70,781) (1,618) -- --
------------ ------------ ------------ ------------ ------------
Loss before minority
interest............... (2,739,047) (2,522,897) (923,430) -- --
Income applicable to
minority interest...... 61,119 53,051 -- -- --
------------ ------------ ------------ ------------ ------------
Provision for income taxes -- -- -- -- 7,959
Net (loss) income...... $(2,677,928) $(2,469,846) $(923,430) $(147,459) $804,628
============ ============ ============ ============ ============
PER SHARE DATA
Net (loss) income per
common share,
Basic............... $(1.39) $(0.94) $(0.35) $(0.06) $0.28
======= ======= ======= ======= =====
Diluted............. $(1.39) $(0.94) $(0.35) $(0.06) $0.25
======= ======= ======= ======= =====
Weighted average number of
common shares outstanding,
Basic............... 1,920,000 2,614,377 2,626,179 2,626,651 2,924,589
========= ========= ========= ========= =========
Diluted............. 1,920,000 2,614,377 2,626,179 2,626,651 3,380,440
========= ========= ========= ========= =========
12
SARATOGA SUMMARY HISTORICAL FINANCIAL DATA (CONTINUED)
NINE MONTHS ENDED (UNAUDITED)
--------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
--------------- ----------------
REVENUE
Total revenue............ $5,057,276 $7,359,818
Cost of goods sold,
exclusive of depreciation
and amortization and
equipment lease expense.. 3,081,563 4,469,732
OPERATING EXPENSES:
Marketing and sales...... 278,881 591,924
General and administrative
expense.................. 772,975 753,530
Depreciation, amortization
and equipment lease
expense.................. 290,042 419,783
-------- ----------
Operating (loss)
income................... 633,815 1,124,849
OTHER INCOME (EXPENSE):
Commission income....... 105,143 89,660
Interest income.......... 30,848 128,332
Interest expense......... (27,274) (59,194)
Provision for income taxes 7,959 17,600
Net (loss) income........ $734,573 $1,266,047
======== ==========
PER SHARE DATA
Net (loss) income per
common share,
Basic................. $0.25 $0.40
===== =====
Diluted............... $0.22 $0.36
===== =====
Weighted average number
of common shares
outstanding,
Basic................. 2,910,519 3,164,515
========= =========
Diluted............... 3,370,686 3,696,156
========= =========
13
[Enlarge/Download Table]
SARATOGA SUMMARY HISTORICAL FINANCIAL DATA (CONTINUED)
-----------------------------------------------------------------------------
AS OF
(UNAUDITED)
-----------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1994 1995 1996 1997
-----------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets............ $6,391,129 $3,915,280 $2,990,376 $2,629,888 $5,704,819
Working capital......... $3,039,336 $1,004,696 $ 255,298 $ 386,670 $2,512,738
Long-term obligations... $ 106,149 $ 0 $ 0 $ 7,455 $1,501,208
Stockholders' equity.... $5,627,301 $3,180,482 $2,176,389 $2,014,471 $2,914,024
FINANCIAL RATIOS AND
OTHER DATA
Current ratio........... 6.03 2.37 1.31 1.64 2.95
(Loss) return on average
assets.................. (.59) (.48) (.27) (.05) .19
(Loss) return on average
stockholders' equity.... (.68) (.56) (.34) (.06) .33
Book value per share at
year end................ $2.07 $1.17 $0.80 $0.74 $0.98
Weighted shares
outstanding,
Basic................ 1,920,000 2,614,377 2,626,179 2,626,651 2,924,589
========= ========= ========= ========= =========
Diluted.............. 1,920,000 2,614,377 2,626,179 2,626,651 3,380,440
========= ========= ========= ========= =========
[Enlarge/Download Table]
AS OF
(UNAUDITED)
--------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
--------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets............. $4,820,460 $7,217,130
Working capital.......... $2,790,943 $3,231,161
Long-term obligations.... $1,502,969 $1,534,423
Stockholders' equity..... $2,837,718 $4,693,071
FINANCIAL RATIOS AND
OTHER DATA
Current ratio............ 6.82 4.26
(Loss) return on average
assets................... .20 .19
(Loss) return on average
stockholders' equity..... .30 .33
Book value per share at
year end................. $0.96 $1.48
Weighted shares
outstanding,
Basic................. 2,910,519 3,164,515
========= =========
Diluted............... 3,370,686 3,696,156
========= =========
14
FRESH JUICE SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
We have set forth selected historical consolidated financial data for
Fresh Juice below. The historical consolidated financial data for each of the
years in the five-year fiscal period ended November 30, 1997, is derived from
Fresh Juice's historical consolidated financial statements which have been
audited and reported upon by KPMG Peat Marwick LLP, independent certified
public accountants. The historical consolidated financial data for each of the
nine-month periods ended August 31, 1997 and August 31, 1998 has not been
audited. Such data reflects all adjustments, consisting solely of normal
recurring adjustments, which are, in the opinion of management, necessary for a
fair presentation of such data for the interim periods to which they relate.
You should be aware that results for interim periods are not necessarily
indicative of results to be expected for any other interim period or for the
year as a whole. You should read the information in the table in conjunction
with Fresh Juice's historical financial statements and the notes to the
financial statements and other financial information provided with these
materials.
[Enlarge/Download Table]
FRESH JUICE SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
YEAR ENDED
------------------------------------------------------------------------------------------------
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1993 1994 1995 1996 1997
------------------------------------------------------------------------------------------------
OPERATING RESULTS
Net sales................... $8,265,588 $8,171,803 $9,219,184 $19,958,022 $41,382,836
Cost of goods sold.......... 4,639,740 5,163,806 6,035,483 15,886,417 30,035,386
Selling, general and administrative
expense..................... 2,367,523 2,451,055 2,820,356 4,984,642 8,801,423
--------- --------- --------- --------- ---------
Operating earnings (loss)... 1,258,325 556,942 363,345 (913,037) 2,546,027
Interest expense............ -- -- (24,355) (139,502) (536,851)
Interest and other income, net 87,360 88,292 104,104 63,496 132,296
------ ------ ------- ------ -------
Earnings (loss) before provision
(benefit for income taxes... 1,345,685 645,234 443,094 (989,043) 2,141,472
Provision (benefit) for income taxes 549,193 256,396 172,051 (60,000) 774,149
------- ------- ------- -------- -------
Net earnings (loss)......... $796,492 $388,838 $271,043 $(929,043) $1,367,323
======== ======== ======== ========== ==========
PER SHARE DATA
Net earnings (loss) per common share,
Basic.................... $0.22 $0.11 $0.08 $(0.20) $0.21
===== ===== ===== ======= =====
Diluted.................. $0.22 $0.11 $0.07 $(0.20) $0.21
===== ===== ===== ======= =====
Weighted average number of
common shares outstanding,
Basic.................... 3,602,356 3,554,862 3,552,462 4,601,349 6,466,731
========= ========= ========= ========= =========
Diluted.................. 3,602,356 3,612,679 3,887,740 4,620,000 6,471,535
========= ========= ========= ========= =========
BALANCE SHEET DATA
Total assets................ $4,773,181 $4,858,799 $6,508,237 $15,281,472 $22,093,344
Working capital............. $3,895,114 $4,112,211 $3,919,590 $624,104 $1,319,323
Long-term debt and obligations $ -- $ -- $1,529,168 $1,524,562 $3,597,151
Stockholders' equity........ $3,990,353 $4,379,191 $4,640,301 $9,921,258 $12,163,257
15
FRESH JUICE SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA (CONTINUED)
[Download Table]
NINE MONTHS ENDED
--------------------------------
AUGUST 31, AUGUST 31,
1997 1998
--------------------------------
OPERATING RESULTS
Net sales............................. $31,491,349 $28,649,567
Cost of goods sold.................... 22,639,803 21,000,420
Selling, general and administrative expense 6,481,003 6,429,154
--------- ---------
Operating earnings (loss)............. 2,370,543 1,219,993
Interest expense...................... (401,345) (367,113)
Interest and other income, net........ 39,878 78,040
------ ------
Earnings (loss) before provision (benefit
for income taxes...................... 2,009,076 930,920
Provision (benefit) for income taxes.. 518,796 414,557
------- -------
Net earnings (loss)................... $1,490,280 $516,363
========== ========
PER SHARE DATA
Net earnings (loss) per common share,
Basic.............................. $0.23 $0.08
===== =====
Diluted............................ $0.23 $0.08
===== =====
Weighted average number of common shares
outstanding,
Basic.............................. 6,466,731 6,466,731
========= =========
Diluted............................ 6,466,731 6,474,818
========= =========
BALANCE SHEET DATA
Total assets.......................... $22,609,273 $22,838,521
Working capital....................... $1,507,594 $1,815,916
Long-term debt and obligations........ $3,750,825 $3,197,095
Stockholders' equity.................. $12,168,183 $12,679,620
16
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The pro forma (unaudited) consolidated balance sheet as of September
30, 1998 set forth below presents the financial position of Saratoga as if the
merger agreement and the related financing had occurred on September 30, 1998.
The pro forma (unaudited) consolidated statements of operations for the nine
months ended September 30, 1998 and the year ended December 31, 1997 set forth
below present the results of operations of Saratoga for such period and such
year as if the consummation of the merger agreement and the related financing
had occurred as of January 1, 1997.
Because Saratoga and Fresh Juice have different fiscal years,
o Saratoga's balance sheet as of September 30, 1998 has been
combined, with appropriate adjustments, with Fresh Juice's
balance sheet as of August 31, 1998.
o Saratoga's results for the nine months ended September 30, 1998
have been combined, with appropriate adjustments, with Fresh
Juice's results for the nine months ended August 31, 1998.
o Saratoga's results for the year ended December 31, 1997 have been
combined, with appropriate adjustments, with Fresh Juice's
results for the fiscal year ended November 30, 1997.
The pro forma financial statements do not indicate the results that
would have been achieved if the consummation of the merger agreement and the
related financing had been effected on the dates indicated. The pro forma
financial statements do not indicate the results which may be achieved in the
future.
The pro forma financial statements should be read in conjunction with
the financial statements of Saratoga and Fresh Juice appearing elsewhere or
incorporated in this document.
17
Preliminary allocations have been made to reflect the estimated asset
values and related tax effects. These amounts as well as the estimated purchase
price will be adjusted as additional analysis is performed and information is
received. The preliminary assumptions and estimates used in the preparation of
the pro forma consolidated financial statements include the following (amounts
in thousands):
o Funds used to acquire Fresh Juice and to pay certain acquisition
and financing related costs have been provided from borrowings
under Saratoga's $22,000 credit facility or have previously been
accrued. Approximately $14,119 has been borrowed at a weighted
average interest rate of approximately 8.4%. Accordingly,
interest expense has been adjusted to reflect the amount that
would have been paid on borrowings, related commitment fees and
the amortization of financing costs.
o The excess purchase price over the fair market value of the
assets or goodwill is being amortized over a 25-year period.
Total amortization of goodwill for the nine months ended
September 30, 1998 and the twelve months ended December 31, 1997
approximate $416 and $555, respectively.
o Property, plant and equipment are carried at Fresh Juice's
recorded cost of which $2,426 was included on the books of Fresh
Juice as of November 30, 1996 based upon an independent
appraisal.
o Trademark, patents and other intangibles are carried at Fresh
Juice's recorded cost, of which $805 was included on the books of
Fresh Juice as of November 30, 1996, based upon an independent
appraisal.
o The provision for income taxes has been adjusted to reflect the
tax effects of pro forma adjustments.
o Income per share has been computed to include the issuance of
2,133,553 shares of Saratoga Class A common stock.
The estimated purchase price in the merger of Fresh Juice of $21,750
is comprised of:
o A payment of $2.24 for each of the 6,347,831
outstanding shares of Fresh Juice common stock............$14,247
o The issuance of 0.33 shares of Saratoga Class A common
stock for each of the 6,347,831 outstanding shares of
Fresh Juice common stock and the issuance of certain
additional shares, all at $2.50 per share...................5,334
o The settlement of Fresh Juice employment agreements,
options and transactions costs..............................2,170
-------
$21,750
=======
18
[Enlarge/Download Table]
PRO FORMA (UNAUDITED) CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS PRO FORMA
SARATOGA FRESH JUICE ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ---------
Cash and cash equivalents................ $ 1,747 $ 83 $ - $ 1,830
Short term investments................... 597 - - 597
Accounts receivable, net................. 1,115 3,470 - 4,585
Inventories.............................. 704 3,455 1,180 5,339
Current portion of note receivable....... 101 - 101
Current deferred income taxes............ 186 (186) -
Prepaid income tax....................... 113 - 113
Prepaid expenses and other current assets 58 412 - 470
------------- -------------- --------------- -------------
Total current assets............ $ 4,221 $ 7,820 $ 994 $ 13,035
Property, plant and equipment, net....... 1,419 6,894 - 8,313
Deferred financing costs, net............ 308 - 465 773
Goodwill................................. - 6,619 7,172 13,791
Note receivable.......................... 400 378 - 778
Deferred acquisition costs............... 498 498 -
Trademarks, patents, and other
intangibles, net ........................ - 1,014 - 1,014
Other assets............................. 371 114 (345) 140
------------- -------------- --------------- -------------
Total assets.................... $ 7,217 $ 22,839 $ 7,788 $ 37,844
============= ============== =============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable............................. $ - $ 1,780 $ - $ 1,780
Current portion of long term debt and
capital leases........................... 11 663 - 674
Accounts payable and accrued liabilities. 979 3,546 1,840 6,365
Accrued income taxes..................... - 15 - 15
------------- -------------- --------------- -------------
Total current liabilities....... 990 6,004 1,840 8,834
Subordinated convertible note............ 1,500 - 1,500
Long term debt and capital leases........ 34 3,197 14,119 17,350
Deferred income taxes.................... - 824 (824) -
Deferred rent............................ - 134 - 134
------------- -------------- --------------- -------------
Total liabilities............... $ 2,524 $ 10,159 $ 15,135 $ 27,818
============= ============== =============== =============
Common stock............................. 32 67 (46) 53
Paid in capital.......................... 9,858 9,454 (4,141) 15,171
Treasury stock, at cost.................. - (285) 285 -
(Accumulated deficit)/Retained earnings
(5,197) 3,444 (3,444) (5,197)
------------- -------------- --------------- -------------
Total stockholders' equity............... 4,693 12,680 (7,346) 10,027
------------- -------------- --------------- -------------
Total liabilities and stockholders'
equity................................... $ 7,217 $ 22,839 $ 7,788 $ 37,844
============= ============== =============== =============
19
PRO FORMA (UNAUDITED) CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
PRO FORMA
SARATOGA FRESH JUICE ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ---------
Net sales................................ $ 7,360 $ 28,649 $ - $ 36,009
Cost of goods sold....................... 4,470 20,227 - 24,697
---------------- --------------- ------------ --------------
Gross profit.................... 2,890 8,422 - 11,312
Selling general and administrative
expense ................................. 1,345 6,008 - 7,353
Depreciation, amortization and equipment
lease expense............................ 420 1,194 139 1,753
---------------- --------------- ------------ --------------
Operating income................ 1,125 1,220 (139) 2,206
Other income (expense):
Other.................................... 90 38 - 128
Interest income.......................... 128 40 - 168
Interest expense......................... (59) (367) (1,206) (1,632)
---------------- --------------- ------------ --------------
Other income (expense), net..... 159 (289) (1,206) (1,336)
Income before income taxes............... 1,284 931 (1,345) 870
Provision for income taxes............... 18 415 (433) -
---------------- --------------- ------------ --------------
Net income............................... $ 1,266 $ 516 $ (912) $ 870
================ =============== ============ ==============
Income per share:
Basic.................................. $ 0.16
==============
Diluted................................ $ 0.16
==============
Weighted average number of shares outstanding:
Basic.................................. 5,298,068
==============
Diluted................................ 5,401,138
==============
20
PRO FORMA (UNAUDITED) CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
PRO FORMA
SARATOGA FRESH JUICE ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ---------
Net sales.................................. $ 6,271 $ 41,383 $ - $ 47,654
Cost of goods sold......................... 3,763 28,992 1,180 33,935
-------------- --------------- --------------- -------------
Gross profit...................... 2,508 12,391 (1,180) 13,719
Selling general and administrative expense. 1,434 8,224 - 9,658
Depreciation, amortization and equipment
lease expense.............................. 394 1,620 185 2,199
-------------- --------------- --------------- -------------
Operating Income.................. 680 2,547 (1,365) 1,862
Other income (expense):
Commission income.......................... 127 - - 127
Interest income............................ 52 132 - 184
Interest expense........................... (47) (537) (1,608) (2,192)
-------------- --------------- --------------- -------------
Other income (expense), net....... 132 (405) (1,608) (1,881)
Income before income taxes................. 812 2,142 (2,973) (19)
Provision for income taxes................. 8 774 (782) -
-------------- --------------- --------------- -------------
Net income (loss).......................... $ 804 $ 1,368 $ (2,191) $ (19)
============== =============== =============== =============
Income per share:
Basic................................... $ 0.00
=============
Diluted................................. $ 0.00
=============
Weighted average number of shares outstanding:
Basic................................... 5,058,142
=============
Diluted................................. 5,058,142
=============
21
COMPARATIVE PER SHARE DATA
The following table sets forth
o historical income (loss) and book value per share for Saratoga,
derived from Saratoga's public filings
o historical income (loss) and book value per share for Fresh
Juice, derived from Fresh Juice's public filings
o unaudited pro forma combined income (loss) and book value per
share for Saratoga and equivalent pro forma per share data by
Fresh Juice. This information shows how 1 share of Saratoga
common stock would have participated in the income from
continuing operations and book value if the merger had been
completed on January 1, 1997.
Pro forma amounts are computed to include the issuance of 2,133,553
shares of Saratoga's Class A common stock in connection with the merger as if
it had occurred as of January 1, 1997. Pro forma book value per share is
computed as the pro forma stockholder equity divided by the number of shares of
Saratoga Class A common stock outstanding as of December 31, 1997 and September
30, 1998 plus the 2,133,553 shares of Saratoga Class A common stock to be
issued in the merger, as if the shares were issued at January 1, 1997.
The comparative per share data should be read in conjunction with the
financial statements of Saratoga and Fresh Juice appearing elsewhere or
incorporated in this document.
[Download Table]
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
Historical:
Saratoga
Net income per share from continuing
operations:
Basic $ 0.28 $ 0.40
-------- --------
Diluted $ 0.25 $ 0.36
-------- --------
Book value per share $ 0.98 $ 1.48
-------- --------
Fresh Juice
Net income per share from continuing
operations:
Basic $ 0.21 $ 0.08
-------- --------
Diluted $ 0.21 $ 0.08
-------- --------
Book value per share $ 1.82 $ 1.96
-------- --------
Pro forma:
Net income per share from continuing
operations:
Basic $ 0.00 $ 0.16
-------- --------
Diluted $ 0.00 $ 0.16
-------- --------
Book value per share $ 1.97 $ 1.89
-------- --------
Equivalent pro forma per share data for
fresh juice:
Basic $ (0.00) $ 0.05
-------- --------
Diluted $ (0.00) $ 0.05
-------- --------
Book value per share $ 0.65 $ 0.56
-------- --------
22
RISK FACTORS
You should carefully consider the following factors and other
information in this document before you make your decision whether to approve
the merger and related transactions. The risks set forth below are in addition
to risks that apply to most businesses, including risks of competition and
product liability in excess of insurance and reliance on employees.
RISK FACTORS RELATING TO THE MERGER
Fixed conversion ratio does not
reflect changes in stock prices
before the closing................. We are issuing a fixed number of shares of
Saratoga Class A common stock in the merger
and will not adjust the number of shares to
reflect changes in the market value of
Saratoga Class A common stock and Fresh
Juice common stock between the date of this
document and the merger. The market value
of your shares of Saratoga Class A common
stock at the time that the merger becomes
effective may be higher or lower than the
price of such shares on the date the merger
was negotiated, the date of the execution
of the merger agreement, the date of this
document or on the date the merger becomes
effective.
Net operating loss
carryforwards of the combined
company may be severely
limited............................ Saratoga expects that the merger will not
result in an ownership change of Saratoga
and Fresh Juice under Section 382 of the
Internal Revenue Code. However, future
stock issuances may result in an ownership
change of Saratoga under Section 382.
Section 382 contains rules that limit the
ability of a company to offset
pre-ownership change net operating losses
and credit carryovers against
post-ownership change taxable income. As a
result, Saratoga's net operating loss
carryforwards and Fresh Juice's net
operating loss carryforwards could be
severely limited in the future for use to
offset any income of Saratoga or Fresh
Juice in any particular year. Saratoga's
carryforwards were approximately $3.8
million as of December 31, 1997, and Fresh
Juice's carryforwards were approximately
$31,000 as of November 30, 1997.
23
RISK FACTORS RELATED TO SARATOGA
Risk of problems with
Saratoga's natural springs
outside of Saratoga's control...... Saratoga uses natural springs for the water
which it bottles and sells. The following
natural occurrences relating to Saratoga's
natural springs could cause Saratoga's
business to suffer:
o Drought, which prevents the natural
springs from recharging themselves
o Contamination of the springs
o Failure of the water supply to comply
with all applicable governmental
requirements for mineral and chemical
concentration
These events are beyond Saratoga's control.
In these events, Saratoga's business could
suffer, because Saratoga would likely buy
bulk spring water, which is available at a
slightly higher cost.
Noncompliance with
government regulation could
restrict sales of Saratoga's
products........................... Many governmental authorities, including
the FDA, regulate the bottled water
industry. If Saratoga's products or
bottling facilities were not in compliance
with applicable FDA and other government
regulations, such failure could cause
Saratoga's business to suffer because
Saratoga would have to change the manner in
which it sells its products or would be
restricted in its sale of products. The FDA
regulates standards for bottled water, good
manufacturing practices for bottling
facilities and labeling on products
regarding health and nutrition. Individual
state health departments also regulate
water purity and safety, labeling of
bottled water products and manufacturing
practices of producers. Saratoga has
satisfied the applicable regulations and is
therefore permitted to sell its products in
39 states. Saratoga believes that its water
supply, products and bottling facility are
in compliance with all applicable
governmental regulations.
24
The holders of Class B
common stock will have
substantial voting power after
the merger......................... Saratoga Class B common stock entitles the
holder to 5 votes per share. The holders of
Saratoga Class B common stock currently
control approximately 49.7% of the total
voting power of Saratoga and will control
approximately 34.5% of the voting power of
Saratoga after the merger. The holders of
the Saratoga Class B common stock can
hinder or prevent a change of control of
Saratoga and can keep the market price of
the Saratoga Class A common stock lower
than it would be without the Class B common
stock. Robin Prever, the President, Chief
Executive Officer and a director of
Saratoga, and Anthony Malatino, a former
director of Saratoga, own all 522,955
outstanding shares of Saratoga Class B
common stock. See "Description of Saratoga
capital stock--Saratoga Class A common
stock" and "--Saratoga Class B common
stock" on page 83.
Saratoga relies on a limited
number of distributors............ Saratoga distributes and sells its products
through a network comprised of
approximately 45 distributors. 32% of
Saratoga's sales from January 1, 1998 to
September 30, 1998 were made to five
distributors. If one or more of these
distributors significantly reduces its
level of purchases from Saratoga, it could
cause Saratoga's business to suffer. Many
of Saratoga's distributors also carry
beverage products from Saratoga's
competitors.
RISK FACTORS RELATED TO FRESH JUICE
Effect on Fresh Juice of lack of
availability of raw materials...... Fresh Juice purchases fruit pursuant to
various contracts and from a variety of
suppliers. The following factors could
cause Fresh Juice's business to suffer:
o General supply of, and demand for, fruit
o Frost, drought or floods
o Various plant diseases or pestilence
o Other natural occurrences
These factors are beyond Fresh Juice's
control.
25
Risks associated with
perishable products................ A majority of Fresh Juice's products are
not pasteurized and do not contain any
preservatives, and thus have a limited
shelf life. Fresh Juice does not hold any
significant finished goods inventory of
non-frozen juice and generally only
squeezes juice for its frozen fresh juice
products during certain peak times of the
Florida harvest season. As a result, if
Fresh Juice does not accurately forecast
its near term sales of non-frozen fresh
juice and annual sales of frozen fresh
juice, its business could suffer because
Fresh Juice will either be unable to meet
higher than anticipated demand or produce
excess inventory that cannot be profitably
sold.
Noncompliance with
government regulation could
restrict sales of Fresh Juice's
products........................... The manufacture, processing, packaging,
storage, distribution and labeling of food
products are subject to extensive federal
and state laws and regulations, including
those of the Florida citrus department, the
USDA and the FDA. If Fresh Juice's products
fail to comply with applicable laws and
regulations, such failure could cause Fresh
Juice's business to suffer because Fresh
Juice would be restricted in its sale of
products. Fresh Juice believes that it is
in compliance with current FDA regulations
regarding the processing of fresh juice
products. We cannot be certain that current
regulations will not be changed to impose
more stringent requirements on the sale of
fresh juice products. Fresh Juice believes
that it currently has all material
government permits, licenses,
qualifications and approvals for its
operations.
Effect of unenforceability of
patents and proprietary
protection on Fresh Juice's
business........................... Fresh Juice regards its patents,
trademarks, trade secrets and similar
intellectual property as critical to its
success. Fresh Juice has obtained a United
States patent and foreign patents with
respect to its expanding juice container
and the process of selling frozen
unprocessed freshly squeezed juice. If
patents obtained by or licensed to Fresh
Juice are not enforceable, the Fresh Juice
container design infringes patents owned by
others, or competitors develop similar or
functionally similar patents, Fresh Juice
could lose its perceived competitive edge
and its business could suffer.
26
IMPORTANT INFORMATION
This document is accompanied by a copy of:
O Saratoga's annual report on form 10-KSB for the fiscal year ended
December 31, 1997
O Saratoga's quarterly report on form 10-QSB for the fiscal quarter
ended September 30, 1998
O Saratoga's annual report to stockholders
O Saratoga's current reports on form 8-K as filed with the SEC on
August 21, 1998 and October 26, 1998
This document is also accompanied by a copy of:
O Fresh Juice's annual report on form 10-KSB for the fiscal year
ended November 30, 1997
O Fresh Juice's quarterly report on form 10-QSB for the fiscal
quarter ended August 31, 1998
O Fresh Juice's current reports on form 8-K as filed with the SEC on
April 3, 1998, August 20, 1998 and October 23, 1998
All information contained in this document with respect to Saratoga
has been provided by Saratoga. All information contained in this document with
respect to Fresh Juice and its subsidiaries has been provided by Fresh Juice.
WE HAVE INCORPORATED CERTAIN IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT SARATOGA AND FRESH JUICE THAT IS NOT INCLUDED IN OR DELIVERED
WITH THIS DOCUMENT, INCLUDING:
O SARATOGA'S QUARTERLY REPORT ON FORM 10-QSB FOR THE THREE MONTHS
ENDED MARCH 31, 1998
O SARATOGA'S QUARTERLY REPORT ON FORM 10-QSB FOR THE SIX MONTHS
ENDED JUNE 30, 1998
O FRESH JUICE'S QUARTERLY REPORT ON FORM 10-QSB FOR THE THREE MONTHS
ENDED FEBRUARY 28, 1998
O FRESH JUICE'S QUARTERLY REPORT ON FORM 10-QSB FOR THE SIX MONTHS
ENDED MAY 31, 1998
O ANY EXHIBITS THAT ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
THE INFORMATION SET FORTH UNDER THE CAPTION "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" ON PAGE 93
THIS INFORMATION IS AVAILABLE WITHOUT CHARGE TO:
O ANY SARATOGA STOCKHOLDER, UPON WRITTEN OR ORAL REQUEST TO SARATOGA
BEVERAGE GROUP, INC., 11 GEYSER ROAD, SARATOGA SPRINGS, NEW YORK
12866, TELEPHONE (518) 584-6363, ATTENTION: SECRETARY
O ANY FRESH JUICE STOCKHOLDER, UPON WRITTEN OR ORAL REQUEST TO THE
FRESH JUICE COMPANY, INC., 280 WILSON AVENUE, NEWARK, NEW JERSEY
07105, TELEPHONE (973) 465-7100, ATTENTION: SECRETARY
IN ORDER THAT YOU RECEIVE REQUESTED DOCUMENTS IN TIME TO VOTE, WE URGE
SARATOGA STOCKHOLDERS TO MAKE ANY REQUEST BY JANUARY 20, 1999, 5 BUSINESS DAYS
PRIOR TO THE DATE OF THE SARATOGA SPECIAL MEETING, AND FRESH JUICE STOCKHOLDERS
TO MAKE ANY REQUEST BY JANUARY 20, 1999, 5 BUSINESS DAYS PRIOR TO THE DATE OF
THE FRESH JUICE SPECIAL MEETING.
27
THE SARATOGA SPECIAL MEETING
TIME, PLACE AND DATE
The Saratoga special meeting will be held at Saratoga's principal
executive offices, 11 Geyser Road, Saratoga Springs, New York, on January 27,
1999 at 10:00 a.m., local time.
PURPOSE OF THE SARATOGA MEETING
At the Saratoga special meeting, the Saratoga stockholders will
consider and vote upon a proposal to approve the merger, merger agreement and
related transactions. In accordance with Delaware law and Saratoga's Bylaws, no
other matter may properly come before the Saratoga special meeting.
The Saratoga board of directors has unanimously approved the merger,
merger agreement and related transactions and recommends that the Saratoga
stockholders vote FOR the approval of the merger, merger agreement and related
transactions.
RECORD DATE; VOTING RIGHTS; PROXIES
The Saratoga board of directors has fixed the close of business on
December 16, 1998 as the Saratoga record date for determining holders of
Saratoga common stock entitled to notice of, and to vote at, the Saratoga
special meeting. Only holders of Saratoga common stock at the close of business
on December 16, 1998 will be entitled to notice of, and to vote at, the
Saratoga special meeting.
On December 16, 1998, the Saratoga record date, there were 2,646,139
shares of Saratoga Class A common stock and 522,955 shares of Saratoga Class B
common stock issued and outstanding and entitled to vote at the Saratoga
special meeting, which were held by 1,628 holders and 2 holders, respectively,
of record. Each share of Saratoga Class A common stock entitles the holder
thereof to 1 vote, and each share of Saratoga Class B common stock entitles the
holder thereof to 5 votes.
All shares of Saratoga common stock represented by properly executed
and dated proxies received in time for the Saratoga special meeting will be
voted in accordance with the instructions indicated in such proxies, unless
such proxies have been previously revoked. IF A PROPERLY EXECUTED AND DATED
PROXY HAS BEEN RECEIVED BY SARATOGA AND NO INSTRUCTIONS ARE INDICATED, SUCH
SHARES OF SARATOGA COMMON STOCK WILL BE VOTED IN FAVOR OF THE MERGER, MERGER
AGREEMENT AND RELATED TRANSACTIONS. Proxies marked as abstentions will not be
counted as votes cast and will be treated as shares of Saratoga common stock
present at the Saratoga special meeting for purposes of determining whether a
quorum is present. In addition, shares of Saratoga common stock held in street
name which have been designated by brokers on proxy cards as not voted will not
be counted as votes cast and will be treated as shares of Saratoga common stock
present at the Saratoga special meeting for purposes of determining whether a
quorum is present.
Any person giving a proxy has the power to revoke it any time before
it is exercised at the Saratoga special meeting, by executing a later dated
proxy, by subsequent written notice to Saratoga or by attendance and voting at
the Saratoga special meeting in person. A proxy revocation may be submitted to
the secretary of Saratoga by facsimile transmission at (518) 584-0380. Saratoga
stockholders whose shares are held in nominee name who wish to revoke their
proxies should contact their brokers.
28
SOLICITATION OF PROXIES
The proxy is solicited by the Saratoga board of directors and such
solicitation may include requests by mail, telegram and personal contact by
Saratoga's directors, officers and employees, at no additional compensation.
Saratoga has not retained a proxy solicitor.
All expenses in connection with the solicitation of proxies, including
the costs of preparing and mailing the proxy materials, will be borne by
Saratoga. Saratoga will reimburse brokers or other nominees for their expenses
in forwarding proxy materials to principals.
QUORUM
The presence, in person or by properly executed and dated proxies, of
Saratoga stockholders holding at least a majority of the issued and outstanding
shares of Saratoga common stock entitled to vote at the Saratoga special
meeting is necessary to constitute a quorum for the transaction of business.
Abstentions and broker non- votes will be counted for purposes of determining
the presence or absence of a quorum. A broker non-vote is where a broker does
not have discretionary authority to vote on any matter in the absence of
instructions from the beneficial owners.
APPROVAL ASSURED; REQUIRED VOTE
Saratoga has sufficient votes to assure the approval of the merger,
merger agreement and related transactions. Approval of the merger, merger
agreement and related transactions requires the affirmative vote of the
Saratoga stockholders holding at least a majority of the outstanding shares of
Saratoga common stock present in person or represented by proxy at the Saratoga
special meeting. Pursuant to the voting agreement, Robin Prever, Anthony
Malatino and Warren Lichtenstein, each of whom is an officer, director and/or
significant stockholder of Saratoga, have agreed to vote their shares of
Saratoga common stock, representing approximately 56.8% of the voting power of
the outstanding Saratoga common stock as of December 16, 1998, the Saratoga
record date, in favor of the merger, merger agreement and related transactions.
See "Terms of the merger agreement--Voting agreement" on page 65.
Approval of the merger, merger agreement and related transactions will
constitute approval of all of the transactions contemplated as part of the
merger, including the issuance of the shares of Saratoga Class A common stock
and the delivery of cash to the Fresh Juice stockholders in exchange for their
shares of Fresh Juice common stock. Abstentions and broker non-votes will have
the same effect as votes cast against the proposal.
As of December 16, 1998, the Saratoga record date, directors and
executive officers of Saratoga may be deemed to be beneficial owners of
approximately 15.4% of the outstanding shares of Saratoga common stock,
excluding shares subject to stock options, which represents 22.1% of the voting
power thereof, entitled to vote at the Saratoga special meeting. See "Terms of
the merger agreement--Voting agreement" on page 65.
WE BELIEVE THAT THE MATTERS TO BE CONSIDERED AT THE SARATOGA SPECIAL
MEETING ARE OF GREAT IMPORTANCE TO YOU. ACCORDINGLY, WE URGE YOU TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED AND INCORPORATED BY REFERENCE IN
THIS DOCUMENT. WE ALSO URGE YOU TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
29
THE FRESH JUICE SPECIAL MEETING
TIME, PLACE AND DATE
The Fresh Juice special meeting will be held at Fresh Juice's offices
at 280 Wilson Avenue, Newark, New Jersey on January 27, 1999 at 10:00 a.m.,
local time.
PURPOSE OF THE FRESH JUICE MEETING
At the Fresh Juice special meeting, Fresh Juice stockholders will
consider and vote upon a proposal to approve the merger, merger agreement and
related transactions. In accordance with Delaware law and Fresh Juice's Bylaws,
no other matter may properly come before the Fresh Juice special meeting.
The Fresh Juice board of directors has approved the merger agreement
and recommends that Fresh Juice stockholders vote FOR the approval of the
merger, merger agreement and the related transactions.
RECORD DATE; VOTING RIGHTS; PROXIES
The Fresh Juice board of directors has fixed the close of business on
December 18, 1998 as the Fresh Juice record date for determining holders of
shares of Fresh Juice common stock entitled to notice of, and to vote at, the
Fresh Juice special meeting. Only holders of shares of Fresh Juice common stock
at the close of business on December 18, 1998 will be entitled to notice of,
and to vote at, the Fresh Juice special meeting.
On December 18, 1998, the Fresh Juice record date, there were
6,467,731 shares of Fresh Juice common stock issued and outstanding and
entitled to vote at the Fresh Juice special meeting, which were held by
approximately 1,098 holders of record. Each share of Fresh Juice common stock
issued entitles the holder thereof to 1 vote.
All shares of Fresh Juice common stock represented by properly
executed and dated proxies received in time for the Fresh Juice special meeting
will be voted in accordance with the instructions indicated in such proxies,
unless such proxies have been previously revoked. IF A PROPERLY EXECUTED AND
DATED PROXY HAS BEEN RECEIVED BY FRESH JUICE AND NO INSTRUCTIONS ARE INDICATED,
SUCH FRESH JUICE COMMON STOCK WILL BE VOTED IN FAVOR OF THE MERGER, THE MERGER
AGREEMENT AND THE RELATED TRANSACTIONS. Proxies marked as abstentions will not
be counted as votes cast and will be treated as shares of Fresh Juice common
stock present at the Fresh Juice special meeting for purposes of determining
whether a quorum is present. In addition, shares of Fresh Juice common stock
held in street name which have been designated by brokers on proxy cards as not
voted will not be counted as votes cast and will be treated as shares of Fresh
Juice common stock present at the Fresh Juice special meeting for purposes of
determining whether a quorum is present.
Any Fresh Juice stockholder giving a proxy may revoke it any time
before it is exercised at the Fresh Juice special meeting, by executing a later
dated proxy, by subsequent written notice to Fresh Juice or by attendance and
voting at the Fresh Juice special meeting in person. A proxy revocation may be
submitted to the Secretary of Fresh Juice by facsimile at (973) 465-7170. Fresh
Juice stockholders whose shares are held in nominee name who wish to revoke
their proxies should contact their brokers.
SOLICITATION OF PROXIES
The proxy is solicited by the Fresh Juice board of directors and such
solicitation may include requests by mail, telegram and personal contact by its
directors, officers and employees, at no additional compensation. Fresh Juice
has not retained a proxy solicitor.
30
QUORUM
The presence, in person or by properly executed proxies, of holders of
at least a majority of the issued and outstanding shares of Fresh Juice common
stock entitled to vote at the Fresh Juice special meeting is necessary to
constitute a quorum at the Fresh Juice special meeting for the transaction of
business. Abstentions and broker non- votes will be counted for purposes of
determining the presence or absence of a quorum. A broker non-vote is where a
broker does not have discretionary authority to vote on any matter in the
absence of instructions from the beneficial owners.
APPROVAL NEARLY ASSURED; REQUIRED VOTE
Pursuant to the voting agreement, Steven Smith, Steven Bogen, Jeffrey
Heavirland and Jeffrey Smith, each of whom is on officer, director and/or
significant stockholder of Fresh Juice, have agreed to vote their shares of
Fresh Juice common stock, representing approximately 41.6% of the shares of
Fresh Juice common stock outstanding as of December 18, 1998, the Fresh Juice
record date, in favor of the merger, merger agreement and related transactions.
Approval of the merger, merger agreement and related transactions requires the
affirmative vote of the holders of at least a majority of the outstanding
shares of Fresh Juice common stock, voting as a class, present in person or
represented by proxy at the Fresh Juice special meeting. See "Terms of the
merger agreement--Voting agreement" on page 65.
Approval will constitute approval of all of the transactions
contemplated as a part of the merger. Abstentions will have the same effect as
votes cast against the proposal.
As of December 18, 1998, directors and executive officers of Fresh
Juice and their respective affiliates may be deemed to be beneficial owners of
approximately 46.3% of the outstanding shares, excluding shares subject to
stock options, of Fresh Juice common stock entitled to vote at the Fresh Juice
special meeting. As of December 18, 1998, Saratoga owned, directly or
indirectly, 119,900 shares of Fresh Juice common stock representing
approximately 1.9% of the outstanding shares of Fresh Juice common stock
entitled to vote at the Fresh Juice special meeting. It is anticipated that
43.5% of the shares of Fresh Juice common stock outstanding as of December 18,
1998 will vote in favor of the merger, merger agreement and related
transactions. Since these votes are not sufficient to constitute a quorum at
the Fresh Juice special meeting or to approve the merger, merger agreement and
related transaction, Fresh Juice intends to postpone or adjourn the meeting if
the required quorum and/or vote is not obtained. See "Terms of the merger
agreement--Voting agreement" on page 65.
If the Fresh Juice special meeting is postponed or adjourned because
Fresh Juice has not received the required quorum and/or vote, once the meeting
resumes, Fresh Juice will vote all previously submitted proxies as indicated on
the proxies unless the proxies were revoked prior to the resumption of the
meeting as described under the caption "Record date; voting rights; proxies" on
page 30. Fresh Juice will not change the vote indicated on the proxies in the
event of a postponement or adjournment of the Fresh Juice special meeting. If
(a) the Fresh Juice special meeting is canceled and rescheduled rather than
merely postponed or adjourned, or (b) the financial terms of the merger are
revised, Fresh Juice will resolicit new proxies and none of the previously
submitted proxies will be used.
WE BELIEVE THAT THE MATTERS TO BE CONSIDERED AT THE FRESH JUICE
SPECIAL MEETING ARE OF GREAT IMPORTANCE TO YOU. ACCORDINGLY, WE URGE YOU TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED AND INCORPORATED BY
REFERENCE IN THIS DOCUMENT. WE ALSO URGE YOU TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU
SHOULD NOT FORWARD ANY FRESH JUICE COMMON STOCK CERTIFICATES WITH YOUR PROXY
CARDS. YOU WILL RECEIVE SEPARATE INSTRUCTIONS REGARDING THE SURRENDER OF FRESH
JUICE COMMON STOCK CERTIFICATES IF THE MERGER IS COMPLETED.
31
THE MERGER
We are describing certain aspects of the merger and the merger
agreement in this section. The following description is not complete and is
qualified in its entirety by reference to the merger agreement which is
attached as Appendix A to this document and is incorporated herein by
reference. Capitalized terms used in this section but not defined in this
document have the meanings set forth in the merger agreement. We urge you to
read the merger agreement carefully.
FORM OF THE MERGER
Pursuant to the merger agreement, on the effective date of the merger,
Rowale Corp., a wholly owned subsidiary of Saratoga, will merge with and into
Fresh Juice, with Fresh Juice being the surviving corporation. After the
merger, Fresh Juice will be operated as a wholly-owned subsidiary of Saratoga.
MERGER CONSIDERATION
Upon completion of the merger, except as described below, each
outstanding share of Fresh Juice common stock not held directly or indirectly
by Saratoga or Fresh Juice or shares of Fresh Juice common stock with respect
to which dissenters' rights have been properly asserted will be converted into
the right to receive:
o $2.244 per share in cash and
o 0.33 shares of Saratoga Class A common stock
For example, a holder of 1,000 shares of Fresh Juice common stock will receive
$2,244.00 in cash and 330 shares of Saratoga Class A common stock.
In the merger, certain options and warrants to purchase Fresh Juice
common stock will be canceled and exchanged for a number of shares of Saratoga
Class A common stock equal to:
o 0.33,
o multiplied by the difference between $3.35 and the exercise price
of such options and warrants,
o divided by $1.106, and
o multiplied by the number of shares of Fresh Juice common stock
subject to such options and warrants.
For example, a holder of options to purchase 1,000 shares of Fresh Juice common
stock at an exercise price of $3.00 will receive 104 shares of Saratoga Class A
common stock. Certain options held by Jeffrey Heavirland, a director and
executive officer of Fresh Juice, will be canceled at the closing of the merger
in exchange for a lump sum payment. See "The Merger--Interests of Certain
Persons in the Merger--Jeffrey Heavirland" on page 49.
Fresh Juice will not pay any dividends prior to the completion of the
merger, pursuant to the merger agreement. The amount of cash to be delivered,
and number of shares of Saratoga Class A common stock to be issued, in the
merger was determined through arm's length negotiations between Saratoga and
Fresh Juice.
32
The table below sets forth closing price of the Saratoga Class A
common stock and the Fresh Juice common stock on the Nasdaq SmallCap Market on
the dates indicated:
[Download Table]
SARATOGA CLASS A FRESH JUICE
COMMON STOCK COMMON STOCK
DATE SIGNIFICANCE (TOGA) (FRSH)
---- ------------ ------ ------
March 30, 1998: The last trading day before the $3.125 $2.75
public announcement of a
possible transaction between
Saratoga and Fresh Juice
August 14, 1998: The last trading day before the $2.6875 $2.0625
public announcement of the
execution of the original
merger agreement (providing
for each share of Fresh Juice
common stock to be
exchanged for $3.75 in cash)
October 13, 1998: The last trading day before the $2.0625 $2.5313
public announcement of the
execution of the current
merger agreement
December 21, 1998: The last practicable trading $2.0625 $2.5625
day preceding the mailing of
this document
WE URGE YOU TO OBTAIN CURRENT MARKET QUOTATIONS FOR SARATOGA'S CLASS A COMMON
STOCK AND THE FRESH JUICE COMMON STOCK. SEE "MARKET PRICE DATA AND DIVIDEND
POLICY" ON PAGE 81.
BACKGROUND OF THE MERGER
The terms of the merger agreement are the result of arm's length
negotiations between representatives of Saratoga and Fresh Juice. The following
is a brief discussion of the events that led to the negotiation and the
execution of the merger agreement and the related transactions.
During March 1998, Robin Prever, President and Chief Executive Officer
of Saratoga, and Warren Lichtenstein, a director of Saratoga, conducted
discussions with Steven Smith, Co-Chairman of the board of directors, President
and significant stockholder of Fresh Juice, and Jeffrey Smith, a director of
Fresh Juice, regarding the possibility of acquiring Fresh Juice common stock
owned by Steven Smith.
As a result of these discussions, Mr. Smith entered into an option
agreement with Saratoga dated as of March 16, 1998 and executed on March 18,
1998. Under the Smith option agreement, Steven Smith granted to Saratoga the
option to purchase 825,000 shares of his Fresh Juice common stock at $3.00 per
share with an outside exercise date of October 31, 1998. The Smith option
agreement further provided that in the event Saratoga exercised the option to
purchase shares of Fresh Juice common stock under the Smith option agreement,
and Fresh Juice consummated a business combination or executed a written
agreement or letter of intent or understanding and
33
consummated a business combination within 120 days of the exercise by Saratoga
of such option, Saratoga would make an additional payment to Steven Smith for
the shares acquired by Saratoga through the exercise of the option under the
Smith option agreement equal to 50% of the amount of the purchase price per
share of Fresh Juice common stock payable in such business combination which is
in excess of $3.00 per share.
In March 1998, the Saratoga board of directors approved the Smith
option agreement and authorized Saratoga to offer to acquire all of the issued
and outstanding shares of Fresh Juice common stock at a price of $3.25 per
share in cash.
By letter dated March 19, 1998 to Steven Bogen as Co-Chairman of the
board of directors, Saratoga informed the Fresh Juice board of directors of its
desire to pursue a business combination with Fresh Juice to acquire all of the
issued and outstanding shares of Fresh Juice common stock at a price equal to
$3.25 per share.
At a meeting of the Fresh Juice board of directors held on March 20,
1998, where the March 19, 1998 letter was discussed and the existence of the
Smith option agreement was disclosed to the Fresh Juice board of directors, the
Fresh Juice board of directors made a determination to explore alternatives to
create stockholder value including, but not limited to, exploring the viability
of entering into a business combination with Saratoga. Members of management of
both Saratoga and Fresh Juice conducted discussions exploring a possible
transaction. Thereafter, the Fresh Juice board of directors conducted an
informal conference call meeting on March 26, 1998 followed by another formal
conference call meeting on March 28, 1998, where the Fresh Juice board of
directors authorized the pursuit of further discussions with Saratoga.
On March 26, 1998, the Saratoga board of directors met and authorized
further discussions with Fresh Juice and approved an increase in the
acquisition price to $3.75 per share in cash.
Fresh Juice entered into a letter agreement dated March 29, 1998 with
Saratoga regarding a possible acquisition of Fresh Juice by Saratoga at a cash
purchase price of $3.75 per share. Pursuant to the March 29, 1998 agreement,
Fresh Juice agreed to certain "no-shop" provisions, subject to its fiduciary
duties, through a date not later than April 25, 1998. The March 29, 1998
agreement further provided for the payment to Saratoga by Fresh Juice of
$750,000 in the event Fresh Juice:
o entered into a definitive agreement with Saratoga and the
transactions contemplated by such agreement were not consummated
for reasons other than a result of:
o Saratoga being unable to obtain financing for the transaction
or
o any failure on the part of Saratoga to comply with its
obligations set forth in the March 19, 1998 agreement; or
o accepted a superior offer on or before a date not later than July
24, 1998.
Fresh Juice issued a news release concerning the March 29, 1998 agreement on
March 31, 1998.
On March 31, 1998, Saratoga filed a statement on schedule 13D with the
SEC relating to Fresh Juice concerning the March 29, 1998 agreement and the
Smith option agreement in accordance with the Exchange Act and the rules
promulgated thereunder. On March 30, 1998, Saratoga and Fresh Juice entered
into a confidentiality agreement covering the confidentiality of information to
be exchanged by Fresh Juice and Saratoga in the course of the parties' conduct
of due diligence.
34
On April 24, 1998, Saratoga and Fresh Juice extended the exclusivity
period to the earliest to occur of:
o May 20, 1998;
o Saratoga notifying Fresh Juice in writing that negotiations toward
the possible acquisition had been terminated; and
o 7 business days after the date on which Fresh Juice provided
Saratoga with all due diligence materials reasonably available to
Fresh Juice and reasonably requested by Saratoga.
Saratoga further agreed not to acquire, offer to acquire or agree to acquire,
in any manner, any assets or securities of Fresh Juice other than pursuant to
the Smith option agreement through the earliest to occur of:
o the execution of a definitive agreement regarding the possible
acquisition;
o the termination by Fresh Juice of discussions with Saratoga
regarding the possible acquisition; and
o May 25, 1998.
Fresh Juice issued a news release concerning the extension of the exclusivity
period on April 27, 1998.
While the parties did not extend the exclusivity period beyond May 25,
1998, representatives of both Saratoga and Fresh Juice continued to negotiate
the potential and possible terms and conditions of a merger agreement following
Saratoga's due diligence with respect to the business affairs of Fresh Juice.
Fresh Juice issued a news release dated May 21, 1998 disclosing the
non-extension of the exclusivity period and that Fresh Juice and Saratoga were
continuing to explore a business combination transaction which may be
structured to include cash consideration in an amount less than $3.75 per share
and shares of Class A common stock.
On June 5, 1998, Fresh Juice engaged Ladenburg to assist in evaluating
the potential merger with Saratoga and provide, when requested, a fairness
opinion to the Fresh Juice stockholders regarding the merger consideration to
be paid to the Fresh Juice stockholders in connection with the proposed merger.
Between June 8, 1998 and August 7, 1998, Fresh Juice and its legal
advisors and representatives of Ladenburg held a series of conference calls to
discuss the terms of a merger between Fresh Juice and Saratoga.
On June 15, 1998, a meeting was held between officers of Saratoga and
representatives of Ladenburg to perform due diligence analysis of the assets,
liabilities, business and prospects of Saratoga at Saratoga's offices.
Additionally, the purpose of the meeting was to discuss the business,
positioning of Saratoga and Fresh Juice in the beverage industry and, on a
preliminary basis, to discuss the potential benefits and operational and
financial synergies that could be derived from a merger of Saratoga and Fresh
Juice. No outside legal or accounting advisors were present at these
preliminary meetings.
On June 29, 1998, the Saratoga board of directors met with legal
counsel and representatives of Schroders to review and consider a possible
business combination with Fresh Juice. At this meeting, Schroders rendered its
oral opinion that, as of such date and based solely on the terms of the
business combination as discussed at the
35
meeting, the acquisition of the Fresh Juice common stock for a purchase price
of $3.75, consisting of $3.1875 in cash and 0.15 shares of Saratoga's Class A
common stock, was fair, from a financial point of view, to Saratoga
stockholders. However, given that there were still various open issues, during
the meeting, the Saratoga board of directors determined not to approve the
transaction at that time.
On June 30, 1998, the Fresh Juice board of directors met with legal
counsel and representatives of Ladenburg to review and consider an alternative
business combination with Saratoga. In July 1998, Saratoga amended its offer to
acquire the Fresh Juice common stock for a total purchase price of $3.35 per
share in cash.
Each of the Fresh Juice board of directors and the Saratoga board of
directors was kept apprised of material developments relating to a possible
business combination between Fresh Juice and Saratoga during the course of the
negotiations.
On August 7, 1998, the Saratoga board of directors met with legal
counsel to review the possible business combination with Fresh Juice. Prior to
this meeting, Schroders reviewed the revised terms of the business combination
and performed financial analysis with respect to the revised terms, but did not
update its fairness opinion. At this meeting, the Saratoga board of directors
unanimously approved the merger, the form of agreement and plan of merger
relating to the merger, the form of voting agreement, the form of the Bogen
agreement, the form of the Smith agreement and the Heavirland agreement.
On August 7, 1998, the Fresh Juice board of directors met. At this
meeting, Ladenburg rendered its oral opinion that, as of such date, a cash
purchase price of $3.35 per share of Fresh Juice common stock was fair, from a
financial point of view, to Fresh Juice stockholders. Subsequently, on August
10, 1998, the Fresh Juice board of directors met again, and based upon its
review of the form of an agreement and plan of merger and the presentations of
Ladenburg, the Fresh Juice board of directors unanimously approved an agreement
and plan of merger. In addition, Steven Smith extended the outside exercise
date for the option granted to Saratoga pursuant to the Smith option agreement
from October 31, 1998 to December 31, 1998.
On August 14, 1998, an agreement and plan of merger and a voting
agreement for certain Fresh Juice stockholders were executed and, on August 17,
1998, Fresh Juice and Saratoga issued a news release and material announcements
regarding the proposed merger.
In September 1998, the proposed merger was restructured to reflect
Saratoga's desire to deleverage the acquisition given current market
conditions. Accordingly, Saratoga amended its offer to acquire the Fresh Juice
common stock for a purchase price per share of $2.244 in cash and 0.33 shares
of Saratoga Class A common stock.
On September 23, 1998, the Saratoga board of directors met with legal
counsel to review the possible business combination with Fresh Juice. However,
given that there were still various open issues and that the Saratoga board of
directors had not received input from Schroders, the Saratoga board of
directors determined not to approve the revised transaction at that time.
On September 29, 1998, Ladenburg held a conference call with Steven
Bogen and Mark Feldman of Fresh Juice. The purpose of the call was to discuss
Fresh Juice's recent financial performance and revised financial projections
for the fiscal years 1998-2000. Ladenburg received an update on Fresh Juice's
business prospects for the remainder of 1998 and beyond, assuming Fresh Juice
remained a stand-alone entity.
On September 29, 1998, Ladenburg had a phone conversation with
Saratoga's legal counsel to discuss Saratoga's anticipated financing of the
merger and to inquire as to whether Saratoga had updated its financial
projections since the last meeting between Ladenburg and Saratoga's management
on June 15, 1998.
36
On October 7, 1998, Ladenburg held a conference call with Robin Prever
and Gayle Henderson of Saratoga. The purpose of the call was to update
Ladenburg's due diligence regarding Saratoga's financial projections and
business prospects for the remainder of 1998 and fiscal years 1999-2000.
On October 7, 1998, the Saratoga board of directors met with legal
counsel to review the possible business combination with Fresh Juice. Prior to
this meeting, Schroders reviewed the revised terms of the business combination
and performed financial analysis with respect to the revised terms, but did not
update its fairness opinion. At this meeting, the Saratoga board of directors
unanimously approved the merger, the merger agreement, the voting agreement,
the Bogen agreement and the Smith agreement.
On October 8, 1998, the Fresh Juice board of directors met. At this
meeting, Ladenburg rendered its oral opinion that, as of such date, a purchase
price of $2.244 in cash and 0.33 shares of Saratoga's Class A common stock per
share of Fresh Juice common stock was fair, from a financial point of view, to
Fresh Juice stockholders. Based upon its review of the merger agreement and the
presentations of Ladenburg, the Fresh Juice board of directors approved, with
one director dissenting, the merger, and the merger agreement.
On October 13, 1998, the merger agreement, the voting agreement, the
Bogen agreement and the Smith agreement were executed and the Smith option
agreement was terminated. On October 13, 1998, Fresh Juice and Saratoga issued
a news release and material announcements regarding the proposed merger.
During the week of November 16, 1998, Saratoga recognized that the
issuance of additional stock to certain Fresh Juice shareholders may cause
adverse tax consequences. As a result, Saratoga proposed, in order to reduce
the number of shares of Saratoga Class A common stock issued in the merger,
o amending the Bogen agreement to provide for an aggregate payment
of $962,687.40 in lieu of the payment of $500,000 in cash and the
issuance of 149,254 shares of Saratoga Class A common stock and
o entering into an agreement with Jeffrey Heavirland to provide for
the payment of $106,832 in lieu of the issuance of 34,462 shares
of Saratoga Class A common stock in exchange for the cancellation
of certain options.
On November 30, 1998, the Fresh Juice board of directors approved the amendment
to the Bogen agreement and the agreement with Mr. Heavirland. See "The
merger--Interest of certain persons in the merger" on page 47.
RECOMMENDATIONS OF THE SARATOGA BOARD OF DIRECTORS AND THE FRESH JUICE BOARD OF
DIRECTORS; REASONS FOR THE MERGER
The Saratoga board of directors has unanimously approved the merger,
merger agreement and related transactions, and recommends a vote for the
approval of the merger, merger agreement and related transactions by the
Saratoga stockholders at the Saratoga special meeting. The Saratoga board of
directors believes that the terms of the merger are fair to, and in the best
interests of, Saratoga and the Saratoga stockholders.
The Fresh Juice board of directors has approved the merger, merger
agreement and related transactions, and recommends a vote for the approval of
the merger, merger agreement and related transactions by the Fresh Juice
stockholders at the Fresh Juice special meeting. The Fresh Juice board of
directors believes that the terms of merger are fair to, and in the best
interests of, Fresh Juice and the Fresh Juice stockholders.
37
CERTAIN STATEMENTS MADE IN THE FOLLOWING PARAGRAPHS REGARDING THE
POTENTIAL BENEFITS THAT COULD RESULT FROM THE MERGER ARE FORWARD-LOOKING
STATEMENTS BASED ON CURRENT EXPECTATIONS AND ENTAIL VARIOUS RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN SUCH STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO BE WORSE THAN THOSE
EXPRESSED IN SUCH FORWARD-LOOKING STATEMENTS. WE URGE YOU TO REVIEW THE
"SPECIAL NOTE REGARDING FORWARD- LOOKING STATEMENTS" SECTION ON PAGE 92 AND THE
"RISK FACTORS" SECTION ON PAGE 23.
The Saratoga board of directors believes that the merger offers
strategic and financial benefits to Saratoga and the Saratoga stockholders. The
Fresh Juice board of directors believes that the merger offers strategic and
financial benefits to Fresh Juice and the Fresh Juice stockholders. The
Saratoga board of directors and the Fresh Juice board of directors each believe
that the merger will create a stronger and more diversified company which can
compete better in the beverage industry. Saratoga will seek to save money by
cutting expenses that are duplicative in the combined entity. After the merger,
these savings will allow Fresh Juice to be more profitable. Saratoga
anticipates the savings should exceed $1.0 million annually, including
elimination of duplicate public entity expenses and duplicate overhead
expenses. However, the potential benefits of the merger may not occur.
We estimate that, as a result of the merger, we will incur
merger-related expenses of approximately $2.0 million. Saratoga will likely
incur expenses of approximately $1.4 million and Fresh Juice will likely incur
expenses of approximately $495,000. These expenses include investment banking,
financing, legal and accounting fees and financial printing and other related
charges. The amount of these expenses may increase depending on when the merger
is completed.
The primary reasons that the Saratoga board of directors approved the
merger include:
o The combined company will have significantly greater resources, a
more diversified product line, and greater manufacturing, sales
and marketing capabilities than those of Saratoga or Fresh Juice
separately.
o Saratoga will benefit from access to Fresh Juice's complimentary
brands, customer base, increased name recognition and credibility
in the marketplace, and a broader and higher level of contact with
existing and potential customers.
o By maintaining facilities in both Florida and California after the
merger, Saratoga will be able to produce fresh orange and other
juices for distribution anywhere in the country.
o Saratoga will have more purchasing power which may enable it to
negotiate more favorable prices for raw materials.
o Saratoga will have substantial opportunities to grow the juice and
water business within existing distribution networks.
The primary reasons that the Fresh Juice board of directors approved
the merger include:
o The combined company will have significantly greater resources, a
more diversified product line, and greater manufacturing, sales
and marketing capabilities than those of Saratoga or Fresh Juice
separately.
o The merger consideration was fair, from a financial point of view,
to the Fresh Juice stockholders.
38
o The merger will provide Fresh Juice stockholders with an
opportunity to receive cash and to participate as stockholders in
the opportunities for growth in Saratoga after the merger.
The Saratoga board of directors also reviewed the proposed terms and
conditions of the merger with its counsel and considered the opinion rendered
by Schroders on June 29, 1998 that, as of the date of such opinion, the merger
consideration of $3.75 per share, comprised of $3.1875 in cash and 0.15 shares
of Saratoga Class A common stock, to be paid by Saratoga in the merger was
fair, from a financial point of view, to the Saratoga stockholders and the
analysis provided by Schroders since that date. The Saratoga board of directors
also considered, among other things:
o an analysis of the value that Fresh Juice might contribute to
Saratoga, including internally generated pro forma historical and
projected financial statements
o the reports and opinions of Saratoga's management concerning the
business, technology, products, operations, financial condition
and prospects of Fresh Juice
o the business, operations, properties, assets, financial condition
and operating results of Saratoga
o Saratoga's future prospects and whether such prospects were likely
to be enhanced as a result of the merger
o the terms and conditions of the merger agreement, which were the
product of extensive arm's length negotiations
o the current financial market conditions and historical market
prices, volatility and trading information with respect to the
Saratoga Class A common stock
The Saratoga board of directors also considered a variety of potentially
negative factors in its deliberations concerning the merger, including:
o the risk that the potential benefits of the merger will not be
fully realized, if at all
o the risks that Saratoga will not be able to efficiently and
effectively integrate the businesses and operations of Saratoga
and Fresh Juice, including operations in New York, New Jersey,
Florida and California
o the possibility that the merger would not be consummated
o Fresh Juice's recent financial performance
o risks inherent in Fresh Juice's business, including risks relating
to the short shelf life of its products and risks relating to new
governmental regulations of the fresh juice industry
o the risk that Saratoga will not be able to create the expected
synergies from the transaction
39
o the risk that the allocation of management's resources toward the
merger and post-merger combination of operations may temporarily
distract their attention from the day-to-day business of the
combined entity after the merger
o the other risks described in the "Risk factors" section on page 23
In view of the wide variety of factors considered in connection with
its evaluation of the merger, the Saratoga board of directors did not rely on
any one specific factor in reaching its determination. However, the Saratoga
board of directors concluded that the positive factors significantly outweighed
the negative factors cited.
The Fresh Juice board of directors also reviewed the proposed terms
and conditions of the merger with its counsel and considered the opinion
rendered by Ladenburg that, as of the date of such opinion, the merger
consideration to be received by the Fresh Juice stockholders was fair, from a
financial point of view, to the Fresh Juice stockholders. The Fresh Juice board
of directors also considered, among other things:
o the reports and opinions of Fresh Juice's management concerning
the business, technology, products, operations, financial
condition and prospects of Saratoga
o the business, operations, properties, assets, financial condition
and operating results of Fresh Juice
o the regulatory and competitive environment which could impact
Fresh Juice's ability to sell fresh juice products in an
economically favorable manner
o the terms and conditions of the merger agreement, which were the
product of extensive arm's length negotiations
o the current financial market conditions and historical market
prices, volatility and trading information with respect to the
Fresh Juice common stock
o the valuation range of the proposed merger consideration
represented an approximately 27% to 34% premium over the average
market price per share of the Fresh Juice common stock for the
thirty day period prior to Fresh Juice's initial announcement on
March 31, 1998 of a potential transaction with Saratoga
o the payment of a significant portion of the merger consideration
in cash reduces the ongoing business risk to the Fresh Juice
stockholders
o Fresh Juice's stand-alone business projections, without
consideration of extraordinary transactions which would require
additional capital, showed prospects for modest growth in revenues
and operating earnings
o the combined companies have complimentary product lines which,
when operating on a combined basis, may result in efficiencies in
sourcing, production, marketing and distribution
o the combined companies should experience cost savings.
40
The Fresh Juice board of directors also considered a variety of potentially
negative factors in its deliberations concerning the merger, including
o the fact that the consummation of the merger is conditioned upon
Saratoga consummating the financing described in "Terms of the
merger agreement--Financing" on page 67
o the highly leveraged capital structure of the combined companies
could hinder future growth due to limited cash flow
o the disparity of voting rights between Saratoga Class A common
stock and Saratoga Class B common stock.
In view of the wide variety of factors considered in connection with
its evaluation of the merger, the Fresh Juice board of directors did not rely
on any one specific factor in reaching its determination. However, the Fresh
Juice board of directors concluded that the positive factors significantly
outweighed the negative factors cited.
OPINION OF FRESH JUICE FINANCIAL ADVISOR
Ladenburg was engaged by the Fresh Juice board of directors to render
an opinion as to whether or not the merger consideration to be received by the
Fresh Juice stockholders in connection with the merger is fair, from a
financial point of view, to the Fresh Juice stockholders. As is more fully
described in the merger agreement, upon consummation of merger, the Fresh Juice
stockholders shall receive $2.244 per share in cash, without interest, and 0.33
shares of Saratoga Class A common stock, as the merger consideration.
On October 8, 1998, Ladenburg presented its opinion to the Fresh Juice
board of directors that, as of such date, the merger consideration to be
received by the Fresh Juice stockholders in connection with the merger was
fair, from a financial point of view, to the Fresh Juice stockholders.
Ladenburg has confirmed its opinion as of the date of this document.
THE FULL TEXT OF THE OPINION OF LADENBURG DATED OCTOBER 8, 1998, WHICH
SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS
DOCUMENT. FRESH JUICE STOCKHOLDERS ARE URGED TO READ THE LADENBURG OPINION
CAREFULLY AND IN ITS ENTIRETY.
The Ladenburg opinion was prepared at the request of and for the
information of the Fresh Juice board of directors. The Ladenburg opinion is
directed only to the fairness of the merger consideration to be paid to Fresh
Juice stockholders from a financial point of view and does not constitute a
recommendation to any of the Fresh Juice stockholders as to how such
stockholders should vote at the Fresh Juice special meeting. The summary of the
Ladenburg opinion set forth in this document is qualified in its entirety by
reference to the full text of the Ladenburg opinion. The Ladenburg opinion does
not address the relative merits of the merger or any other transactions or
business strategies discussed by the Fresh Juice board of directors as
alternatives to the merger or the decision of the Fresh Juice board of
directors to proceed with the merger.
In conducting its analysis, for purposes of rendering the Ladenburg
opinion, Ladenburg reviewed and considered such information as it deemed
necessary or appropriate for such purposes including, without limitation, the
following:
41
o a draft of the merger agreement and a draft of the Voting
Agreement, in each case in the form presented to the Fresh Juice
board of directors;
o certain business and financial information relating to Fresh Juice
and Saratoga, provided by Fresh Juice and Saratoga, respectively,
including the financial condition and results of operations of
Fresh Juice and Saratoga, the historical financial performance of
Fresh Juice and Saratoga and certain projected financial
information, provided by Fresh Juice and Saratoga;
o certain public filings made by Fresh Juice and Saratoga with the
SEC; and
o certain publicly available market trading data and historical
trading performance of Fresh Juice and Saratoga common stock.
In addition, Ladenburg conducted such other analyses and examinations and
reviewed and considered such other financial, economic and market data as it
deemed appropriate for purposes of rendering the Ladenburg opinion. Ladenburg
also met with members of senior management of Fresh Juice and Saratoga to
discuss, among other things, the historical and prospective industry
environment, their respective financial condition and operating results and the
reasons for the merger.
Overview of analyses
Ladenburg used both qualitative and quantitative analyses and
valuation methods in connection with rendering the Ladenburg opinion. The
following paragraphs summarize the significant analyses performed by Ladenburg
in rendering the Ladenburg opinion, and when taken together, provide the basis
for the Ladenburg opinion.
Qualitative considerations
In addition to the quantitative analyses discussed below, Ladenburg
considered a number of qualitative factors related to the merger. Ladenburg did
not apply valuation weightings to any of these qualitative factors.
Among the positive qualitative factors relating to the merger, Ladenburg noted:
o due to the cash and stock components of the merger consideration
to be received by Fresh Juice stockholders, the merger provides
Fresh Juice stockholders with liquidity and limits ongoing
business risk while enabling Fresh Juice stockholders to
participate in the benefits of the combined companies;
o Fresh Juice's stand-alone business projections show limited
expected growth in revenues and operating earnings;
o the combined companies will be able to offer a wider breadth of
product lines and benefit from efficiencies in sourcing,
production, marketing and distribution;
o the combined companies should experience significant cost savings
due to the elimination of duplicative overhead; and
o the merger mitigates Fresh Juice stockholders' exposure to risk
from regulatory uncertainties in the fresh juice industry.
40
Among the negative qualitative factors relating to the merger, Ladenburg noted
that the majority of the consideration being paid in cash limits the ability of
the Fresh Juice stockholders to participate in potential share price
appreciation and potential growth of both Fresh Juice on a stand-alone basis
and on the combined companies.
Quantitative analyses
In developing the Ladenburg opinion, Ladenburg calculated a range of
values for Fresh Juice using four separate valuation approaches:
o a market multiples analysis based upon comparable publicly traded
companies;
o an acquisition multiples analysis based upon acquisitions of
comparable companies over the previous three years;
o a discounted cash flow analysis; and
o a takeover premium analysis.
Ladenburg also considered the historical trading price and volume of Fresh
Juice's common stock in developing the Ladenburg opinion.
In developing its opinion, Ladenburg calculated a range of values for
Saratoga in order to value the Saratoga Class A common stock to be received as
part of the merger consideration. Ladenburg used a weighted average valuation
approach assigning a weighting of 20.0% to a range derived using three
valuation approaches:
o a market multiples analysis based upon comparable publicly
traded-companies;
o an acquisition multiples analysis based upon acquisitions of
comparable companies over the previous three years; and
o a discounted cash flow analysis. Ladenburg then considered the
historical trading price and volume of Saratoga's common stock and
assigned an 80.0% weighting to the value of the shares as
determined by the 30 day average closing price of the Saratoga
Class A common stock in the public market prior to the date of the
Ladenburg opinion.
Market multiples analysis: The market multiples analysis determines an
implied public market value for Fresh Juice and Saratoga by evaluating the
public valuations of comparable companies competing in similar industries using
available public information. In choosing comparable companies Ladenburg
examined manufacturers and marketers of waters, juices and soft drinks
(beverages) of the same relative market capitalization as Fresh Juice and
Saratoga. Ladenburg examined nine companies in the beverage industry including
Aquapenn Spring Water Company, Inc., Great Pines Water, Inc., Hansen Natural
Corporation, National Beverage Corporation, Odwalla, Inc., Seneca Foods
Corporation and Vermont Pure Holdings, Ltd., as well as Fresh Juice and
Saratoga.
The multiples used for the market multiples analysis were derived by
dividing the public valuations of comparable companies by certain measures of
operating performance such as earnings before interest, taxes, depreciation and
amortization ("EBITDA"), earnings before interest and taxes ("EBIT"), net
income and projected earnings per share ("EPS"), as developed by certain
research analysts. EBITDA and EBIT multiples are based on
43
total enterprise value divided by each financial measure, respectively. Total
enterprise value is defined as the market value of common stock, plus total
indebtedness, less cash and cash equivalents. Total enterprise value is
essentially the value of a company assuming an un-leveraged capital structure.
The net income and EPS multiples were derived by dividing the market value of
the common stock in aggregate or per share, as appropriate, by net income or
projected EPS.
Ladenburg used these multiples to calculate a range of public market
values for each of Fresh Juice and Saratoga to develop an implied market
multiple valuation. For total enterprise valuations developed using EBITDA and
EBIT multiples, for each of Fresh Juice and Saratoga, Ladenburg generated the
market value of the respective entity's equity by subtracting outstanding debt
and adding excess cash and cash equivalents. For valuations based on net income
and projected EPS, Ladenburg multiplied the entity's respective values by the
appropriate median multiples to arrive at equity value. Based on this analysis,
the range of implied per share equity value for Fresh Juice was $0.54 to $3.19.
The range of implied per share equity value for Saratoga was $3.09 to $5.50.
Acquisition multiples analysis: the acquisition multiples analysis
applies a similar methodology as the market multiples analysis, but relies upon
multiples derived from merger and acquisition transactions involving target
companies similar to Fresh Juice and Saratoga. For purposes of the acquisition
multiples analysis, Ladenburg analyzed comparable mergers and acquisitions in
the beverage industry completed since 1995, which incorporated thirteen
separate transactions.
For all of the comparable merger and acquisition transactions,
Ladenburg derived median multiples using various financial measures, including
revenue, EBITDA, EBIT and net income multiples. For purposes of this analysis,
total purchase price equals the amount paid for the target's equity, and total
enterprise value equals the purchase price, plus the target's outstanding
interest bearing indebtedness, less cash and cash equivalents purchased.
Similar to its market multiple analysis, Ladenburg calculated an
acquisition multiple valuation for Fresh Juice and Saratoga by utilizing median
acquisition multiples to develop a valuation range. Equity valuations for Fresh
Juice and Saratoga based on revenues, EBITDA and EBIT were calculated by
multiplying each company's revenues, EBITDA and EBIT by the respective
multiples, then subtracting total debt and adding cash and cash equivalents.
For valuations based on net income Ladenburg multiplied each company's net
income by the net income median multiple to arrive at equity value. Based on
this analysis, the range of implied per share equity values for Fresh Juice was
$1.74 to $4.14. The range of implied per share equity values for Saratoga was
$1.30 to $4.71.
Discounted cash flow analysis: the discounted cash flow analysis ("DCF
analysis") derives enterprise values based on the present value of a company's
unleveraged free cash flow over a five year period, plus the present value of a
company's total enterprise value in five years (the "Terminal Value"). The
unleveraged free cash flows Ladenburg used for purposes of completing the DCF
analysis were derived from projections for each of Fresh Juice and Saratoga
provided to Ladenburg by management of Fresh Juice and Saratoga, respectively.
For purposes of this analysis unleveraged free cash flow equals EBIT, plus
depreciation, less capital expenditures, plus any decreases or minus any
increases in working capital. A company's unleveraged free cash flow provides a
measure of how much cash it produces, irrespective of how it finances its
operations (i.e., before interest income and expense).
Ladenburg developed the discount rate used to calculate the present
value of the combined entity's future unleveraged free cash flow and Terminal
Value by estimating Fresh Juice and Saratoga's weighted average cost of capital
("WACC"). To estimate the WACC, Ladenburg used a standard capital asset pricing
model formula to determine a WACC for each company comparable to Fresh Juice
and Saratoga. For purposes of the DCF Analysis, Ladenburg then adjusted the
WACC upward for Fresh Juice and Saratoga because a number of the comparable
companies have larger market capitalizations and less expensive access to
capital.
44
Ladenburg calculated the Terminal Value of Fresh Juice and Saratoga by
applying a range of multiples based on the acquisition multiples analysis to
Fresh Juice and Saratoga's EBITDA in the fifth year, the resulting value of
which was then discounted to present value. By adding the present value of each
of Fresh Juice and Saratoga's unleveraged free cash flows over the next five
years and the Terminal Values, Ladenburg arrived at a total enterprise
valuation for Fresh Juice and Saratoga. Ladenburg adjusted the total enterprise
value by subtracting total debt and adding cash and cash equivalents to arrive
at a valuation of the equity. Based on this analysis, the range of implied per
share equity values for Fresh Juice was $1.95 to $2.42. The range of implied
per share equity values for Saratoga was $5.65 to $6.68.
Takeover premium analysis: the takeover premium analysis examines
recent premiums paid in the acquisition of public companies. Premiums are
defined, in percentage terms, as the excess (or shortfall) of the per share
purchase price relative to the target's stock price prior to the announcement
of the transaction. The percentage premiums were applied by Ladenburg to Fresh
Juice's average stock price for the 30 days immediately preceding the
announcement of the proposed merger to derive a range of per share values for
Fresh Juice. Based on this analysis, the range of implied per share equity
values for Fresh Juice was $3.07 to $3.45.
Summary: In developing the Ladenburg opinion, Ladenburg calculated a
range of values for Fresh Juice assigning an equal weighting to each of the
four quantitative valuation approaches described above. Based on this
calculation, the range of implied per share equity values for Fresh Juice was
$1.77 to $3.14.
Ladenburg then calculated a range of values for the Saratoga Class A
common stock assigning an 80.0% valuation weighting to Saratoga's 30 day
average stock price of $2.55 and a 20.0% valuation weighting to a range of
values determined using the three valuation approaches for Saratoga described
above. Based on the three valuation approaches the range of implied per share
equity values for Saratoga was $3.67 to $6.15. The weighted average range of
implied per share equity values for Saratoga Class A common stock given the
80.0%/20.0% valuation weighting was $2.77 to $3.27. Given the per share cash
consideration to Fresh Juice stockholders of $2.24 and the per share stock
consideration of .33 shares of Saratoga Class A common stock for each share of
Fresh Juice common stock with a per share valuation range of the Saratoga Class
A common stock of $2.77 to $3.27, the total value of per share merger
consideration to Fresh Juice stockholders was determined to be $3.17 to $3.33.
Limitations of analyses
Although each of the analyses employed by Ladenburg in rendering the
Ladenburg opinion is summarized above, the above summary does not purport to be
a complete description of Ladenburg's analyses and contains those aspects of
Ladenburg's analyses deemed most relevant. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
quantitative and qualitative methods of financial analyses and the application
of those methods to the particular circumstances and, therefore, such an
opinion is not readily susceptible to partial analysis or summary description.
Accordingly, Ladenburg believes that its analyses must be considered as a whole
and that 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 Ladenburg opinion.
In conducting its analysis, Ladenburg assumed and relied upon the
accuracy and completeness of all information that was publicly available,
supplied or otherwise communicated to Ladenburg by or on behalf of Fresh Juice
and Saratoga, respectively and Ladenburg did not undertake to independently
verify such information. Ladenburg assumed that the financial forecasts
examined by it were reasonably prepared on bases reflecting the best currently
available estimates and good faith judgments of management of Fresh Juice and
Saratoga, respectively, as to the future performance of each company. Ladenburg
also relied upon assurances of management of Fresh Juice and Saratoga that they
were unaware of any facts that would make the information or financial
forecasts provided to Ladenburg incomplete or misleading. Ladenburg also
assumed that any material liabilities (contingent or otherwise, known or
unknown) of Fresh Juice and Saratoga were as set forth in the consolidated
financial statements of each
45
company. Ladenburg did not make nor was it provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Fresh Juice or Saratoga. Ladenburg was not authorized to, and did not,
solicit third party indications of interest in acquiring all or part of Fresh
Juice, and Ladenburg was not asked to consider, and its opinion does not
address, the consideration Fresh Juice might receive from another third-party
purchaser, the relative merits of the merger as compared to any alternative
business strategies that might exist for Fresh Juice or the effect of any other
transaction in which Fresh Juice might engage. Ladenburg was not requested to
and did not analyze or give any effect to the impact of any federal, state or
local income taxes to Fresh Juice stockholders arising out of the merger.
Although Ladenburg evaluated the merger consideration to be received by Fresh
Juice stockholders, it was not requested to, and did not, participate in the
negotiation of the merger agreement and was not requested to, and did not
recommend, the specific consideration payable to Fresh Juice stockholders upon
consummation of the merger. In connection with its analyses, Ladenburg made
numerous assumptions with respect to industry performance, general business,
economic, market and financial conditions and other matters, based on, among
other things, information provided to it by Fresh Juice and Saratoga, many of
which are beyond the control of Fresh Juice and Saratoga. Any estimates
contained in Ladenburg's analyses are not necessarily indicative of actual
values or results, which may be significantly more or less favorable than as
set forth therein. Ladenburg's analyses are necessarily based upon information
available to Ladenburg, and financial, stock market, economic and other
conditions and circumstances existing and disclosed to Ladenburg as of the date
of the Ladenburg opinion.
The Fresh Juice board of directors selected Ladenburg as its financial
advisor because Ladenburg is a prominent investment banking firm with
experience in transactions similar to the merger. As part of its investment
banking services, Ladenburg is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
Pursuant to an engagement letter dated June 5, 1998, as amended on
October 8, 1998, Ladenburg will be paid a fee of $165,000 for the rendering of
the Ladenburg opinion. Of this amount, $40,000 was paid upon execution of the
engagement letter and the balance of the fee outstanding totaling $125,000 will
be paid at the time of closing of the merger. In addition, whether or not the
merger is consummated, Fresh Juice has also agreed to reimburse Ladenburg for
its reasonable out-of-pocket expenses (including, without limitation,
attorneys' fees and expenses) incurred by Ladenburg in connection with
rendering the Ladenburg opinion. Fresh Juice also agreed, under separate
agreement, to indemnify Ladenburg, its affiliates and each of its directors,
officers, agents and employees and each person, if any, controlling Ladenburg
and any of its affiliates against certain liabilities, including liabilities
under federal securities laws. Ladenburg holds a warrant to purchase 50,000
shares of Fresh Juice common stock at an exercise price of $2.96 which will be
exchanged in the merger for shares of Saratoga Class A common stock. Ladenburg
has, in the past, been engaged by Fresh Juice to perform various corporate
finance activities for which it has received customary fees including the
warrant, which was issued to Ladenburg in 1996.
Ladenburg may provide financial advisory services to, and may act as
underwriter or placement agent for, Saratoga in the future. In the ordinary
course of Ladenburg's business, Ladenburg may actively trade the securities of
Fresh Juice and Saratoga for its own account and for the accounts of its
customers and, accordingly, may at any time hold long or short positions in
such securities.
46
INTERESTS OF CERTAIN PERSONS IN THE MERGER
You should be aware that certain executive officers and directors of
Fresh Juice will be entitled to certain benefits upon consummation of the
merger that are in addition to the interests of the Fresh Juice stockholders
generally.
Steven Bogen
Steven Bogen, Chief Executive Officer of Fresh Juice and Co-Chairman
of the Fresh Juice board of directors, and Fresh Juice entered into a
three-year employment agreement dated March 31, 1996, which provides that the
parties may extend the employment agreement for up to two additional terms of
three years each. The existing employment agreement between Mr. Bogen and Fresh
Juice provides for the payment of termination benefits to Mr. Bogen in the
event of the termination of his employment for certain reasons following a
change of control of Fresh Juice, which could amount to approximately
$1,146,000. As a condition to the completion of the merger, Mr. Bogen, Fresh
Juice and Saratoga have entered into an agreement which amended in part Mr.
Bogen's employment agreement. The Bogen agreement provides that, as of the
completion of the merger, Mr. Bogen shall resign from all positions held by him
as an officer, director and employee of Fresh Juice and its subsidiaries. The
Bogen agreement further provides that Mr. Bogen shall waive certain payments
and benefits due to him under his existing employment agreement with Fresh
Juice, including certain change of control termination payments, except that he
will:
o be paid the sum of $962,687.40 in cash at the closing;
o be provided, at no cost to him, the automobile currently provided
to him by Fresh Juice with insurance and maintenance for a period
of two years following the closing of the merger;
o be provided, at no cost to him, health or other group insurance
pursuant to plans in effect for executive officers or employees
generally of Fresh Juice for a period of two years following the
closing of the merger; and
o be paid $15,000 toward certain legal fees and expenses incurred by
Mr. Bogen in connection with the Bogen agreement.
The Bogen agreement further provides that, upon payment of $962,687.40 as
described above, Mr. Bogen will terminate his existing employment agreement
with Fresh Juice, except his agreement not to compete. Effective as of the
closing of the merger, Mr. Bogen will increase slightly the scope of the
agreement not to compete from the citrus juice beverage industry to the juice
beverage industry.
In addition, Saratoga has retained Mr. Bogen to serve as a full-time
consultant to Saratoga and Fresh Juice during the one year period following the
closing of the merger in exchange for the sum of $300,000 payable monthly in
arrears during such one year period. Full-time is defined as not more than
1,000 hours in total. In the event that Mr. Bogen's consulting relationship is
terminated without cause, Saratoga will be required to pay the consulting fee
in full. A crucial term of the consulting agreement is Mr. Bogen's agreement to
extend the existing term of his agreement not to compete with Fresh Juice from
one year to two years following the closing, including the increased scope of
the agreement not to compete as described above.
As provided in the Bogen agreement, Mr. Bogen will be appointed as a
member of the Saratoga board of directors, effective as of the closing of the
merger until the 1999 annual meeting of Saratoga stockholders. Mr.
47
Bogen will receive all associated compensation payable to non-employee
directors. In addition, Robin Prever, the President, Chief Executive Officer
and a director of Saratoga, and Anthony Malatino, a former director of
Saratoga, have entered into an agreement with Mr. Bogen pursuant to which, as
long as Mr. Bogen owns 400,000 shares of Saratoga's Class A common stock, Ms.
Prever and Mr. Malatino will vote for the re-election of Mr. Bogen to the
Saratoga board of directors, subject to certain conditions set forth in the
agreement.
The payments to be made to Mr. Bogen in connection with the merger and
the value of non-cash benefits or deferred payments or benefits which accrue to
Mr. Bogen will be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Internal Revenue Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Internal Revenue Code will be
treated as subject to an excise tax imposed by Section 4999 of the Internal
Revenue Code. The determination of whether any of the payments to be made to
Mr. Bogen will constitute "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Internal Revenue Code will not be made until the
closing. To the extent that any of the payments constitute "excess parachute
payments", such payments will not be deductible by Saratoga.
Steven Smith
Saratoga and Steven Smith, President of Fresh Juice and Co-Chairman of
the Fresh Juice board of directors, entered into an option agreement. Under the
Smith option agreement, Mr. Smith granted to Saratoga an option to purchase
825,000 shares of his Fresh Juice common stock at $3.00 per share. The Smith
option agreement provided that Saratoga would pay to Mr. Smith additional
consideration under certain circumstances involving the acquisition of Fresh
Juice at a price in excess of the option price of $3.00 per share. On October
13, 1998, the Smith option agreement was terminated by mutual agreement of the
parties.
Mr. Smith and Fresh Juice entered into a three-year employment
agreement dated March 31, 1996, which provides that the parties may extend the
employment agreement for up to two additional terms of three years each. The
existing employment agreement between Mr. Smith and Fresh Juice provides for
the payment of termination benefits to Mr. Smith in the event of the
termination of his employment for certain reasons following a change of control
of Fresh Juice, which could amount to approximately $1,146,000. As a condition
to the completion of the merger, Mr. Smith, Fresh Juice and Saratoga have
entered into an agreement which amended in part Mr. Smith's employment
agreement. The Smith agreement provides that, as of the closing of the merger,
Mr. Smith shall resign from all positions held by him as an officer, director
and employee of Fresh Juice and its subsidiaries. The Smith agreement further
provides that Mr. Smith shall waive certain payments and benefits due to him
under his existing employment agreement with Fresh Juice, including certain
change of control termination payments, except that he will:
o be paid $250,000 in cash at the closing;
o be provided, at no cost to him, the automobile currently provided
to him by Fresh Juice with insurance and maintenance for a period
of one year following the closing of the merger; and
o be provided, at no cost to him, health or other group insurance
pursuant to plans in effect for executive officers or employees
generally of Fresh Juice for a period of one year following the
closing of the merger.
The Smith agreement further provides that upon payment of the $250,000 in cash
as described above, Mr. Smith agrees to terminate his existing employment
agreement with Fresh Juice, except his agreement not to compete, as extended.
Effective as of the closing of the merger, Mr. Smith will agree to extend the
existing term of his
48
agreement not to compete with Fresh Juice from one year to three years
following the closing of the merger and to increase slightly the scope of the
agreement not to compete from the citrus juice beverage industry to the juice
beverage industry. Additionally, Mr. Smith has agreed that certain stock
options granted to him under Fresh Juice's incentive stock option plan which
were in dispute are ineffective, null and void.
Jeffrey Heavirland
Jeffrey Heavirland, a director and executive officer of Fresh Juice,
has entered into a two-year employment agreement with Saratoga which, upon the
closing of the merger, will replace his existing employment agreement with
Fresh Juice, which may have entitled him to certain change in control payments
and benefits in connection with the merger which could amount to approximately
$530,000. Pursuant to the Heavirland agreement, Saratoga has agreed to employ
Mr. Heavirland after the merger as Executive Vice President of Saratoga and to
continue to employ Mr. Heavirland as President and Chief Executive Officer of
The Fresh Juice Company of California, Inc.
The Heavirland agreement provides for:
o a payment of an annual salary of not less than $150,000, which is
a reduction from his current annual salary of $200,000;
o payment of an annual performance bonus under Saratoga's executive
bonus plan;
o payment of a bonus of $100,000 to Mr. Heavirland at the closing of
the merger; and
o the grant of an option to purchase 100,000 shares of Saratoga
Class A common stock to be exercisable at a price equal to the
fair market value of shares of Saratoga Class A common stock on
the date of grant, which will be as soon as practicable after the
closing of the merger. The Class A common stock underlying the
options to be issued to Mr. Heavirland is worth $206,250, based on
the closing sales price of the Saratoga Class A common stock as
reported by the Nasdaq SmallCap Market of $2.0625 per share on
December 21, 1998. On the date of grant, the exercise price of the
options to be granted to Mr. Heavirland will be equal to the value
of the Class A common stock underlying the options.
Such stock options shall vest over 3 years with 50% vesting in the first year
and the remaining stock options vesting 25% on each of the second and third
anniversary dates of the grant. The vesting schedule for the stock options may
accelerate if the Heavirland agreement is terminated under certain
circumstances.
The Heavirland agreement provides that if the Heavirland agreement is
terminated by Saratoga without cause or Mr. Heavirland terminates the
Heavirland agreement for "good reason" and Heavirland agrees to comply with the
confidentiality covenant and, for a period of one year, agrees to comply with
the non-compete covenant contained in the Heavirland agreement, Mr. Heavirland
will be entitled to payment of an aggregate amount equal to the sum of (a) his
annual salary rate, then in effect, and (b) the average of his annual bonuses,
if any, actually paid with respect to the two most recently completed fiscal
years prior to the termination. Such amounts will be payable, in Saratoga's
sole and absolute discretion, either in a lump sum or in equal monthly payments
ending with the end of the term of the Heavirland agreement.
The Heavirland agreement also provides for the payment to Mr.
Heavirland of a lump sum severance payment equal to 2.99 times his "base
amount", as defined in Section 280G of the Internal Revenue Code subject to
certain reductions, in the event (a) his employment with Saratoga is terminated
within six months following a change in control of Saratoga, other than for
non-renewal of the Heavirland agreement on the second anniversary
49
date of the closing of the merger or for cause, retirement, death or
disability, or; (b) if he is deemed terminated for good reason within such time
period. For the purpose of the Heavirland agreement, a "Change of Control" of
Saratoga shall be deemed to have occurred after the effective date (x) if
during any period of 2 consecutive years from the execution of the Heavirland
agreement, individuals who at the beginning of such period constitute the board
of directors of Saratoga and any new director whose election by the Saratoga
board of directors or nomination for election by the Saratoga's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (y) upon the Saratoga stockholders'
approval of a dissolution or liquidation of Saratoga or a sale by Saratoga of
all or substantially all of Saratoga's assets.
Mr. Heavirland has agreed to cancel at the closing of the merger
options to purchase 60,000 shares of Fresh Juice common stock at $3.00 per
share, and an option to purchase 150,000 shares of Fresh Juice common stock at
$2.72 per share in exchange for a lump sum payment of $106,832. The agreement
is attached as Appendix C to this document. In addition, Mr. Heavirland has a
warrant to purchase 42,857 shares of Fresh Juice common stock at $3.00 per
share, which will be cashed out in the merger. For such warrants, Mr.
Heavirland will receive 4,476 shares of Saratoga Class A common stock. These
shares are worth $9,232, based on the closing sales price of the Saratoga Class
A common stock as reported by the Nasdaq SmallCap Market of $2.0625 per share
on December 21, 1998.
Options and warrants
In the merger, certain options and warrants to purchase Fresh Juice
common stock will be canceled and exchanged for a number of shares of Saratoga
Class A common stock equal to:
o 0.33,
o multiplied by the difference between $3.35 and the exercise price
of such options and warrants,
o divided by $1.106, and
o multiplied by the number of shares of Fresh Juice common stock
subject to such options and warrants.
For example, a holder of options to purchase 1,000 shares of Fresh Juice common
stock at an exercise price of $3.00 will receive 104 shares of Saratoga Class A
common stock. Certain options held by Mr. Heavirland will be canceled at the
closing of the merger in exchange for a lump sum payment. Other than Mr.
Heavirland, no director or executive officer of Fresh Juice holds options or
warrants to purchase shares of Fresh Juice common stock.
The Fresh Juice board of directors had determined to grant options to
each non-employee director to purchase 7,500 shares of Fresh Juice common stock
in lieu of an annual retainer for services rendered in fiscal year 1998 subject
to adoption and approval by the Fresh Juice stockholders of a non-employee
director stock option plan. If the merger is completed, the non-employee
director stock option plan will not be adopted and the three non-employee
members of the Fresh Juice board of directors who served during the year will
each be paid an annual retainer of $2,625 based on the difference between the
merger consideration and a proposed stock option price of $3.00 per share
multiplied by the 7,500 shares which were to be granted.
50
Indemnification; insurance
The merger agreement provides that after the merger, each of Saratoga
and Fresh Juice shall defend, indemnify and hold harmless and advance costs and
expenses, including reasonable attorney's fees, disbursements and expenses, to
each present and former director and officer of Fresh Juice and its
subsidiaries determined as of the closing of the merger against any costs or
expenses, including reasonable attorney's fees, judgments, fines, losses,
claims, damages, settlements or liabilities incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising after the effective time of the merger
and out of or pertaining to matters existing or occurring at or prior to the
closing of the merger, including without limitation, the authorization of the
merger, merger agreement and the related transactions, whether asserted or
claimed prior to, at or after the closing of the merger, to the fullest extent
that Fresh Juice would have been permitted under Delaware law and its charter
or bylaws in effect on the date of the merger agreement to indemnify such
person and also advance expenses as incurred to the fullest extent permitted
under applicable law provided the person to whom expenses are advanced provides
an undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification; provided that any determination
required by law to be made with respect to whether an officer's or director's
conduct complies with the standards set forth under Delaware law and Fresh
Juice's charter and bylaws as of the date of the merger agreement shall be made
by independent counsel selected jointly by Saratoga and the indemnified party.
For a period of 6 years following the closing of the merger, Saratoga
will provide to the persons who served as directors or officers of Fresh Juice
or any of Fresh Juice's subsidiaries on or before the effective time of the
merger, insurance against liabilities and claims and related expenses made
against them resulting from their service as such prior to the closing of the
merger. Such coverage may be provided by means of an extended reporting period
endorsement to the policy presently issued to Fresh Juice by the present
carrier for Fresh Juice, or by such other means which shall provide
substantially equivalent coverage to the persons.
The Fresh Juice board of directors and the Saratoga board of directors
were each aware of these benefits and considered them, among other things, in
making their respective decisions. See "The merger--Background of the merger"
on page 33 and "Terms of the merger agreement--Certain covenants--Insurance for
the benefit of directors and officers" on page 58.
EFFECTIVE TIME; EFFECT OF THE MERGER
Effective time. If the Saratoga stockholders and Fresh Juice
stockholders approve the matters requested in this document, and if all other
conditions to the obligations of the parties to consummate the merger are
satisfied or waived, the merger will become effective upon the filing of a
certificate of merger with the secretary of state of Delaware in accordance
with Delaware law. Saratoga will file the certificate of merger promptly
following the closing of the merger. The closing will occur as soon as
practicable following approval of the merger agreement by both of the Fresh
Juice stockholders and the Saratoga stockholders, and the satisfaction or
waiver of the other conditions to each party's obligations to consummate the
merger as set forth more fully in the merger agreement. It is anticipated that
the merger will be completed on or before January 31, 1999.
Effect of the merger. As of the effective time of the merger, Rowale
will be merged with and into Fresh Juice (which will be the surviving
corporation) and Rowale's separate corporate existence will cease. All of the
assets and liabilities of Rowale will be transferred to, and assumed by, Fresh
Juice, as the surviving corporation, upon consummation of the merger. Fresh
Juice will become a wholly-owned subsidiary of Saratoga.
51
MANNER AND BASIS OF CONVERTING FRESH JUICE COMMON STOCK
At the closing, each of the 6,467,731 issued and outstanding shares of
Fresh Juice common stock other than shares held directly or indirectly by
Saratoga, Rowale or Fresh Juice and shares with respect to which dissenters'
rights have been properly made will be converted into the right to receive and
be exchangeable for the merger consideration.
Within 3 business days after the closing of the merger, American Stock
Transfer & Trust Company, or such other bank or trust company selected by
Saratoga and reasonably acceptable to Fresh Juice as exchange agent, shall send
or cause to be sent to each Fresh Juice stockholder a form letter of
transmittal which will specify instructions for use in surrendering
certificates representing shares of Fresh Juice common stock in exchange for
the merger consideration into which such shares have been converted.
YOU SHOULD NOT FORWARD YOUR FRESH JUICE STOCK CERTIFICATES UNTIL YOU
HAVE RECEIVED TRANSMITTAL FORMS AND INSTRUCTIONS. YOU SHOULD NOT RETURN FRESH
JUICE STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
On or prior to the closing of the merger, Saratoga shall deposit, or
shall cause to be deposited with the exchange agent selected by Saratoga in
trust for the benefit of the Fresh Juice stockholders, sufficient cash to pay
in full the cash payments to be paid in exchange for the outstanding shares of
Fresh Juice common stock as part of the merger consideration.
Until the certificates representing the Fresh Juice common stock are
surrendered for exchange after the consummation of the merger, holders of such
certificates will not be paid the merger consideration. The merger agreement
requires that when such certificates are surrendered, the merger consideration
attributable to the shares of Fresh Juice common stock surrendered will be paid
promptly without interest.
After the closing of the merger, there will be no transfers on the
stock transfer books of Fresh Juice of the shares of Fresh Juice common stock
which were issued and outstanding immediately prior to the closing of the
merger.
Any portion of the cash deposited with the exchange agent selected by
Saratoga that remains unclaimed 6 months after the closing of the merger shall
be transferred from such exchange agent to Saratoga. Thereafter, Fresh Juice
stockholders shall look only to Saratoga for payment of the merger
consideration, without interest, subject to applicable laws regarding abandoned
property and escheat.
DISSENTERS' RIGHTS OF APPRAISAL
Pursuant to Delaware law, any Fresh Juice stockholder who does not
wish to accept the merger consideration to be paid pursuant to the merger
agreement may dissent from the merger and elect to have the fair value of his
shares of Fresh Juice common stock judicially determined and paid in cash,
provided that he complies with the provisions of Delaware law.
The following is a brief summary of the statutory procedures to be
followed by a Fresh Juice stockholder in order to dissent from the merger and
perfect appraisal rights under the Delaware law. THIS SUMMARY IS NOT INTENDED
TO BE COMPLETE. YOU ARE URGED TO READ SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW IN ITS ENTIRETY, WHICH IS ATTACHED AS APPENDIX D TO THIS
DOCUMENT.
If any Fresh Juice stockholder elects to exercise his right to dissent
from the merger and demand appraisal, such stockholder must satisfy each of the
following conditions:
52
o You must deliver a written demand for appraisal to Fresh Juice on
or before the vote in taken at the Fresh Juice special meeting,
which will be held on January 27, 1998 at 10:00 a.m., local time.
This written demand for appraisal must be separate from your proxy
or vote against the merger agreement.
o You must not vote in favor of the merger agreement. If you vote in
favor of the merger agreement, by proxy or in person, if you
return a signed proxy and fail to vote against approval or if you
abstain from voting, you will have waived your right of appraisal,
even if you previously filed a written demand for appraisal.
o You must continuously hold such shares of Fresh Juice common stock
from the date of the making of the demand through the closing of
the merger. You should read the paragraphs below for more details
on making a demand for appraisal.
If any Fresh Juice stockholder fails to comply with any of these
conditions and the merger becomes effective, such stockholder will only be
entitled to receive the merger consideration provided in the merger agreement.
All written demands for appraisal should be addressed to: Steven
Bogen, Chief Executive Officer and Secretary, The Fresh Juice Company, Inc.,
280 Wilson Avenue, Newark, New Jersey 07105, before the taking of the vote
concerning the merger agreement at the Fresh Juice special meeting, and should
be executed by, or on behalf of, the stockholder of record. Such demand must
reasonably inform Fresh Juice of the identity of the stockholder and that such
stockholder is thereby demanding appraisal of his shares.
TO BE EFFECTIVE, A DEMAND FOR APPRAISAL MUST BE EXECUTED BY OR FOR THE
STOCKHOLDER OF RECORD WHO HELD SUCH SHARES ON THE DATE OF MAKING SUCH DEMAND,
AS SUCH STOCKHOLDER'S NAME APPEARS ON HIS STOCK CERTIFICATE(S) AND CANNOT BE
MADE BY THE BENEFICIAL OWNER IF HE DOES NOT ALSO HOLD THE SHARES OF RECORD. THE
BENEFICIAL HOLDER MUST, IN SUCH CASE, HAVE THE REGISTERED OWNER SUBMIT THE
REQUIRED DEMAND IN RESPECT OF SUCH SHARES.
If Fresh Juice common stock is owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of a demand
for appraisal should be made in such capacity. If Fresh Juice common stock is
owned of record by more then one person, as in a joint tenancy or tenancy in
common, such demand must be executed by or for all joint owners. An authorized
agent, including one of two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, he is acting as agent for the record owner. A record owner, such as a
broker, who holds Fresh Juice common stock as a nominee for others may exercise
his right of appraisal with respect to the shares held for one or more
beneficial owners, while not exercising such right for other beneficial owners.
In such case, the written demand should set forth the number of shares as to
which the record owner dissents. Where no number of shares is expressly
mentioned, the demand will be presumed to cover all shares of Fresh Juice
common stock in the name of such record owner.
Within 10 days after the closing of the merger, Fresh Juice (as the
surviving corporation in the merger) must give written notice that the merger
has become effective to each stockholder who so filed demand for appraisal and
who did not vote in favor of the merger agreement. Within 120 days after the
closing of the merger, either Fresh Juice, or any holder of shares of Fresh
Juice common stock who has complied with the requirements of Section 262 of the
Delaware General Corporation Law, may file a petition in the Delaware court of
chancery demanding a determination of the value of the shares of Fresh Juice
common stock held by all stockholders entitled to appraisal. Fresh Juice does
not presently intend to file such a petition. Inasmuch as Fresh Juice has no
obligation to file such a petition, the failure of a stockholder to do so
within the period specified could nullify such stockholder's previous written
demands for appraisal. In any event, at any time within 60 days after the
closing of the merger or at any time
53
thereafter with the written consent of Fresh Juice, any stockholder who has
demanded appraisal has the right to withdraw the demand and to accept payment
of the merger consideration provided in the merger agreement.
Within 120 days after the closing of the merger, any stockholder who
has complied with the provisions of Section 262 of the Delaware General
Corporation Law to that point in time will be entitled to receive from Fresh
Juice as the surviving corporation, upon written request, a statement setting
forth the aggregate number of shares not voted in favor of the merger agreement
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. After the merger, Fresh Juice must
mail such statement to the stockholder within 10 days of receipt of such
request.
If a petition for appraisal is duly filed by a stockholder and a copy
thereof is delivered to Fresh Juice, Fresh Juice will then be obligated within
20 days to provide the court of chancery with a duly verified list containing
the names and addresses of all Fresh Juice stockholders who have demanded an
appraisal of their shares and with whom agreement as to the value of such
shares has not been reached. After notice to such stockholders, the court of
chancery is empowered to conduct a hearing upon the petition to determine those
stockholders who have complied with Section 262 of the Delaware General
Corporation Law and who have become entitled to appraisal rights under that
section. The court of chancery may require the stockholders who demanded
payment for their shares to submit their stock certificates to the registry in
chancery for notation thereon of the pendency of the appraisal proceedings; and
if any stockholder fails to comply with such direction, the court of chancery
may dismiss the proceedings as to such stockholder.
After determination of the stockholders entitled to an appraisal, the
court of chancery will appraise the shares of Fresh Juice common stock,
determining their fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger. When the value is so determined,
the court of chancery will direct the payment by Fresh Juice of such value,
with interest thereon, simple or compound, if the court of chancery so
determines, to the stockholders entitled to receive the same, upon surrender to
Fresh Juice by such stockholders of the certificates representing such Fresh
Juice common stock.
WE NOTE THAT THE FAIR VALUE OF THEIR SHARES OF FRESH JUICE COMMON
STOCK DETERMINED UNDER SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
COULD BE MORE THAN, THE SAME AS, OR LESS THAN THE MERGER CONSIDERATION THAT
FRESH JUICE STOCKHOLDERS ARE TO RECEIVE PURSUANT TO THE MERGER AGREEMENT IF
THEY DO NOT SEEK APPRAISAL OF THEIR SHARES OF FRESH JUICE COMMON STOCK, AND
THAT AN OPINION OF AN INVESTMENT BANKING FIRM AS TO FAIRNESS IS NOT AN OPINION
AS TO FAIR VALUE UNDER SECTION 262.
Costs of the appraisal proceeding may be assessed against Fresh Juice
and the stockholders participating in the appraisal proceeding by the court of
chancery, as the court of chancery deems equitable under the circumstances.
Upon application of any stockholder, the court of chancery may determine the
amount of interest, if any, to be paid upon the value of the Fresh Juice common
stock owned by stockholders entitled to the payment of interest. Upon
application of a stockholder, the court of chancery may order all or a portion
of the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable counsel fees and the fees
and expenses of experts, to be charged pro rata against the value of all shares
entitled to appraisal. Any stockholder who has demanded appraisal rights will
not, after the closing of the merger, be entitled to:
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o vote the Fresh Juice common stock subject to such demand for any
purpose
o receive payment of dividends or any other distribution with
respect to such shares other than dividends or distributions, if
any, payable to holders of record as of a record date prior to the
effective time of the merger
o receive the payment of the consideration provided for in the
merger agreement
However, if no petition for an appraisal is filed within 120 days after the
closing of the merger or if such stockholder delivers to Fresh Juice a written
withdrawal of his demand for an appraisal and an acceptance of the merger,
either within 60 days after the closing of the merger or thereafter with the
written approval of Fresh Juice, then the right of such stockholder to an
appraisal will cease. Notwithstanding the foregoing, no appraisal proceeding in
the court of chancery will be dismissed as to any stockholder without the
approval of the court of chancery, and such approval may be conditioned upon
such terms as the court of chancery deems just.
FAILURE TO COMPLY STRICTLY WITH THESE PROCEDURES WILL CAUSE THE
STOCKHOLDER TO LOSE HIS DISSENTERS' RIGHTS. CONSEQUENTLY, ANY STOCKHOLDER WHO
DESIRES TO EXERCISE HIS DISSENTERS' RIGHTS IS URGED TO CONSULT A LEGAL ADVISOR
BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS.
Completion of the merger is subject to a number of conditions
including the requirement that shares of Fresh Juice common stock with respect
to which dissenters' rights have been asserted and perfected under Section 262
of the Delaware General Corporation Law shall not constitute more than 5% of
the issued and outstanding shares of Fresh Juice common stock as of December
18, 1998 (the Fresh Juice record date). See "Terms of the merger
agreement--Conditions to completion of the merger" on page 59.
The Saratoga stockholders are not entitled to dissenters' rights of
appraisal in connection with the merger. See "Comparison of rights of holders
of Saratoga common stock and Fresh Juice common stock" on page 85.
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TERMS OF THE MERGER AGREEMENT
We are summarizing certain provisions of the merger agreement in this
section. A copy of the merger agreement is attached as Appendix A to this
document and is incorporated herein by reference. The following summary is not
complete and is qualified in its entirety by reference to the merger agreement.
Capitalized terms used in this section but not defined in this document have
the meanings set forth in the merger agreement. We urge you to read the merger
agreement carefully.
As of the date of this document, nothing has come to either of
Saratoga's or Fresh Juice's attention that has led it to believe that the
representations and warranties made by each of Fresh Juice, Saratoga and Rowale
in the merger agreement are not true and correct in all material respects or
that the respective covenants of each party contained therein have not been
complied with in all material respects by the respective parties. Accordingly,
nothing has come to either of Saratoga's or Fresh Juice's attention that has
led it to believe that, if the Saratoga stockholders and the Fresh Juice
stockholders approve the merger agreement, the other conditions to the merger
will not ultimately be satisfied. There can be no assurance, however, that such
conditions will be satisfied or that the merger will be completed.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various customary representations and
warranties made by Fresh Juice, Saratoga and Rowale. In particular, each party
to the merger agreement provided representations and warranties relating to,
among other things:
o its due organization, power, authority and good standing and
similar corporate matters;
o its authorization, execution, delivery and enforceability of the
merger agreement;
o its non-contravention of its charter, bylaws, agreements or law;
o its required consents or approvals;
o its capital structure;
o its financial information;
o the absence of material adverse changes in its business;
o litigation and legal proceedings;
o its tax returns and taxes;
o its employee benefit plans;
o the delivery of certain documents filed by it with the SEC;
o the accuracy of information provided or to be provided by it for
inclusion in this document and the compliance of this document
with the rules of the SEC;
o its compliance with applicable law and certain agreements;
o its material contracts, agreements or commitments;
o its agreements with regulatory agencies;
o its environmental matters;
o its real and personal properties;
o its material insurance policies;
o the absence of certain non-disclosed transactions with affiliates;
o the accuracy of its disclosure;
o its labor relations;
o its intellectual property rights;
o its substantial suppliers and customers; and
o its incurrence of broker's fees, commissions or finder's fees in
connection with the merger.
56
Saratoga and Rowale also provided representations and warranties that
Saratoga knows of no reason that the financing required to complete the merger
will not be consummated. Fresh Juice also provided representations and
warranties relating to its receipt of its fairness opinion from Ladenburg and
that such opinion has not been amended or rescinded as of the date of the
merger agreement.
CERTAIN COVENANTS
General. Pursuant to the merger agreement, each party to the merger
agreement has agreed, among other things, that, during the period from the date
of the merger agreement until the earlier of the termination of the merger
agreement or the closing of the merger, except as otherwise consented to in
writing by Saratoga or Fresh Juice, as the case may be, or as expressly
contemplated or permitted by the merger agreement, it shall and shall cause its
subsidiaries to:
o carry on its business in the ordinary course consistent with past
practice, including the use of reasonable efforts to: preserve its
business organization, keep available the present services of its
employees, and preserve the goodwill of its customers and others
having business dealings with it;
o not declare or pay any dividends on, or make other distributions
in respect of, any of its capital stock;
o not effect certain changes in its capitalization, and (for Fresh
Juice only) not purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
o not issue, authorize or propose the issuance, delivery or sale of,
any shares of its capital stock or securities convertible into or
exercisable for shares of its capital stock, with certain
exceptions;
o not amend its charter or bylaws;
o not enter into a new line of business;
o not acquire or agree to acquire any material business or assets,
other than in the ordinary course of business;
o not take any action that would result in any of its
representations and warranties becoming untrue or in any of the
conditions to the merger not being satisfied, or result in a
breach of any provision of the merger agreement except, in every
case, as may be required by applicable law;
o not change its methods of accounting except as required by
generally accepted accounting principles;
o other than in the ordinary course of business consistent with past
practice, not incur any indebtedness or refinance existing debt,
with certain exceptions;
o not sell, lease, encumber, assign or otherwise dispose of any of
its material assets, properties or other rights or agreements or
agree to do so except in the ordinary course of business, with
certain exceptions;
o not make any material tax election or settle or compromise any
material tax liability;
57
o not waive any material right, whether in equity or at law; and
o not agree to do any of the foregoing.
Fresh Juice has further agreed, among other things, that, during the
period from the date of the merger agreement until the earlier of the
termination of the merger agreement or the closing of the merger, except as
otherwise consented to by Saratoga or as expressly contemplated or permitted by
the merger agreement, Fresh Juice shall and shall cause its subsidiaries to:
o not make any capital expenditures in excess of $50,000
individually, or $150,000 in the aggregate, with certain
exceptions;
o not (a) enter into, adopt, amend, renew or terminate any plan for
the benefit of its directors, officers or employees, (b) increase
the compensation or fringe benefits or any of its directors,
officers or employees, subject to certain exceptions, or (c) enter
into, modify or renew any agreement with any director, officer or
employee, or establish or amend any plan, agreement, policy or
arrangement providing for any benefit to any director, officer or
employee, with certain exceptions;
o not pay, discharge or satisfy any claim, liability or obligation
other than in the ordinary course of business consistent with past
practice; and
o not enter into, amend or terminate any material lease, contract,
agreement, or commitment with certain exceptions.
No solicitation of alternative transactions. The merger agreement
provides that none of Fresh Juice, any of its subsidiaries or any of their
respective officers, directors, employees, representatives, agents or advisors
or other persons controlled by Fresh Juice shall: solicit or hold discussions
or negotiations with, or assist or provide any information to, any third party
concerning any merger, business combination, disposition or a significant
portion of its assets or acquisition of a significant portion of its capital
stock or similar transaction involving Fresh Juice; provided, however, the
Fresh Juice board of directors may enter into discussion or negotiations with,
and assist and provide information to, any person or entity that makes an
unsolicited written bona fide offer to consummate an acquisition proposal if
the Fresh Juice board of directors determines in good faith (a) based upon the
advice of its financial and legal advisors that the acquisition proposal, if
consummated, would result in a transaction more favorable to Fresh Juice
stockholders from a financial point of view than the merger and is subject only
to reasonable conditions of closing which shall include financing terms
reasonably satisfactory to Fresh Juice; and (b) after receiving advice from its
outside legal counsel and, based upon such advice, that such action is required
for the Fresh Juice board of directors to comply with its fiduciary duties to
the Fresh Juice stockholders under applicable law. The merger agreement
provides that the Fresh Juice board of directors may (x) vote to recommend an
acquisition proposal that its outside counsel determines is a superior offer
rather than pursuing the completion of the merger and terminate the merger
agreement or (y) withdraw, modify or amend its recommendation of the merger
agreement. Any such action may occur only within 21 days after the superior
offer is received and upon 2 full business days' notice to Saratoga. Any such
termination of the merger agreement arising out of a superior offer may result
in the payment of a termination fee to Saratoga. See "Terms of the merger
agreement--Termination of the merger agreement--Termination fees" on page 62.
Insurance for the benefit of directors and officers. Pursuant to the
merger agreement, for a period of 6 years following the closing of the merger,
Saratoga will provide to the persons who served as directors or officers of
58
Fresh Juice or any subsidiaries of Fresh Juice on or before the closing of the
merger, insurance against liabilities and claims and related expenses made
against them resulting from their service as such prior to the closing of the
merger. See "The merger--Interests of certain persons in the
merger--Indemnification; insurance" on page 51.
CONDITIONS TO COMPLETION OF THE MERGER
The obligations of each of Fresh Juice and Saratoga to complete the
merger are subject to, among other things, the following conditions:
o the approval of the merger agreement and the transactions
contemplated thereby by the Fresh Juice stockholders and the
approval of the issuance of the Saratoga Class A common stock in
the merger by the Saratoga stockholders;
o the receipt of all necessary governmental approvals;
o the absence of any order, injunction or decree issued by any court
or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the merger or any
transactions contemplated by the merger agreement, and the absence
of any statute, rule, regulation, order, injunction or decree of
any governmental entity which prohibits, restricts or makes
illegal the completion of the merger or any of the transactions
contemplated by the merger agreement; and
o the completion of the financing by Saratoga pursuant to the terms
and conditions set forth in the commitment letter to Saratoga
dated September 24, 1998 from NationsBank, N.A.
In addition, Saratoga's and Rowale's obligations to complete the
merger are also subject to the satisfaction of certain other conditions, may be
waived by Saratoga and Rowale, including:
o the accuracy of the representations and warranties of Fresh Juice
contained in the merger agreement and the delivery of an officer's
certificate by Fresh Juice certifying to the accuracy of such
representations and warranties as of the closing of the merger;
o the performance in all material respects by Fresh Juice of all of
its obligations under the merger agreement and the delivery of an
officer's certificate by Fresh Juice certifying to such
performance;
o the receipt by Fresh Juice of all necessary third party approvals;
o the receipt by Saratoga of the legal opinion of Bourne, Noll &
Kenyon, P.C., legal counsel to Fresh Juice, dated as of the
closing of the merger, addressed to Saratoga and Rowale, covering
such matters as the Saratoga and Rowale shall reasonably request;
o the delivery by Fresh Juice of an affidavit, dated as of the
closing of the merger, pursuant to Sections 897 and 1445 of the
Internal Revenue Code;
o the Bogen agreement and the Smith agreement shall be in effect as
of the closing of the merger, and the existing employment
agreements of Steven Bogen and Steven Smith with Fresh Juice
59
shall have been terminated in all respects, except as expressly
contemplated by the Bogen agreement and the Smith agreement;
o Fresh Juice shall have demonstrated that its in-plant quality
assurance systems for the production of non-pasteurized juices
comply with recent FDA standards for the reduction of organisms
that lead to food borne illness by 100,000-fold (5-log reduction),
which compliance will eliminate any FDA mandated warning label on
Fresh Juice products; and
o shares of Fresh Juice common stock with respect to which
dissenters' rights have been asserted and perfected shall
constitute not more than 5% of the Fresh Juice common stock issued
and outstanding as of the Fresh Juice record date.
Saratoga has acknowledged that the 5-log reduction condition to
closing has been satisfied as of the date of this document.
In addition, Fresh Juice's obligations to complete the merger are also
subject to the satisfaction of certain other conditions, any of which may be
waived by Fresh Juice, including:
o the accuracy of the representations and warranties of each of
Saratoga and Rowale contained in the merger agreement and the
delivery of an officer's certificate by each of Saratoga and
Rowale certifying to the accuracy in all material respects of such
representations and warranties as of the closing;
o the performance in all material respects by each of Saratoga and
Rowale of all of its obligations under the merger agreement and
the delivery of an officer's certificate by each of Saratoga and
Rowale certifying to such performance;
o the receipt by Fresh Juice and Rowale of all necessary third party
approvals;
o the Registration Statement shall have been declared effective by
the SEC and shall not be subject to a stop order or any threatened
stop order;
o the shares of Saratoga Class A common stock to be issued in
connection with the merger shall have been included for quotation
on the Nasdaq SmallCap Market or any other national securities
exchange, or quotation system, if any, upon which the shares of
Saratoga Class A common stock is trading or being quoted at the
closing of the merger;
o the receipt by Fresh Juice of the fairness opinion of Ladenburg
and such opinion shall not have been amended or rescinded as of
the closing of the merger;
o Fresh Juice shall have received the legal opinion of Swidler
Berlin Shereff Friedman, LLP, special counsel to Saratoga and
Rowale, dated as of the closing of the merger, covering such
matters as Fresh Juice shall reasonably request;
o Saratoga shall have made available to the exchange agent the funds
for payment of the cash portion of the merger consideration; and
o as of the closing of the merger, Saratoga shall have maintained at
all times from and after the date of the merger agreement
Saratoga's then current directors' and officers' liability
insurance policy,
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or an equivalent policy, subject in either case to terms and
conditions, including, without limitation, the amount of coverage,
no less advantageous to the beneficiaries of the policy than those
contained in the policy in effect as of the date of the merger
agreement.
TERMINATION OF THE MERGER AGREEMENT
Grounds for termination. The merger agreement may be terminated and
the merger abandoned at any time prior to the closing of the merger, whether
before or after approval of the matters presented in connection with the merger
by the Fresh Juice stockholders or the Saratoga stockholders for the following
reasons, among others:
o by mutual written consent of Fresh Juice and Saratoga duly
authorized by a majority vote of the members of their respective
boards of directors;
o by either Fresh Juice or Saratoga upon written notice to the other
party (a) at least 30 days after the date of any request or
application for a regulatory approval required to complete the
merger shall have been denied or withdrawn at the request or
recommendation of the responsible governmental entity, unless
within such 30 day period a petition for rehearing or an amended
application has been filed with the applicable governmental
entity; provided, however, that no party shall have the right to
terminate the merger agreement pursuant to this provision if such
denial or request or recommendation for withdrawal shall be due to
the failure of the party seeking such termination to perform or
observe the covenants and agreements of such party set forth in
the merger agreement or (b) if any governmental entity of
competent jurisdiction shall have issued a final nonappealable
order enjoining or otherwise prohibiting the consummation of any
of the transactions contemplated by the merger agreement;
o by either Fresh Juice or Saratoga if the merger shall not have
been completed on or before the later of (a) if Fresh Juice has
mailed this document to its stockholders on or prior to December
31, 1998, the 30th day after such mailing or, if later, 5 days
after the Fresh Juice special meeting, and (b) December 31, 1998,
unless due to the failure of the party seeking to terminate the
merger agreement to perform or observe in any material respect the
covenants and agreements of such party set forth in the merger
agreement;
o by Fresh Juice if it is not in material breach of any of its
obligations and if any approval of the Fresh Juice stockholders
required for the completed of the merger shall not have been
obtained by reason of the failure to obtain the required vote at a
duly held meeting of stockholders or at any adjournment or
postponement thereof;
o by either Fresh Juice or Saratoga if the terminating party is not
then in material breach of any representation, warranty, covenant
or other agreement contained in the merger agreement and if there
shall have been a material breach of any of the representations or
warranties set forth in the merger agreement on the part of the
other party, which breach, if susceptible to cure, is not cured by
the responsible party within 20 business days following written
notice thereof, or which, by its nature, cannot be cured;
o by either Fresh Juice or Saratoga if the terminating party is not
then in material breach of any representation, warranty, covenant
or other agreement contained in the merger agreement and if there
shall have been a material breach of any of the covenants or
agreements set forth in the merger agreement on the part of the
other party, which breach, if susceptible to cure, shall not
61
have been cured by the responsible party within 20 business days
following receipt by the breaching party of written notice thereof
or which, by its nature, cannot be cured;
o by Saratoga, if the Fresh Juice board of directors shall have
withdrawn, modified or amended its recommendation that the Fresh
Juice stockholders approve and adopt the merger agreement in any
respect materially adverse to Saratoga;
o by Fresh Juice, if the Fresh Juice board of directors votes to
recommend a superior offer rather than pursuing the merger, or
shall have withdrawn, modified or amended such recommendation that
the Fresh Juice stockholders approve and adopt the merger
agreement and the merger in order to recommend a superior offer,
with two days' prior notice to Saratoga; or
o by either Fresh Juice or Saratoga if the terminating party is not
then in material breach of any representation, warranty, covenant
or other agreement contained in the merger agreement and after a
reasonable and objective determination that any of the conditions
precedent to such party's obligations to complete the merger have
not been satisfied or cured within the required time frame, or are
incapable of being satisfied or cured by the later of (a) if Fresh
Juice has mailed this document to its stockholders on or prior to
December 31, 1998, the 30th day after Fresh Juice has mailed this
document, or if later, 5 days after the Fresh Juice special
meeting, and (b) December 31, 1998.
Termination fees. Pursuant to the merger agreement, in the event the
transactions contemplated by the merger agreement are not completed because:
o the merger agreement shall not have been approved and adopted by
the Fresh Juice stockholders;
o Fresh Juice failed to perform in all material respects all
obligations to be performed by it under the merger agreement at or
prior to the closing of the merger;
o the Bogen agreement and the Smith agreement are not in effect as
of the closing of the merger; or
o Fresh Juice terminates the merger agreement and, at the time of
such termination, the board of directors has received a superior
offer and such superior offer is accepted by Fresh Juice within 12
months after the termination of the merger agreement;
then in connection with any such termination of the merger agreement, Fresh
Juice shall pay to Saratoga a termination fee in the amount of $1,500,000,
inclusive of out-of-pocket expenses.
In the event the transactions contemplated by the merger agreement are
not completed because:
o the issuance of the Saratoga Class A common stock in the merger
shall not have been approved and adopted by the Saratoga
stockholders;
o Saratoga and Rowale failed to perform in all material respects all
obligations to be performed by it under the merger agreement at or
prior to the closing of the merger; or
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o the merger agreement is terminated by Saratoga, and at the time of
such termination the Saratoga board of directors has received an
offer to be acquired by a third party and Saratoga accepts such
offer within 12 months after termination of the merger agreement;
then in connection with any such termination of the merger agreement, Saratoga
shall pay Fresh Juice a termination fee in the amount of $750,000, inclusive of
out-of-pocket expenses.
In addition, in the event that the transactions contemplated by the
merger agreement are not completed, other than as a result of the failure to
satisfy the following conditions:
o the merger agreement shall have been approved and adopted by the
Fresh Juice stockholders;
o the representations and warranties of Fresh Juice contained in the
merger agreement shall be accurate;
o Fresh Juice shall have performed in all material respects all of
its obligations under the merger agreement;
o Fresh Juice shall have received all necessary third party
approvals;
o Fresh Juice shall have delivered an affidavit, dated as of the
closing of the merger, pursuant to Sections 897 and 1445 of the
Internal Revenue Code;
o the Bogen agreement and the Smith agreement shall be in effect as
of the effective time of the merger, and the existing employment
agreements of Steven Bogen and Steven Smith with Fresh Juice shall
have been terminated in all respects, except as expressly
contemplated by the Bogen agreement and the Smith agreement;
o Fresh Juice shall have demonstrated that its in-plant quality
assurance systems for the production of non-pasteurized juices
comply with recent FDA standards for the reduction of organisms
that lead to food borne illness by 100,000-fold (5-log reduction),
which compliance will eliminate any FDA mandated warning label on
Fresh Juice products; and
o shares of Fresh Juice common stock with respect to which
dissenters' rights have been asserted and perfected shall
constitute not more than 5% of the Fresh Juice common stock issued
and outstanding as of the Fresh Juice record date;
then Saratoga shall not directly or indirectly acquire an entity which
manufactures fresh juices within 12 months after the termination or failure to
consummate the merger agreement. Saratoga has acknowledged that the 5-log
reduction condition to closing has been satisfied as of the date of this
document.
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EXTENSION AND WAIVER
At any time prior to the closing of the merger, any of Fresh Juice,
Saratoga, or Rowale may, by action taken or authorized by their respective
boards of directors, to the extent legally allowed:
o extend the time for the performance of any of the obligations or
other acts of the other parties to the merger agreement;
o waive any inaccuracies in the representations and warranties
contained in the merger agreement or in any document delivered
pursuant to the merger agreement; and
o waive compliance with any of the agreements or conditions
contained in the merger agreement.
Any such extension or waiver shall be valid and binding only if set forth in an
instrument in writing signed by the party to be bound thereby, but such
extension or waiver should not operate as a waiver of, or estoppel with respect
to, any subsequent or other failure.
AMENDMENT
The merger agreement may be amended by the parties by action taken or
authorized by their respective boards of directors at any time before or after
stockholder approval of the merger, merger agreement and related transactions.
However, after approval by the Fresh Juice stockholders, no amendment shall be
made which reduces or changes the amount or form of the consideration to be
delivered to the Fresh Juice stockholders without the approval of a majority of
the Fresh Juice stockholders. The merger agreement may only be amended in
writing signed on behalf of each of the parties to the merger agreement.
FEES AND EXPENSES
Pursuant to the merger agreement, if the merger is not completed, all
costs and expenses incurred in connection with the merger agreement shall be
borne by the party incurring such costs and expenses. If the merger is
completed, all costs and expenses incurred in connection with the merger
agreement and the related transactions shall be borne by Saratoga; provided,
however, Saratoga shall not be obligated to pay more than an aggregate of
$495,000 for the out-of-pocket expenses of Fresh Juice, excluding printing
costs for this document and the proposed proxy filing already incurred by Fresh
Juice.
RESALE RESTRICTIONS
All of the shares of Saratoga Class A common stock issued to
non-affiliated Fresh Juice stockholders pursuant to the merger agreement will
be freely transferable under the Securities Act. However, shares of Saratoga
Class A common stock issued to any Fresh Juice stockholder who may be deemed to
be an "affiliate" of Saratoga after the merger or an "affiliate" of Fresh Juice
prior to the merger may be resold by them in the following manner:
o pursuant to an effective registration statement under the
Securities Act covering such shares or
o in transactions permitted by the resale provisions of Rule 145
under the Securities Act or Rule 144 under the Securities Act or
o as otherwise permitted under the Securities Act.
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Persons who may be deemed to be "affiliates" of Fresh Juice or Saratoga
generally include individuals or entities that control, or are controlled by,
or are under common control with, such party and would ordinarily include
directors, executive officers and principal stockholders of such party. Steven
Bogen and Steven Smith may be deemed to be "affiliates" for these purposes.
Pursuant to the voting agreement, each of Steven Smith, Steven Bogen,
Jeffrey Heavirland and Jeffrey Smith has agreed until the termination of the
merger agreement, among other things, not to (a) sell, transfer, pledge, assign
or otherwise dispose of or enter into any arrangement with respect to the
disposition of their shares of Fresh Juice common stock, or (b) deposit any of
their shares of Fresh Juice common stock into a voting trust or enter into a
voting agreement or otherwise grant any voting rights to any other person or
entity with respect to any such securities.
GOVERNMENTAL AND REGULATORY APPROVALS
Fresh Juice and Saratoga are aware of no other governmental or
regulatory approvals required for the completion of the merger, other than the
filing of a certificate of merger with the secretary of state of Delaware and
compliance with applicable federal and state securities laws.
VOTING AGREEMENT
In connection with the merger, Fresh Juice, Steven Smith, Steven
Bogen, Jeffrey Heavirland, Jeffrey Smith, Saratoga and Robin Prever, Anthony
Malatino, Warren Lichtenstein have entered into the voting agreement. Pursuant
to the voting agreement, each of Steven Smith, Steven Bogen, Jeffrey Heavirland
and Jeffrey Smith has agreed:
o to vote all of his currently owned of Fresh Juice common stock in
favor of the merger, the merger agreement and the related
transactions; and
o until the termination of the voting agreement or, if the merger is
completed, the closing of the merger, not to (a) sell, transfer,
pledge, assign or otherwise dispose of or enter into any
arrangement with respect to the disposition of his shares of Fresh
Juice common stock, or (b) deposit any of his shares of Fresh
Juice common stock into a voting trust, enter into a voting
agreement or otherwise grant any voting rights to any other person
or entity with respect to his Fresh Juice common stock; or
o for a period commencing on October 13, 1998 and ending on the
earlier to occur of (a) the third anniversary of the closing or
(b) the termination of the merger agreement by any party thereto
pursuant to the terms thereof, not to directly or indirectly,
through one or more intermediaries or otherwise, participate in
any transaction in which one or more parties have done or seek to
do any of the following without the prior written consent of
Saratoga:
o purchase or acquire, or agree to purchase or acquire, any
shares of capital stock or other securities of Saratoga;
o solicit, or encourage any other person to solicit, proxies or
consents of stockholders of Saratoga, or become a
"participant" or otherwise engage in any "solicitation" (as
such terms are defined under Regulation 14A of the Exchange
Act), with respect to any matter
65
in opposition to the recommendation of a majority of the
members of the Saratoga board of directors then in office;
o acquire or affect, or seek to acquire or affect, control of
Saratoga, or influence or seek to influence the management of
Saratoga, or directly or indirectly participate in or
encourage the formation of any group seeking to influence
management or to displace or modify the composition of the
Saratoga board of directors;
o join a partnership, limited partnership, syndicate or other
group within the meaning of Section 13(d) of the Exchange Act
for the purpose of acquiring, holding or disposing of any
shares of capital stock or other securities of Saratoga;
o initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals with respect to
Saratoga, as described in Rule 14a-8 under the Exchange Act,
irrespective of whether Rule 14a-8 under the Exchange Act is
applicable; or
o seek to modify the terms of this paragraph, or
o to allow Saratoga to act as each Fresh Juice party's true and
lawful proxy and attorney-in-fact to vote all shares of Fresh
Juice common stock subject to the voting agreement for the
approval of the merger, the merger agreement and the related
transactions, only upon the failure of any Fresh Juice party to do
so, or
o Other than certain options held by Mr. Heavirland to convert all
options and warrants to purchase Fresh Juice common stock into
shares of Saratoga Class A common stock in the merger.
Pursuant to the voting agreement, each of Ms. Prever, Mr. Malatino and
Mr. Lichtenstein has agreed:
o to vote all of his or her currently owned shares of Saratoga
common stock in favor of the issuance of the shares of Saratoga
Class A common stock in the merger;
o until the termination of the voting agreement or, if the merger is
consummated, the closing of the merger, not to (a) sell, transfer,
pledge, assign or otherwise dispose of or enter into any
arrangement with respect to the disposition of their shares of
Saratoga common stock, or (b) deposit any of their shares of
Saratoga common stock into a voting trust, enter into a voting
agreement or otherwise grant any voting rights to any other person
or entity with respect to their Fresh Juice common stock, and
o to allow Fresh Juice to act as each Saratoga party's true and
lawful proxy and attorney-in-fact to vote all shares of Saratoga
common stock subject to the voting agreement for the approval of
the merger, the merger agreement and the related transactions,
only upon the failure of any Saratoga party to do so.
66
FINANCING
As noted above, the completion of the merger is also conditioned upon
the completion of the financing by Saratoga. On September 24, 1998, Saratoga
signed a commitment letter agreement with NationsBank, N.A. The following
paragraphs summarize the provisions of the commitment letter which are material
to the consideration of the merger by the Fresh Juice stockholders.
NationsBank will provide the following credit facilities to Saratoga:
o a revolving line of credit facility in an aggregate principal
amount of up to $14.0 million, based on lending formulas and
subject to certain sublimits to be set forth in the definitive
loan documents;
o a term loan facility in an aggregate principal amount of up to
$8.0 million; and
o an interest rate protection product agreement whereby Saratoga and
NationsBank may enter into interest rate hedging agreements in an
aggregate notational amount of up to $22.0 million.
Proceeds from the NationsBank Facilities may only be used by Saratoga to
finance the merger, Saratoga's capital expenditures, certain other permitted
acquisitions and working capital.
The initial funding of the facilities is subject to satisfaction of
the following conditions precedent plus any other conditions precedent deemed
appropriate by NationsBank, as agent for NationsBank and such other lenders who
may participate in providing the facilities:
o No additional information shall have come to the attention of the
agent which shall lead it to believe that the information
previously provided with respect to Saratoga or Fresh Juice shall
be deemed to be untrue, incomplete or misleading in any respect.
o Definitive documentation with respect to the facilities
satisfactory to the agent shall have been negotiated, executed and
delivered.
o The agent shall have received (a) satisfactory opinions of counsel
to Saratoga and the other obligors under the facilities, which
shall cover, among other things, authority, legality, validity,
binding effect and enforceability of the documents for the
facilities, and such corporate resolutions, certificates and other
documents as the agent shall reasonably require and (b)
satisfactory evidence that the lenders hold perfected liens in all
collateral for the facilities, subject to no other liens except
for permitted liens to be determined.
o There shall not have occurred a material adverse change since
December 31, 1997 in the business, assets, operations, conditions
(financial or otherwise) or prospects of Saratoga, its
subsidiaries or in the facts and information regarding such
entities as represented to the date of the commitment letter.
o There shall not have occurred any action, suit, investigation or
proceeding pending or threatened in any court or before any
arbitrator or governmental authority that purports to affect
Saratoga or its subsidiaries or any transaction contemplated
hereby, and that could have a material adverse effect on Saratoga
or its subsidiaries or any transaction contemplated hereby or on
the ability of Saratoga and its subsidiaries to perform their
obligations under the documents to be executed in connection with
the facilities.
67
o Saratoga and its subsidiaries shall be in compliance with all
existing financial obligations.
o There shall not have occurred any disruption or adverse change in
the financial or capital markets generally which the agent, in its
sole reasonable discretion, deems material in connection with the
syndication of the facilities.
o The agent shall have received and reviewed, with results
satisfactory to the agent and its counsel, information regarding
litigation, tax, accounting, labor, insurance, pension liabilities
(actual or contingent), real estate lease, material contracts,
debt agreements, property ownership, and contingent liabilities of
Saratoga and its subsidiaries.
FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences to Fresh Juice and its stockholders of the merger. The discussion
is based on currently existing provisions of the Internal Revenue Code,
treasury regulations thereunder, current administrative rulings and court
decisions. All of the foregoing are subject to change (possibly on a
retroactive basis) and any such change could affect the continuing validity of
this discussion. The federal income tax discussions set forth below may not be
applicable to certain classes of taxpayers, including insurance companies,
securities dealers, financial institutions, foreign persons, persons who
acquired shares of Fresh Juice common stock pursuant to the exercise of
employee stock options or rights or otherwise as compensation, and persons who
are holders of employee stock options or warrants, and persons in special
situations, including persons who hold shares of Fresh Juice common stock as
part of a hedging transaction, conversion transaction or straddle. The
following discussion assumes that Fresh Juice stockholders hold such stock as
capital assets, which is generally for investment. Fresh Juice stockholders are
urged to consult their tax advisors as to their respective personal tax
situations, including the applicability and effect of state, local and other
tax laws.
The merger
For each holder of Fresh Juice common stock, the merger will be a
taxable transaction for federal income tax purposes and probably also will be a
taxable transaction under applicable state, local and other income tax laws. A
holder of Fresh Juice common stock will recognize capital gain or loss equal to
the difference between (a) its tax basis in the Fresh Juice common stock
surrendered and (b) the sum of (1) the cash received, plus (2) the fair market
value of the Saratoga Class A common stock received. The fair market value of
the Saratoga Class A common stock will be determined on the date of the
exchange pursuant to the merger, which may not equal the value used to
determine the number of Saratoga Class A common stock to be received in the
merger. Gain or loss must be determined separately for each block of Fresh
Juice common stock acquired at the same cost in a single transaction
surrendered in connection with the merger. Any such capital gain or loss will
be treated as long-term capital gain or loss if such shares were held for more
than 12 months. In the case of an individual, any such short-term capital gain
will be taxable at ordinary income tax rates of up to 39.6%, and any such
long-term capital gain will be taxable at the maximum rate of 20%. The maximum
capital gain tax rate for a corporation currently is the same as the maximum
tax rate on ordinary income. Capital loss recognized by a corporation may only
offset capital gain, and capital loss recognized by an individual may only
offset capital gain, plus $3,000 of other income.
Any Saratoga Class A common stock received by a holder of Fresh Juice
common stock in exchange for Fresh Juice common stock will have a tax basis
equal to the fair market value of each Saratoga Class A common stock received
at the time of the effective time of the merger and will commence a new holding
period for that Saratoga Class A common stock.
68
Fresh Juice options and warrants
The exchange by a holder of any Fresh Juice options and warrants of
such Fresh Juice options and warrants for Saratoga Class A common stock will be
a taxable event with respect to the holder.
Backup withholding
Payments in respect of Fresh Juice common stock may be subject to
informational reporting to the IRS and to a 31% backup withholding tax. Backup
withholding will not apply, however, to a payment to Fresh Juice stockholder or
other payee if such shareholder or payee completes and returns a Form W-9 or
otherwise establishes an exemption from backup withholding.
Loss of net operating loss carryforwards
Saratoga expects that the merger will not result in an ownership
change of Saratoga and Fresh Juice under Section 382 of the Internal Revenue
Code. However, future stock issuances may result in an ownership change of
Saratoga under Section 382. Section 382 contains rules that limit the ability
of a company to offset pre-ownership change net operating losses and credit
carryovers against post-ownership change taxable income. As a result,
Saratoga's net operating loss carryforwards and Fresh Juice's net operating
loss carryforwards could be severely limited in the future for use to offset
any income of Saratoga or Fresh Juice in any particular year.
FRESH JUICE 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 HEREIN. EACH FRESH JUICE 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
The merger will be accounted for as a purchase for accounting and
financial reporting purposes with Saratoga viewed as the acquiring company.
Purchase accounting for a merger is similar to the accounting treatment used in
the acquisition of any asset group. The fair market value of the consideration
(cash, stock, debt securities, etc.) given by the acquiring company is used as
the valuation basis of the merger. The assets and liabilities of the acquired
company are revalued to their respective fair market values at the date of the
merger. The financial statements of the acquiring company will reflect the
combined operations from the date of the merger.
69
SARATOGA SUMMARY HISTORICAL FINANCIAL DATA
We have set forth selected historical financial data for Saratoga
below, for the periods and at the dates indicated. The historical consolidated
financial data for each of the years in the five-year period ended December 31,
1997, is derived from Saratoga's historical consolidated financial statements
that have been audited and reported upon by PricewaterhouseCoopers LLP,
independent public accountants. The historical consolidated financial data for
each of the nine-month periods ended September 30, 1997 and September 30, 1998
have not been audited. Such data reflects all adjustments, consisting solely of
normal recurring adjustments, which are, in the opinion of management,
necessary for a fair presentation of such data for the interim periods to which
they relate. You should be aware that results for interim periods cannot be
used to project the results of any other interim period or for the year as a
whole. You should read the information in the table in conjunction with the
Company's historical financial statements and the notes to the financial
statements and other financial information regarding the Company provided with
these materials.
SARATOGA SUMMARY HISTORICAL FINANCIAL DATA
[Enlarge/Download Table]
YEAR ENDED
------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1994 1995 1996 1997
------------------------------------------------------------------------
REVENUE
Total revenue.......... $3,643,742 $6,235,408 $3,265,314 $4,374,825 $6,270,691
Cost of goods sold,
exclusive of depreciation
and amortization and
equipment lease expense 2,659,417 4,633,071 2,395,464 2,749,121 3,762,549
OPERATING EXPENSES:
Marketing and sales.... 1,941,853 1,853,344 601,887 489,701 388,709
General and administrative
expense................ 1,480,052 1,676,937 992,138 906,885 1,044,960
Depreciation, amortization
and equipment lease expense 270,623 319,998 338,714 442,143 393,876
Write-off of Sample
Goodwill............... -- 222,000 -- -- --
------------ ------------ ------------ ------------ ------------
Operating (loss)
income................. (2,708,203) (2,469,852) (1,062,889) (213,025) 680,597
OTHER INCOME (EXPENSE):
Commission income..... -- -- 121,196 75,490 126,735
Interest income........ 50,746 49,586 21,215 4,969 52,259
Interest expense....... (33,090) (31,850) (1,334) (14,893) (47,004)
Net loss on disposal of
equipment.............. (48,500) (70,781) (1,618) -- --
------------ ------------ ------------ ------------ ------------
Loss before minority
interest............... (2,739,047) (2,522,897) (923,430) -- --
Income applicable to
minority interest...... 61,119 53,051 -- -- --
------------ ------------ ------------ ------------ ------------
Provision for income taxes -- -- -- -- 7,959
Net (loss) income...... $(2,677,928) $(2,469,846) $(923,430) $(147,459) $804,628
============ ============ ============ ============ ============
PER SHARE DATA
Net (loss) income per
common share,
Basic............... $(1.39) $(0.94) $(0.35) $(0.06) $0.28
======= ======= ======= ======= =====
Diluted............. $(1.39) $(0.94) $(0.35) $(0.06) $0.25
======= ======= ======= ======= =====
Weighted average number of
common shares outstanding,
Basic............... 1,920,000 2,614,377 2,626,179 2,626,651 2,924,589
========== ========== ========= =========
Diluted............. 1,920,000 2,614,377 2,626,179 2,626,651 3,380,440
========= ========= ========= ========= =========
70
SARATOGA SUMMARY HISTORICAL FINANCIAL DATA (CONTINUED)
[Download Table]
NINE MONTHS ENDED (UNAUDITED)
--------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
--------------- ----------------
REVENUE
Total revenue............ $5,057,276 $7,359,818
Cost of goods sold,
exclusive of depreciation
and amortization and
equipment lease expense.. 3,081,563 4,469,732
OPERATING EXPENSES:
Marketing and sales...... 278,881 591,924
General and administrative
expense.................. 772,975 753,530
Depreciation, amortization
and equipment lease
expense.................. 290,042 419,783
---------- ----------
Operating (loss)
income................... 633,815 1,124,849
OTHER INCOME (EXPENSE):
Commission income....... 105,143 89,660
Interest income.......... 30,848 128,332
Interest expense......... (27,274) (59,194)
---------- ----------
Provision for income taxes 7,959 17,600
Net (loss) income........ $734,573 $1,266,047
======== ==========
PER SHARE DATA
Net (loss) income per
common share,
Basic................. $0.25 $0.40
===== =====
Diluted............... $0.22 $0.36
===== =====
Weighted average number
of common shares
outstanding,
Basic................. 2,910,519 3,164,515
========= =========
Diluted............... 3,370,686 3,696,156
========= =========
71
[Enlarge/Download Table]
SARATOGA SUMMARY HISTORICAL FINANCIAL DATA (CONTINUED)
-----------------------------------------------------------------------------
AS OF
-----------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1994 1995 1996 1997
-----------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets............ $6,391,129 $3,915,280 $2,990,376 $2,629,888 $5,704,819
Working capital......... $3,039,336 $1,004,696 $ 255,298 $ 386,670 $2,512,738
Long-term obligations... $ 106,149 $ 0 $ 0 $ 7,455 $1,501,208
Stockholders' equity.... $5,627,301 3,180,482 $2,176,389 $2,014,471 $2,914,024
FINANCIAL RATIOS AND
OTHER DATA
Current ratio........... 6.03 2.37 1.31 1.64 2.95
(Loss) return on average
assets.................. (.59) (.48) (.27) (.05) .19
(Loss) return on average
stockholders' equity.... (.68) (.56) (.34) (.06) .33
Book value per share at
year end................ $2.07 $1.17 $0.80 $0.74 $0.98
Weighted shares
outstanding,
Basic................ 1,920,000 2,614,377 2,626,179 2,626,651 2,924,589
========= ========= ========= ========= =========
Diluted.............. 1,920,000 2,614,377 2,626,179 2,626,651 3,380,440
========= ========= ========= ========= =========
[Enlarge/Download Table]
AS OF
(UNAUDITED)
--------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
--------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets............. $4,820,460 $7,217,130
Working capital.......... $2,790,943 $3,231,161
Long-term obligations.... $1,502,969 $1,534,423
Stockholders' equity..... $2,837,718 $4,693,071
FINANCIAL RATIOS AND
OTHER DATA
Current ratio............ 6.82 4.26
(Loss) return on average
assets................... .20 .19
(Loss) return on average
stockholders' equity..... .30 .33
Book value per share at
year end................. $0.96 $1.48
Weighted shares
outstanding,
Basic................. 2,910,519 3,164,515
========= =========
Diluted............... 3,370,686 3,696,156
========= =========
72
FRESH JUICE SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
We have set forth selected historical consolidated financial data for
Fresh Juice below. The historical consolidated financial data for each of the
years in the five-year fiscal period ended November 30, 1997, is derived from
Fresh Juice's historical consolidated financial statements which have been
audited and reported upon by KPMG Peat Marwick LLP, independent certified
public accountants. The historical consolidated financial data for each of the
nine-month periods ended August 31, 1997 and August 31, 1998 has not been
audited. Such data reflects all adjustments, consisting solely of normal
recurring adjustments, which are, in the opinion of management, necessary for a
fair presentation of such data for the interim periods to which they relate.
You should be aware that results for interim periods are not necessarily
indicative of results to be expected for any other interim period or for the
year as a whole. You should read the information in the table in conjunction
with Fresh Juice's historical financial statements and the notes to the
financial statements and other financial information provided with these
materials.
FRESH JUICE SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
[Enlarge/Download Table]
YEAR ENDED
----------------------------------------------------------------------------------------------
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1993 1994 1995 1996 1997
----------------------------------------------------------------------------------------------
OPERATING RESULTS
Net sales................... $8,265,588 $8,171,803 $9,219,184 $19,958,022 $41,382,836
Cost of goods sold.......... 4,639,740 5,163,806 6,035,483 15,886,417 30,035,386
Selling, general and
administrative expense...... 2,367,523 2,451,055 2,820,356 4,984,642 8,801,423
--------- --------- --------- --------- ---------
Operating earnings (loss)... 1,258,325 556,942 363,345 (913,037) 2,546,027
Interest expense............ -- -- (24,355) (139,502) (536,851)
Interest and other income, net 87,360 88,292 104,104 63,496 132,296
------ ------ ------- ------ -------
Earnings (loss) before provision
(benefit for income taxes... 1,345,685 645,234 443,094 (989,043) 2,141,472
Provision (benefit) for
income taxes ............... 549,193 256,396 172,051 (60,000) 774,149
------- ------- ------- -------- -------
Net earnings (loss)......... $796,492 $388,838 $271,043 $ (929,043) $1,367,323
======== ======== ======== ========== ==========
PER SHARE DATA
Net earnings (loss) per common
share,
Basic.................... $0.22 $0.11 $0.08 $(0.20) $0.21
===== ===== ===== ======= =====
Diluted.................. $0.22 $0.11 $0.07 $(0.20) $0.21
===== ===== ===== ======= =====
Weighted average number of
common shares outstanding,
Basic.................... 3,602,356 3,554,862 3,552,462 4,601,349 6,466,731
========= ========= ========= ========= =========
Diluted.................. 3,602,356 3,612,679 3,887,740 4,620,000 6,471,535
========= ========= ========= ========= =========
BALANCE SHEET DATA
Total assets................ $4,773,181 $4,858,799 $6,508,237 $15,281,472 $22,093,344
Working capital............. $3,895,114 $4,112,211 $3,919,590 $ 624,104 $ 1,319,323
Long-term debt and obligations $ -- $ -- $1,529,168 $1,524,562 $3,597,151
Stockholders' equity........ $3,990,353 $4,379,191 $4,640,301 $9,921,258 $12,163,257
73
FRESH JUICE SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA (CONTINUED)
[Download Table]
NINE MONTHS ENDED
-------------------------------
AUGUST 31, AUGUST 31,
1997 1998
-------------------------------
OPERATING RESULTS
Net sales............................. $31,491,349 $28,649,567
Cost of goods sold.................... 22,639,803 21,000,420
Selling, general and administrative
expense .............................. 6,481,003 6,429,154
--------- ---------
Operating earnings (loss)............. 2,370,543 1,219,993
Interest expense...................... (401,345) (367,113)
Interest and other income, net........ 39,878 78,040
------ ------
Earnings (loss) before provision (benefit
for income taxes...................... 2,009,076 930,920
Provision (benefit) for income taxes.. 518,796 414,557
------- -------
Net earnings (loss)................... $1,490,280 $516,363
========== ========
PER SHARE DATA
Net earnings (loss) per common share,
Basic.............................. $0.23 $0.08
===== =====
Diluted............................ $0.23 $0.08
===== =====
Weighted average number of common shares
outstanding,
Basic.............................. 6,466,731 6,466,731
========= =========
Diluted............................ 6,466,731 6,474,818
========= =========
BALANCE SHEET DATA
Total assets.......................... $22,609,273 $22,838,521
Working capital....................... $1,507,594 $1,815,916
Long-term debt and obligations........ $3,750,825 $3,197,095
Stockholders' equity.................. $12,168,183 $12,679,620
74
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The pro forma (unaudited) consolidated balance sheet as of September
30, 1998 set forth below presents the financial position of Saratoga as if the
merger agreement and the related financing had occurred on September 30, 1998.
The pro forma (unaudited) consolidated statements of operations for the nine
months ended September 30, 1998 and the year ended December 31, 1997 set forth
below present the results of operations of Saratoga for such period and such
year as if the consummation of the merger agreement and the related financing
had occurred as of January 1, 1997.
Because Saratoga and Fresh Juice have different fiscal years,
o Saratoga's balance sheet as of September 30, 1998 has been
combined, with appropriate adjustments, with Fresh Juice's balance
sheet as of August 31, 1998.
o Saratoga's results for the nine months ended September 30, 1998
have been combined, with appropriate adjustments, with Fresh
Juice's results for the nine months ended August 31, 1998.
o Saratoga's results for the year ended December 31, 1997 have been
combined, with appropriate adjustments, with Fresh Juice's results
for the fiscal year ended November 30, 1997.
The pro forma financial statements do not indicate the results that
would have been achieved if the consummation of the merger agreement and the
related financing had been effected on the dates indicated. The pro forma
financial statements do not indicate the results which may be achieved in the
future.
The pro forma financial statements should be read in conjunction with
the financial statements of Saratoga and Fresh Juice appearing elsewhere or
incorporated in this document.
75
Preliminary allocations have been made to reflect the estimated asset
values and related tax effects. These amounts as well as the estimated purchase
price will be adjusted as additional analysis is performed and information is
received. The preliminary assumptions and estimates used in the preparation of
the pro forma consolidated financial statements include the following (amounts
in thousands):
o Funds used to acquire Fresh Juice and to pay certain acquisition
and financing related costs have been provided from borrowings
under Saratoga's $22,000 credit facility or have previously been
accrued. Approximately $14,119 has been borrowed at a weighted
average interest rate of approximately 8.4%. Accordingly, interest
expense has been adjusted to reflect the amount that would have
been paid on borrowings, related commitment fees and the
amortization of financing costs.
o The excess purchase price over the fair market value of the assets
or goodwill is being amortized over a 25-year period. Total
amortization of goodwill for the nine months ended September 30,
1998 and the twelve months ended December 31, 1997 approximate
$416 and $555, respectively.
o Property, plant and equipment are carried at Fresh Juice's
recorded cost of which $2,426 was included on the books of Fresh
Juice as of November 30, 1996 based upon an independent appraisal.
o Trademark, patents and other intangibles are carried at Fresh
Juice's recorded cost, of which $805 was included on the books of
Fresh Juice as of November 30, 1996, based upon an independent
appraisal.
o The provision for income taxes has been adjusted to reflect the
tax effects of pro forma adjustments.
o Income per share has been computed to include the issuance of
2,133,553 shares of Saratoga Class A common stock.
The estimated purchase price in the merger of Fresh Juice of $21,750
is comprised of:
o A payment of $2.24 for each of the 6,347,831 outstanding
shares of Fresh Juice common stock........................$14,247
o The issuance of 0.33 shares of Saratoga Class A common
stock for each of the 6,347,831 outstanding shares of
Fresh Juice common stock and the issuance of certain
additional shares, all at $2.50 per share...................5,334
o The settlement of Fresh Juice employment agreements,
options and transactions costs..............................2,170
-------
$21,750
=======
76
[Enlarge/Download Table]
PRO FORMA (UNAUDITED) CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS PRO FORMA
SARATOGA FRESH JUICE ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ---------
Cash and cash equivalents............... $ 1,747 $ 83 $ - $ 1,830
Short term investments.................. 597 - - 597
Accounts receivable, net................ 1,115 3,470 - 4,585
Inventories............................. 704 3,455 1,180 5,339
Current portion of note receivable...... 101 - 101
Current deferred income taxes........... 186 (186) -
Prepaid income tax...................... 113 - 113
Prepaid expenses and other current
assets ................................. 58 412 - 470
------------- -------------- --------------- -------------
Total current assets........... $ 4,221 $ 7,820 $ 994 $ 13,035
Property, plant and equipment, net...... 1,419 6,894 - 8,313
Deferred financing costs, net........... 308 - 465 773
Goodwill................................ - 6,619 7,172 13,791
Note receivable......................... 400 378 - 778
Deferred acquisition costs.............. 498 498 -
Trademarks, patents, and other
intangibles, net........................ - 1,014 - 1,014
Other assets............................ 371 114 (345) 140
------------- -------------- --------------- -------------
Total assets................... $ 7,217 $ 22,839 $ 7,788 $ 37,844
============= ============== =============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable............................ $ - $ 1,780 $ - $ 1,780
Current portion of long term debt and
capital leases.......................... 11 663 - 674
Accounts payable and accrued liabilities 979 3,546 1,840 6,365
Accrued income taxes.................... - 15 - 15
------------- -------------- --------------- -------------
Total current liabilities...... 990 6,004 1,840 8,834
Subordinated convertible note........... 1,500 - 1,500
Long term debt and capital leases....... 34 3,197 14,119 17,350
Deferred income taxes................... - 824 (824) -
Deferred rent........................... - 134 - 134
------------- -------------- --------------- -------------
Total liabilities.............. $ 2,524 $ 10,159 $ 15,135 $ 27,818
============= ============== =============== =============
Common stock............................ 32 67 (46) 53
Paid in capital......................... 9,858 9,454 (4,141) 15,171
Treasury stock, at cost................. - (285) 285 -
(Accumulated deficit)/Retained earnings
(5,197) 3,444 (3,444) (5,197)
------------- -------------- --------------- -------------
Total stockholders' equity.............. 4,693 12,680 (7,346) 10,027
------------- -------------- --------------- -------------
Total liabilities and stockholders'
equity.................................. $ 7,217 $ 22,839 $ 7,788 $ 37,844
============= ============== =============== =============
77
PRO FORMA (UNAUDITED) CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
PRO FORMA
SARATOGA FRESH JUICE ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ---------
Net sales................................ $ 7,360 $ 28,649 $ - $ 36,009
Cost of goods sold....................... 4,470 20,227 - 24,697
---------------- --------------- ---------------- --------------
Gross profit.................... 2,890 8,422 - 11,312
Selling general and administrative
expense ................................. 1,345 6,008 - 7,353
Depreciation, amortization and equipment
lease expense............................ 420 1,194 139 1,753
---------------- --------------- ---------------- --------------
Operating income................ 1,125 1,220 (139) 2,206
Other income (expense):
Other.................................... 90 38 - 128
Interest income.......................... 128 40 - 168
Interest expense......................... (59) (367) (1,206) (1,632)
---------------- --------------- ---------------- --------------
Other income (expense), net..... 159 (289) (1,206) (1,336)
Income before income taxes............... 1,284 931 (1,345) 870
Provision for income taxes............... 18 415 (433) -
---------------- --------------- ---------------- --------------
Net income............................... $ 1,266 $ 516 $ (912) $ 870
================ =============== ================ ==============
Income per share:
Basic.................................. $ 0.16
==============
Diluted................................ $ 0.16
==============
Weighted average number of shares
outstanding:
Basic.................................. 5,298,068
==============
Diluted................................ 5,401,138
==============
78
PRO FORMA (UNAUDITED) CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
PRO FORMA
SARATOGA FRESH JUICE ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ---------
Net sales.................................. $ 6,271 $ 41,383 $ - $ 47,654
Cost of goods sold......................... 3,763 28,992 1,180 33,935
-------------- --------------- --------------- ------------
Gross profit...................... 2,508 12,391 (1,180) 13,719
Selling general and administrative expense. 1,434 8,224 - 9,658
Depreciation, amortization and equipment
lease expense.............................. 394 1,620 185 2,199
-------------- --------------- --------------- ------------
Operating Income.................. 680 2,547 (1,365) 1,862
Other income (expense):
Commission income.......................... 127 - - 127
Interest income............................ 52 132 - 184
Interest expense........................... (47) (537) (1,608) (2,192)
-------------- --------------- --------------- ------------
Other income (expense), net....... 132 (405) (1,608) (1,881)
Income before income taxes................. 812 2,142 (2,973) (19)
Provision for income taxes................. 8 774 (782) -
-------------- --------------- --------------- ------------
Net income (loss).......................... $ 804 $ 1,368 $ (2,191) $ (19)
============== =============== =============== ============
Income per share:
Basic................................... $ 0.00
============
Diluted................................. $ 0.00
============
Weighted average number of shares
outstanding:
Basic................................... 5,058,142
============
Diluted................................. 5,058,142
============
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COMPARATIVE PER SHARE DATA
The following table sets forth
o historical income (loss) and book value per share for Saratoga,
derived from Saratoga's public filings
o historical income (loss) and book value per share for Fresh Juice,
derived from Fresh Juice's public filings
o unaudited pro forma combined income (loss) and book value per
share for Saratoga and equivalent pro forma per share data by
Fresh Juice. This information shows how 1 share of Saratoga common
stock would have participated in the income from continuing
operations and book value if the merger had been completed on
January 1, 1997.
Pro forma amounts are computed to include the issuance of 2,133,553
shares of Saratoga's Class A common stock in connection with the merger as if
it had occurred as of January 1, 1997. Pro forma book value per share is
computed as the pro forma stockholder equity divided by the number of shares of
Saratoga Class A common stock outstanding as of December 31, 1997 and September
30, 1998 plus the 2,133,553 shares of Saratoga Class A common stock to be
issued in the merger, as if the shares were issued at January 1, 1997.
The comparative per share data should be read in conjunction with the
financial statements of Saratoga and Fresh Juice appearing elsewhere or
incorporated in this document.
[Download Table]
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
Historical:
Saratoga
Net income per share from continuing
operations:
Basic $ 0.28 $ 0.40
--------- --------
Diluted $ 0.25 $ 0.36
--------- --------
Book value per share $ 0.98 $ 1.48
--------- --------
Fresh Juice
Net income per share from continuing
operations:
Basic $ 0.21 $ 0.08
--------- --------
Diluted $ 0.21 $ 0.08
--------- --------
Book value per share $ 1.82 $ 1.96
--------- --------
Pro forma:
Net income per share from continuing
operations:
Basic $ 0.00 $ 0.16
--------- --------
Diluted $ 0.00 $ 0.16
--------- --------
Book value per share $ 1.97 $ 1.89
--------- --------
Equivalent pro forma per share data for
fresh juice:
Basic $ (0.00) $ 0.05
--------- --------
Diluted $ (0.00) $ 0.05
--------- --------
Book value per share $ 0.65 $ 0.56
--------- --------
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MARKET PRICE DATA AND DIVIDEND POLICY
SARATOGA
The Saratoga Class A common stock is traded over-the-counter and is
quoted on the Nasdaq SmallCap Market under the symbol "TOGA".
The table below sets forth the high and low closing sale prices for
the Saratoga Class A common stock as reported by the Nasdaq SmallCap Market for
the quarterly periods indicated.
1996 HIGH LOW
---- ---- ---
First fiscal quarter..................... $2.25 $1.375
Second fiscal quarter.................... $3.50 $1.3125
Third fiscal quarter..................... $2.50 $1.125
Fourth fiscal quarter.................... $1.875 $0.875
1997 HIGH LOW
---- ---- ---
First fiscal quarter..................... $7.75 $0.875
Second fiscal quarter.................... $6.00 $2.125
Third fiscal quarter..................... $3.4375 $2.125
Fourth fiscal quarter.................... $3.75 $2.00
1998 HIGH LOW
---- ---- ---
First fiscal quarter..................... $3.875 $2.0625
Second fiscal quarter.................... $3.5625 $2.75
Third fiscal quarter..................... $3.25 $2.125
Fourth fiscal quarter.................... $2.75 $1.625
Saratoga has never paid cash dividends on the Saratoga Class A common
stock. Saratoga expects that for the foreseeable future it will follow a policy
of retaining earnings to finance the development of its business, including for
working capital and to fund capital expenditures. Saratoga also anticipates
that the Facilities will also restrict payment of dividends to stockholders.
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FRESH JUICE
The Fresh Juice common stock is traded over-the-counter and are quoted
on the Nasdaq SmallCap Market under the symbol "FRSH".
The table below sets forth the high bid and low bid prices for the
Fresh Juice common stock as reported by the Nasdaq SmallCap Market for the
fiscal quarterly periods indicated.
1996 HIGH LOW
---- ---- ---
First fiscal quarter................................ $3.25 $1.38
Second fiscal quarter............................... $4.68 $2.25
Third fiscal quarter................................ $3.75 $2.13
Fourth fiscal quarter............................... $2.88 $1.50
1997 HIGH LOW
---- ---- ---
First fiscal quarter................................ $2.50 $1.62
Second fiscal quarter............................... $2.31 $1.18
Third fiscal quarter................................ $3.00 $1.38
Fourth fiscal quarter............................... $4.12 $2.31
1998 HIGH LOW
---- ---- ---
First fiscal quarter................................ $3.06 $2.00
Second fiscal quarter............................... $3.22 $2.25
Third fiscal quarter................................ $3.00 $1.75
Fourth fiscal quarter............................... $2.97 $1.88
1999 HIGH LOW
---- ---- ---
First fiscal quarter (through December 21, 1998).... $2.57 $2.31
Fresh Juice has never paid cash dividends on the Fresh Juice common
stock.
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DESCRIPTION OF SARATOGA CAPITAL STOCK
The authorized capital stock of Saratoga presently consists of
50,000,000 shares of Saratoga Class A common stock, 2,000,000 shares of
Saratoga Class B common stock, and 5,000,000 shares of preferred stock.
SARATOGA CLASS A COMMON STOCK
Each outstanding share of Saratoga Class A common stock entitles the
holder to 1 vote, either in person or by proxy, on each matter presented to
Saratoga Stockholders for a vote. Holders of Saratoga Class A common stock are
entitled to receive ratably such distributions as may be declared on the
Saratoga Class A common stock by the Saratoga board of directors in its
discretion from funds legally available therefor. In the event of the
liquidation, dissolution or winding up of Saratoga, holders of Saratoga Class A
common stock are entitled to share ratably in all assets remaining after
payment of all debts and other liabilities. Holders of Saratoga common stock
have no subscription, redemption, conversion or preemptive rights. Matters
submitted for stockholder approval generally require authorization by a
majority of the votes cast by the holders of shares entitled to vote thereon,
unless a greater vote is required by Saratoga's charter or other provisions of
Delaware law. Holders of Saratoga Class A common stock have no cumulative
voting rights, and, accordingly, the holders of a majority of the outstanding
Saratoga common stock have the ability to elect all of the directors. The
outstanding shares of Saratoga common stock are, and the Saratoga common stock
to be issued in the merger will be, when issued, fully paid and nonassessable.
As of December 16, 1998, the Saratoga record date, Saratoga had
2,646,139 shares of Saratoga Class A common stock outstanding and 1,628
stockholders of record.
SARATOGA CLASS B COMMON STOCK
Each outstanding share of Saratoga Class B common stock entitles the
holder to 5 votes, either in person or by proxy, on each matter presented to
Saratoga stockholders for a vote. Each Saratoga Class B common stock may, at
any time, be converted at the election of the holder thereof into one fully
paid and nonassessable share of Saratoga Class A common stock. Other than with
respect to the number of votes and this conversion option, the Saratoga Class A
common stock and Saratoga Class B common stock are identical.
As of December 16, 1998, the Saratoga record date, Saratoga had
522,955 Saratoga Class B common stock outstanding and 2 stockholders of record.
SARATOGA PREFERRED STOCK
Saratoga's charter authorizes the Saratoga board of directors, without
stockholder approval, to cause Saratoga to issue from time to time, in one or
more series, Saratoga preferred stock with such designations, preferences and
relative rights as shall be prescribed by resolution of the Saratoga board of
directors. The Saratoga board of directors is authorized to determine the
privileges and restrictions granted to, and imposed upon, each series of
Saratoga preferred stock and to fix the number of shares of any series of
Saratoga preferred stock. The Saratoga board of directors, by its approval of
certain series of Saratoga preferred stock, could adversely affect the voting
power or other rights of the holders of Saratoga common stock, and, by issuing
Saratoga preferred stock with certain voting, conversion, redemption rights or
other terms, could delay, discourage or make more difficult changes of control
or management of Saratoga, without any action of the holders of the Saratoga
common stock.
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As of the date of this document, Saratoga had not designated or issued
any Saratoga preferred stock, and had no plans to do so.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Saratoga common stock is
American Stock Transfer & Trust Company.
DESCRIPTION OF FRESH JUICE CAPITAL STOCK
The authorized capital stock of Fresh Juice presently consists of
30,000,000 shares of Fresh Juice common stock and 7,000,000 shares of preferred
stock.
FRESH JUICE COMMON STOCK
Each share of outstanding Fresh Juice common stock entitles the holder
to 1 vote, either in person or by written proxy, on all matters presented to
Fresh Juice stockholders for a vote. Holders of Fresh Juice common stock are
entitled to receive ratably such distributions as may be declared on the Fresh
Juice common stock by the Fresh Juice board of directors in its discretion from
funds legally available therefor. In the event of the liquidation, dissolution
or winding up of Fresh Juice, holders of shares of Fresh Juice common stock are
entitled to share ratably in all assets remaining after payment of all debts
and other liabilities. Holders of shares of Fresh Juice common stock have no
subscription, redemption, conversion or preemptive rights. Matters submitted
for stockholder approval generally require a majority vote of the shares
present and voting thereon. The outstanding shares of Fresh Juice common stock
are fully paid and nonassessable.
As of December 18, 1998, the Fresh Juice record date, Fresh Juice had
6,467,731 shares of Fresh Juice common stock outstanding and 1,098 stockholders
of record.
FRESH JUICE PREFERRED STOCK
Fresh Juice's charter authorizes the Fresh Juice board of directors to
issue from time to time, shares of Fresh Juice preferred stock in one or more
series, to establish the number of shares in each series, and to fix the
designations, preferences, qualifications, limitations, relative voting rights,
and optional or other special rights by resolution of the Fresh Juice board of
directors. The Fresh Juice board of directors, by its approval of certain
series of Fresh Juice preferred stock could adversely affect the voting power
of the holders of shares of Fresh Juice common stock, and by issuing shares of
Fresh Juice preferred stock with certain voting, conversion, redemption rights
or other terms, could delay, discourage or make more difficult changes of
control or management of Fresh Juice.
As of the date of this document, Fresh Juice had not designated or
issued any Fresh Juice preferred stock, and has no plans to do so.
The transfer agent and registrar for the Fresh Juice common stock is
Continental Stock Transfer & Trust Company.
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COMPARISON OF RIGHTS OF HOLDERS OF
SARATOGA COMMON STOCK AND FRESH JUICE COMMON STOCK
Saratoga and Fresh Juice are both Delaware corporations subject to the
provisions of Delaware law. Fresh Juice stockholders, whose rights are governed
by Fresh Juice's charter and bylaws and Delaware law, will, upon the completion
of the merger, become stockholders of Saratoga whose rights will then be
governed by Saratoga's charter and bylaws and Delaware law. The following is a
summary of the material differences in the rights of the stockholders of
Saratoga and Fresh Juice, and is qualified in its entirety by reference to
Saratoga's charter and bylaws, Fresh Juice's charter and bylaws and Delaware
law. Certain topics discussed below are also subject to federal law and the
regulations promulgated thereunder. Copies of Saratoga's charter and bylaws,
Fresh Juice's charter and bylaws are incorporated by reference in this
document, and will be sent to stockholders upon request.
VOTING RIGHTS
Delaware law. Delaware law provides that the vote or written consent
of the holder of majority of the shares of the then outstanding common stock is
required to be authorize a plan of merger or consolidation.
Saratoga. Saratoga has two classes of issued and outstanding voting
stock, Saratoga Class A common stock and Saratoga Class B common stock, which
vote together as a single class. Saratoga shall not, without the affirmative
vote or written consent of the holders of a majority of the shares of the then
outstanding Saratoga common stock, authorize the merger.
Fresh Juice. Fresh Juice has one class of issued and outstanding
voting stock, Fresh Juice common stock, which vote a single class. Fresh Juice
shall not, without the affirmative vote or written consent of the holders of a
majority of the then outstanding Fresh Juice common stock, authorize the
merger.
APPRAISAL/DISSENTERS' RIGHTS
Delaware law. Under Delaware law, stockholders of a Delaware
corporation have appraisal rights in a merger or consolidation, except for
certain mergers not requiring any vote by stockholders of the corporation if
the corporation is the survivor, and corporations whose shares are not listed
on a national securities exchange or designated as a national market system
security on an interdealer quotation systems by the NASD or held of record by
more than 2,000 holders. However, even with respect to shares so listed or so
held, appraisal rights exist if, pursuant to a plan of merger, the stockholder
is to receive in exchange for his shares anything other than stock of the
surviving corporation, stock of any corporation listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the NASD or held of record by more than 2,000 holders or
cash in lieu of fractional shares.
Saratoga. Holders of Saratoga common stock are not entitled to
appraisal rights in connection with the merger.
Fresh Juice. Holders of Fresh Juice common stock are entitled to
appraisal rights in connection with the merger. Pursuant to Delaware law, any
Fresh Juice stockholder who does not wish to accept the merger consideration to
be paid pursuant to the merger agreement may dissent from the merger and elect
to have the fair value of his shares of Fresh Juice common stock judicially
determined and paid in cash, provided that he complies with the provisions of
Delaware law. See "The merger--Dissenters' rights of appraisal" on page 52.
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AMENDMENT OF CHARTER
Delaware law. Under Delaware law, holders of the outstanding shares of
a class of stock are entitled to vote as a class on any amendment of the
corporation's charter if the amendment would increase or decrease the number of
authorized shares of the class, increase or decrease its par value, or
adversely alter or affect the powers, preferences or rights of the class.
Delaware law further provides, however, that a corporation, in its original
charter, or in any amendment which creates any class of stock or which is
adopted prior to the issuance of any shares of such class, or in any amendment
approved by the affected class, may provide that the number of authorized
shares of any such class may be increased or decreased, but not below the
number of shares of the class then outstanding, by vote of a majority of the
stock of the corporation entitled to vote.
Saratoga. With respect to any proposed amendment to Saratoga's
charter, which would (a) increase or decrease the number of authorized shares
of either the Saratoga Class A common stock or the Saratoga Class B common
stock, (b) increase or decrease the par value of the Saratoga Class A common
stock or the Saratoga Class B common stock, or (c) alter or change the powers,
preferences, relative voting power or special rights of the Saratoga Class A
common stock or Saratoga Class B common stock, the approval of a majority of
the votes entitled to be cast by the holders of the class affected by the
proposed amendment, voting separately as a class, shall be obtained in addition
to the approval of a majority of the votes entitled to be cast by the holders
of shares of Saratoga Class A common stock and the Saratoga Class B common
stock voting together without regard to class.
Fresh Juice. Fresh Juice's charter contains no such provision
affecting the rights of stockholders as permitted by Delaware law respecting
the amendment of Fresh Juice's charter.
POWER TO ADOPT, AMEND OR REPEAL BY-LAWS
Saratoga. Under Delaware law and Saratoga's bylaws, Saratoga laws may
be amended or repealed or new by-laws may be adopted, by a majority of the
holders of the outstanding capital stock of Saratoga entitled to vote thereon
or by a majority of Saratoga board of directors then in office; provided,
however that notice of such alteration, amendment, repeal or adoption of new
by-Laws be contained in the notice of such meeting of stockholder or directors
as the case may be.
Fresh Juice. Under Delaware law and Fresh Juice's bylaws, Fresh
Juice's bylaws may be amended or repealed, or new by-laws adopted, by the Fresh
Juice stockholders or the Fresh Juice board of directors, except that the Fresh
Juice board of directors may not amend, repeal or adopt new by-laws regarding
an impending election of directors without notice to the Fresh Juice
stockholders in the notice of the next annual meeting for the election of
directors.
SPECIAL MEETINGS OF STOCKHOLDERS
Delaware law. Under Delaware law, special meetings of stockholders may
be called by the board of directors or by such person or persons as may be
authorized by a corporation's charter or bylaws.
Saratoga. Saratoga's bylaws provide that special meetings may be
called by any of the chairman, if there be one, the president, any vice
president, the secretary or any assistant secretary and shall be called by any
such officer at the request in writing of a majority of the Saratoga board of
directors or at the request in writing of stockholders owning a majority of the
capital stock of Saratoga entitled to vote at such meeting.
Fresh Juice. Fresh Juice's bylaws provide that special meetings may be
called by the directors, chief executive officer or the president, and shall be
called by the chief executive officer, the president or Secretary upon
86
written application of 50% of the directors or by stockholders holding at least
30% of the shares of capital stock issued and outstanding.
ACTION BY STOCKHOLDERS BY WRITTEN CONSENT IN LIEU OF A MEETING
Delaware law. Delaware law permits any action by stockholders to be
taken by written consent in lieu of a meeting.
Saratoga. Saratoga's bylaws provide that any action that may be taken
by vote may be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of shares 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.
Fresh Juice. Fresh Juice's bylaws provide that any action that may be
taken by vote may be taken without a meeting on written consent, setting forth
the action so taken, signed by the holders of all the outstanding shares
entitled to vote thereon.
NUMBER OF DIRECTORS
Saratoga. Saratoga's bylaws provide that the number of directors which
shall constitute the Saratoga board of directors shall be determined by a vote
of the Saratoga board of directors. The Saratoga board of directors has fixed
the current number of directors at four. However, when the merger is completed,
the number of directors will be five.
Fresh Juice. Fresh Juice's bylaws provide that the number of directors
which shall constitute the Fresh Juice board of directors shall be determined
by a vote of the Fresh Juice board of directors or by the affirmative vote of a
majority in interest of the stockholders at the annual meeting or at a special
meeting called for that purpose. The Fresh Juice board of directors has fixed
the current number of directors at seven.
REMOVAL OF DIRECTORS
Delaware law. Delaware law provides that the stockholders of a
corporation may remove one or more directors with or without cause unless the
charter provides that directors may be removed only for cause. The vote for
removal shall be by a majority of shares entitled to vote at an election of
directors, except that the charter may require a higher vote for removal
without cause.
Saratoga. Saratoga's charter contains no such provision affecting the
rights of stockholders as permitted by Delaware law.
Fresh Juice. Fresh Juice's bylaws provide that any director may be
removed for or without cause at any time by the affirmative vote of a majority
of all the shares of stock outstanding and entitled to vote at a special
meeting of the stockholders called for that purpose. Fresh Juice's charter
contains no such provision affecting the rights of stockholders permitted by
Delaware law.
87
FILLING BOARD VACANCIES
Saratoga. Saratoga's bylaws provide that vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director.
Fresh Juice. Fresh Juice's bylaws provide that newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the board or directors for any reason except the removal
of directors without cause may be filled by a vote of the majority of directors
then in office, although less than a quorum. Fresh Juice's bylaws further
provide that vacancies occurring by reason of the removal of directors without
cause shall be filled by vote of the stockholders.
There are no material differences in the rights of the stockholders of
Saratoga and Fresh Juice with respect to the following topics:
o Mergers, acquisitions and certain other transactions;
o Conflict of interest transactions; and
o Nominations to the board of directors.
LEGAL MATTERS
The validity of the issuance of the Saratoga Class A common stock
offered pursuant to this document and certain legal matters in connection with
the merger have been passed upon by Swidler Berlin Shereff Friedman, LLP, New
York, New York, special counsel to Saratoga.
EXPERTS
The consolidated balance sheets of Saratoga as of December 31, 1997
and 1996 and the consolidated statements of operations, stockholders' equity,
and cash flows for each of the two years in the period ended December 31, 1997,
incorporated by reference in this document have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The consolidated balance sheets of Fresh Juice and its subsidiaries as
of November 30, 1997 and 1996, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the years in the
three-year period ended November 30, 1997, have been incorporated by reference
in the registration statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
88
OTHER MATTERS
YEAR 2000 COMPLIANCE
SARATOGA
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 problem.
Cost
Saratoga has evaluated its management information systems, including
information technology and non-IT computerized systems, and has prepared a plan
for Year 2000 compliance. Saratoga estimates that the cost to modify its
management information systems to become Year 2000 compliant will be
approximately $5,000 and therefore will not be material to its financial
condition or results of operations. Such modification is expected to be
completed by December 31, 1998.
Risk
Saratoga relies on third party suppliers for raw materials,
transportation, utilities, and other critical services. Saratoga's operations
could be affected by the interruption of significant suppliers. Saratoga
initiated efforts to evaluate the status of suppliers' compliance with Year
2000 issues and are in the process of determining alternatives and contingency
plan requirements. In the event that its current vendors are unable to certify
that they will be Year 2000 compliant by early 1999 or if such suppliers are
unable to certify that their failure to be Year 2000 will not adversely affect
Saratoga, Saratoga will be reviewing its alternatives with respect to other
vendors. There can be no assurance that Saratoga will be able to find suppliers
which are acceptable to Saratoga. Another option could include the accumulation
of inventory to assure production capability if warranted. These efforts are
intended to minimize risk, but cannot eliminate the potential for disruption
due to third party failures to be Year 2000 compliant. Saratoga also is
dependent on customers for sales and for cashflow. Interruptions in customers'
operations due to Year 2000 could result in decreased revenue, increased
inventory and cash flow reductions. Saratoga is in the process of evaluating
its customers' Year 2000 risks, as well as developing alternative sales
strategies. The cost of this evaluation is expected to be nominal.
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.
89
Contingency plans
Given that modification to its management information systems is
expected to be completed by December 31, 1998, Saratoga has not prepared a
contingency plan pertaining to Saratoga's information systems. Saratoga is in
the process of developing a contingency plan based on its evaluation of
significant suppliers and customers in regard to Year 2000 compliance. The
contingency plan includes the identification of backup suppliers and broadening
the customer base.
FRESH JUICE
Background
In the past, many computers, software programs, and other IT systems,
as well as other non-IT systems, relying on microprocessors or similar
circuitry, were written or designed using two digits, rather than four, to
define the applicable year. As a result, date-sensitive systems, both IT
systems and non-IT systems, may recognize a date identified with "00" as the
year 1900, rather than year 2000. This is generally described as the Year 2000
issue. If the situation occurs, the potential exists for system failure or
miscalculations, which could impact business operations.
State of readiness
Fresh Juice began a concerted effort to address its Year 2000 issues
in fiscal year 1997 as part of its system's readiness program. A Year 2000 team
of individuals from Fresh Juice, as well as outside professionals, report to
the chief financial officer.
Under the auspices of the Year 2000 team, Fresh Juice believes that it
has identified all significant IT systems and non-IT systems that require
modification in connection with Year 2000 issues. Internal and external
resources have been used and are continuing to be used, to make the required
modifications and test Year 2000 readiness. The required modification of most
significant systems are under way. Fresh Juice plans on completing the
modifications and testing of all significant systems by the end of fiscal 1999.
In addition, through its Year 2000 team, Fresh Juice is conducting on
going communications with companies with which it does significant business to
determine their Year 2000 readiness and the extent to which Fresh Juice is
vulnerable to any other organization's Year 2000 issues. Based on these on
going communications and related responses, Fresh Juice will be monitoring the
Year 2000 preparations and state of readiness of its business partners.
Although Fresh Juice is not aware of any significant Year 2000 problems with
its business partners, there can be no guarantee that the systems of other
organizations on which Fresh Juice systems rely will be converted in a timely
manner, or that a failure to convert by another organization, or a conversion
that is incompatible with Fresh Juice's systems, would not have a material
adverse effect on Fresh Juice.
Cost
The total cost of Fresh Juice's Year 2000 activities has not been and
is not anticipated to be material to its financial position or results of
operations in any given year. As of the end of the third quarter of fiscal
1998, Fresh Juice had spent approximately $75,000 on Year 2000 issues. Many of
these costs were to be incurred as Fresh Juice, for reasons other than Year
2000 issues, rebuilds its network systems for its Northeast and Florida
operations. The total costs to Fresh Juice of addressing Year 2000 issues is
estimated to be less than $250,000. These total costs, as well as the date on
which Fresh Juice plans to complete the Year 2000 modification and testing
processes, are based on management's best estimates, which were derived
utilizing numerous assumptions of future events,
90
including the continued availability of certain resources, third-party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved, and actual results differ from those
estimates.
Risk
Fresh Juice utilizes IT systems and non-IT systems in many aspects of
its business. Year 2000 problems in some of Fresh Juice's systems could
possibly disrupt some operations, but Fresh Juice does not expect that any such
disruption would have a material adverse impact on Fresh Juice's operating
results.
Fresh Juice is also exposed to the risk that one or more of its
suppliers or vendors could experience Year 2000 problems that could impact the
ability of such suppliers or vendors to provide good and services. Although
this risk is lessened by the availability of alternating suppliers, the
disruption of certain services, such as utilities, could, depending upon the
extent of the disruption, potentially have a material adverse impact on Fresh
Juice's operations.
Contingency plans
The Year 2000 team is in the process of developing contingency plans
for Fresh Juice's significant IT systems and non-IT systems requiring Year 2000
modifications. These contingency plans will include the identification,
acquisitions and/or preparation of backup systems, suppliers and vendors.
OTHER PROPOSALS
None of Saratoga or the members of the Saratoga board of directors nor
Fresh Juice or the members of the Fresh Juice board of directors intend to
bring before their respective special meeting of stockholders any matters other
than those set forth in their respective notices of special meeting, and they
have no present knowledge that any other matters will be presented for action
at the meeting by others. If any other matters properly come before such
meeting, however, it is the intention of the persons named in the enclosed form
of proxy to vote in accordance with their best judgment.
A stockholder proposal which is intended to be presented at the
Saratoga's 1999 annual meeting of stockholders and is eligible for inclusion in
Saratoga's proxy statement for that meeting under applicable rules of the SEC
must be received by Saratoga at its principal executive offices, 11 Geyser
Road, Saratoga Springs, New York 12866, by June 30, 1999. Such proposals should
be sent to the secretary of Saratoga by certified mail, return receipt
requested. A proxy will confer discretionary authority to management of
Saratoga to vote on any matter other than matters for which Saratoga received
notice by the shareholder prior to September 13, 1999; provided, however, that
if the 1999 annual meeting of stockholders is held prior to September 28, 1999,
Saratoga will notify the Saratoga stockholders of a revised date for submitting
notice to Saratoga.
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WHERE YOU CAN FIND MORE INFORMATION
Saratoga (Commission file no. 33-62038NY) and Fresh Juice (Commission
file no. 0-15320) are subject to the informational reporting requirements of
the Exchange Act, and, in accordance therewith, files reports (including annual
reports on form 10-KSB, quarterly reports on form 10-QSB and current reports on
form 8-K), proxy statements and other information with the SEC. You may read
and copy any materials filed by the Company and Fresh Juice with the SEC at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
SEC's Web site is http://www.sec.gov.
This document does not contain all the information set forth in the
Registration Statement on Form S-4 and the exhibits thereto, including any
amendments thereto, of which this document is a part, and which Saratoga has
filed with the SEC under the Securities Act. Reference is made to such
Registration Statement for further information with respect to Saratoga and the
Saratoga Class A common stock offered hereby.
Statements contained herein or incorporated herein by reference
concerning the provisions of documents are summaries of such documents and each
statement is qualified in its entirety by reference to the copy of the
applicable document if filed with the SEC or attached as an appendix hereto.
No person is authorized to give any information or to make any
representation with respect to the matters described in this document other
than those contained herein or in the documents incorporated by reference
herein and, if given or made, such information or representation must not be
relied upon as having been authorized by Saratoga or Fresh Juice. This document
does not constitute an offer to sell, or a solicitation of an offer to
purchase, the securities offered hereby, nor does it constitute the
solicitation of a proxy, in any jurisdiction in which, or to any person to
whom, it is unlawful to make such offer or solicitation of an offer or proxy
solicitation. Neither the delivery of this document nor any sale made hereby,
under any circumstances, shall create any implication that there has been no
change in the affairs of Saratoga or Fresh Juice since the date hereof, or that
the information herein is correct as of any time subsequent to its date.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this document that are not historical
facts are forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995). We have tried to identify forward-
looking statements by using words such as "believes," "expects," "may," "will,"
"should" or "anticipates" or by discussions of strategy that involve risks and
uncertainties. We make forward-looking statements in our public filings, in
press releases and in oral statements made by or with the approval of an
authorized executive officer of Saratoga or Fresh Juice. These forward-looking
statements, such as statements regarding anticipated future revenues, capital
expenditures and other statements regarding matters that are not historical
facts, involve predictions and reflect the current expectations of management
of Saratoga and Fresh Juice. Saratoga's and Fresh Juice's actual results,
performance or achievements could be better or worse than what is expressed or
implied by these forward-looking statements. You are urged to read carefully
our public filings and the "Risk factors" section beginning on page 23 which
discusses certain of potential risks and uncertainties that could affect our
future operating results. None of these events can be predicted with certainty
and, accordingly, are taken into consideration in the making of the
forward-looking statements contained in this document. We make no assurance
that the assumptions used in this document are necessarily the most likely to
occur. We are not required to update any forward-looking statement to reflect
actual results, changes in assumptions or changes in other factors affecting
such statement.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
WE HAVE INCORPORATED CERTAIN IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT SARATOGA AND FRESH JUICE THAT IS NOT INCLUDED IN OR DELIVERED
WITH THIS DOCUMENT, INCLUDING ANY EXHIBITS THAT ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO SUCH INFORMATION. THIS INFORMATION IS AVAILABLE WITHOUT
CHARGE TO:
O ANY SARATOGA STOCKHOLDER, UPON WRITTEN OR ORAL REQUEST TO SARATOGA
BEVERAGE GROUP, INC., 11 GEYSER ROAD, SARATOGA SPRINGS, NEW YORK
12866, TELEPHONE (518) 584-6363, ATTENTION: SECRETARY; OR
O ANY FRESH JUICE STOCKHOLDER, UPON WRITTEN OR ORAL REQUEST TO THE
FRESH JUICE COMPANY, INC., 280 WILSON AVENUE, NEWARK, NEW JERSEY
07105, (973) 465-7100; ATTENTION: SECRETARY.
IN ORDER THAT YOU RECEIVE REQUESTED DOCUMENTS IN TIME TO VOTE, WE URGE
SARATOGA STOCKHOLDERS TO MAKE ANY REQUEST BY JANUARY 20, 1999, 5 BUSINESS DAYS
PRIOR TO THE DATE OF THE SARATOGA SPECIAL MEETING, AND FRESH JUICE STOCKHOLDERS
TO MAKE ANY REQUEST BY JANUARY 20, 1999, 5 BUSINESS DAYS PRIOR TO THE DATE OF
THE FRESH JUICE SPECIAL MEETING.
The following documents filed by the Company with the SEC by Saratoga
(File No. 33-62038NY) are hereby incorporated by reference into this document
and made a part hereof:
o Saratoga's annual report on form 10-KSB for the fiscal year ended
December 31, 1997
o Saratoga's quarterly report on form 10-QSB for the three months
ended March 31, 1998
o Saratoga's quarterly report on form 10-QSB for the six months
ended June 30, 1998
o Saratoga's quarterly report on form 10-QSB for the nine months
ended September 30, 1998
o Saratoga's current reports on form 8-K dated August 21, 1998 and
October 26, 1998
o the appendices to this document, including the merger agreement
attached hereto as Appendix A
The following documents filed with the SEC by Fresh Juice (File No.
0-15320) pursuant to the Exchange Act are incorporated by reference in this
document:
o Fresh Juice's annual report on form 10-KSB for the year ended
November 30, 1997
o Fresh Juice's quarterly report on form 10-QSB for the three months
ended February 28, 1998
o Fresh Juice's quarterly report on form 10-QSB for the six months
ended May 31, 1998
o Fresh Juice's quarterly report on form 10-QSB for the nine months
ended August 31, 1998
o Fresh Juice's current reports on form 8-K dated April 3, 1998,
August 20, 1998 and October 23, 1998
All documents and reports filed by each of Saratoga and Fresh Juice
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 or
the Fresh Juice special meeting, as the case may be, shall be deemed to be
incorporated by reference in this document and to be a part hereof from the
dates of filing of such 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 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 such 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.
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APPENDIX A
RESTATED AGREEMENT AND PLAN OF MERGER
RESTATED AGREEMENT AND PLAN OF MERGER dated as of October 13, 1998, by
and among Saratoga Beverage Group, Inc., a Delaware corporation ("Parent"),
Rowale Corp., a Delaware corporation and wholly owned subsidiary of Parent
("Sub"), and The Fresh Juice Company, Inc., a Delaware corporation (the
"Company").
WHEREAS, Parent, Sub and the Company previously entered into an
agreement and plan of merger, dated as of August 14, 1998 (the "First
Agreement"); and
WHEREAS, the Board of Directors of Parent and the Company have
determined to amend the terms of the First Agreement; and
WHEREAS, the Boards of Directors of Parent and the Company have
determined that it is in the best interests of their respective companies and
their stockholders to consummate the business combination transaction provided
for herein in which Sub will, subject to the terms and conditions set forth
herein, merge with and into the Company (the "Merger"); and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties and covenants in connection with the Merger.
NOW, THEREFORE, in consideration of the mutual covenants;
representations, warranties and agreements contained herein, and intending to
be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.01 THE MERGER. Subject to the terms and conditions of this
Agreement, in accordance with the Delaware General Corporation Law ("DGCL"), at
the Effective Time (as hereinafter defined), Sub shall merge with and into the
Company. The Company shall become the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") in the Merger, and shall continue
its corporate existence under the laws of the State of Delaware. The name of
the Surviving Corporation shall be The Fresh Juice Company, Inc. Upon
consummation of the Merger, the separate corporate existence of Sub shall
terminate.
1.02 PLAN OF MERGER. This Agreement shall constitute an agreement of
merger for purposes of the DGCL.
1.03 EFFECTIVE TIME. As promptly as practicable after all of the
conditions set forth in Article VII shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same, the
Company and Sub shall duly execute and file a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware
(the "Delaware Secretary") in accordance with Section 251 of the DGCL. The
Merger shall become effective on the date (the "Effective Date") and at such
time (the "Effective Time") as the Certificate of Merger is filed with the
Delaware Secretary or at such later date and time as is specified in the
Certificate of Merger.
1.04 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided herein and as set forth in Section 259 of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, (i) all the property, rights, privileges, powers and franchises
of Sub shall vest in the Surviving Corporation, (ii) all debts, liabilities,
obligations, restrictions, disabilities and duties of Sub and the Company shall
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become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation and (iii) the Surviving Corporation shall
become a wholly owned subsidiary of Parent.
1.05 CONVERSION OF COMPANY COMMON STOCK.
(a) At the Effective Time, each share of the common stock, par
value $.01 per share, of the Company (the "Company Common Stock")
issued and outstanding immediately prior to the Effective Time (other
than (i) shares of Company Common Stock held in the Company's treasury
or directly or indirectly by Parent, Sub or the Company, and (ii)
Dissenting Shares (as such term is defined in Section 1.06 hereof))
shall, by virtue of this Agreement and without any action on the part
of the holder thereof, be converted into the right to receive and be
exchangeable for $2.244 per share in cash (the "Cash Per Share Price")
and 0.33 shares of Class A Common Stock, par value $.01 per share (the
"Parent Common Stock"), of Parent (the "Stock Per Share Price" and,
together with the Cash Per Share Price, the "Per Share Price"). By way
of example, a holder of 1,000 shares of Company Common Stock will
receive $2,244.00 in cash and 330 shares of Parent Common Stock.
(b) Each share of Company Common Stock converted into the Per
Share Price pursuant to this Article I shall no longer be outstanding
and shall automatically be canceled and shall cease to exist, and each
certificate (each a "Certificate," and collectively, the
"Certificates") previously representing any such shares of Company
Common Stock shall thereafter represent the right to receive (i) cash
equal to the Cash Per Share Price multiplied by the number of shares
of Company Common Stock represented by such Certificate and (ii)
shares of Parent Common Stock equal to the Stock Per Share Price
multiplied by the number of shares of Company Common Stock represented
by such Certificate (in the aggregate, the "Merger Consideration") or
the right to perfect their right to receive payment for their shares
pursuant to the DGCL and Section 1.06 hereof. Certificates previously
representing shares of Company Common Stock shall be exchanged for the
Merger Consideration upon the surrender of such Certificates in
accordance with Section 2.02 hereof, without any interest thereon,
subject to applicable law and the provisions of this Agreement
relating to Dissenting Shares (as hereinafter defined).
(c) If, between the date of this Agreement and the date of
payment of any portion of the Merger Consideration payable hereunder,
the outstanding shares of Parent Common Stock shall be changed into a
different number of shares by reason of any reclassification,
recapitalization or exchange of shares or if a stock split,
combination, stock dividend, stock rights or extraordinary dividend
thereon shall be declared with a record date within said period, the
Stock Per Share Price shall be correspondingly adjusted. No fractional
shares of Parent Common Stock will be issued and, in lieu thereof, any
stockholder entitled to receive a fractional share of Parent Common
Stock shall be paid in cash an amount equal to the value of such
fractional shares, which shall be calculated as the fraction of the
share of Parent Common Stock that would otherwise be issued multiplied
by $3.35.
(d) The Company (i) will grant no additional options or
restricted stock or similar rights under its 1996 Incentive Stock
Option Plan (the "Option Plan") or otherwise on or after the date of
this Agreement and (ii) has suspended, pending the termination of this
Agreement without the Merger being consummated, the Option Plan
without prejudice to the rights of the holder of options awarded
pursuant thereto. The Company will use reasonable diligence and timely
efforts to obtain the consent of each holder of an option or
restricted stock right (whether or not then exercisable or vested) to
the cancellation or conversion into shares of Company Common Stock of
his, her or its options or warrants in exchange for, at the Effective
Time, a number of shares of Parent Common Stock equal to (A) the Stock
Per Share Price (B) multiplied by the difference between $3.35 and the
exercise price thereof, (C) divided by $1.106, and (D) multiplied by
the number of shares of Company Common Stock subject thereto. By way
of example, a holder of options to purchase 1,000 shares of Company
Common Stock at an exercise price of $3.00 will receive 104 shares of
Parent Common Stock.
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(e) Each share of Company Common Stock held in the treasury of
the Company, and each share of Company Common Stock owned directly or
indirectly by Parent, Sub or the Company, shall be canceled and
retired without payment of any consideration therefor. Each share of
common stock, par value $.01 per share, of Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock,
par value $.01 per share, of the Surviving Corporation.
1.06 RIGHTS WITH RESPECT TO DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary
and unless otherwise provided by applicable law, shares of Company
Common Stock that are issued and outstanding immediately prior to the
Effective Time and that are owned by stockholders who have properly
exercised and perfected their rights of appraisal within the meaning
of Section 262 of the DGCL (the "Dissenting Shares"), shall not be
converted into the right to receive the Per Share Price, unless and
until such stockholders shall have failed to perfect or shall have
effectively withdrawn or lost their right of appraisal and payment
under applicable law. If any such stockholder shall have failed to
perfect or shall have effectively withdrawn or lost such right of
appraisal, each share of Company Common Stock held by such stockholder
shall thereupon be deemed to have been converted into the right to
receive and become exchangeable for the Per Share Price, at the
Effective Time, pursuant to Section 1.05(a) hereof.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such
demands, and any other instruments served in connection with such
demands pursuant to the DGCL and received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL consistent with the obligations
of the Company thereunder. The Company shall not, except with the
prior written consent of Parent, (x) make any payment with respect to
any demands for appraisal, (y) offer to settle or settle any such
demands or (z) waive any failure to timely deliver a written demand
for appraisal in accordance with the DGCL.
1.07 CERTIFICATE OF INCORPORATION. Unless otherwise agreed to by the
parties prior to the Effective Time, at and after the Effective Time, the
Certificate of Incorporation of Sub shall be the Certificate of Incorporation
of the Surviving Corporation, until thereafter amended as provided by law and
the Certificate of Incorporation.
1.08 BYLAWS. Unless otherwise agreed to by the parties prior to the
Effective Time, at and after the Effective Time, the Bylaws of Sub shall be the
Bylaws of the Surviving Corporation, until thereafter amended as provided by
law, the Certificate of Incorporation of the Surviving Corporation and such
Bylaws.
1.09 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. As of the
Effective Time, the board of directors of the Surviving Corporation shall
consist of one (1) member whom shall be designated by Parent in writing prior
to the Effective Time. The director so designated shall hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until his or her respective successors are duly elected or
appointed and qualified. The board of directors of the Surviving Corporation
shall elect the officers of the Surviving Corporation.
1.10 BOARD OF DIRECTORS OF PARENT. As of the Effective Time, the board
of directors of Parent shall be the Board of Directors in office prior to the
Effective Time, plus one (1) designee of the Company. The directors in office
shall hold office in accordance with the Certificate of Incorporation and
Bylaws of the Parent until his or her respective successor(s) is (are) duly
elected or appointed and qualified. The designee of the Company to the Board of
Directors of Parent shall not serve after the 1999 Annual Meeting of
Stockholders of Parent unless such designee is nominated by the Nominating
Committee of the Board of Directors of Parent. The board of directors of the
Parent shall elect the officers of the Parent.
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1.11 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, title
to and possession of any property or right of the Company acquired or to be
acquired by reason of, or as a result of, the Merger, or (b) otherwise to carry
out the purposes of this Agreement, the Company and its proper officers and
directors shall be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such property or rights in
the Surviving Corporation and otherwise to carry out the purposes of this
Agreement; and the proper officers and directors of the Surviving Corporation
are fully authorized in the name of the Company or otherwise to take any and
all such action.
1.12 COMPANY ACTION. The Company represents and warrants that (i) the
Board of Directors of the Company has duly approved the execution of this
Agreement, and the Merger, and has resolved to recommend approval of the Merger
by the Company's stockholders, (ii) the persons or entities listed on Exhibit
A-1 attached hereto own an aggregate of 2,688,889 issued and outstanding shares
of Company Common Stock and (iii) each such person or entity listed on Exhibit
A has executed and delivered a Voting, Standstill and Proxy Agreement, in
substantially the form annexed hereto as Exhibit B (the "Voting Agreement").
1.13 PARENT ACTION. Parent represents and warrants that (i) each of
the Board of Directors of Parent and Sub has duly approved the execution of
this Agreement, and the Merger, and has resolved to recommend approval of the
Merger by Parent's stockholders, (ii) the persons listed on Exhibit A-2
attached hereto own an aggregate of 371,325 issued and outstanding shares of
Parent Common Stock and 522,955 issued and outstanding shares of Parent Class B
Common Stock (as hereinafter defined) and (iii) each such person listed on
Exhibit A-2 has executed and delivered the Voting Agreement, in substantially
the form annexed hereto as Exhibit B.
1.14 BOGEN AGREEMENT AND SMITH AGREEMENT. Steven Bogen, Parent and the
Company shall have entered into an Employment Termination, Non-Competition and
Consulting Agreement, in substantially the form annexed hereto as Exhibit C
(the "Bogen Agreement"). Steven Smith, Parent and the Company shall have
entered into an Employment Termination and Non-Competition Agreement, in
substantially the form annexed hereto as Exhibit D (the "Smith Agreement").
1.15 FINANCING; EQUITY FINANCING. Parent has delivered to the Company
a commitment letter or letters (the "Commitment Letter(s)"), in form and on
terms reasonably satisfactory to the Company, from a responsible financing
source or sources, indicating its or their willingness, subject to the
conditions set forth therein, to lend (the "Financing") Parent an amount
sufficient, together with Parent's cash and cash equivalents, to fund the Cash
Per Share Price plus expenses related to the transactions contemplated hereby.
In addition, Parent intends to issue such number of shares of its common stock
to investors, which may include one or more non-officer directors or other
affiliates of the Company, as is necessary to consummate the Financing.
ARTICLE II
PAYMENT OF MERGER CONSIDERATION
2.01 PARENT TO MAKE CASH AVAILABLE. On or prior to the Effective Time,
Parent shall deposit, or shall cause to be deposited, with American Stock
Transfer & Trust Company or such other bank or trust company selected by Parent
and reasonably acceptable to the Company (the "Exchange Agent"), in trust for
the benefit of the holders of Certificates, for exchange in accordance with
this Article II, sufficient cash to pay in full the cash payments (such cash
being hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 1.05 and paid pursuant to Section 2.02(a) in exchange for outstanding
shares of Company Common Stock.
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2.02 EXCHANGE OF SHARES.
(a) As soon as practicable after the Effective Time, and in no
event later than three (3) business days thereafter, the Exchange
Agent shall (and Parent shall cause the Exchange Agent to so) mail to
each holder of record of a Certificate or Certificates a form letter
of transmittal and instructions for use in effecting the surrender of
the Certificates in exchange for (i) cash equal to the Cash Per Share
Price multiplied by the number of shares of Company Common Stock
represented by such Certificate or Certificates and (ii) shares of
Parent Common Stock equal to the Stock Per Share Price multiplied by
the number of shares of Company Common Stock represented by such
Certificate or Certificates, plus in each case cash in lieu of
fractional shares of Parent Common Stock, valued in accordance with
Section 1.05(c) hereof. Such letter of transmittal and instructions
shall be in the form agreed to by Parent and the Company prior to the
Closing. Upon surrender of a Certificate for exchange and cancellation
to the Exchange Agent, together with such letter of transmittal, duly
executed, the holder of such Certificates shall be entitled to receive
in exchange therefor a check representing the amount of cash which
such holder has the right to receive in respect of the Certificate so
surrendered pursuant to the provisions of this Article II, and the
Certificate so surrendered shall forthwith be canceled. No interest
will be paid or accrued on the cash paid for the Company Common Stock,
unpaid dividends and distributions, if any, payable to holders of
Certificates. Notwithstanding the time of surrender of the
Certificates, record holders ("Record Holders") of Company Common
Stock shall be deemed stockholders of Parent for all purposes from the
Effective Time, except that Parent shall withhold the payment of
dividends from any Record Holder until such Record Holder effects the
exchange of Certificates for Parent Common Stock. (Such Record Holder
shall receive such withheld dividends, without interest, upon
effecting the share exchange.)
(b) After the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Company Common
Stock which were issued and outstanding immediately prior to the
Effective Time.
(c) Any portion of the Exchange Fund that remains unclaimed by
the stockholders of the Company for six (6) months after the Effective
Time shall be transferred to the Surviving Corporation. Any
stockholders of the Company who have not theretofore complied with
this Article II shall thereafter look only to Parent and the Surviving
Corporation for payment of their Merger Consideration, without any
interest thereon. Notwithstanding the foregoing, none of the Surviving
Corporation, the Company, Parent, Sub, 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.
(d) 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 and, if
required by Parent, the posting by such person of a bond in such
amount as Parent may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate,
the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
2.03 LISTING OF SHARES. Parent shall cause the Parent Common Stock to
be issued in connection with the Merger to be listed on Nasdaq SmallCap Market
or any other national securities exchange or quotation system, if any, upon
which the Parent Common Stock is trading or is being quoted at the Effective
Time.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub as
follows, subject only to the exceptions specifically disclosed under
appropriate section headings in the Company's schedules:
3.01 CORPORATE ORGANIZATION.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The
Company has the corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it
or the character or location of the properties and assets owned or
leased by it makes such licensing or qualification necessary, except
where the failure to be so licensed or qualified would not have a
Material Adverse Effect (as defined below) on the Company. As used in
this Agreement, the term "Material Adverse Effect" means, with respect
to Parent, the Company or the Surviving Corporation, as the case may
be, any change or effect that is or is reasonably expected to be
materially adverse to the business, properties, assets, liabilities,
financial condition or results of operations of such party and its
Subsidiaries, taken as a whole. As used in this Agreement, the word
"Subsidiary" means any corporation, partnership or other organization,
whether incorporated or unincorporated, which is or was consolidated
with such party or with which such party is or was consolidated for
financial reporting purposes. The Certificate of Incorporation and
Bylaws of the Company, copies of which have previously been delivered
to Parent, are true and complete copies of such documents as in effect
as of the date of this Agreement.
(b) Except as set forth on Schedule 3.01, the Company has no
direct or indirect Subsidiaries. Except as set forth on Schedule 3.01,
the Company does not own, control or hold with the power to vote,
directly or indirectly of record, beneficially or otherwise, any
capital stock or any equity or ownership interest in any corporation,
partnership, associate, joint venture or other entity, except for less
than five percent (5%) of any equity security registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(c) The minute books of each of the Company and its Subsidiaries
contains true, accurate and complete records of all meetings and other
corporate actions held or taken by its stockholders and board of
directors (including committees thereof).
3.02 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
30,000,000 shares of Company Common Stock and 7,000,000 shares of
preferred stock, par value $.01 per share ("Company Preferred Stock").
As of the date of this Agreement, there are (x) 6,467,731 shares of
Company Common Stock issued and outstanding and (y) such shares of
Company Common Stock issuable upon exercise of outstanding options or
warrants as set forth in Schedule 3.02 annexed hereto. No Company
Preferred Stock has ever been issued. Except as set forth on Schedule
3.02, all of the issued and outstanding shares of Company Common Stock
have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights with no personal liability
attaching to the ownership thereof. The authorized and issued and
outstanding capital stock of each Subsidiary of the Company is set
forth on Schedule 3.02. All of the issued and outstanding shares of
capital stock of each Subsidiary of the Company are owned by the
Company, have been duly authorized and validly issued and are fully
paid, non-assessable and free of preemptive rights with no personal
liability attaching to the ownership thereof. Except as set forth in
Schedule 3.02 hereto, the Company does not have and is not bound by
any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of
any shares of Company Common Stock or any other equity security of the
Company or any of its Subsidiaries or any securities representing the
right
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to purchase or otherwise receive any shares of Company Common Stock or
any other equity security of the Company or any of its Subsidiaries
other than as provided for in this Agreement. There are no bonds,
debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for securities
having the right to vote) on any matters on which stockholders of the
Company may vote.
(b) Except as contemplated herein or disclosed on Schedule 3.02
hereto, there are no agreements or understandings, with respect to the
voting of any shares of Company Common Stock or capital stock of any
Subsidiary of the Company or which restrict the transfer of such
shares, to which the Company or any of its Subsidiaries is a party
and, to the knowledge of the Company, there are no such agreements or
understandings to which the Company or any of its Subsidiaries is not
a party with respect to the voting of any such shares or which
restrict the transfer of such shares, other than applicable federal
and state securities laws.
(c) All dividends on Company Common Stock which have been
declared prior to the date of this Agreement have been paid in full.
3.03 AUTHORITY; NO VIOLATION.
(a) The Company has full corporate 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 by the Company of the transactions contemplated by
this Agreement have been duly and validly approved by the Board of
Directors of the Company. Subject to the requirements of applicable
law, the Board of Directors of the Company has directed that this
Agreement and the transactions contemplated hereby be submitted to the
Company's stockholders for approval at a meeting of such stockholders
(the "Company Stockholder Meeting") and has voted to recommend to its
stockholders that its stockholders approve and adopt this Agreement
and the transactions contemplated thereby and, except for the adoption
of this Agreement by the requisite vote of the Company's stockholders
and the filing of the Certificate of Merger, no other corporate
proceedings on the part of the Company are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the
Company and (assuming the due authorization, execution and delivery by
Parent and Sub) constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
(b) Except as set forth in Schedule 3.03 hereto, neither the
execution and delivery of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby,
nor compliance by the Company with any of the terms or provisions
hereof, will (i) violate, conflict with or result in a breach of any
provision of the Certificate of Incorporation or Bylaws of the
Company, (ii) assuming that the consents and approvals referred to in
Section 3.04 hereof are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company or any of its Subsidiaries, or
any of their respective properties or assets, or (y) violate, conflict
with, result in a breach of any provisions of or the loss of any
benefit under, constitute a default (or any event, which, with notice
or lapse of time, or both would constitute a default) under, result in
the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of
any lien, pledge, security interest, charge or other encumbrance upon
any of the properties or assets of the Company or any of its
Subsidiaries under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party, or by which the Company or any of
its Subsidiaries or any of their respective properties or assets may
be bound or affected, except (in the case of clause (y) above) for
such violations, conflicts, beaches or defaults which, either
individually or in the aggregate, will not have a Material Adverse
Effect on the Company.
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3.04 CONSENTS AND APPROVALS. Except for (a) the filing with the
Securities and Exchange Commission (the "SEC") of a Registration Statement on
Form S-4 registering the issuance of the shares of Parent Common Stock to be
issued in connection with the Merger and containing a joint proxy statement in
definitive form relating to the Company Stockholder Meeting and the Parent
Stockholder Meeting (as hereinafter defined) and the transactions contemplated
hereby (the "Registration Statement") and the declaration of the effectiveness
thereof by the SEC, (b) the approval of this Agreement by the requisite vote of
the stockholders of the Company and Parent, respectively, (c) the filing of the
Certificate of Merger with the Delaware Secretary pursuant to the DGCL to
effect the Merger and (d) such filings, authorizations, consents or approvals
as may be set forth in Schedule 3.04 hereto, no consents or approvals of, or
filings or registrations with, any court, administrative agency or commission
or other governmental authority or instrumentality (each a "Governmental
Entity") or with any third party are necessary in connection with the execution
and delivery by the Company of this Agreement and the consummation by the
Company of the Merger and the other transactions contemplated hereby.
3.05 FINANCIAL STATEMENTS.
(a) The Company has previously delivered to Parent copies of the
audited consolidated balance sheets of the Company as of November 30,
1995, November 30, 1996 and November 30, 1997, and the related
consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1996 through 1997, inclusive, included
in the Company's Annual Report on Form 10-KSB for the fiscal year
ended November 30, 1997 filed with the SEC under the Exchange Act. The
Company has also previously delivered to Parent copies of the
unaudited consolidated balance sheets of the Company as of May 31,
1998, and the related unaudited consolidated statements of income and
cash flows for the six months ended May 31, 1998, included in the
Company's Quarterly Report on Form 10-QSB for the quarter ended May
31, 1998 filed with the SEC under the Exchange Act. The audited
consolidated financial statements and unaudited consolidated interim
financial statements of the Company and its Subsidiaries included or
incorporated by reference in the Company SEC Reports (as hereinafter
defined) filed on or after November 30, 1995 have been prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-QSB), complied as of their
respective dates in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, and fairly present the consolidated financial
position of the Company and its Subsidiaries as of the dates thereof
and the consolidated income and retained earnings and sources and
applications of funds for the periods then ended (subject, in the case
of any unaudited interim financial statements, to the absence of
footnotes required by GAAP and normal year-end adjustments).
(b) Except as set forth on Schedule 3.05(b) hereto for
liabilities incurred since May 31, 1998 in the ordinary course of
business consistent with past practice and as otherwise set forth on
Schedule 3.05(b) hereto, the Company does not have any liabilities or
obligations of any nature whatsoever (whether absolute, accrued,
contingent or otherwise) which are not adequately reserved or
reflected on the balance sheet of the Company included in its
Quarterly Report on Form 10-QSB for the quarter ended May 31, 1998,
except for liabilities or obligations which in the aggregate do not
exceed $100,000, and there do not exist any circumstances that could
reasonably be expected to result in such liabilities or obligations.
3.06 FAIRNESS OPINION. The Company has received the opinion of
Ladenburg Thalmann & Company to the effect that, as of the date of such
opinion, the Per Share Price is fair to the Company's stockholders from a
financial point of view, and such opinion has not been amended or rescinded as
of the date of this Agreement.
3.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 3.07 hereto, since May 31, 1998, there has not been any Material
Adverse Effect on the Company (including without limitation any loss of
employees or customers that has had a Material Adverse Effect, or that is
reasonably likely to have a Material Adverse Effect, on the Company) and, to
the best knowledge of the Company, no fact or condition exists which will cause
such a Material Adverse Effect on the Company in the future.
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3.08 LEGAL PROCEEDINGS. Except as set forth in Schedule 3.08 hereto,
neither the Company nor any of its Subsidiaries is a party to any, and there
are no pending or, to the best knowledge of the Company, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against or affecting the Company or
any of its Subsidiaries or any property or asset of the Company or any of its
Subsidiaries, before any court, arbitrator or administrative, Governmental
Entity, domestic or foreign, which would, either individually or in the
aggregate, have a Material Adverse Effect on the Company, and no facts or
circumstances have come to the Company's attention which have caused it to
believe that such a claim, action, proceeding or investigation against or
affecting the Company or any of its Subsidiaries could reasonably be expected
to occur. Neither the Company nor any of its Subsidiaries nor any property or
asset of the Company or any of its Subsidiaries is subject to any order, writ,
judgment, injunction, decree, determination or award which restricts its
ability to conduct business in any area in which it presently does business or
has or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on the Company.
3.09 TAXES AND TAX RETURNS.
(a) For purposes of this Agreement, the terms "Tax" and "Taxes"
shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross
income, gross receipts, premium, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding, payroll,
employment, excise, estimated, severance, stamp, occupation, property
or other taxes, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties (including penalties for
failure to file in accordance with applicable information reporting
requirements), and additions to tax by any authority, whether federal,
state, or local or domestic or foreign. The term "Tax Return" shall
mean any report, return, form, declaration or other document or
information required to be supplied to any authority in connection
with Taxes. The term "Code" shall mean the Internal Revenue Code of
1986, as amended.
(b) Each of the Company and its Subsidiaries (the "Taxpayers")
has filed all Tax Returns that were required to be filed. All such Tax
Returns were when filed, and continue to be, correct and complete in
all material respects. All Taxes owed by the Taxpayers (whether or not
shown on any Tax Return) have been timely paid. Except as set forth on
Schedule 3.09(b) annexed hereto, none of the Taxpayers currently is
the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where any of the Taxpayers does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no liens with
respect to Taxes on any of the assets or property of any of the
Taxpayers, except for liens with respect to Taxes not yet payable.
(c) Each of the Taxpayers has withheld or collected and paid all
Taxes required to have been withheld or collected and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, an other third party, or otherwise.
(d) There is no dispute or claim concerning any Tax Liability of
any of the Taxpayers either (A) claimed or raised by any authority in
writing or (B) as to which any of the Taxpayers or the directors and
officers (and employees responsible for Tax matters) of any of the
Taxpayers has knowledge. There are no proceedings with respect to
Taxes pending, except as set forth on Schedule 3.09(d) annexed hereto.
(e) Schedule 3.09(e) annexed hereto sets forth an accurate,
correct and complete list of all federal, state, local, and foreign
Tax Returns filed with respect to the Taxpayers for taxable periods
ended on or after November 30, 1991, indicates those Tax Returns that
have been audited and indicates those Tax Returns that currently are
the subject of audit. The Company has delivered to the Parent correct
and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to
by or on behalf of any of the Taxpayers since December 1, 1991. To the
knowledge of the
A-9
Taxpayers and their directors and officers (and employees responsible
for Tax matters), no other audit or investigation with respect to
Taxes is pending or has been threatened.
(f) None of the Taxpayers have waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency.
(g) None of the assets of any of the Taxpayers are assets that
Sub or the Parent is or shall be required to treat as being owned by
another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately
before the enactment of the Tax Reform Act of 1986, or is "tax-exempt
use property" within the meaning of Section 168(h)(1) of the Code.
(h) None of the Taxpayers has agreed to make, nor is it required
to make, any adjustments under Section 481(a) of the Code by reason of
a change in accounting method or otherwise.
(i) None of the Taxpayers is a party to any contract, arrangement
or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code, or the payment of any
consideration which would not be deductible by reason of Section
162(m) of the Code.
(j) None of the Taxpayers has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section
897(c)(1)(A)(ii).
(k) None of the Taxpayers is a party to any agreement, whether
written or unwritten, providing for the payment of Tax liabilities,
payment for Tax losses, entitlements to refunds or similar Tax
matters.
(l) No ruling with respect to Taxes relating to any of the
Taxpayers has been requested by or on behalf of the Taxpayers.
(m) None of the Taxpayers (A) has never been a member of an
affiliated group (within the meaning of Section 1504 of the Code, or
any similar group as defined for state, local or foreign tax purposes)
filing a consolidated federal (or combined or unitary state, local or
foreign) income Tax Return or (B) has any liability for the taxes of
any Person (other than the Taxpayers) under Reg. ss. 1.1502-6 (or any
similar provision of state, local or foreign Law), as a transferee or
successor, by contract, or otherwise.
(n) The unpaid Taxes of the Taxpayers (A) did not, as of the most
recent fiscal quarter end, exceed the reserves for Tax liability
(rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) on their respective
books at such time and (B) do not exceed that reserve as adjusted for
the passage of time through the Effective Date in accordance with the
past custom and practice of the Taxpayers in filing their Tax Returns.
(o) Schedule 3.09 sets forth the following information with
respect to each of the Company and its Subsidiaries as of the most
recent practicable date (as well as on an estimated pro forma basis as
of the Effective Date giving effect to the consummation of the
transactions contemplated hereby): (A) the basis of each of the
Company and its Subsidiaries in its assets; and (B) the amount of any
net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution
allocable to each of the Company and its Subsidiaries.
(p) None of the Company or its Subsidiaries has filed an
election, consent or agreement under Section 341(f) of the Code.
(q) For purposes of this Section 3.09, references to the
Taxpayers shall also refer to any predecessor companies.
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3.10 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.10 hereto sets forth a true and complete list of
all Plans maintained or contributed to by the Company or any of its
Subsidiaries during the five (5) years preceding this Agreement. The
term "Plans" for purposes of this Article III means all employee
benefit plans, arrangements or agreements that are maintained or
contributed to, or that were maintained or contributed to at any time
during the five (5) years preceding the date of this Agreement, by the
Company or any of its Subsidiaries, or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), all of which
together with the Company would be deemed a "single employer" within
the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
(b) The Company has heretofore delivered to Parent true and
complete copies of each of the Plans and all related documents,
including but not limited to (i) all required Forms 5500 and all
related schedules for such Plans (if applicable) for each of the last
two (2) years, (ii) the actuarial report for such Plan (if applicable)
for each of the last two (2) years, and (iii) the most recent
determination letter from the IRS (if applicable) for such plan.
(c) (i) Except as may be provided in Schedule 3.10 hereto, each
of the Plans has been operated and administered in all material
respects in accordance with applicable laws, including but not limited
to ERISA and the Code, (ii) each of the Plans intended to be
"qualified" within meaning of Section 401(a) of the Code has been
maintained so as to qualify from the effective date of such Plan to
the Effective Time, (iii) with respect to each Plan which is subject
to Title IV of ERISA, the present value of "benefit liabilities"
(within the meaning of Section 4001(a)(16) of ERISA) under such Plan,
based upon the actuarial assumptions currently used by the Plan for
IRS funding purposes did not, as of its latest valuation date, exceed
the then current value of the assets of such Plan allocable to such
accrued benefits, and there has been no "accumulated funding
deficiency" (whether or not waived), (iv) no Plan provides benefits,
including without limitation death, medical or other benefits (whether
or not insured), with respect to current or former employees of the
Company, any of its Subsidiaries or any ERISA Affiliate beyond their
retirement or other termination of service, other than (u) coverage
mandated by applicable law, (v) life insurance death benefits payable
in the event of the death of a covered employee, (w) disability
benefits payable to disabled former employees, (x) death benefits or
retirement benefits under any "employee pension plan," as that term is
defined in Section 3(2) of ERISA, (y) deferred compensation benefits
accrued as liabilities on the books of the Company, any of its
Subsidiaries or any ERISA Affiliate or (z) benefits the full cost of
which is borne by the current or former employee (or his beneficiary),
(v) with respect to each Plan subject to Title IV of ERISA no
liability under Title IV of ERISA has been incurred by the Company,
any of its Subsidiaries or any ERISA Affiliate that has not been
satisfied in full, no condition exists that presents a material risk
to the Company, any of its Subsidiaries or any ERISA Affiliate of
incurring a material liability to or on account of such Plan, and
there has been no "reportable event" (within the meaning of Section
1013 of ERISA and the regulations thereunder), (vi) none of the
Company, any of its Subsidiaries or any ERISA Affiliate has ever
maintained or contributed to a "multiemployer pension plan," as such
term is defined in Section 3(37) of ERISA, (vii) all contributions or
other amounts payable by the Company or any of its Subsidiaries as of
the Effective Time with respect to each Plan in respect of current or
prior plan years have been paid or accrued in accordance with GAAP and
Section 412 of the Code, (viii) none of the Company, any of its
Subsidiaries or any ERISA Affiliate has engaged in a transaction in
connection with which the Company, any of its Subsidiaries or any
ERISA Affiliate has any material liability for either a civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed
pursuant to Section 4975 or 4976 of the Code, (ix) consummation of the
transactions contemplated hereby will not cause any amounts payable
under any of the Plans to fail to be deductible for federal income tax
purposes under Sections 280G or 162(m) of the Code, and (x) there are
no pending or, to the best knowledge of the Company, threatened or
anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the Plans or any trusts related thereto.
A-11
(d) With respect to any Plan that is a welfare plan (within the
meaning of Section 3(1) of ERISA (i) no such Plan is funded through a
"welfare benefit fund," as such term is defined in Section 419(a) of
the Code, and (ii) each such Plan complies in all material respects
with the applicable requirements of Section 4980B(f) of the Code, Part
6 of Subtitle B of Title I of ERISA and any applicable state
continuation coverage requirements ("COBRA").
(e) Except as prohibited by law (including Section 411(d)(6) of
the Code), each Plan may be amended, terminated, modified or otherwise
revised by the Company, any of its Subsidiaries or its ERISA
Affiliates as of the Effective Time to eliminate, without material
effect, any and all future benefit accruals under any Plan (except
claims incurred under any welfare plan).
(f) Except as set forth on Schedule 3.10, since May 31, 1998,
neither the Company nor any of its Subsidiaries has entered into,
adopted or amended in any respect any collective bargaining agreement
or adopted or amended any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, insurance or other
similar plan, agreement, trust, fund or arrangement for the benefit of
employees (whether or not legally binding).
3.11 SEC REPORTS. The Company has previously delivered to Parent an
accurate and complete copy of each (a) final registration statement,
prospectus, report, schedule and definitive proxy statement of the Company
filed since January 1, 1993 with the SEC pursuant to the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act") (collectively, the
"Company SEC Reports"), and (b) communication mailed by or on behalf of the
Company to its stockholders since January 1, 1993. The Company has timely filed
(either by the required filing date or pursuant to Rule 12b-25 promulgated
under the Exchange Act) all Company SEC Reports and other documents required to
be filed by it under the Securities Act and the Exchange Act and, as of their
respective dates, all Company SEC Reports complied with all of the rules and
regulations of the SEC with respect thereto. As of their respective dates, no
such Company SEC Reports or communications contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. The Company has made
available to Parent true and complete copies of all amendments and
modifications to all agreements, documents and other instruments which
previously had been filed with the SEC by the Company and which are currently
in effect.
3.12 COMPANY INFORMATION.
The information supplied by the Company relating to the Company and its
Subsidiaries contained in the Registration Statement to be sent to the
stockholders of the Company in connection with the Company Stockholder Meeting,
or in any other document filed with any other regulatory agency in connection
herewith, will not contain, on the date of mailing of the Registration
Statement and on the date of the Company Stockholder Meeting, 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 in which they are made, not false or misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Company Stockholder Meeting which shall
have become false or misleading. The Registration Statement will comply in all
material respects with the provisions of the Securities Act and the Exchange
Act and the rules and regulations thereunder and the rules and regulations of
the SEC with respect thereto. Nothing in this Section 3.12 relates to any
information concerning Parent or Sub or their businesses, contracts,
litigation, stockholders, directors or officers.
3.13 COMPLIANCE WITH APPLICABLE LAW; CERTAIN AGREEMENTS. Except as set
forth in Schedule 3.13 hereto, each of the Company and its Subsidiaries holds
all material licenses, franchises, permits and authorizations necessary for the
lawful conduct of its business under and pursuant to all, and has complied with
and is not in conflict with, or in default or violation of any (a) statute,
code, ordinance, law, rule, regulation, order, writ, judgment, injunction or
decree, published policies and guidelines of any Governmental Entity,
applicable to the Company or Subsidiary or by which any property or asset of
the Company or Subsidiary is bound or affected or (b) any note, bond, mortgage,
indenture, deed of trust, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which
A-12
the Company or Subsidiary is a party or by which the Company or Subsidiary or
any property or asset of the Company or Subsidiary is bound or affected, except
for any such non-compliance, conflicts, defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect; and the
Company neither knows of, nor has received notice of, any material violations
of any the above. In addition to the foregoing, the Company has in place, and
is in compliance with, plans regarding Hazard Analysis Critical Control Points
for each facility of the Company.
3.14 CERTAIN CONTRACTS.
(a) Except as set forth in Schedule 3.14 hereto, neither the
Company nor any of its Subsidiaries is a party to or bound by any
contract, arrangement, commitment or understanding (whether written or
oral): (i) with respect to the employment of any director, officer or
employee, or with respect to the employment of any consultant which
cannot be terminated with a payment of less than $25,000, (ii) which,
upon the consummation of the transactions contemplated by this
Agreement, will result in any payment (whether of severance pay or
otherwise) becoming due from the Company or any of its Subsidiaries to
any officer or employee thereof, (iii) which is a material contract
(as defined in Item 601(b)(10) of Regulation S-B of the SEC) to be
performed after the date of this Agreement that has not been filed or
incorporated by reference in the Company SEC Reports, (iv) which is a
consulting or other agreement (including agreements entered into in
the ordinary course and data processing, software programming and
licensing contracts) not terminable on ninety (90) days or less notice
and involves the payment of more than $25,000 per annum, (v) which
restricts the conduct of any line of business by the Company or any of
its Subsidiaries, (vi) with or to a labor union or guild (including
any collective bargaining agreement), or (vii) (including any stock
option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan) any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement,
or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement. The
Company has previously delivered to Parent true and complete copies of
all employment, consulting and deferred compensation agreements which
are in writing and to which the Company is a party. Each contract,
arrangement, commitment or understanding of the type described in this
section is referred to herein as a "Company Contract".
(b) Except as set forth in Schedule 3.14(b) hereto, (i) each
Company Contract is legal, valid and binding upon the Company or a
Subsidiary of the Company, as the case may be, assuming due
authorization of the other party or parties thereto, and in full force
and effect, (ii) the Company or Subsidiary, as the case may be, has in
all material respects performed all obligations required to be
performed by it to date under each such Company Contract, and (iii) no
event or condition exists which constitutes or, after notice or lapse
of time or both, would constitute, a default on the part of the
Company or Subsidiary, as the case may be, under any such Company
Contract.
(c) Neither the Company nor its Subsidiaries has made any express
warranty to any person or entity with respect to any product it
manufactures or sells or has manufactured or sold or has made or
agreed to make any indemnification payment, or replacement with
respect to any product warranty claim, except for (i) the warranties
and/or agreement(s) to indemnify or replace product of which true and
correct copies have been delivered to Parent, (ii) the warranties
applicable under the Uniform Commercial Code as in effect from time to
time in the jurisdictions in which its products are sold and (iii) any
other warranties under other state or federal laws.
3.15 AGREEMENTS WITH REGULATORY AGENCIES. Neither the Company nor any
of its Subsidiaries is subject to any cease-and-desist or other order issued
by, or is a party to any written agreement, consent agreement or memorandum of
understanding, commitment letter or similar undertaking (each a "Regulatory
Agreement") with any Regulatory Agency or other Governmental Entity that
restricts the conduct of its business in any material respect, nor has the
Company or any of its Subsidiaries been notified by any Regulatory Agency or
other Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement.
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3.16 ENVIRONMENTAL MATTERS.
(a) The Company and its Subsidiaries are, and have been, in
material compliance with all applicable environmental laws and with
all rules, regulations, standards and requirements of the United
States Environmental Protection Agency (the "EPA") and of state and
local agencies with jurisdiction over pollution or protection of the
environment.
(b) There is no suit, claim, action or proceeding pending or, to
the best knowledge of the Company, threatened, before any Governmental
Entity or other forum in which the Company or any of its Subsidiaries
have been or, with respect to threatened proceedings, may be named as
a defendant, responsible party or potentially responsible party (i)
for alleged noncompliance (including by any predecessor), with any
environmental law, rule, regulation, standard or requirement or (ii)
relating to the release into or presence in the Environment (as
hereinafter defined) of any Hazardous Materials (as hereinafter
defined) or Oil (as hereinafter defined) whether or not occurring at
or on a site owned, leased or operated by the Company or any of its
Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries has received
any notice regarding a matter on which a suit, claim, action or
proceeding as described in subsection (b) of this Section 3.16 could
reasonably be based. No facts or circumstances have come to the
Company's attention which have caused either to believe that a
material suit, claim, action or proceeding as described in subsection
(b) of this Section 3.16 could reasonably be expected to occur.
(d) Except as set forth in the Environmental Site Assessment
Reports described in Schedule 3.16(d) hereto, during the period of the
ownership or operation by the Company or any of its Subsidiaries of
any of their respective current properties, there has been no release
or presence in the Environment of Hazardous Material or Oil in, on,
under or affecting such property. To the best knowledge of the
Company, prior to the period of the ownership or operation by the
Company or any of its Subsidiaries of any of their respective current
properties or any previously owned or operated properties, there was
no release or presence in the Environment of Hazardous Material or Oil
in, on, under or affecting any such property.
(e) The following definitions apply for purposes of this
Agreement: (i) "Hazardous Material" means any pollutant, contaminant,
or hazardous substance or hazardous material as defined in or pursuant
to the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601 et seq., or any other federal, state
or local environmental law, regulation or requirement; (ii) "Oil"
means oil or petroleum of any kind or origin or in any form, as
defined in or pursuant to the Federal Clean Water Act, 33 U.S.C. ss.
1251 et seq., or any other federal, state or local environmental law,
regulation or requirement; and (iii) "Environment" means any soil,
surface waters, groundwaters, stream sediments, surface or subsurface
strata, and ambient air and any other environmental medium.
3.17 PROPERTIES.
(a) Schedule 3.17 hereto contains a true, complete and correct
list and a brief description (including carrying value) of all real
properties owned by the Company or any of its Subsidiaries. Except as
set forth in Schedule 3.17 hereto, the Company or its Subsidiaries has
good and marketable title to all the real property and other property
owned by it and included in the balance sheet of the Company for the
period ended May 31, 1998, and owns such property subject to no
encumbrances, liens, mortgages, security interests, pledges or title
imperfections except for (i) those items that secure liabilities that
are reflected in such balance sheet or the notes thereto, (ii)
statutory liens for amounts not yet delinquent or which are being
contested in good faith, (iii) with respect to owned real property,
title imperfections noted in title reports, and (iv) those items that
do not, individually or in the aggregate, have a Material Adverse
Effect on the Company or which
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do not and will not interfere with the use of the property as
currently used or contemplated to be used by the Company or its
Subsidiaries, or the conduct of the business of the Company or its
Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries has received
any notice of a material violation of any applicable zoning or
environmental regulation, ordinance or other law, order, regulation or
requirement relating to its operations or its properties and, to the
knowledge of the Company, there is no such violation. Except as set
forth in Schedule 3.17 hereto, all buildings and structures owned and
used by the Company or any of its Subsidiaries conform in all material
respects with all applicable ordinances, codes or regulations, except
to the extent such noncompliance does not or will not have a Material
Adverse Effect on the Company and which does not or will not interfere
with the use of any property as currently used or contemplated to be
used by the Company or its Subsidiaries, or the conduct of the
business of the Company or its Subsidiaries. Except as set forth in
Schedule 3.17 hereto, to the knowledge of the Company, all buildings
and structures leased and used by the Company or any of its
Subsidiaries conform in all material respects with all applicable
ordinances, codes or regulations, except to the extent such
noncompliance does not or will not have a Material Adverse Effect on
the Company and which does not or will not interfere with the use of
any property as currently used or contemplated to be used by the
Company or its Subsidiaries, or the conduct of the business of the
Company or its Subsidiaries.
(c) Schedule 3.17 contains a true, complete and correct list of
all leases pursuant to which the Company or any of its Subsidiaries
leases any real or personal property, either as lessee or as lessor
(the "Company Leases"). Assuming due authorization of the other party
or parties thereto, each of the Company Leases is valid and binding on
the Company or Subsidiary, as the case may be, and, to the best of the
Company's knowledge, valid and binding on and enforceable against all
other respective parties to such leases, in accordance with their
respective terms. Except to the extent such breaches, defaults or
events of default do not or will not have a Material Adverse Effect on
the Company and which do not or will not interfere with the use of any
property as currently used or contemplated to be used by the Company
or its Subsidiaries, or the conduct of the business of the Company or
its Subsidiaries, there are not under such Company Leases any existing
breaches, defaults or events of default by the Company or any of its
Subsidiaries, nor has the Company or any of its Subsidiaries received
notice of, or made a claim with respect to, any breach or default by
any other party to such Company Leases. Each of the Company and its
Subsidiaries enjoys quiet and peaceful possession of all such leased
properties occupied by it as lessee.
(d) All of the real properties, leasehold improvements and items
of equipment and other material personal property owned, leased, or
licensed by the Company or any of its Subsidiaries, or in which any of
those parties hold an interest, are in good maintenance, repair and
operating condition, ordinary wear and tear excepted, are adequate for
the purpose for which they are now being or are anticipated to be
used, and, to the best of the Company's knowledge, are free from any
material defects.
3.18 INSURANCE. The Company has made available to Parent true and
complete copies of all material policies of insurance of the Company or any of
its Subsidiaries currently in effect. All of the policies relating to insurance
maintained by the Company or any of its Subsidiaries with the respect to its
material properties and the conduct of its business in any material respect (or
any comparable policies entered into as a replacement thereof) are in full
force and effect and neither the Company nor any of its Subsidiaries has
received any notice of cancellation with respect thereto. All life insurance
policies on the lives of any of the current and former officers of the Company
or any of its Subsidiaries which are maintained by the Company or any of its
Subsidiaries or which are otherwise included as assets on the books of the
Company (i) are, or will at the Effective Time be, owned by the Company or any
of its Subsidiaries, free and clear of any claims thereon by the officers or
members of their families, except with respect to the death benefits
thereunder, as to which the Company agrees that there will not be an amendment
prior to the Effective Time without the consent of Parent, and (ii) are
accounted for properly on the books of the Company in accordance with GAAP. The
Company does not have any material liability for unpaid premium or premium
adjustments not properly reflected on the Company's May 31, 1998 balance sheet.
The Company and its Subsidiaries have been and are adequately insured with
respect to their respective property and the conduct of their respective
business in such amounts
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and against such risks as are substantially similar in kind and amount to that
customarily carried by parties similarly situated who own properties and engage
in businesses substantially similar to that of the Company (including without
limitation liability insurance and blanket bond insurance). All claims under
any policy or bond have been duly and timely filed.
3.19 TRANSACTIONS WITH CERTAIN PERSONS. Except as disclosed in the
Company SEC Reports or otherwise set forth on Schedule 3.19 hereto, since April
1, 1996, neither the Company nor any of its Subsidiaries has entered into any
transaction or series of transactions, in which the amount involved exceeded
$10,000, with any executive officer, director or greater-than-5% stockholder of
the Company or any "associate" (as defined in Rule 14a-1 under the Exchange
Act) of any such officer or director or "affiliates" (as defined in Rule
144(a)(1) of the Securities Act) of any such officer, director or stockholder.
3.20 LABOR MATTERS. Neither the Company nor any of its Subsidiaries is
a party to any collective bargaining or other labor union or guild contract nor
has the Company or any of its Subsidiaries been approached since November 30,
1997 by any collective bargaining or other labor union or guild seeking to
enter into a contract with the Company or any of its Subsidiaries. There is no
pending or, to the best knowledge of the Company, threatened, labor dispute,
strike or work stoppage against the Company or any of its Subsidiaries which
may interfere with the business activities of the Company or any of its
Subsidiaries. None of the Company, any of its Subsidiaries or their respective
representatives or employees has committed any unfair labor practices in
connection with the operation of the business of the Company or any of its
Subsidiaries, and there is no pending or, to the best knowledge of the Company,
threatened charge or complaint against the Company or any of its Subsidiaries
by the National Labor Relations Board or any comparable state agency. Except as
set forth on Schedule 3.20 hereto, to its knowledge, neither the Company nor
its Subsidiaries has hired any illegal aliens as employees. To its knowledge,
neither the Company nor its Subsidiaries has discriminated on the basis of
race, age, sex or otherwise in its employment conditions or practices with
respect to its employees. There are no race, age, sex or other discrimination
complaints pending, or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries by any employee, former or current, before
any domestic (federal, state or local) or foreign board, department, commission
or agency nor, to the knowledge of the Company, does any basis therefor exist.
There are no pending or, to the knowledge of the Company, threatened
representation questions respecting any employees.
3.21 INTELLECTUAL PROPERTY. The Company and its Subsidiaries own or
possess valid and binding licenses and other rights to use without payment of
any material amount all material patents, copyrights, trade secrets, trade
names, service marks, trademarks, software and other intellectual property used
in its business, which are set forth in Schedule 3.21 hereto; neither the
Company nor any of its Subsidiaries has received any notice of conflict with
respect thereto that asserts the right of others. The Company and its
Subsidiaries have performed in all material respects all the obligations
required to be performed by it with respect to the items of intellectual
property set forth in Schedule 3.21 hereto and are not in default under any
contract, agreement, arrangement or commitment relating to any of the
foregoing.
3.22 SUBSTANTIAL SUPPLIERS AND CUSTOMERS. Except as set forth on
Schedule 3.22 hereto, since November 30, 1997, 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, taken as a whole, has substantially
reduced the use or supply of the products or goods made available for purchase
by the Company or its Subsidiaries in their business or has ceased, or
threatened to cease, to use or to supply such products or goods, and the
Company does not have any reason to believe that any such supplier or customer
will do so.
3.23 BROKER'S FEES. Neither the Company nor any of its officers or
directors, has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement, except pursuant to an agreement
dated June 5, 1998, as amended by a letter agreement dated October 7, 1998,
between the Company and Ladenburg Thalmann & Company.
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3.24 DISCLOSURE. No representation or warranty contained in this
Agreement or any schedule to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances in which they are
made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby represent and warrant to the Company as follows:
4.01 CORPORATE ORGANIZATION.
(a) Each of Parent and Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Each of Parent and Sub has the corporate power and authority
to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified would not have a Material Adverse Effect on Parent. The
Certificate of Incorporation and Bylaws of each of Parent and Sub,
copies of which have previously been delivered to the Company, are
true and complete copies of such documents as in effect as of the date
of this Agreement.
(b) Parent has no direct or indirect Subsidiaries other than Sub
and is the sole stockholder of Sub. Sub has no direct or indirect
Subsidiaries. Neither Parent nor Sub owns, controls or holds with the
power to vote, directly or indirectly of record, beneficially or
otherwise, any capital stock or any equity or ownership interest in
any corporation, partnership, association, joint venture or other
entity, except for (i) Parent's ownership of Sub, (ii) Parent's
ownership of Company Common Stock and (iii) less than five percent
(5%) of any equity security registered under the Exchange Act.
(c) The minute books of each of Parent and Sub contain true,
complete and accurate records of all meetings and other corporate
actions held or taken by their respective stockholders and boards of
directors (including committees of their respective boards of
directors).
4.02 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 50,000,000
shares of Parent Common Stock, 2,000,000 shares of Class B common
stock, par value $.01 per share ("Parent Class B Common Stock"), of
Parent and 5,000,000 shares of preferred stock, par value $.01 per
share, of Parent. As of September 15, 1998, 2,646,139 shares of Parent
Common Stock, 522,955 shares of Parent Class B Common Stock and no
shares of preferred stock of Parent were issued and outstanding. As of
September 15, 1998, options and warrants exercisable to purchase
559,839 and 30,000 shares of Parent Common Stock, respectively, were
outstanding, and a promissory note convertible into 428,571 shares of
Parent Common Stock was outstanding. All of the issued and outstanding
shares of Parent Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights
with no personal liability attaching to the ownership thereof.
(b) The authorized capital stock of Sub consists of 1,500 shares
of common stock, without par value ("Sub Common Stock"), of Sub. As of
the date hereof, 100 shares of Sub Common Stock are outstanding. All
of the issued and outstanding shares of capital stock of Sub are owned
by Parent, have been duly authorized and validly issued and are fully
paid, non-assessable and free of preemptive rights with no personal
liability attaching to the ownership thereof.
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(c) Except as described in Section 4.02(a) hereof, neither Parent
nor Sub has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling
for the purchase or issuance of any shares of Parent Common Stock, Sub
Common Stock or any other equity security of Parent or Sub or any
securities representing the right to purchase or otherwise receive any
shares of Parent Common Stock, Sub Common Stock or any other equity
security of Parent or Sub other than as provided for in this
Agreement. Except as described in Section 4.02(a) hereof, there are no
bonds, debentures, notes or other indebtedness of Parent or Sub having
the right to vote (or convertible into, or exchangeable for securities
having the right to vote) on any matters on which stockholders of
Parent or Sub may vote.
(d) Except as contemplated herein, there are no agreements or
understandings, with respect to the voting of any shares of Parent
Common Stock or Sub Common Stock or which restrict the transfer of
such shares, to which Parent or Sub is a party and, to the knowledge
of Parent, there are no such agreements or understandings to which
Parent or Sub is not a party with respect to the voting of any such
shares or which restrict the transfer of such shares, other than
applicable federal and state securities laws.
(e) All dividends on Parent Common Stock or Sub Common Stock
which have been declared prior to the date of this Agreement have been
paid in full.
4.03 AUTHORITY; NO VIOLATION.
(a) Each of Parent and Sub have full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Sub and the consummation by Parent and Sub of
the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of Parent and Sub, respectively.
Except for the filing of the Certificate of Merger, no other corporate
proceedings on the part of Parent or Sub are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Parent
and Sub and (assuming the due authorization, execution and delivery by
the Company) constitutes a valid and binding obligation of Parent and
Sub, enforceable against Parent and Sub in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by each
of Parent and Sub, nor the consummation by either Parent or Sub, as
the case may be, of the transactions contemplated hereby, nor
compliance by either Parent or Sub with any of the terms or provisions
hereof, will (i) violate, conflict with or result in a breach of any
provision of the Certificate of Incorporation or Bylaws of Parent, or
Sub, as the case may be, or (ii)(x) violate any statute, code,
ordinance, rule, regulations, judgment, order, writ, decree or
injunction applicable to the Parent or Sub or any of their respective
properties or assets, or (y) violate, conflict with, result in a
breach of any provisions of or the loss of any benefit under,
constitute a default (or any event which, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of
any lien, pledge, security interest, charge or other encumbrance upon
any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Parent or Sub is a party, or by
which they or any of their respective properties or assets may be
bound or affected, except (in the case of clause (y) above) for such
violations, conflicts, breaches or defaults which, either individually
or in the aggregate, will not have a Material Adverse Effect on
Parent.
4.04 CONSENTS AND APPROVALS. Except for (a) the filing with the SEC of
the Registration Statement and the declaration of the effectiveness thereof by
the SEC, (b) the approval of this Agreement by the requisite vote of the
stockholders of Parent and the Company, respectively, and (c) the filing of the
Certificate of Merger with the Delaware Secretary pursuant to the DGCL to
effect the Merger, no consents or approvals of or filings or registrations with
any Governmental Entity or with any third party are necessary in connection
with the execution and delivery by Parent and
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Sub of this Agreement and the consummation by Parent and Sub of the Merger and
the other transactions contemplated hereby.
4.05 BROKER'S FEES. Neither Parent nor Sub, nor any of their
respective officers or directors, has employed any broker or finder or incurred
any liability for any broker's fee, commission or finder's fee in connection
with any of the transactions contemplated by this Agreement, except as set
forth in Schedule 4.05 hereto.
4.06 FINANCIAL STATEMENTS.
(a) Parent has previously delivered to the Company copies of the
audited consolidated balance sheets of the Company as of December 31,
1995, December 31, 1996 and December 31, 1997, and the related
consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1996 through 1997, inclusive, included
in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997 filed with the SEC under the Exchange Act.
Parent has also previously delivered to the Company copies of the
unaudited consolidated balance sheets of Parent as of June 30, 1998,
and the related unaudited consolidated statements of income and cash
flows for the quarter ended June 30, 1998, included in Parent's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998
filed with the SEC under the Exchange Act. The audited consolidated
financial statements and unaudited consolidated interim financial
statements of Parent and its Subsidiaries included or incorporated by
reference in the Parent SEC Reports (as hereinafter defined) filed on
or after December 31, 1995 have been prepared in accordance with GAAP
consistently applied during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-QSB), complied as of their
respective dates in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, and fairly present the consolidated financial
position of Parent and its Subsidiaries as of the dates thereof and
the consolidated income and retained earnings and sources and
applications of funds for the periods then ended (subject, in the case
of any unaudited interim financial statements, to the absence of
footnotes required by GAAP and normal year-end adjustments).
(b) Except for liabilities incurred since June 30, 1998 in the
ordinary course of business consistent with past practice, Parent does
not have any liabilities or obligations of any nature whatsoever
(whether absolute, accrued, contingent or otherwise) which are not
adequately reserved or reflected on the balance sheet of Parent
included in its Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1998, except for liabilities or obligations which in the
aggregate do not exceed $50,000, and there do not exist any
circumstances that could reasonably be expected to result in such
liabilities or obligations.
4.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1998, there
has not been any Material Adverse Effect on Parent (including without
limitation any loss of employees or customers that has had a Material Adverse
Effect, or that is reasonably likely to have a Material Adverse Effect, on
Parent) and, to the best knowledge of Parent, no fact or condition exists which
will cause such a Material Adverse Effect on Parent in the future.
4.08 LEGAL PROCEEDINGS. Except as set forth in Schedule 4.08 hereto,
neither Parent nor Sub is a party to any, and there are no pending or, to the
best knowledge of Parent, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of
any nature against or affecting Parent or Sub or any property or asset of
Parent or Sub, before any court, arbitrator or administrative, Governmental
Entity, domestic or foreign, which would, either individually or in the
aggregate, have a Material Adverse Effect on Parent, and no facts or
circumstances have come to Parent's attention which have caused it to believe
that such a claim, action, proceeding or investigation against or affecting
Parent or Sub could reasonably be expected to occur. Neither Parent nor Sub nor
any property or asset of Parent or Sub is subject to any order, writ, judgment,
injunction, decree, determination or award which restricts its ability to
conduct business in any area in which it presently does business or has or
could reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect on Parent.
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4.09 TAXES AND TAX RETURNS.
(a) Each of Parent and its Subsidiaries (the "Parent Taxpayers")
has filed all Tax Returns that were required to be filed. All such Tax
Returns were when filed, and continue to be, correct and complete in
all material respects. All Taxes owed by the Parent Taxpayers (whether
or not shown on any Tax Return) have been timely paid. Except as set
forth on Schedule 4.09(a) annexed hereto, none of the Parent Taxpayers
currently is the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where any of the Parent Taxpayers does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
There are no liens with respect to Taxes on any of the assets or
property of any of the Parent Taxpayers, except for liens with respect
to Taxes not yet payable.
(b) Each of the Parent Taxpayers has withheld or collected and
paid all Taxes required to have been withheld or collected and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, an other third party, or otherwise.
(c) There is no dispute or claim concerning any Tax Liability of
any of the Parent Taxpayers either (A) claimed or raised by any
authority in writing or (B) as to which any of the Parent Taxpayers or
the directors and officers (and employees responsible for Tax matters)
of any of the Parent Taxpayers has knowledge. There are no proceedings
with respect to Taxes pending.
(d) Schedule 4.09(a) annexed hereto sets forth an accurate,
correct and complete list of all federal, state, local, and foreign
Tax Returns filed with respect to the Parent Taxpayers for taxable
periods ended on or after December 31, 1992, indicates those Tax
Returns that have been audited and indicates those Tax Returns that
currently are the subject of audit. Parent has delivered to the
Company correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against
or agreed to by or on behalf of any of the Parent Taxpayers since
January 1, 1993. To the knowledge of the Parent Taxpayers and their
directors and officers (and employees responsible for Tax matters), no
other audit or investigation with respect to Taxes is pending or has
been threatened.
(e) None of the Parent Taxpayers have waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(f) None of the Parent Taxpayers has agreed to make, nor is it
required to make, any adjustments under Section 481(a) of the Code by
reason of a change in accounting method or otherwise.
(g) None of the Parent Taxpayers is a party to any agreement,
whether written or unwritten, providing for the payment of Tax
liabilities, payment for Tax losses, entitlements to refunds or
similar Tax matters.
(h) No ruling with respect to Taxes relating to any of the Parent
Taxpayers has been requested by or on behalf of the Parent Taxpayers.
(i) None of the Parent Taxpayers is a party to any contract,
arrangement or plan that has resulted or would result, separately or
in the aggregate, in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code, or the payment of any
consideration which would not be deductible by reason of Section
162(m) of the Code.
(j) Except as set forth on Schedule 4.09(j), none of the Parent
Taxpayers (A) has never been a member of an affiliated group (within
the meaning of Section 1504 of the Code, or any similar group as
defined for state, local or foreign tax purposes) filing a
consolidated federal (or combined or unitary state, local or foreign)
income Tax Return or (B) has any liability for the taxes of any Person
(other than the Parent
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Taxpayers) under Reg. ss. 1.1502-6 (or any similar provision of
state, local or foreign Law), as a transferee or successor, by
contract, or otherwise.
(k) The unpaid Taxes of the Parent Taxpayers (A) did not, as of
the most recent fiscal quarter end, exceed the reserves for Tax
liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) on their
respective books at such time and (B) do not exceed that reserve as
adjusted for the passage of time through the Effective Date in
accordance with the past custom and practice of the Parent Taxpayers
in filing their Tax Returns.
(l) None of Parent or Sub has filed an election, consent or
agreement under Section 341(f) of the Code.
(m) For purposes of this Section 4.09, references to the Parent
Taxpayers shall also refer to any predecessor companies.
4.10 EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.10 hereto sets forth a true and complete list of
all Plans maintained or contributed to by Parent or Sub during the
five (5) years preceding this Agreement. The term "Plans" for purposes
of this Article IV means all employee benefit plans, arrangements or
agreements that are maintained or contributed to, or that were
maintained or contributed to at any time during the five (5) years
preceding the date of this Agreement, by Parent or Sub, or by any
ERISA Affiliate, all of which together with Parent would be deemed a
"single employer" within the meaning of Section 4001 of ERISA.
(b) Parent has heretofore delivered to the Company true and
complete copies of each of the Plans and all related documents,
including but not limited to (i) all required Forms 5500 and all
related schedules for such Plans (if applicable) for each of the last
two (2) years, (ii) the actuarial report for such Plan (if applicable)
for each of the last two (2) years, and (iii) the most recent
determination letter from the IRS (if applicable) for such plan.
(c) (i) Each of the Plans has been operated and administered in
all material respects in accordance with applicable laws, including
but not limited to ERISA and the Code, (ii) each of the Plans intended
to be "qualified" within meaning of Section 401(a) of the code has
been maintained so as to qualify from the effective date of such Plan
to the Effective Time, (iii) with respect to each Plan which is
subject to Title IV of ERISA, the present value of "benefit
liabilities" (within the meaning of Section 4001(a)(16) of ERISA)
under such Plan, based upon the actuarial assumptions currently used
by the Plan for IRS funding purposes did not, as of its latest
valuation date, exceed the then current value of the assets of such
Plan allocable to such accrued benefits, and there has been no
"accumulated funding deficiency" (whether or not waived), (iv) no Plan
provides benefits, including without limitation death, medical or
other benefits (whether or not insured), with respect to current or
former employees of Parent, Sub or any ERISA Affiliate beyond their
retirement or other termination of service, other than (u) coverage
mandated by applicable law, (v) life insurance death benefits payable
in the event of the death of a covered employee, (w) disability
benefits payable to disabled former employees, (x) death benefits or
retirement benefits under any "employee pension plan," as that term is
defined in Section 3(2) of ERISA, (y) deferred compensation benefits
accrued as liabilities on the books of Parent, Sub or any ERISA
Affiliate or (z) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), (v) with respect to
each Plan subject to Title IV of ERISA no liability under Title IV of
ERISA has been incurred by Parent, Sub or any ERISA Affiliate that has
not been satisfied in full, no condition exists that presents a
material risk to Parent, Sub or any ERISA Affiliate of incurring a
material liability to or on account of such Plan, and there has been
no "reportable event" (within the meaning of Section 1013 of ERISA and
the regulations thereunder), (vi) none of Parent, Sub or any ERISA
Affiliate has ever maintained or contributed to a "multiemployer
pension plan," as such term is defined in Section 3(37) of ERISA,
(vii) all contributions or other amounts payable by Parent or Sub as
of the Effective Time with
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respect to each Plan in respect of current or prior plan years
have been paid or accrued in accordance with GAAP and Section 412 of
the Code, (viii) none of Parent, any of its Subsidiaries or any ERISA
Affiliate has engaged in a transaction in connection with which
Parent, Sub or any ERISA Affiliate has any material liability for
either a civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code,
(ix) consummation of the transactions contemplated hereby will not
cause any amounts payable under any of the Plans to fail to be
deductible for federal income tax purposes under Sections 280G or
162(m) of the Code, and (x) there are no pending or, to the best
knowledge of Parent, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the
Plans or any trusts related thereto.
(d) With respect to any Plan that is a welfare plan (within the
meaning of Section 3(1) of ERISA (i) no such Plan is funded through a
"welfare benefit fund," as such term is defined in Section 419(a) of
the Code, and (ii) each such Plan complies in all material respects
with the applicable requirements of Section 4980B(f) of the Code, Part
6 of Subtitle B of Title I of ERISA and any applicable state COBRA
requirements.
(e) Except as prohibited by law (including Section 411(d)(6) of
the Code), each Plan may be amended, terminated, modified or otherwise
revised by Parent, Sub or its ERISA Affiliates as of the Effective
Time to eliminate, without material effect, any and all future benefit
accruals under any Plan (except claims incurred under any welfare
plan).
(f) Since December 31, 1997, neither Parent nor Sub has entered
into, adopted or amended in any respect any collective bargaining
agreement or adopted or amended any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred
compensation, insurance or other similar plan, agreement, trust, fund
or arrangement for the benefit of employees (whether or not legally
binding).
4.11 SEC REPORTS. Parent has previously delivered to the Company an
accurate and complete copy of each (a) final registration statement,
prospectus, report, schedule and definitive proxy statement of Parent filed
since Parent's initial public offering in June 1993 with the SEC pursuant to
the Exchange Act or the Securities Act (collectively, the "Parent SEC
Reports"), and (b) communication mailed by or on behalf of the Parent to its
stockholders since June 1, 1993. Parent has timely filed (either by the
required filing date or pursuant to Rule 12b-25 promulgated under the Exchange
Act) all Parent SEC Reports and other documents required to be filed by it
under the Securities Act and the Exchange Act and, as of their respective
dates, all Parent SEC Reports complied with all of the rules and regulations of
the SEC with respect thereto. As of their respective dates, no such Parent SEC
Reports or communications contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances in which
they were made, not misleading. Parent has made available to the Company true
and complete copies of all amendments and modifications to all agreements,
documents and other instruments which previously had been filed with the SEC by
Parent and which are currently in effect. Since June 30, 1998, there has not
been any Material Adverse Effect on Parent and, to the best knowledge of
Parent, no fact or condition exists which will, or is reasonably likely to,
cause such a Material Adverse Effect on Parent in the future.
4.12 PARENT AND SUB INFORMATION. The information supplied by Parent
and Sub relating to Parent and Sub contained in the Registration Statement to
be sent to the stockholders of Parent in connection with the Parent Stockholder
Meeting, or in any other document filed with any other regulatory agency in
connection therewith, will not contain, on the date of mailing of the
Registration Statement and on the date of the Parent Stockholder Meeting, 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 in which they are made, not false or misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Parent Stockholder Meeting which shall have
become false or misleading. The Registration Statement will comply in all
material respects with the provisions of the Securities Act and the Exchange
Act and the rules and regulations thereunder and the rules and regulations of
the SEC with respect thereto. Nothing in this Section 4.12 relates to any
information
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concerning the Company, its Subsidiaries or their respective business,
contracts, litigation, stockholders, directors or officers.
4.13 COMPLIANCE WITH APPLICABLE LAW; CERTAIN AGREEMENTS. Each of
Parent and Sub holds all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business under and
pursuant to all, and has complied with and is not in conflict with, or in
default or violation of any (a) statute, code, ordinance, law, rule,
regulation, order, writ, judgment, injunction or decree, published policies and
guidelines of any Governmental Entity, applicable to Parent or Sub or by which
any property or asset of Parent or Sub is bound or affected or (b) any note,
bond, mortgage, indenture, deed of trust, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or Sub is a
party or by which Parent or Sub or any property or asset of Parent or Sub is
bound or affected, except for any such non-compliance, conflicts, defaults or
violations that would not, individually or in the aggregate, have a Material
Adverse Effect; and Parent neither knows of, nor has received notice of, any
material violations of any the above.
4.14 CERTAIN CONTRACTS.
(a) Neither Parent nor Sub is a party to or bound by any
contract, arrangement, commitment or understanding (whether written or
oral): (i) which, upon the consummation of the transactions
contemplated by this Agreement, will result in any payment (whether of
severance pay or otherwise) becoming due from Parent or Sub to any
officer or employee thereof, (ii) which is a material contract (as
defined in Item 601(b)(10) of Regulation S-B of the SEC) to be
performed after the date of this Agreement that has not been filed or
incorporated by reference in the Parent SEC Reports, (iii) which
restricts the conduct of any line of business by Parent or Sub, (iv)
with or to a labor union or guild (including any collective bargaining
agreement), or (v) (including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase
plan) any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, or the value of
any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. Parent has previously
delivered to the Company true and complete copies of all employment,
consulting and deferred compensation agreements which are in writing
and to which Parent or Sub is a party. Each contract, arrangement,
commitment or understanding of the type described in this section is
referred to herein as a "Parent Contract".
(b) (i) Each Parent Contract is legal, valid and binding upon
Parent or Sub, as the case may be, assuming due authorization of the
other party or parties thereto, and in full force and effect, (ii)
Parent or Sub has in all material respects performed all obligations
required to be performed by it to date under each such Parent
Contract, and (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a default on
the part of Parent or Sub under any such Parent Contract.
(c) Neither Parent nor Sub has made any express warranty to any
person or entity with respect to any product it manufactures or sells
or has manufactured or sold or has made or agreed to make any
indemnification payment, or replacement with respect to any product
warranty claim, except for (i) the warranties and/or agreement(s) to
indemnify or replace product of which true and correct copies have
been delivered to the Company, (ii) the warranties applicable under
the Uniform Commercial Code as in effect from time to time in the
jurisdictions in which its products are sold and (iii) any other
warranties under other state or federal laws.
4.15 AGREEMENTS WITH REGULATORY AGENCIES. Neither Parent nor Sub is
subject to any cease-and-desist or other order issued by, or is a party to any
Regulatory Agreement with any Regulatory Agency or other Governmental Entity
that restricts the conduct of its business in any material respect, nor has
Parent or Sub been notified by any Regulatory Agency or other Governmental
Entity that it is considering issuing or requesting any Regulatory Agreement.
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4.16 ENVIRONMENTAL MATTERS.
(a) Parent and Sub are, and have been, in material compliance
with all applicable environmental laws and with all rules,
regulations, standards and requirements of the EPA and of state and
local agencies with jurisdiction over pollution or protection of the
environment.
(b) There is no suit, claim, action or proceeding pending or, to
the best knowledge of Parent, threatened, before any Governmental
Entity or other forum in which Parent or Sub have been or, with
respect to threatened proceedings, may be named as a defendant,
responsible party or potentially responsible party (i) for alleged
noncompliance (including by any predecessor), with any environmental
law, rule, regulation, standard or requirement or (ii) relating to the
release into or presence in the Environment of any Hazardous Materials
or Oil whether or not occurring at or on a site owned, leased or
operated by Parent or Sub.
(c) Neither Parent nor Sub has received any notice regarding a
matter on which a suit, claim, action or proceeding as described in
subsection (b) of this Section 4.16 could reasonably be based. No
facts or circumstances have come to Parent's attention which have
caused either to believe that a material suit, claim, action or
proceeding as described in subsection (b) of this Section 4.16 could
reasonably be expected to occur.
(d) During the period of the ownership or operation by Parent or
Sub of any of their respective current properties, there has been no
release or presence in the Environment of Hazardous Material or Oil
in, on, under or affecting such property. To the best knowledge of
Parent, prior to the period of the ownership or operation by Parent or
Sub of any of their respective current properties or any previously
owned or operated properties, there was no release or presence in the
Environment of Hazardous Material or Oil in, on, under or affecting
any such property.
4.17 PROPERTIES.
(a) Schedule 4.17(a) hereto contains a true, complete and correct
list and a brief description (including carrying value) of all real
properties owned by Parent or Sub. Parent or Sub has good and
marketable title to all the real property and other property owned by
it and included in the balance sheet of Parent for the period ended
June 30, 1998, and owns such property subject to no encumbrances,
liens, mortgages, security interests, pledges or title imperfections
except for (i) those items that secure liabilities that are reflected
in such balance sheet or the notes thereto, (ii) statutory liens for
amounts not yet delinquent or which are being contested in good faith,
(iii) with respect to owned real property, title imperfections noted
in title reports, and (iv) those items that do not, individually or in
the aggregate, have a Material Adverse Effect on Parent or which do
not and will not interfere with the use of the property as currently
used or contemplated to be used by Parent or Sub, or the conduct of
the business of Parent or Sub.
(b) Neither Parent nor Sub has received any notice of a material
violation of any applicable zoning or environmental regulation,
ordinance or other law, order, regulation or requirement relating to
its operations or its properties and, to the knowledge of Parent,
there is no such violation. All buildings and structures owned and
used by Parent or Sub conform in all material respects with all
applicable ordinances, codes or regulations, except to the extent such
noncompliance does not or will not have a Material Adverse Effect on
Parent and which does not or will not interfere with the use of any
property as currently used or contemplated to be used by Parent or
Sub, or the conduct of the business of Parent or Sub. To the knowledge
of Parent, all buildings and structures leased and used by Parent or
Sub conform in all material respects with all applicable ordinances,
codes or regulations, except to the extent such noncompliance does not
or will not have a Material Adverse Effect on Parent and which does
not or will not interfere with the use of any property as currently
used or contemplated to be used by Parent or Sub, or the conduct of
the business of Parent or Sub.
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(c) Schedule 4.17(c) contains a true, complete and correct list
of all leases pursuant to which Parent or Sub leases any real or
personal property, either as lessee or as lessor (the "Parent
Leases"). Assuming due authorization of the other party or parties
thereto, each of the Parent Leases is valid and binding on Parent or
Sub, as the case may be, and, to the best of Parent's knowledge, valid
and binding on and enforceable against all other respective parties to
such leases, in accordance with their respective terms. Except to the
extent such breaches, defaults or event of default do not or will not
have a Material Adverse Effect on Parent and which do not or will not
interfere with the use of any property as currently used or
contemplated to be used by Parent or Sub, or the conduct of the
business of Parent or Sub, there are not under such Parent Leases any
existing breaches, defaults or events of default by Parent or Sub, nor
has Parent or Sub received notice of, or made a claim with respect to,
any breach or default by any other party to such Parent Leases. Each
of Parent and Sub enjoys quiet and peaceful possession of all such
leased properties occupied by it as lessee.
(d) All of the real properties, leasehold improvements and items
of equipment and other material personal property owned, leased, or
licensed by Parent or Sub, or in which any of those parties hold an
interest, are in good maintenance, repair and operating condition,
ordinary wear and tear excepted, are adequate for the purpose for
which they are now being or are anticipated to be used, and, to the
best of Parent's knowledge, are free from any material defects.
4.18 INSURANCE. Parent has made available to the Company true and
complete copies of all material policies of insurance of Parent or Sub
currently in effect. All of the policies relating to insurance maintained by
Parent or Sub with the respect to its material properties and the conduct of
its business in any material respect (or any comparable policies entered into
as a replacement thereof) are in full force and effect and neither Parent nor
Sub has received any notice of cancellation with respect thereto. All life
insurance policies on the lives of any of the current and former officers of
Parent or Sub which are maintained by Parent or Sub or which are otherwise
included as assets on the books of Parent (i) are, or will at the Effective
Time be, owned by Parent or Sub, free and clear of any claims thereon by the
officers or members of their families, except with respect to the death
benefits thereunder, as to which Parent agrees that there will not be an
amendment prior to the Effective Time without the consent of the Company, and
(ii) are accounted for properly on the books of Parent in accordance with GAAP.
Parent does not have any material liability for unpaid premium or premium
adjustments not properly reflected on Parent's June 30, 1998 balance sheet.
Parent and Sub have been and are adequately insured with respect to their
respective property and the conduct of their respective business in such
amounts and against such risks as are substantially similar in kind and amount
to that customarily carried by parties similarly situated who own properties
and engage in businesses substantially similar to that of Parent (including
without limitation liability insurance and blanket bond insurance). All claims
under any policy or bond have been duly and timely filed.
4.19 TRANSACTIONS WITH CERTAIN PERSONS. Except as disclosed in the
Parent SEC Reports, neither Parent nor Sub has entered into any transaction
with any executive officer, director or greater-than-5% stockholder of Parent
or any "associate" (as defined in Rule 14a-1 under the Exchange Act) of any
such officer or director or "affiliates" (as defined in Rule 144(a)(1) of the
Securities Act) of any such officer, director or stockholder.
4.20 LABOR MATTERS. Neither Parent nor Sub is a party to any
collective bargaining or other labor union or guild contract nor has Parent or
Sub been approached since December 31, 1997 by any collective bargaining or
other labor union or guild seeking to enter into a contract with Parent or Sub.
There is no pending or, to the best knowledge of Parent, threatened, labor
dispute, strike or work stoppage against Parent or Sub which may interfere with
the business activities of Parent or Sub. None of Parent, Sub or their
respective representatives or employees has committed any unfair labor
practices in connection with the operation of the business of Parent or Sub,
and there is no pending or, to the best knowledge of Parent, threatened charge
or complaint against Parent or Sub by the National Labor Relations Board or any
comparable state agency. To its knowledge, neither Parent nor Sub has
discriminated on the basis of race, age, sex or otherwise in its employment
conditions or practices with respect to its employees. There are no race, age,
sex or other discrimination complaints pending, or, to the knowledge of Parent,
threatened against Parent or Sub by any employee, former or current, before any
domestic (federal, state or local) or foreign board, department, commission or
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agency nor, to the knowledge of Parent, does any basis therefor exist. There
are no pending or, to the knowledge of Parent, threatened representation
questions respecting any employees.
4.21 INTELLECTUAL PROPERTY. Parent and Sub own or possess valid and
binding licenses and other rights to use without payment of any material amount
all material patents, copyrights, trade secrets, trade names, service marks,
trademarks, software and other intellectual property used in its business,
which are set forth in Schedule 4.21 hereof; neither Parent nor Sub has
received any notice of conflict with respect thereto that asserts the right of
others. Parent and Sub have performed in all material respects all the
obligations required to be performed by it with respect to the items of
intellectual property set forth in Schedule 4.21 hereof and are not in default
under any contract, agreement, arrangement or commitment relating to any of the
foregoing.
4.22 SUBSTANTIAL SUPPLIERS AND CUSTOMERS. Since December 31, 1997,
none of the top ten (10) suppliers (by dollar volume) or the top ten (10)
customers (by dollar volume) of Parent has substantially reduced the use or
supply of the products or goods made available for purchase by Parent and Sub
in their business or has ceased, or threatened to cease, to use or to supply
such products or goods, or, nor does Parent have any reason to believe that any
such supplier or customer will do so.
4.23 FINANCIAL ABILITY TO PERFORM. Parent has delivered to the Company
prior to the date of this Agreement a letter from a financing source acceptable
to the Company regarding its commitment to fund an amount sufficient to pay the
Merger Consideration. As of the date of this Agreement, Parent knows of no
reason that the financing source will not be able to consummate the Financing.
4.24 DISCLOSURE. No representation or warranty contained in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein, in light of the
circumstances in which they are made, not misleading. No information material
to the Merger and which is necessary to make Parent's and Sub's representations
and warranties hereto contained not misleading, has been withheld from, or has
not been delivered in writing to the Company.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01 COVENANTS OF THE COMPANY. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent
of Parent, the Company shall (and shall cause its Subsidiaries to) carry on its
business in the ordinary course consistent with past practice. The Company will
(and shall cause its Subsidiaries to) use all reasonable efforts to (x)
preserve its business organization, (y) keep available the present services of
its employees and (z) preserve for itself and Parent the goodwill of the
customers of the Company and its Subsidiaries and others with whom business
relationships exist. Without limiting the generality of the foregoing, and
except as otherwise contemplated by this Agreement or consented to in writing
by Parent, the Company shall not (and shall cause its Subsidiaries not to):
(a) declare or pay any dividends on, or make other distributions
in respect of, any of its capital stock;
(b) (i) split, combine or reclassify any shares of its capital
stock; or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock except upon the exercise or fulfillment of rights or
options issued or existing pursuant to employee benefit plans,
programs or arrangements, all to the extent outstanding and in
existence on the date of this Agreement, or (ii) repurchase, redeem or
otherwise acquire, any shares of the capital stock of the Company, or
any securities convertible into or exercisable for any shares of the
capital stock of the Company;
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(c) except in connection with the exercise of any of the options
or warrants of the Company outstanding as of the date of this
Agreement, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any
securities convertible into or exercisable for, or any rights,
warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing;
(d) amend its Certificate of Incorporation or Bylaws;
(e) except as set forth on Schedule 5.01(e), make any capital
expenditures in excess of $50,000 individually, or $150,000 in the
aggregate;
(f) enter into any new line of business;
(g) (i) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof or (ii) otherwise acquire
any assets, other than in the ordinary course of business, which would
be material to the Company and its Subsidiaries, taken as a whole;
(h) take any action that is intended or would result in any of
its representations and warranties set forth in this Agreement being
or becoming untrue, or in any of the conditions to the Merger set
forth in Article VII not being satisfied, or in breach of any
provision of this Agreement except, in every case, as may be required
by applicable law;
(i) change its methods of accounting in effect at November 30,
1997, except as required by changes in GAAP or regulatory accounting
principles as concurred to by the Company's independent auditors;
(j) except as set forth on Schedule 5.01(j), (i) except as
required by applicable law or to maintain qualification pursuant to
the Code, (x) enter into, adopt, amend, renew or terminate any Plan or
any agreement, arrangement, plan or policy between the Company or any
of its Subsidiaries and one or more of its current or former
directors, officers or employees or (y) increase in any manner
compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan or agreement as in effect
as of the date hereof (including, without limitation, the granting of
stock options, stock appreciation rights, restricted stock, restricted
stock units or performance units or shares); provided, however, that
the Company or its Subsidiaries may increase the compensation of
non-officer employees in the ordinary course of business consistent
with past practice; or (ii) except for the Bogen Agreement or the
Smith Agreement, enter into, modify or renew any employment, severance
or other agreement with any director, officer or employee of the
Company or any of its Subsidiaries or establish, adopt, enter into, or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement providing for any
benefit to any director, officer or employee (whether or not legally
binding);
(k) other than (i) as set forth on Schedule 5.01(k), (ii) in the
ordinary course of business consistent with past practice or (iii) to
refinance existing debt with indebtedness under the Company's
revolving credit facility, incur any indebtedness for borrowed money,
assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation
or other entity;
(l) other than (i) as set forth on Schedule 5.01(l) or (ii) in
the ordinary course of business consistent with past practice, sell,
lease, encumber, assign or otherwise dispose of, or agree to sell,
lease, encumber, assign or otherwise dispose of, any of its material
assets, properties or other rights or agreements;
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(m) make any Tax election or settle or compromise any material
federal, state, local or foreign Tax liability;
(n) pay, discharge or satisfy any claim, liability or obligation,
other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice or as incurred in
connection with the Merger and the transactions expressly contemplated
hereby, subject to the limitation on fees set forth in Section 8.03(a)
hereof, of liabilities reflected or reserved against in the balance
sheet for the fiscal year ended November 30, 1997, or subsequently
incurred in the ordinary course of business and consistent with past
practice;
(o) except as set forth on Schedule 5.01(o), enter into or renew
amend or terminate, or give notice of a proposed renewal amendment or
termination, or make any commitment with respect to, regardless of
whether consistent with past practices, any lease, contract, agreement
or commitment (i) involving an aggregate payment by or to the Company
of more than $100,000, (ii) having a term of one year or more from the
time of execution or (iii) outside of the ordinary course of business
consistent with past practices;
(p) waive any material right, whether in equity or at law; or
(q) agree to do any of the foregoing.
5.02 COVENANTS OF PARENT AND SUB. During the period from the date of
this Agreement and continuing until the Effective Time, except (i) as expressly
contemplated or permitted by this Agreement or the Commitment Letter(s) or (ii)
with the prior written consent of the Company, Parent shall (and shall cause
Sub to) carry on its business in the ordinary course consistent with past
practice. Parent will (and shall cause Sub to) use all reasonable efforts to
(x) preserve its business organization, (y) keep available the present services
of its employees and (z) preserve for itself the goodwill of the customers of
Parent and Sub and others with whom business relationships exist. Without
limiting the generality of the foregoing, and except as otherwise contemplated
by this Agreement or Schedule 5.02 hereto or consented to in writing by the
Company, Parent shall not (and shall cause Sub not to):
(a) declare or pay any dividends on, or make other distributions
in respect of, any of its capital stock;
(b) split, combine or reclassify any shares of its capital stock;
or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock except upon the exercise or fulfillment of rights or options
issued or existing pursuant to employee benefit plans, programs or
arrangements, all to the extent outstanding and in existence on the
date of this Agreement or currently contemplated to be implemented on
or prior to the Closing Date;
(c) except in connection with the exercise of any of the options
or warrants of Parent outstanding as of the date of this Agreement,
issue, deliver or sell, or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares, or enter into any agreement with
respect to any of the foregoing;
(d) amend its Certificate of Incorporation or Bylaws;
(e) enter into any new line of business;
(f) (i) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof or (ii) otherwise acquire
any assets, other than in the ordinary course of business, which would
be material to Parent;
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(g) take any action that is intended or would result in any of
its representations and warranties set forth in this Agreement being
or becoming untrue, or in any of the conditions to the Merger set
forth in Article VII (including, without limitation, Section 7.01(d)
hereof relating to the Financing) not being satisfied, or in breach of
any provision of this Agreement except, in every case, as may be
required by applicable law;
(h) change its methods of accounting in effect at December 31,
1997, except as required by changes in GAAP or regulatory accounting
principles as concurred to by the Company's independent auditors;
(i) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other
entity;
(j) sell, lease, encumber, assign or otherwise dispose of, or
agree to sell, lease, encumber, assign or otherwise dispose of, any of
its material assets, properties or other rights or agreements;
(k) make any Tax election or settle or compromise any material
federal, state, local or foreign Tax liability;
(l) waive any material right, whether in equity or at law; or
(m) agree to do any of the foregoing.
5.03 NO SOLICITATION; NON-DISCLOSURE.
(a) None of the Company, any of its Subsidiaries or any of their
respective directors, officers, employees, representatives, agents and
advisors or other persons controlled by the Company shall solicit or
hold discussions or negotiations with, or assist or provide any
information to, any person, entity or group (other than Parent, Sub
and their affiliates and representatives) concerning any merger,
business combination, disposition of a significant portion of its
assets, or acquisition of a significant portion of its capital stock
or similar transactions involving the Company; provided, however, that
the Board of Directors of the Company may furnish or cause to be
furnished such information to, and may participate in such discussions
or negotiations with, persons or entities who have made a bona fide
proposal if the Board of Directors of the Company believes, in good
faith, after consultation with its financial and legal advisors, that
such bona fide proposal represents a transaction which is more
favorable to the Company's stockholders from a financial point of view
and is subject only to reasonable conditions of closing which shall
include financing terms reasonably satisfactory to the Company and, in
the opinion of counsel to the Board of Directors of the Company, the
fiduciary duty of the Board of Directors under applicable law requires
it to furnish or cause to be furnished such information and/or
participate in such discussions or negotiations (a "Superior Offer").
The Company will promptly communicate to Parent, Sub and their
affiliates and representatives the terms of any proposal, discussion,
negotiation or inquiry relating to a merger or disposition of a
significant portion of its capital stock or assets or similar
transaction involving the Company and the identity of the party making
such proposal or inquiry, which it may receive with respect to any
such transaction. In the event that the Board of Directors of the
Company receives what it determines, based on the opinion of counsel
to the Board of Directors of the Company, to be a Superior Offer, the
Board of Directors may vote to recommend such Superior Offer rather
than pursuing the consummation of the transactions contemplated
hereunder or withdraw, modify or amend its recommendation of this
Agreement and the Merger, thus terminating this Agreement in
accordance with Section 8.01(h) hereof, but any such termination may
occur only (i) within twenty-one (21) days after such Superior Offer
is received and (ii) upon two (2) full business days prior notice to
Parent.
(b) No party (or its representatives, agents, counsel,
accountants or investment bankers) hereto shall disclose to any third
party, other than either party's representatives, agents, counsel,
accountants or investment bankers or the potential lenders previously
disclosed to the Company and Parent in writing, any
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confidential or proprietary information about the business, assets or
operations of the other parties to this Agreement or the transactions
contemplated hereby, except as may be required by applicable law.
Disclosure of such information by the Company or Parent with respect
to obtaining financing shall be made only if the recipient executes a
reasonable and appropriate agreement to hold such information
confidential. The parties hereto agree that the remedy at law for any
breach of the requirements of this subsection will be inadequate and
that any breach would cause such immediate and permanent damage as
would be impossible to ascertain, and, therefore, the parties hereto
agree and consent that in the event of any breach of this subsection,
in addition to any and all other legal and equitable remedies
available for such breach, including a recovery of damages, the
non-breaching parties shall be entitled to obtain preliminary or
permanent injunctive relief without the necessity of proving actual
damage by reason of such breach and, to the extent permissible under
applicable law, a temporary restraining order may be granted
immediately on commencement of such action.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 REGULATORY MATTERS.
(a) The parties hereto shall cooperate with each other and use
all reasonable efforts promptly to prepare and file all necessary
documentation, to effect all applications, notices, petitions and
filings, and to obtain as promptly as practicable all permits,
consents, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement (including without
limitation the Merger). The Company and Parent shall have the right to
review in advance, and to the extent practicable each will consult
with the other on, in each case subject to applicable laws relating to
the exchange of information, all the information relating to the
Company, Parent or Sub, as the case may be, which appear in any filing
made with or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated
by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will keep the other apprised of the
status of matters relating to completion of the transactions
contemplated herein.
(b) Parent (or Sub as the case may be) shall, upon request,
furnish the Company with all information concerning themselves, their
respective directors, officers and stockholders and such other matters
as may be reasonably necessary or advisable in connection with the
Registration Statement made by or on behalf of the Company in
connection with the Merger and the other transactions contemplated
hereby.
(c) Parent (or Sub as the case may be) and the Company shall
promptly furnish each other with copies of written communications
received by Parent, Sub or the Company, as the case may be, from, or
delivered by any of the foregoing to, any Governmental Entity in
respect of the transactions contemplated hereby.
6.02 SECURITIES LAWS MATTERS.
(a) As soon as reasonably practicable after the date hereof,
Parent shall file the Registration Statement with the SEC under the
Exchange Act. Parent shall use all reasonable efforts to have the
Registration Statement cleared by the SEC as promptly as practicable
after such filing.
(b) Parent, Sub and the Company shall cooperate with each other
in the preparation of the Registration Statement, and each shall
notify the other of the receipt of any comments of the SEC with
respect
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to the Registration Statement and of any requests by the SEC for any
amendment or supplement thereto or for additional information and
shall provide to the other parties promptly copies of all
correspondence between the party or any representative or agent of the
party and SEC. Each party shall review the Registration Statement
prior to its being filed with the SEC and shall review all amendments
and supplements to the Registration Statement and all responses to
requests for additional information and replies to comments prior to
their being filed with, or sent to, the SEC. The parties agree to use
all reasonable efforts, after consultation with each other, to respond
promptly to all such comments of and requests by the SEC.
(c) Each of Parent and the Company further agrees to cause the
applicable proxy statement contained in the Registration Statement and
all required supplements thereto to be mailed to its stockholders
entitled to vote at the Parent Stockholder Meeting or the Company
Stockholder Meeting, as the case may be, at the earliest practicable
time.
6.03 COMPANY STOCKHOLDER MEETING; PARENT STOCKHOLDER MEETING.
(a) In order to consummate the Merger, the Company shall take all
steps necessary to duly call, give notice of, convene and hold the
Company Stockholder Meeting as soon as reasonably practicable for the
purpose of voting upon the approval of this Agreement and the
transactions contemplated hereby and shall use all reasonable efforts
to obtain such approval and adoption. Subject to Sections 5.03 or 6.11
hereof, the Company shall, through its Board of Directors, recommend
to its stockholders approval of this Agreement and the transactions
contemplated hereby.
(b) In order to consummate the Merger, Parent shall take all
steps necessary to duly call, give notice of, convene and hold the
Parent Stockholder Meeting as soon as reasonably practicable for the
purpose of voting upon the approval of the issuance of the shares of
Parent Common Stock in the Merger and shall use all reasonable efforts
to obtain such approval and adoption. Parent shall, through its Board
of Directors, recommend to its stockholders approval of the issuance
of the shares of Parent Common Stock in the Merger.
6.04 ACCESS TO INFORMATION.
(a) Upon reasonable notice to the Chief Executive Officers of the
parties and subject to applicable laws relating to the exchange of
information, the parties shall afford each other's officers,
employees, counsel, accountants, agents, advisors and other authorized
representatives, access, during normal business hours of the person(s)
to whom access is required, during the period prior to the Effective
Time, to all its properties, books, contracts, commitments and records
and, during such period, make available to the other party (i) when
applicable, a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant
to the requirements of federal securities laws (other than reports or
documents which are not permitted to be disclosed under applicable
law), (ii) copies of all periodic reports regularly received by senior
management, and (iii) all other information concerning its business,
properties, assets and personnel as either party may reasonably
request.
(b) In addition to any other confidentiality covenants and
obligations imposed under this Agreement, the parties agree to comply
with the confidentiality agreement dated as of March 30, 1998 between
Parent and the Company, as amended by that certain letter agreement
dated April 24, 1998 between Parent and the Company (the
"Confidentiality Agreement"), which is incorporated herein by
reference.
6.05 LEGAL CONDITIONS TO MERGER. Each of Parent, Sub and the Company
shall use all reasonable efforts (a) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
which may be imposed on such party with respect to the Merger and, subject to
the conditions set forth in Article VII hereof, to consummate the transactions
contemplated by this Agreement and (b) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of or any
exemption by, any
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Governmental Entity and any other third party which is required to be obtained
by Parent, Sub or the Company in connection with the Merger and the other
transactions contemplated by this Agreement.
6.06 ADDITIONAL AGREEMENTS. If at any time after the Effective Time
any further action is necessary or desirable to carry out the purpose of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement shall take all such necessary action as may be reasonably requested
by the Company or Parent (without additional cost to them).
6.07 DISCLOSURE SUPPLEMENTS. Prior to the Effective Time, each party
will supplement or amend the Schedules hereto delivered in connection with the
execution of this Agreement to reflect any matter which, if existing, occurring
or known at the date of this Agreement, would have been required to be set
forth or described in such Schedules or which is necessary to correct any
information in such Schedules which has been rendered inaccurate thereby. No
supplement or amendment to such Schedules shall have any effect for the
purposes of determining satisfaction of the conditions set forth in Sections
7.02(a) hereof or the compliance by the Company with the covenants set forth in
Section 5.01 hereof or for the purposes of determining satisfaction of the
conditions set forth in Sections 7.03(a) hereof or the compliance by Parent or
Sub with the covenants set forth in Section 5.02 hereof.
6.08 CURRENT INFORMATION.
(a) During the period from the date of this Agreement to the
Effective Time, each of the Company and Parent will cause its Chief
Executive Officer or one or more of his or her designated
representatives to be available to confer from time to time with
representatives of the other and to report the general status of their
ongoing operations. Each such party will promptly notify the other
party of any material change in the normal course of its business and
of any governmental complaints, investigations or hearings or the
institution of significant litigation involving them or their
subsidiaries or properties and will keep the other party reasonably
informed of such events.
(b) To the extent not covered by paragraph (a) above, the Company
shall give prompt notice to Parent, and Parent shall give prompt
notice to the Company, of (i) the occurrence or non-occurrence of any
event which would be reasonably likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate and
(ii) any failure of Parent, Sub or the Company, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided,
however, that the delivery of any notice pursuant to this paragraph
(b) shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
6.09 NO INCONSISTENT ACTIONS. Prior to the Effective Time, except as
otherwise permitted by this Agreement, no party will enter into any transaction
or make any agreement or commitment and will use reasonable efforts not to
permit any event to occur, which could reasonably be anticipated to result in
(x) a denial of the regulatory approvals referred to in Section 7.01(b) or (y)
the imposition of any condition or requirement that would materially adversely
affect the economic or business benefits to the Surviving Corporation of the
transactions contemplated by this Agreement.
6.10 INDEMNIFICATION OF DIRECTORS.
(a) From and after the Effective Time, Parent and Surviving
Corporation shall each defend, indemnify and advance costs and
expenses (including reasonable attorneys' fees, disbursements and
expenses) and hold harmless each present and former director and
officer of the Company or its Subsidiaries determined as of the
Effective Time (the "Indemnified Parties"), against any costs or
expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages, settlements or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative
or investigative, arising after the Effective Time and out of or
pertaining to matters existing or
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occurring at or prior to the Effective Time, including without
limitation, the authorization of this Agreement and the transactions
contemplated hereby, whether asserted or claimed prior to, at or after
the Effective Time, to the fullest extent that the Company would have
been permitted under Delaware law and its certificate of incorporation
or by-laws in effect on the date hereof to indemnify such person (and
also advance expenses as incurred to the fullest extent permitted
under applicable law provided the person to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification);
provided that any determination required by law to be made with
respect to whether an officer's or director's conduct complies with
the standards set forth under Delaware law and the Company's
certificate of incorporation and by-laws as of the date hereof shall
be made by independent counsel selected jointly by Parent and the
Indemnified Party.
(b) In the event of any claim, action, suit, proceeding or
investigation in which indemnification pursuant to Section 6.10(a) is
sought (whether arising before or after the Effective Time), (i)
Parent shall have the right to assume the defense thereof and Parent
shall not be liable to any Indemnified Parties for any legal expenses
of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except
that if Parent elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise
conflicts of interest between Parent and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them and
reasonably satisfactory to Parent, and Parent shall pay the reasonable
fees and expenses of such counsel for the Indemnified Parties promptly
as statements therefor are received; provided, however, that Parent
shall be obligated pursuant to this paragraph (b) to pay for only one
firm of counsel for all Indemnified Parties in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest, (ii) the Indemnified Parties will
cooperate in the defense of any such matter unless counsel for the
Indemnified Parties advises that there are issues which raise
conflicts of interest making such cooperation inadvisable and (iii)
Parent shall not be liable for any settlement effected without its
prior written consent (which shall not be unreasonably withheld); and
provided further that Parent shall not have any obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become
final and nonappealable, that the indemnification of such Indemnified
Party in the manner contemplated hereby is prohibited by applicable
law. If a court of competent jurisdiction determines that the
indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law, then Parent shall provide
indemnification to the maximum extent and in such manner as is
permissible under applicable law. If such indemnity is completely
unavailable with respect to any Indemnified Party, Parent and the
Indemnified Party shall contribute to the amount payable in such
proportion as is appropriate to reflect relative faults and benefits.
(c) For a period of six (6) years following the Effective Time,
Parent will provide to the persons who served as directors or officers
of Company or any of the Company's Subsidiaries on or before the
Effective Time, insurance against liabilities and claims (and related
expenses) made against them resulting from their service as such prior
to the Effective Time. Such coverage may be provided by means of an
extended reporting period endorsement to the policy presently issued
to the Company by the present carrier for the Company, or by such
other means which shall provide substantially equivalent coverage to
the persons.
6.11 FIDUCIARY OBLIGATIONS. Notwithstanding anything in this Agreement
to the contrary, the Company shall not be required to take, or cause to be
taken, or fail to take any actions or to do, or cause to be done or fail to do
any things which may be contrary to the fiduciary obligations of persons who
are directors of the Company, or are acting pursuant to the exercise of the
directors' fiduciary obligations, as determined in good faith by a majority of
the directors of the Company, based as to legal matters on the advice of its
legal counsel.
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6.12 FINANCING.
(a) Parent shall use all reasonable good faith efforts to
consummate the Financing and Parent will keep the Purchaser apprised
of the status of matters relating to completion of the Financing.
Parent shall raise the amount in cash equity required by the terms of
the Commitment Letter(s).
(b) In the event that the Financing is not consummated and a
claim, action, suit or proceeding is sought by Parent against the
financing source or sources for failure to consummate the Financing
(i) Parent shall offer the Company the right to join in such claim,
action, suit or proceeding, (ii) Parent and the Company shall
cooperate in any such claim, action, suit or proceeding, and (iii)
Parent and the Company shall share equally in all costs and in all
recoveries in any such claim, action, suit or proceeding. Nothing
contained herein shall obligate (A) Parent to pursue any such claim,
action, suit or proceeding or (B) the Company to participate in any
such claim, action, suit or proceeding.
ARTICLE VII
CONDITIONS PRECEDENT
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Closing of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the
affirmative vote of the stockholders of the Company, to the extent
required by Delaware law and the Company's Certificate of
Incorporation. The issuance of the shares of Parent Common Stock in
the Merger shall have been approved and adopted by the affirmative
vote of the stockholders of Parent, to the extent required by Delaware
law and Parent's Certificate of Incorporation.
(b) REGULATORY APPROVALS. All necessary approvals, authorizations
and consents of all Governmental Entities required to consummate the
transactions contemplated hereby shall have been obtained and shall
remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired or been terminated (all such
approvals and the expiration of all such waiting periods being
referred to herein as the "Requisite Regulatory Approvals").
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order,
injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger or any of the other
transactions contemplated by this Agreement shall be in effect and no
proceeding initiated by any Governmental Entity seeking an injunction
shall be pending. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by
any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger, or any of the other transactions
contemplated by this Agreement.
(d) FINANCING. The Financing shall have been consummated in
accordance with the proposal set forth in the Commitment Letter(s).
7.02 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligation of
Parent and Sub to effect the Merger is also subject to the satisfaction or
waiver by Parent and Sub, at or prior to the Effective Time, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement shall be true
and correct as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of
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the Closing Date. Parent shall have received a certificate signed on
behalf of the Company by its Chief Executive Officer and Chief
Financial Officer to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
and Parent shall have received a certificate signed on behalf of the
Company by its Chief Executive Officer and Chief Financial Officer to
such effect.
(c) CONSENTS UNDER AGREEMENTS. The consent, approval, waiver or
amendment (with financial covenants) of each person (other than the
Governmental Entities referred to in Section 7.01(b)) whose consent or
approval shall be required in order to permit the succession by the
Surviving Corporation pursuant to the Merger to any obligation, right
or interest of the Company under any material loan or credit
agreement, note, mortgage, indenture, lease, license or other
agreement or instrument shall have been obtained and shall be
reasonably satisfactory to Parent.
(d) LEGAL OPINION. Parent shall have received the legal opinion
of Bourne, Noll & Kenyon, counsel to the Company, dated the Closing
Date, covering such matters as Parent and Sub shall reasonably
request.
(e) FIRPTA. The Company shall have delivered to the Parent and
Sub an affidavit, dated as of the Effective Date, pursuant to Sections
897 and 1445 of the Code in substantially the form set forth in
Exhibit E hereto, and shall have complied with the notice requirements
set forth in Treasury Regulation Section 1.897-2(h)(2).
(f) BOGEN AGREEMENT AND SMITH AGREEMENT. The Bogen Agreement and
the Smith Agreement shall be in full force and effect as of the
Effective Time, and the employment agreements of Steven Bogen and
Steven Smith with the Company shall have been terminated in all
respects, except as expressly contemplated by the Bogen Agreement and
the Smith Agreement, respectively.
(g) DISSENTING SHARES. Dissenting Shares shall constitute not
more than five percent (5%) of the issued and outstanding shares of
Company Common Stock as of the record date for the Company Stockholder
Meeting.
(h) FIVE LOG REDUCTION. The Company shall be in compliance with
the requirements of the Food Labeling: Warning and Notice Statement;
Labeling of Juice Products; Final Rule promulgated by the United
States Food and Drug Administration through in-plant validation of
five (5) log reduction without use of pasteurization, which compliance
will eliminate any requirement for a warning label.
7.03 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to effect the Merger is also subject to the satisfaction, or waiver by
the Company, at or prior to the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Sub set forth in this Agreement shall be true
and correct of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date. The
Company shall have received a certificate signed on behalf of Parent
and Sub by their respective Chief Executive Officers and Chief
Financial Officers to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and Sub
shall have each performed in all material respects all obligations
required to be performed by them; under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate
signed on behalf of Parent and Sub by their respective Chief Executive
Officers and Chief Financial Officers to such effect.
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(c) CONSENTS UNDER AGREEMENTS. The consent, approval, waiver or
amendment (with financial covenants) of each person (other than the
Governmental Entities referred to in Section 7.01(b)) whose consent or
approval shall be required in order to permit the succession by the
Surviving Corporation pursuant to the Merger to any obligation, right
or interest of Parent or Sub under any material loan or credit
agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, shall have been obtained and shall be
reasonably satisfactory to the Company.
(d) SEC REGISTRATION; LISTING OF SHARES. The Registration
Statement shall have been declared effective by the SEC and shall not
be subject to a stop order or any threatened stop order, and the
issuance of the Parent Common Stock shall have been qualified in every
state where such qualification is required under the applicable state
securities laws. The Parent Common Stock to be issued in connection
with the Merger shall have been included for quotation on the Nasdaq
SmallCap Market or any other national securities exchange, or
quotation system, if any, upon which the Parent Common Stock is
trading or being quoted at the Effective Time.
(e) FAIRNESS OPINION. The Company shall have received the written
opinion of Ladenburg Thalmann & Company to the effect that, as of the
date of such opinion, the Per Share Price is fair to the Company's
stockholders from a financial point of view, and such opinion shall
not have been amended or rescinded as of the Effective Time.
(f) LEGAL OPINION. The Company shall have received the legal
opinion of Swidler Berlin Shereff Friedman, LLP, counsel to Parent and
Sub, dated the Closing Date, covering such matters as the Company
shall reasonably request.
(g) INSURANCE. The Company shall have received evidence,
reasonably satisfactory to it, that Parent shall have obtained the
insurance referred to in Section 6.10(c) hereof or, after giving ten
(10) days' prior written notice to Parent, shall have obtained the
insurance referred to in Section 6.10(c) hereof.
(h) PROVISION OF THE EXCHANGE FUND. Parent shall have made
available to the Exchange Agent the Exchange Fund described in Section
2.01 hereof.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.01 TERMINATION. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company and Parent:
(a) by mutual consent of Parent and the Company in a written
instrument, if the Board of Directors of each so determines by a vote
of a majority of the members of its entire Board;
(b) by either Parent or the Company upon written notice to the
other party (i) at least thirty (30) days after the date on which any
request or application for a regulatory approval required to
consummate the Merger shall have been denied or withdrawn at the
request or recommendation of the Governmental Entity which must grant
such requisite regulatory approval, unless within the thirty (30) day
period following such denial or withdrawal a petition for rehearing or
an amended application has been filed with the applicable Governmental
Entity; provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 8.01(b)(i) if such
denial or request or recommendation for withdrawal shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein,
or (ii) if any Governmental Entity of competent jurisdiction shall
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have issued a final nonappealable order enjoining or otherwise
prohibiting the consummation of any of the transactions contemplated
by this Agreement;
(c) by either Parent or the Company if the Merger shall not have
been consummated on or before the later of (i) if the Company has
mailed the proxy statement contained in the Registration Statement to
its stockholders on or prior to December 31, 1998, the thirtieth
(30th) day after the Company has mailed the proxy statement or, if
later, five (5) days after the Company Stockholder Meeting and (ii)
December 31, 1998, unless the failure of the Closing to occur by such
date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe in any material respect the
covenants and agreements of such party set forth herein;
(d) by the Company (provided that the Company shall not be in
material breach of any of its obligations under Section 6.03) if any
approval of the stockholders of the Company required for the
consummation of and Merger shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of
stockholders or at any adjournment or postponement thereof;
(e) by either Parent or the Company (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein) if there shall have been a material breach of any of the
representations or warranties set forth in this Agreement on the part
of the other party, (i) which breach (if susceptible to cure) is not
cured within twenty (20) business days following written notice to the
party committing such breach, or (ii) which breach, by its nature,
cannot be cured;
(f) by either Parent or the Company (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein) if there shall have been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of the
other party, (i) which breach (if susceptible to cure) shall not have
been cured within twenty (20) business days following receipt by the
breaching party of written notice of such breach from the other party
hereto, or (ii) which breach, by its nature, cannot be cured;
(g) by Parent, if the Board of Directors of the Company does not
publicly recommend, as required by Section 6.03 hereof, in the
Registration Statement that the Company's stockholders approve and
adopt this Agreement or, if after recommending in the Registration
Statement that stockholders approve and adopt this Agreement, the
Board of Directors of the Company shall have withdrawn, modified or
amended such recommendation in any respect materially adverse to
Parent;
(h) by the Company, if the Board of Directors of the Company
votes to recommend a Superior Offer rather than pursuing the
consummation of the transactions contemplated hereunder or, if after
recommending in the Registration Statement that stockholders approve
and adopt this Agreement and the Merger, the Board of Directors of the
Company shall have withdrawn, modified or amended such recommendation
in order to recommend a Superior Offer; provided, however, that the
Company shall notify Parent at least two (2) full business days prior
to the exercise of its termination rights under this Section 8.01(h);
or
(i) by either Parent or the Company (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein) after a reasonable and objective determination that any of the
conditions in Section 7.01 or 7.02, in the case of a termination by
Parent, or that any of the conditions in Section 7.01 or 7.03, in the
case of a termination by the Company, have not been satisfied or cured
within the time frames required by such sections or are incapable of
being satisfied or cured, as the case may be, by the later of (i) if
the Company has mailed the proxy statement contained in the
Registration Statement to its stockholders on or prior to December 31,
1998, the thirtieth (30th) day after the Company has mailed the proxy
statement or, if later, five (5) days after the Company Stockholder
Meeting and (ii) December 31, 1998.
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8.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect except Sections
6.04(b), 6.12(b) and 8.03 shall survive any termination of this Agreement, and
there shall be no further obligation on the part of Parent, Sub, the Company,
or their respective officers or directors except for the obligations under such
provisions. Notwithstanding anything to the contrary contained in this
Agreement, no party shall be relieved or released from any liabilities or
damages arising out of its intentional breach of any provision of this
Agreement; provided, however, that no claim for intentional breach shall
survive the Closing.
8.03 EXPENSES; TERMINATION FEE.
(a) If the Merger is not consummated, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense,
provided that nothing contained herein shall limit Parent's rights
under Section 8.03(b) hereof. If the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by Parent; provided,
however, that Parent shall not be required to pay more than an
aggregate of $495,000 for the out-of-pocket expenses of the Company
and its advisors, including without limitation legal counsel,
investment advisors and accountants (but excluding the out-of pocket
expenses of the financial printer with respect to the Registration
Statement and the proposed proxy filing already incurred by the
Company).
(b) In order to induce Parent to enter into this Agreement and to
reimburse Parent for incurring the costs and expenses related to
entering into this Agreement and consummating the transactions
contemplated by this Agreement, in the event that (i) the transactions
contemplated by this Agreement are not consummated as a result of any
failure to satisfy the conditions set forth in Sections 7.01(a) (as to
the Company's stockholders), 7.02(b) or 7.02(f) of this Agreement or
(ii) the Company terminates this Agreement and, at the time of
termination, the Board of Directors of the Company has received a
Superior Offer and such Superior Offer is accepted by the Company
within twelve (12) months after the termination of this Agreement),
the Company shall pay Parent an amount equal to $1,500,000 (inclusive
of out-of-pocket expenses) in connection with the transactions
contemplated by this Agreement.
(c) In order to induce the Company to enter into this Agreement
and to reimburse the Company for incurring the costs and expenses
related to entering into this Agreement and consummating the
transactions contemplated by this Agreement, in the event that (i) the
transactions contemplated by this Agreement are not consummated as a
result of any failure to satisfy the conditions set forth in Sections
7.01(a) (as to the Parent's stockholders) or 7.03(b) of this Agreement
or (ii) Parent terminates this Agreement and, at the time of
termination, the Board of Directors of Parent has received an offer to
be acquired by a third party and Parent accepts such offer within
twelve (12) months after the termination of this Agreement), Parent
shall pay the Company an amount equal to $750,000 (inclusive of
out-of-pocket expenses) in connection with the transactions
contemplated by this Agreement.
(d) In order to induce the Company to enter into this Agreement,
in the event that the transactions contemplated by this Agreement are
not consummated for reasons other than as a result of any failure to
satisfy the conditions set forth in Sections 7.01(a) (as to the
Company's stockholders), 7.02(a), 7.02(b), 7.02(c), 7.02(e), 7.02(f),
7.02(g) or 7.02(h) of this Agreement, Parent hereby covenants and
agrees that it will not directly or indirectly acquire an entity which
manufactures fresh juices within twelve (12) months after the
termination or failure to consummate of this Agreement.
8.04 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
by their respective Boards of Directors, at any time before or after approval
of the matters presented in connection with the Merger by the stockholders of
the Company; provided, however, that, after approval by the stockholders of the
Company, no amendment shall be made which reduces or changes the amount
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or form of the consideration to be delivered to the stockholders of the Company
without the approval of a majority of the stockholders of the Company. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
8.05 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party, but such extension or waiver shall nor operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.01 CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") will take place at such date, time
and place as is mutually agreed upon by the Company and Parent, which shall be
not more than three (3) business days after the satisfaction of the conditions
set forth in Article VII hereof. The date on which such Closing takes place is
referred to herein as the "Closing Date."
9.02 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any term or provision of this Agreement to the contrary and
regardless of any investigation made by any party, none of the representations,
warranties, covenants and agreements in this Agreement or otherwise made or
delivered pursuant to, or in connection with, this Agreement, the Merger or any
related transactions shall survive the Closing Date, except for those covenants
and agreements contained or referenced in the Bogen Agreement or the Smith
Agreement and in the Confidentiality Agreement.
9.03 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally or telecopied
(with confirmation from recipient), three (3) days after mailed by registered
or certified mail (return receipt requested) or on the day delivered by an
express courier (with confirmation from recipient) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Sub, to:
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, New York 12866
Attention: Chief Executive Officer
Facsimile No.: (518) 584-0380
with a copy to:
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, New York 10022-9998
Attention: Charles I. Weissman, Esq.
Facsimile No.: (212) 758-9526
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(b) if to the Company, to:
The Fresh Juice Company, Inc.
280 Wilson Avenue
Newark, New Jersey 07105
Attention: Chief Executive Officer
Facsimile No.: (973) 465-7170
with a copy to:
Bourne, Noll & Kenyon
382 Springfield Avenue
P.O. Box 690
Summit, New Jersey 07902-0690
Attention: John F. Kuntz, Esq.
Facsimile No.: (908) 277-6808
9.04 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to be October 13, 1998.
9.05 COUNTERPARTS. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.06 ENTIRE AGREEMENT. This Agreement (including the documents and the
instruments referred to herein), the Voting Agreement, the Bogen Agreement, the
Smith Agreement, the Confidentiality Agreement and the Option Agreement by and
between Parent and Steven Smith constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
9.07 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable to conflicts of law.
9.08 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained in
Sections 5.03, 6.04(b), or 8.03 of this Agreement were not performed in
accordance with its specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of Sections 5.03, 6.04(b) or 8.03 of this
Agreement and to enforce specifically the terms and provisions thereof in any
court of the United States or any court located in the State of New York (if
such injunction or enforcement action is instituted by the Company) or the
State of New Jersey (if such injunction or enforcement action is instituted by
Parent), this being in addition to any other remedy to which they are entitled
at law or in equity. In the event Parent institutes an action to enforce the
provisions of 8.03(b) of this Agreement, the prevailing party in such action
shall be entitled to all documented, out of pocket costs and expenses, without
limitation.
9.09 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this
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Agreement is deemed to be so broad as to be unenforceable, the provision shall
be interpreted to be only so broad as is enforceable.
9.10 PUBLICITY. Except as otherwise required by law or the rules of
the National Association of Securities Dealers, so long as this Agreement is in
effect, none of Parent, Sub or the Company shall, or shall permit any of their
Subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the consent
of the other party, which consent shall nor be unreasonably withheld.
9.11 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns. Except as otherwise expressly
provided herein, this Agreement (including the documents and instruments
referred to herein) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
SARATOGA BEVERAGE GROUP, INC.
By /s/ Robin Prever
----------------------------------
Title: President and
Chief Executive Officer
ROWALE CORP.
By /s/ Robin Prever
----------------------------------
Title: President
THE FRESH JUICE COMPANY, INC.
By /s/ Steven M. Bogen
----------------------------------
Title: Chief Executive Officer
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EXHIBIT A-1
COMPANY STOCKHOLDERS
Steven Bogen
Steven Smith
Jeffrey Smith
Jeffrey Heavirland
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EXHIBIT A-2
PARENT STOCKHOLDERS
Robin Prever
Anthony Malatino
Warren Lichtenstein
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EXHIBIT B
RESTATED VOTING, STANDSTILL AND PROXY AGREEMENT
This Restated Voting, Standstill and Proxy Agreement (the "Agreement")
is made and entered into as of October 13, 1998 by and among THE FRESH JUICE
COMPANY, INC., a Delaware corporation (the "Company"), the stockholders of the
Company whose names and addresses are set forth on the signature pages hereto
(the "Company Stockholders"), SARATOGA BEVERAGE GROUP, INC., a Delaware
corporation ("Saratoga"), and the stockholders of Saratoga whose names and
addresses are set forth on the signature pages hereto (the "Saratoga
Stockholders").
WHEREAS, the Company, the Company Stockholders and Saratoga previously
entered into a voting, standstill and proxy agreement, dated as of August 14,
1998 (the "First Agreement"); and
WHEREAS, the parties hereto have determined to amend the terms of the
First Agreement; and
WHEREAS, the Company, Saratoga and Rowale Corp., a wholly-owned
subsidiary of Saratoga ("Sub"), entered into, as of the date hereof, a Restated
Agreement and Plan of Merger (the "Merger Agreement"; terms used herein and not
otherwise defined are used herein as defined in the Merger Agreement), pursuant
to which Sub will merge with and into the Company (the "Merger") and each share
of common stock, $.01 par value per share, of the Company ("Company Common
Stock") would be converted into the right to receive cash and shares of Class A
common stock, $.01 par value per share, of Saratoga ("Class A Common Stock");
and
WHEREAS, each of the Company Stockholders owns the number of shares of
Company Common Stock set forth opposite his name on Schedule A annexed hereto
(collectively, the "Company Securities" and, with respect to the Company
Securities owned by a specific Company Stockholder, the "Company Stockholder's
Securities"); and
WHEREAS, each of the Saratoga Stockholders owns the number of shares
of Class A Common Stock and shares of Class B common stock, $.01 par value per
share, of Saratoga ("Class B Common Stock") set forth opposite his or her name
on Schedule B annexed hereto (collectively, the "Saratoga Securities" and, with
respect to the Saratoga Securities owned by a specific Saratoga Stockholder,
the "Saratoga Stockholder's Securities"); and
WHEREAS, execution and delivery of this Agreement by the Company
Stockholders and by the Saratoga Stockholders is a condition to the execution
and delivery of the Merger Agreement by Saratoga and Sub, and by the Company,
respectively.
NOW, THEREFORE, in order to induce Saratoga, Sub and the Company to
enter into the Merger Agreement and in consideration of the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. Term. This Agreement (except for Section 3(e) hereof) shall expire
on the earlier of (i) the Effective Date (as defined in the Merger Agreement)
or (ii) the termination of the Merger Agreement by any party thereto pursuant
to the terms thereof.
2. Covenants of the Saratoga Stockholders.
(a) Each Saratoga Stockholder agrees to vote all of his or her
Saratoga Securities for the approval of the issuance of shares of Class A
Common Stock in the Merger.
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(b) Except in accordance with the provisions of this Agreement or as
expressly set forth in the Merger Agreement, each Saratoga Stockholder
agrees, until the termination of this Agreement, not to:
(i) sell, transfer, pledge, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, assignment or other
disposition of, any Saratoga Securities; or
(ii) deposit any Saratoga Securities into a voting trust, enter
into a voting agreement or otherwise grant any voting rights to any
other person or entity with respect to any such securities.
(c) Until such time as this Agreement is terminated, each Saratoga
Stockholder agrees to take any actions as reasonably requested by the
Company or Saratoga, within his or her power, as are necessary or
appropriate to enable Saratoga and Sub to satisfy the conditions precedent
set forth in the Merger Agreement to the Company's obligations to
consummate the Merger, and to use her reasonable efforts to cause Saratoga
and Sub to satisfy such conditions precedent; provided, however, that such
Saratoga Stockholder shall not be required to pay any moneys or incur any
liability in connection with the foregoing.
3. Covenants of the Company Stockholders.
(a) Each Company Stockholder agrees to vote all of his currently owned
shares of Company Common Stock for the approval of the Merger, the Merger
Agreement (in the form executed as of the date hereof, with such changes
thereto as the parties to the Merger Agreement may agree prior to such
changes), and the transactions contemplated therein.
(b) Each Company Stockholder, in his capacity as such, further agrees
to convert, at the Closing, all in-the-money options and warrants to
purchase shares of Company Common Stock into the cash and shares of Class A
Common Stock in accordance with Section 1.05(d) of the Merger Agreement.
(c) Except in accordance with the provisions of this Agreement or as
expressly set forth in the Merger Agreement, each Company Stockholder
agrees, until the termination of this Agreement, not to:
(i) sell, transfer, pledge, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, assignment or other
disposition of, any Company Securities; or
(ii) deposit any Company Securities into a voting trust, enter
into a voting agreement or otherwise grant any voting rights to any
other person or entity with respect to any Company Securities.
(d) Until such time as this Agreement is terminated, each Company
Stockholder agrees to take any actions as reasonably requested by the
Company or Saratoga, within his power as are necessary or appropriate to
enable the Company to satisfy the conditions precedent set forth in the
Merger Agreement to Saratoga's obligations to consummate the Merger, and to
use his best efforts to cause the Company to satisfy such conditions
precedent; provided, however, that such Company Stockholder shall not be
required to pay any moneys or incur any liability in connection with the
foregoing.
(e) In addition, for a period commencing on the date of this Agreement
and ending on the earlier to occur of (i) the third anniversary of the
Effective Date or (ii) the termination of the
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Merger Agreement by any party thereto pursuant to the terms thereof,
each Company Stockholder hereby agrees that, without the prior written
consent of Saratoga, he will not, directly or indirectly, through one or
more intermediaries or otherwise, participate in any transaction in which
one or more parties have done or seek to do any of the following: (i)
purchase or acquire, or agree to purchase or acquire, any shares of capital
stock or other securities of Saratoga; (ii) solicit, or encourage any other
person to solicit, proxies or consents of stockholders of Saratoga, or
become a "participant" or otherwise engage in any "solicitation" (as such
terms are defined under Regulation 14A of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), with respect to any matter in
opposition to the recommendation of a majority of the members of the Board
of Directors of Saratoga then in office; (iii) acquire or affect, or seek
to acquire or affect, control of Saratoga, or influence or seek to
influence the management of Saratoga, or directly or indirectly participate
in or encourage the formation of any group seeking to influence management
or to displace or modify the composition of the Board of Directors of
Saratoga; (iv) join a partnership, limited partnership, syndicate or other
group within the meaning of Section 13(d) of the Exchange Act for the
purpose of acquiring, holding or disposing of any shares of capital stock
or other securities of Saratoga; (v) initiate, propose or otherwise solicit
stockholders for the approval of one or more stockholder proposals with
respect to Saratoga, as described in Rule 14a-8 under the Exchange Act,
irrespective of whether Rule 14a-8 under the Exchange Act is applicable; or
(vi) seek to modify the terms of this paragraph.
4. Representations and Warranties of the Saratoga Stockholders. Each
Saratoga Stockholder represents and warrants to the Company as follows:
(a) the Saratoga Stockholder owns such Saratoga Securities of record
or beneficially free and clear of any lien, security interest, encumbrance
or other adverse claim;
(b) such Saratoga Stockholder's Securities set forth on Schedule B
hereto are the only securities of Saratoga owned of record or beneficially
by such Saratoga Stockholder or in which such Saratoga Stockholder has any
interest; and
(c) such Saratoga Stockholder has the right, power and authority to
execute and deliver this Agreement and to perform his or her obligations
hereunder; such execution, delivery and performance will not violate any
applicable law, rule or regulation or any outstanding agreement or
instrument to which such Saratoga Stockholder is a party; and this
Agreement constitutes a legal, valid and binding agreement on the part of
such Saratoga Stockholder enforceable against such Saratoga Stockholder in
accordance with its terms.
5. Representations and Warranties of Saratoga. Saratoga represents and
warrants to the Company that the execution and delivery of this Agreement by
Saratoga and the performance by it of its obligations hereunder have been duly
authorized by all necessary corporate action, do not violate the terms of its
Certificate of Incorporation, its By-Laws, any law, rule or regulation or any
outstanding agreement or instrument to which it is a party or is bound or
subject to, and this Agreement constitutes a legal, valid and binding agreement
on its part.
6. Representations and Warranties of the Company Stockholders. Each
Company Stockholder represents and warrants to Saratoga as follows:
(a) such Company Stockholder owns such Company Stockholder's
Securities of record or beneficially free and clear of any lien, security
interest, encumbrance or other adverse claim;
(b) such Company Stockholder's Securities set forth on Schedule A
hereto are the only securities of the Company owned of record or
beneficially by such Company Stockholder or in which such Company
Stockholder has any interest, and, except as set forth on Schedule A, such
Company Stockholder has no right to acquire any other securities of the
Company; and
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(c) such Company Stockholder has the right, power and authority to
execute and deliver this Agreement and to perform his obligations
hereunder; such execution, delivery and performance will not violate any
applicable law, rule or regulation or any outstanding agreement or
instrument to which such Company Stockholder is a party; and this Agreement
constitutes a legal, valid and binding agreement on the part of such
Company Stockholder enforceable against such Company Stockholder in
accordance with its terms.
7. Representations and Warranties of the Company. The Company
represents and warrants to Saratoga that the execution and delivery of this
Agreement by the Company and the performance by it of its obligations hereunder
have been duly authorized by all necessary corporate action, do not violate the
terms of its Articles of Incorporation, its By-Laws, any law, rule or
regulation or any outstanding agreement or instrument to which it is a party or
is bound or subject to, and this Agreement constitutes a legal, valid and
binding agreement on its part.
8. Saratoga Proxy.
(a) Each Saratoga Stockholder hereby irrevocably makes, constitutes
and appoints the Company to act as such Saratoga Stockholder's true and
lawful proxy and attorney-in-fact in the name and on behalf of such
Saratoga Stockholder, with full power to appoint a substitute or
substitutes to vote all of his or her Saratoga Securities for the approval
of the issuance of the shares of Class A Common Stock as set forth in
Section 2(a) hereof (subject to Section 18 hereof). By giving this proxy,
each such Saratoga Stockholder hereby revokes any other proxy granted by
such Saratoga Stockholder to vote any of such Saratoga Stockholder's
Securities with respect to such matters. This proxy, and the power of
attorney and all authority contained herein, shall become effective as to
any Saratoga Stockholder only upon the failure of such Saratoga Stockholder
to vote or consent with respect to his or her shares in accordance with
Section 2(a) hereof, following notice to such Saratoga Stockholder to that
effect.
(b) All power and authority hereby conferred is coupled with an
interest and is irrevocable, shall not be terminated by any act of such
Saratoga Stockholder or by operation of law, by lack of appropriate power
or authority, or by the occurrence of any other event or events and shall
be binding upon all beneficiaries, heirs at law, legatees, distributees,
successors, assigns and legal representatives of such Saratoga Stockholder.
If after the execution of this Agreement any Saratoga Stockholder shall
cease to have appropriate power or authority, or if any other such event or
events shall occur, the Company is nevertheless authorized and directed to
vote the Saratoga Securities in accordance with the terms of this Agreement
as if such lack of appropriate power or authority or other event or events
had not occurred and regardless of notice thereof.
(c) Each Saratoga Stockholder agrees to use all good faith efforts to
cause any record owner of Saratoga Securities of which such Saratoga
Stockholder is the beneficial owner to grant to the Company a proxy of the
same effect as that contained herein. Subject to the proviso set forth in
Section 2(c) hereof, each Saratoga Stockholder shall perform such further
acts and execute such further documents as may be required to vest in the
Company the power to vote the Saratoga Stockholder's Securities during the
term of the proxy granted herein.
9. Company Proxy.
(a) Each Company Stockholder hereby irrevocably makes, constitutes and
appoints Saratoga to act as such Company Stockholder's true and lawful
proxy and attorney-in-fact in the name and on behalf of such Company
Stockholder to vote all of his, her or its shares of Company Common Stock
for the approval of the Merger, the Merger Agreement and the transactions
contemplated therein as set forth in Section 3(a) hereof (subject to
Section 18 hereof). By giving this proxy, each such holder of Company
Common Stock hereby revokes any other proxy granted by such Company
Stockholder to vote any of such
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Company Stockholder's Securities with respect to such matters. This
proxy, and the power of attorney and all authority contained herein, shall
become effective as to any Company Stockholder only upon the failure of
such Company Stockholder to vote or consent with respect to his shares in
accordance with Section 3(a) hereof, following notice to such Company
Stockholder to that effect.
(b) All power and authority hereby conferred is coupled with an
interest and is irrevocable, shall not be terminated by any act of such
Company Stockholder or by operation of law, by lack of appropriate power or
authority, or by the occurrence of any other event or events and shall be
binding upon all beneficiaries, heirs at law, legatees, distributees,
successors, assigns and legal representatives of such Company Stockholder.
If after the execution of this Agreement any Company Stockholder shall
cease to have appropriate power or authority, or if any other such event or
events shall occur, Saratoga is nevertheless authorized and directed to
vote the Company Securities in accordance with the terms of this Agreement
as if such lack of appropriate power or authority or other event or events
had not occurred and regardless of notice thereof.
(c) Each Company Stockholder agrees to use all good faith efforts to
cause any record owner of Company Securities of which such Company
Stockholder is the beneficial owner to grant to Saratoga a proxy of the
same effect as that contained herein. Subject to the proviso set forth in
Section 3(d) hereof, each Company Stockholder shall perform such further
acts and execute such further documents as may be required to vest in
Saratoga the power to vote the Company Stockholder's Securities during the
term of the proxy granted herein.
10. Further Assurances. Subject to the provisos set forth in Sections
2(d) and 3(d) hereof, each party hereto shall perform such further acts and
execute such further documents as may reasonably be required to carry out the
provisions of this Agreement.
11. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties hereto.
12. Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
13. Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed duly given when delivered in
person or by telecopier, cable, telex or telegram or three (3) days after
mailed by certified mail, postage prepaid, addressed as follows:
To the Company or to the Company Stockholders:
The Fresh Juice Company, Inc.
280 Wilson Avenue
Newark, New Jersey 07105
Attention: Chief Executive Officer
Facsimile No.: (973) 465-7170
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with a copy to:
Bourne, Noll & Kenyon
382 Springfield Avenue
P.O. Box 690
Summit, New Jersey 07902-0690
Attention: John F. Kuntz, Esq.
Facsimile No.: (908) 277-6808
To Saratoga or to the Saratoga Stockholders:
Saratoga Beverage Group, Inc.
11 Geyser Road
Saratoga Springs, New York 12866
Attention: Chief Executive Officer
Facsimile No.: (518) 584-0380
with a copy to:
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, New York 10022-9998
Attention: Charles I. Weissman, Esq.
Facsimile No.: (212) 758-9526
14. Effect of Invalidity. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, such
provision shall be interpreted to be only so broad as is enforceable.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
16. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the Delaware without giving effect
to the conflicts of laws principles thereof.
17. Binding Effect: Benefits. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their respective
heirs, legal representatives, successors and assigns. Nothing in this
Agreement, expressed or implied, is intended to or shall confer on any person
other than the parties hereto and their respective heirs, legal representatives
and successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
18. Merger Agreement Amendments. No amendment to the Merger Agreement
after the date hereof shall alter or affect the rights granted to the Company
and Saratoga hereunder.
19. Supersession. This Agreement supersedes and replaces the First
Agreement with respect to the subject matter hereof.
A-49
IN WITNESS WHEREOF, the Company, the Company Stockholders, Saratoga
and the Saratoga Stockholders have executed this Agreement or caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as the case may be, as of the date first above written.
THE FRESH JUICE COMPANY, INC.
/s/ Steven M. Bogen
--------------------------------------------
Name: Steven M. Bogen
Title: Chief Executive Officer
SARATOGA BEVERAGE GROUP, INC.
/s/ Robin Prever
--------------------------------------------
Name: Robin Prever
Title: President and Chief Executive Officer
/s/ Steven Bogen
----------------------------------
/s/ Steven Smith
----------------------------------
/s/ Jeffrey Smith
----------------------------------
/s/ Jeffrey Heavirland
----------------------------------
/s/ Robin Prever
----------------------------------
/s/ Anthony Malatino
----------------------------------
/s/ Warren Lichtenstein
----------------------------------
Stockholders
A-50
SCHEDULE A
NUMBER OF SHARES OF
NAME COMPANY CAPITAL STOCK^^
---- -----------------------
Steven Smith 1,361,248
Steven Bogen 1,232,708
Jeffrey Heavirland 77,667*
Jeffrey Smith 17,266**
2,688,889 shares
6,467,731 total shares
41.6%
All above based on 10-KSB for 11-30-97 and review of subsequent Form 4s and 5s.
* 237,857 options and warrants backed out of 10-KSB 11-30-97 numbers
** 50,000 options out of 10-KSB 11/30/97 numbers
A-51
SCHEDULE B
NAME NUMBER OF SARATOGA SECURITIES
---- -----------------------------
Robin Prever 20,345 shares of Class A Common Stock
167,960 shares of Class B Common Stock
Anthony Malatino 51,000 shares of Class A Common Stock
345,995 shares of Class B Common Stock
Warren Lichtenstein 300,000 shares of Class A Common Stock
A-52
EXHIBIT C
SARATOGA BEVERAGE GROUP, INC.
11 Geyser Road
Saratoga Springs, New York 12866
December 2, 1998
Steven M. Bogen
81 Dahlia Street
Staten Island, NY 10312
Re: Consulting Agreement
Dear Steve:
Pursuant to the proposed transaction (the "Transaction") between The
Fresh Juice Company, Inc. ("Fresh Juice") and Saratoga Beverage Group, Inc.
("Saratoga"), wherein a newly formed, wholly owned subsidiary of Saratoga will
merge (the "Merger") with and into Fresh Juice, you hereby agree as follows:
Effective as of and subject to the date of consummation of the Merger
(the "Closing Date"), you hereby agree to become a full-time consultant to
Saratoga and Fresh Juice during the one year period following the Closing Date
in exchange for the sum of $300,000, payable monthly in arrears over said one
year period. Full time is defined for purposes of this letter as not more than
1,000 hours in total. You shall perform such consulting services as reasonably
requested by the President/Chief Executive Officer of Saratoga or the Board of
Directors of Saratoga. This consulting relationship may be terminated for cause
(defined as (i) conviction of a felony or crime involving moral turpitude, or
(ii) wilful malfeasance or willful refusal to perform consulting services
reasonably requested, or (iii) death or disability, which would prevent you
from being a full-time consultant). In the event of a termination of the
consulting relationship by Saratoga other than for cause, Saratoga shall remain
obligated to pay the full balance due and owing on the $300,000 consulting fee
at the time of termination. You shall not be required to perform consulting
services outside of the Newark facility or at your home on Staten Island,
except that you agree that reasonable out-of-state travel may be required
(consistent with your past two years' employment). Any business travel shall
include reimbursement for travel and lodging (consistent with your past two
years' employment).
Effective as of and subject to the Closing Date, you hereby agree to
comply with the terms set forth on Exhibit A annexed hereto from and after the
first anniversary of the Closing Date until the second anniversary of the
Closing Date. You hereby acknowledge that your agreement to comply with the
terms set forth on Exhibit A annexed hereto is a crucial term of the consulting
relationship and, but for such agreement, Saratoga would not have entered into
the consulting relationship described in this letter agreement.
A-53
Steven M. Bogen
December 2, 1998
Page 2
Kindly indicate your acceptance of the foregoing by signing in the
space provided below.
Very truly yours,
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Robin Prever
Robin Prever
President and Chief Executive Officer
Accepted and agreed to as of
December 2, 1998
/s/ Steven M. Bogen
------------------------
Steven M. Bogen
A-54
Steven M. Bogen
December 2, 1998
Page 3
EXHIBIT A
1. Confidentiality. In view of the fact that your work as a consultant
to Saratoga and Fresh Juice and their respective subsidiaries and affiliates
will bring you into close contact with many confidential affairs of Saratoga
and Fresh Juice and their respective affiliates, including the names of
Saratoga's and Fresh Juice's customers and suppliers, matters of a business
nature such as information about costs, profits, markets, sales, other
information not readily available to the public, and plans for future
developments (hereinafter collectively "Confidential Matters"), you agree (i)
to keep secret all Confidential Matters of Saratoga and Fresh Juice and their
respective subsidiaries and affiliates, and not to disclose such Confidential
Matters to anyone outside of Saratoga or Fresh Juice (other than Saratoga's or
Fresh Juice's customers or potential customers and Saratoga's and Fresh Juice's
vendors or suppliers or potential vendors or suppliers), either during or after
your consultancy with Saratoga and Fresh Juice, except with Saratoga's written
consent at each time as to any Confidential Matter which is to be disclosed,
and (ii) to deliver promptly to Saratoga on termination of your consultancy, or
at any time Saratoga may so request, all memoranda, notes, records, reports,
lists or other documents (and all copies thereof) and materials relating to
Saratoga's and Fresh Juice's and their respective subsidiaries' and affiliates'
business which you may then possess or have under your control.
2. Agreement Not to Compete. During the period from the first
anniversary of the Closing Date until the second anniversary of the Closing
Date, you shall not (i) purchase an ownership interest of more than 5% of a
company or other entity which is at such time engaged in the juice beverage
industry and active in the same geographic area as Saratoga or Fresh Juice or
their respective subsidiaries or affiliates, is otherwise competitive with
Saratoga or Fresh Juice or their respective subsidiaries or affiliates, or is
attempting to enter such industry in such geographic area or to become
otherwise competitive; (ii) act as a consultant, officer, director or in any
other capacity, whose responsibilities are related to the juice beverage
industry in the same geographic area as Saratoga or Fresh Juice or their
respective subsidiaries or affiliates operate; or (iii) solicit in any way or
entice away from Saratoga or Fresh Juice or their respective subsidiaries or
affiliates (a) any clients or accounts of Saratoga or Fresh Juice or their
respective subsidiaries or affiliates which were active clients or accounts of
Saratoga or Fresh Juice or their respective subsidiaries or affiliates during
your consultancy with Saratoga and Fresh Juice, (b) any prospective client or
account of Saratoga or Fresh Juice or their respective subsidiaries or
affiliates which Saratoga or Fresh Juice or their respective subsidiaries or
affiliates was actively engaged in soliciting during your consultancy with
Saratoga and Fresh Juice, (c) any employee of Saratoga or Fresh Juice or their
respective subsidiaries or affiliates (unless such employee shall have been
either discharged by such entity or shall have otherwise ceased to have been
employed by such entity for a period of 365 days) or (d) any manufacturers or
suppliers of Saratoga or Fresh Juice or their respective subsidiaries or
affiliates, which were manufacturers or suppliers of Saratoga or Fresh Juice or
their respective subsidiaries or affiliates during your consultancy with
Saratoga and Fresh Juice. Notwithstanding the foregoing, however, if Saratoga
or Fresh Juice fail to make any payments due under the Consulting Agreement
dated December 2, 1998 (the "Letter Agreement") to which this Exhibit A is
annexed to you when due, the provisions of this Section 2 shall not apply.
3. Remedies. You recognize that any breach of the covenants set forth
in Sections 1 and 2 of this Exhibit A would irreparably injure Saratoga and
Fresh Juice. Accordingly, you agree that any breach of the covenants contained
in Sections 1 and 2 of this Exhibit A will result in forfeiture to Saratoga as
liquidated damages of any and all amounts otherwise payable to you under the
Letter Agreement to which this Exhibit A is annexed as of and from the date of
such breach. Furthermore, Saratoga and Fresh Juice may, in addition to pursuing
its other remedies, obtain an injunction against you from any court having
jurisdiction over the matter, restraining any further violation of this Exhibit
A by you and no bond or other security shall be required in connection with
such injunction. In the event that you prevail in any judicial proceeding
relating to a breach by you under this Exhibit A, (i) all sums determined to be
due hereunder in such judicial proceeding shall be due and payable in a lump
sum
A-55
Steven M. Bogen
December 2, 1998
Page 56
(unless otherwise ordered by the court in which such judicial proceeding is
bought) and (ii) Saratoga and Fresh Juice shall be liable for all fees and
expenses, including attorneys' fees, incurred by you in connection with any
action taken to enforce this Exhibit A or obtain judgment for a breach of this
Exhibit A.
4. Reformation. If any of the covenants contained in Sections 1 or 2
of this Exhibit A, or any part thereof, are held to be unenforceable because of
the scope or duration of any such provision, the parties agree that the body
making such determination shall have the power to reduce the scope or duration
of such provision and, in its reduced form, said provision shall be
enforceable. If any of the covenants in Sections 1 or 2 of this Exhibit A, or
any part thereof, is hereafter construed to be invalid or unenforceable, the
same shall not affect the remainder of the covenants, which shall be given full
force and effect without regard to the invalid provisions.
A-56
THE FRESH JUICE COMPANY, INC.
35 WALNUT AVENUE, SUITE 4
CLARK, NEW JERSEY 07066
December 2, 1998
Steven M. Bogen
81 Dahlia Street
Staten Island, NY 10312
Re: Amendment of Employment Agreement
Dear Steve:
Pursuant to the proposed transaction (the "Transaction") between The
Fresh Juice Company, Inc. ("Fresh Juice") and Saratoga Beverage Group, Inc.
("Saratoga"), wherein a newly formed, wholly owned subsidiary of Saratoga will
merge (the "Merger") with and into Fresh Juice, it will be a condition to the
consummation of the Transaction that you and Fresh Juice amend, and you hereby
agree to amend, the Employment Agreement between Fresh Juice and you, dated as
of March 31, 1996 (the "Employment Agreement"), as follows:
1. Effective as of and subject to the date of consummation of the
Merger (the "Closing Date") you hereby agree to resign from all positions held
by you as an officer, director and employee of Fresh Juice and each of its
subsidiaries.
2. Effective as of and subject to the Closing Date, you hereby waive
all amounts (including payments and benefits) due to you under Sections 6, 14,
15 and 16 of the Employment Agreement, except for (i) the payment of the sum of
$962,687.40 in cash on the Closing Date, (ii) the provision at no cost to you
of the automobile currently utilized by you for a period of two years (with
insurance and maintenance) following the Closing Date, and (iii) the provision
at no cost to you of health or other group insurance pursuant to plans which
are in effect or which are instituted after the date hereof for executive
officers or employees generally of Fresh Juice for a period of two years
following the Closing Date; provided, however, that the aggregate amount of all
termination and severance payments payable to you herein shall not exceed the
product of 2.99 times your "base amount" as such term is defined in Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and as
determined in accordance with temporary or final regulations, if any,
promulgated under Section 280G of the Code.
3. Effective as of and subject to the Closing Date, you hereby agree
to delete the word "citrus" before the phrase "juice beverage industry" from
Section 24.2(i) and Section 24.2(ii).
4. Upon your receipt of the cash referenced in clause (i) of paragraph
2 above, you hereby agree to terminate the Employment Agreement in all respects
other than Section 24 of the Employment Agreement which section, as amended by
this letter agreement, shall survive the termination of the Employment
Agreement.
5. Effective as of and subject to the Closing Date, Fresh Juice hereby
agrees to pay $15,000 toward your legal fees and expenses to Gibbons, Del Deo,
Dolan, Griffinger & Vecchione, attention Brian J. McMahon.
6. Effective as of and subject to the Closing Date, you will be
appointed as a member of the Board of Directors of Saratoga (with all
associated compensation payable to non-employee directors) until the 1999
Annual Meeting of Stockholders of Saratoga.
A-57
Steven M. Bogen
December 2, 1998
Page 2
7. This letter agreement supersedes and replaces the letter agreements
dated August 12, 1998 and October 13, 1998 among the parties hereto with
respect to the subject matter hereof.
Kindly indicate your acceptance of the foregoing by signing in the
space provided below.
Very truly yours,
THE FRESH JUICE COMPANY, INC.
By: /s/ Jeffrey Heavirland
------------------------------
Jeffrey Heavirland
Vice President
Accepted and agreed to as of
December 2, 1998
/s/ Steven M. Bogen
----------------------------------
Steven M. Bogen
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Robin Prever
-------------------------------
Robin Prever
President and Chief Executive Officer
A-58
EXHIBIT D
THE FRESH JUICE COMPANY, INC.
35 WALNUT AVENUE, SUITE 4
CLARK, NEW JERSEY 07066
October 13, 1998
Steven Smith
5 Lawson Lane
Great Neck, NY 11021
Re: Amendment of Employment Agreement
Dear Steve:
Pursuant to the proposed transaction (the "Transaction") between The
Fresh Juice Company, Inc. ("Fresh Juice") and Saratoga Beverage Group, Inc.
("Saratoga"), wherein a newly formed, wholly owned subsidiary of Saratoga will
merge (the "Merger") with and into Fresh Juice, it will be a condition to the
consummation of the Transaction that you and Fresh Juice amend, and you hereby
agree to amend, the Employment Agreement between Fresh Juice and you, dated as
of March 31, 1996 (the "Employment Agreement"), as follows:
1. Effective as of and subject to the date of the consummation of the
Merger (the "Closing Date") you hereby agree to resign from all positions held
by you as an officer, director and employee of Fresh Juice and each of its
subsidiaries.
2. Effective as of and subject to the Closing Date, you hereby waive
all amounts (including payments and benefits) due to you under Sections 6, 14,
15 and 16 of the Employment Agreement, except for (i) the payment of the sum of
$250,000 in cash referenced in paragraph 3 below on the Closing Date, (ii) the
provision at no cost to you of the Cadillac automobile currently utilized by
you for a period of one year (with insurance and maintenance) following the
Closing Date, and (iii) the provision at no cost to you of health or other
group insurance pursuant to plans which are in effect or which are instituted
after the date hereof for executive officers or employees generally of Fresh
Juice for a period of one year following the Closing Date.
3. Effective as of and subject to the Closing Date, in consideration
of the payment of the sum of $250,000 in cash, you hereby agree (i) to extend
the term of Section 24.2 (Agreement Not to Compete) from one year to three
years and (ii) to delete the word "citrus" before the phrase "juice beverage
industry" from Section 24.2(i) and Section 24.2(ii).
4. Upon your receipt of the sum of $250,000 in cash referenced in
paragraph 3 above and payment of your compensation, expenses and benefits on
account of services provided through the Closing Date, you hereby agree to
terminate the Employment Agreement in all respects other than Section 24 of the
Employment Agreement, which Section, as amended by this letter agreement, shall
survive the termination of the Employment Agreement.
5. You hereby agree to terminate the Option Agreement, dated as of
March 16, 1998, by and between you and Saratoga.
A-59
6. You hereby acknowledge and agree that those certain options granted
by Fresh Juice to you in the amount of (i) 100,000 shares on October 27, 1988
under Fresh Juice's Incentive Stock Option Plan and (ii) 60,000 shares, are all
ineffective, null and void.
Kindly indicate your acceptance of the foregoing by signing in the
space provided below.
Very truly yours,
THE FRESH JUICE COMPANY, INC.
By: /s/ Jeffrey Heavirland
-------------------------------
Jeffrey Heavirland
Vice President
Accepted and agreed to as of
October 13, 1998
/s/ Steven Smith
-------------------------------
Steven Smith
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Robin Prever
----------------------------
Robin Prever
President and Chief Executive Officer
A-60
EXHIBIT E
STATEMENT THAT STOCK OF THE FRESH JUICE COMPANY, INC. IS NOT A
U.S. REAL PROPERTY INTEREST
To: Saratoga Beverage Group, Inc.
Please be advised that pursuant to your request, we advise you that as
of [EFFECTIVE DATE], ownership interests in The Fresh Juice Company, Inc. were
not U.S. real property interests for purposes of Treasury Regulations Section
1.897-2(g)(1)(ii) and (h)(1)(i).
The undersigned responsible officer of The Fresh Juice Company, Inc.,
hereby certifies under penalties of perjury that this Statement is correct to
his knowledge and belief, and that he has authority to sign this Statement on
behalf of the Corporation.
The Fresh Juice Company, Inc.
By: ______________________________
Name:
Title:
Date:_____________________________
Based on: Reg. Section 1.897-2(g)(1)(ii), (h)(1)(i).
A-61
APPENDIX B
October 8, 1998
The Board of Directors of
The Fresh Juice Company, Inc.
280 Wilson Avenue
Newark, NJ 07105
Gentlemen:
You have engaged us pursuant to an engagement letter, dated June 5,
1998 (the "Engagement Letter"), as amended on October 7, 1998, between the
Fresh Juice Company, Inc. (the "Company") and Ladenburg Thalmann & Co. Inc.
("Ladenburg"). Specifically, Ladenburg has been requested, pursuant to the
Engagement Letter, to render our opinion as to whether or not the consideration
to be paid to the stockholders of the Company in connection with the proposed
merger between the Company and a wholly owned subsidiary of Saratoga Beverage
Group, Inc. ("Saratoga") is fair, from a financial point of view, to the
stockholders of the Company.
The Agreement and Plan of Merger, dated as of October 13, 1998 (the
"Merger Agreement"), by and among Saratoga, Rowale Corp., a wholly owned
subsidiary of Saratoga ("Rowale"), and the Company provides for the merger of
Rowale in and to the Company with the Company being the surviving corporation
and a wholly owned subsidiary of Saratoga (the "Transaction"). The Merger
Agreement further provides that at the closing of the Transaction, each share
of common stock of the Company, par value $0.01 per share, issued and
outstanding, shall be converted into the right to receive, and to be
exchangeable for, $2.24 per share in cash, without interest, and 0.33 shares of
Saratoga's Class A common stock, as the merger consideration (the "Merger
Consideration").
In conducting our analysis, Ladenburg reviewed and considered such
information as we deemed necessary or appropriate for the purposes of stating
our opinion including, without limitation, the following: (i) the draft of the
Merger Agreement and a draft of the Voting Agreement, in each case in the form
presented to you; (ii) certain business and financial information relating to
Fresh Juice and Saratoga, provided by Fresh Juice and Saratoga, respectively,
including the financial condition and results of operations of Fresh Juice and
Saratoga, the historical financial performance of Fresh Juice and Saratoga and
certain projected financial information, provided by Fresh Juice and Saratoga;
(iii) certain public filings made by Fresh Juice and Saratoga with the
Securities and Exchange Commission; and (iv) certain publicly available market
trading data and historical trading performance of Fresh Juice and Saratoga
common stock. In addition, we
B-1
The Board of Directors of
The Fresh Juice Company, Inc.
Page 2
conducted such other analyses and examinations and reviewed and considered such
other financial, economic and market data as we deemed appropriate in arriving
at our opinion. Ladenburg also met with members of senior management of the
Company and Saratoga to discuss, among other things, the historical and
prospective industry environment, their respective financial condition and
operating results, and the reasons for the Transaction.
In rendering our opinion, we have assumed and relied upon the
accuracy, completeness and fairness, without assuming any responsibility for
the independent verification of, all financial and other information that was
available to us from public sources, that was provided to us by the Company or
Saratoga, or that was otherwise reviewed by us. With respect to financial
forecasts, we have assumed that they have been reasonably prepared reflecting
the best currently available estimates and judgments of the management of the
Company and Saratoga as to the future financial performance of the Company and
Saratoga, respectively. We have not made or been provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company or Saratoga, and we do not assume any responsibility for
verifying any of the information reviewed by us. Our opinion is necessarily
based upon information available to us, and financial, stock market, economic
and other conditions and circumstances existing and disclosed to us, as of the
date hereof.
In conducting our investigation and analyses and in arriving at our
opinion expressed herein, we have taken into account such accepted financial
and investment banking procedures and considerations as we have deemed
relevant, including the following: (i) historical revenues, operating earnings,
net income and capitalization of the Company and Saratoga and certain other
publicly held companies in businesses we believe to be comparable to the
Company and Saratoga; (ii) acquisition multiples that have historically been
paid for other companies in businesses we believe to be comparable to the
Company and Saratoga; (iii) projected revenues, operating earnings and net
income of the Company and Saratoga in a discounted cash flow analysis; (iv) the
premium per share to be paid by Saratoga for the common stock of the Company as
compared to the premium per share paid by acquirors of public targets since
January 1, 1997; (v) the current financial and market position and results of
operations of the Company and Saratoga; and (vi) the general condition of the
securities market and other economic conditions.
In rendering our opinion, we have assumed that this Transaction will
comply with all applicable federal and state laws and will not result in the
breach or cancellation of any contracts or other agreements that are material
to he Company or Saratoga.
Ladenburg, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with
mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for estate, corporate or
other purposes. Ladenburg has been retained by the Board of Directors of the
Company to provide this opinion and has received fees and indemnification
against certain liabilities for the services rendered pursuant to this
engagement. In addition, Ladenburg holds a
B-2
The Board of Directors of
The Fresh Juice Company, Inc.
Page 3
warrant to purchase 50,000 shares of the Company's Common Stock at an exercise
price of $2.96 which will be exchanged for shares of Saratoga Class A common
stock pursuant to the Merger Agreement.
In the ordinary course of business, we actively trade securities for
our own account and for the accounts of our customers and, accordingly, may at
any time hold a long or short position in the debt or equity securities of the
Company and Saratoga.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Merger Consideration to be
received by the stockholders of the Company upon consummation of the merger, is
fair, from a financial point of view, to the stockholders of the Company.
Very truly yours,
/s/ LADENBURG THALMANN & CO. INC.
LADENBURG THALMANN & CO. INC.
B-3
APPENDIX C
THE FRESH JUICE COMPANY, INC.
35 WALNUT AVENUE, SUITE 4
CLARK, NEW JERSEY 07066
December 2, 1998
Jeffrey Heavirland
[Address]
[City/State/Zip]
Re: Termination of Option
Dear Jeff:
Pursuant to the proposed transaction (the "Transaction") between The
Fresh Juice Company, Inc. ("Fresh Juice") and Saratoga Beverage Group, Inc.
("Saratoga"), wherein a newly formed, wholly owned subsidiary of Saratoga will
merge (the "Merger") with and into Fresh Juice, you hereby agree, to terminate
immediately prior to the consummation of the Merger (the "Closing Date"), your
options to purchase an aggregate of 210,000 shares of Fresh Juice common stock
in exchange for the payment by Fresh Juice of the sum of $106,832 in cash on
the Closing Date. If the Merger does not occur by January 31, 1999, this
agreement shall be null and void.
Kindly indicate your acceptance of the foregoing by signing in the
space provided below.
Very truly yours,
THE FRESH JUICE COMPANY, INC.
By: /s/ Steven M. Bogen
---------------------------
Steven M. Bogen
Chief Executive Officer
Accepted and agreed to as of
December 2, 1998
/s/ Jeffrey Heavirland
---------------------------
Jeffrey Heavirland
C-1
APPENDIX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
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 ss.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 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 ss.251 (other than a merger effected pursuant to ss.251(g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 of this title:
(1) Provide, 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
ss.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 ss.ss.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 form 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.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss.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.
(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 that 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 such stockholder's shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder'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 stockholder's
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 ss.228 or
ss.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
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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
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 and consolidation, any stockholder shall have the right to
withdraw such stockholder's 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 such stockholder's 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 is 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 1 or more
publications at least 1 week before the day of the hearing, in a newspaper or
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
who 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 proceeding and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any such 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 such stockholder's
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
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(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.
(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 an 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 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 such
stockholder's 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. (Last amended by Ch.
339, L. '98, eff. 7-1- 98.)
D-4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The indemnification of officers and directors of Saratoga Beverage
Group, Inc. (the "Company" or "Saratoga") is governed by Section 145 of the
Delaware General Corporation Law (the "Delaware Law") and the Restated
Certificate of Incorporation of the Company (the "Company Charter"). Among
other things, the Delaware Law permits indemnification of a director, officer,
employee or agent in civil, criminal, administrative or investigative actions,
suits or proceedings (other than an action by or in the right of the
corporation) to which such person is a party or is threatened to be made a
party by reason of the fact of such relationship with the corporation or the
fact that such person is or was serving in a similar capacity with another
entity at the request of the corporation against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him if such person 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, if he had
no reasonable cause to believe his conduct was unlawful. No indemnification may
be made in any such suit to any person adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which the action was brought determines that, despite the adjudication of
liability, such person is under all circumstances, fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Under the Delaware Law, to the extent that a director, officer, employee or
agent is successful, on the merits or otherwise, in the defense of any action,
suit or proceeding or any claim, issue or matter therein (whether or not the
suit is brought by or in the right of the corporation), he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him. In all cases in which indemnification is permitted (unless ordered by a
court), it may be made by the corporation only as authorized in the specific
case upon a determination that the applicable standard of conduct has been met
by the party to be indemnified. The determination must be made by a majority
vote of the directors who were not parties to the action, even though less than
a quorum, or, if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or by the stockholders. The
statute authorizes the corporation to pay expenses incurred by an officer or
director in advance of a final disposition of a proceeding upon receipt of an
undertaking by or on behalf of the person to whom the advance will be made, to
repay the advances if it shall ultimately be determined that he was not
entitled to indemnification. The Delaware Law provides that indemnification and
advances of expenses permitted thereunder are not to be exclusive of any rights
to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. The Delaware Law also authorizes the corporation to
purchase and maintain liability insurance on behalf of its directors, officers,
employees and agents regardless of whether the corporation would have the
statutory power to indemnify such persons against the liabilities insured.
The Company Charter provides that no director of the Company shall be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) for paying a dividend or approving a stock
repurchase in violation of Section 174 of the Delaware Law, (iv) for any
transaction from which the director derived an improper personal benefit or (v)
for any act or omission occurring prior to the date when the provision became
effective.
The Company Charter provides that directors, officers and others shall
be indemnified to the fullest extent authorized by the Delaware Law, as in
effect (or, to the extent indemnification is broadened, as it may be amended),
against any and all judgments, fines and amounts paid in settling or otherwise
disposing of threatened, pending or completed actions, suits or proceedings,
whether civil, criminal, administrative or investigative and
II-1
expenses incurred by such person in connection therewith. The Company Charter
further provides that, to the extent permitted by law, expenses so incurred by
any such person in defending a civil or criminal action or proceeding shall, at
his request, be paid by the Company in advance of the final disposition of such
action or proceeding.
The Company Charter provides that the right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition shall not be exclusive of any other right which any person may have
or acquire under any statute, provision of the Company Charter or the Company's
By-Laws or otherwise.
Pursuant to employment agreements with certain of its executive
officers, the Company has agreed to indemnify such executive officers
(including their respective heirs, executors and administrators) to the fullest
extent permitted by the Delaware Law against all expenses and liabilities
reasonably incurred in connection with or arising out of any action, suit or
proceeding in which such executive officer may be involved by reason of having
been a director or officer of the Company or any subsidiary thereof.
The Company has obtained directors and officers liability and company
reimbursement insurance which, among other things, (i) provides for payment on
behalf of its officers and directors against loss as defined in the policy
stemming from acts committed by directors and officers as such and (ii)
provides for reimbursement to the Company for such loss but only when the
Company shall be required or permitted to indemnify directors or officers for
loss pursuant to statutory or common law or pursuant to duly effective
certificate of incorporation or bylaw provisions. Coverage is afforded to the
directors and officers, the Company for reimbursement of the directors and
officers and the Company directly for securities related claims.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits/Financial Statement Schedules
EXHIBIT NO.
2.1(1) (P) Agreement and Plan of Merger
3.1(1) (P) Restated Certificate of Incorporation of Saratoga
3.2(1) (P) By-Laws of Saratoga
3.3(10) Amendment to By-Laws of Saratoga
4.1(1) (P) Specimen of Class A Stock Certificate
5.1(12) Opinion of Swidler Berlin Shereff Friedman, LLP
9.1(11) Restated Voting, Standstill and Proxy Agreement dated as of
October 13, 1998
9.2(11) Stockholder Agreement dated October 13, 1998 by and among
Saratoga, Robin Prever, Anthony Malatino and Steven Bogen
10.1(2)+ (P) Employment Agreement entered into by the Registrant and
Robin Prever
10.2(1)+ (P) Form of the Saratoga Spring Water Company 1993 Stock Option
Plan
10.3(2)+ (P) Consulting Agreement entered into by Saratoga and Leonard
Toboroff
10.4(1) (P) Letter Agreement between Saratoga and Owens-Brockway Glass
Containers
10.5(2) (P) Partnership Agreement, dated July 21, 1993, by and between
JNJ Distributors, Inc. and Saratoga Springs Distribution Corp.,
as amended by Amendment of Partnership Agreement hereto dated
November 9, 1993
10.6(2) (P) Stock Agreement, dated July 21, 1993, by and between JNJ
Distributors, Inc. and Saratoga Spring Water Company
10.7(2) (P) Distribution Agreement, dated March 25, 1993, by and between
Joseph Victori Wines, Inc. and JNJ Distributors, Inc.
10.8(5) Termination Agreement dated as of January 31, 1997 between
Saratoga and Triarc
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10.9(3) (P) Cott Co-pack Agreement dated as of June 8, 1995
10.10(4) Manufacturing and Distribution Agreement, dated as of July 23,
1996, by and between Saratoga and Mistic Brands, Inc.
10.11(6) Bottling Agreement, dated April 16, 1997, by and among Saratoga,
Hype Corporation, Hype Beverage Corporation, World Wide Beverage
Inc., Hype Water Company, Inc., Hyperholics Inc., R.J. Barry Cox
and Nigel Spiro
10.12(6)+ Line of Credit dated as of April 10, 1997 to Saratoga from Robin
Prever and Anthony Malatino
10.13(7) Saratoga Splash Agreement, dated as of June 30, 1997, by and
between Saratoga and Mistic Brands, Inc.
10.14(7) Master Distribution Agreement dated as of June 16, 1997 by and
among Saratoga Beverage Group, Inc., Hype Corporation, World
Wide Beverage Inc., Global Brands AG, Hype Water Company, Inc.
and Hyperholics Inc.
10.15(8) Loan Agreement, Securities Purchase Agreement, Secured
Promissory Note, and Warrants for Messrs. Holliday, Merhi and
Barr in connection with the loan to Onyx Management Services,
LLC
10.16(9)+ Securities Purchase Agreement dated February 12, 1998 between
Saratoga and Carl T. Wolf
10.17(9)+ Stock Option Agreement dated February 25, 1998 between Saratoga
and Steel Partners II, L.P.
10.18(9)+ Securities Purchase Agreement dated February 25, 1998 between
Saratoga and Carl T. Wolf
10.19(9) Option Agreement dated March 16, 1998 between Saratoga and
Steven Smith
10.20(9) Letter agreement dated March 29, 1998 between Saratoga and The
Fresh Juice Company, Inc.
10.21(9)+ Amended and Restated Stock Option Agreement dated April 17, 1998
between Saratoga and Carl T. Wolf
10.22(9) Letter agreement dated April 24, 1998 between Saratoga and The
Fresh Juice Company, Inc.
10.23(11)+ Form of the Saratoga Beverage Group, Inc. 1998 Stock Option Plan
10.24(12) Commitment letter dated September 24, 1998 between Saratoga and
NationsBank, N.A.
10.25(11) Restated Agreement and Plan of Merger dated as of October 13,
1998 by and among Saratoga, Rowale Corp. and The Fresh Juice
Company, Inc.
10.26(11)+ Employment Agreement dated October 13, 1998 between Saratoga and
Jeffrey Heavirland
10.27(11) Letter agreement dated October 13, 1998 among Saratoga, Fresh
Juice and Steven Smith (amending the agreement set forth in
Exhibit 10.30 hereof)
10.28(12)+ Letter agreements dated December 2, 1998 among Saratoga, Fresh
Juice and Steven Bogen (amending the agreement set forth in
Exhibit 10.31 hereof)
10.29(12)+ Letter agreement dated December 2, 1998 among Saratoga, Fresh
Juice and Jeffrey Heavirland
10.30(12) Employment Agreement effective April 1, 1996 between The Fresh
Juice Company, Inc. and Steven Smith
10.31(12) Employment Agreement effective April 1, 1996 between The Fresh
Juice Company, Inc. and Steven M. Bogen
10.32(12) Supply Agreement dated March 31, 1996 between The Fresh Juice
Company, Inc. and Natural Juice Company, Inc.
10.33(12) Agreement of Lease dated November 24, 1997 between The Fresh
Juice Company of New York, Inc. and 280 Wilson Avenue
Associates, L.L.C. and guaranteed by The Fresh Juice Company,
Inc.
10.34(12) Industrial Real Estate Lease dated June 17, 1992 between
Hansen's Juices, Inc. and Pruco Life Insurance Company
21.1(11) Subsidiaries of Saratoga
23.1(12) Consent of Swidler Berlin Shereff Friedman, LLP (included in
Exhibit 5.1)
23.2(12) Consent of PricewaterhouseCoopers LLP
23.3(12) Consent of KPMG Peat Marwick LLP
23.4(12) Consent of Steven Bogen
23.5(12) Consent of Ladenburg Thalmann & Co. Inc.
24.1(12) Power of Attorney (included on page II-6 hereof)
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(1) Incorporated herein by reference to Saratoga's Registration Statement on
Form SB-2 filed with the SEC on June 16, 1993 (Registration No.
33-62038NY).
(2) Incorporated herein by reference to Saratoga's Form 10-KSB filed with the
SEC on March 30, 1994.
(3) Incorporated herein by reference to Saratoga's Form 10-KSB filed with the
SEC on March 29, 1996.
(4) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on November 12, 1996.
(5) Incorporated herein by reference to Saratoga's Form 10-KSB filed with the
SEC on April 15, 1997.
(6) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on May 13, 1997.
(7) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on August 8, 1997.
(8) Incorporated herein by reference to Saratoga's Form 10-KSB filed with the
SEC on March 20, 1998.
(9) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on May 11, 1998.
(10) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on August 5, 1998.
(11) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on November 5, 1998.
(12) Filed herewith.
(+) Management agreement.
(P) Paper filing.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
twenty percent (20%) change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
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(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Company pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(1) The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration Statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Company undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the Registration Statement and
will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions set forth in response to
the foregoing provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1993 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 22nd day of December, 1998.
SARATOGA BEVERAGE GROUP, INC.
By: /s/ Robin Prever
--------------------------------------
Robin Prever
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robin Prever and Gayle J.
Henderson, and each of them (with full power and each of them to act alone),
his or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him or her and on his or her behalf, and in
his or her name, place and stead, in any and all capacities to execute and sign
any and all amendments or post-effective amendments to this Registration
Statement and any registration statement or amendment to such registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact or
any of them or their or her substitute or substitutes, may lawfully do or cause
to be done by virtue hereof and the registrant hereby confers like authority on
its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
/s/ Robin Prever President, Chief Executive
------------------------- Officer and Chairman of the December 22, 1998
Robin Prever Board of Directors
/s/ Gayle J. Henderson Chief Financial Officer December 22, 1998
-------------------------
Gayle J. Henderson
/s/ Warren Lichtenstein Director December 22, 1998
-------------------------
Warren Lichtenstein
/s/ John A. Morabito Director December 22, 1998
-------------------------
John A. Morabito
/s/ Leonard Toboroff Director December 22, 1998
-------------------------
Leonard Toboroff
EXHIBIT INDEX
-------------
2.1(1) (P) Agreement and Plan of Merger
3.1(1) (P) Restated Certificate of Incorporation of Saratoga
3.2(1) (P) By-Laws of Saratoga
3.3(10) Amendment to By-Laws of Saratoga
4.1(1) (P) Specimen of Class A Stock Certificate
5.1(12) Opinion of Swidler Berlin Shereff Friedman, LLP
9.1(11) Restated Voting, Standstill and Proxy Agreement dated as of
October 13, 1998
9.2(11) Stockholder Agreement dated October 13, 1998 by and among
Saratoga, Robin Prever, Anthony Malatino and Steven Bogen
10.1(2)+ (P) Employment Agreement entered into by the Registrant and
Robin Prever
10.2(1)+ (P) Form of the Saratoga Spring Water Company 1993 Stock Option
Plan
10.3(2)+ (P) Consulting Agreement entered into by Saratoga and Leonard
Toboroff
10.4(1) (P) Letter Agreement between Saratoga and Owens-Brockway Glass
Containers
10.5(2) (P) Partnership Agreement, dated July 21, 1993, by and between
JNJ Distributors, Inc. and Saratoga Springs Distribution Corp.,
as amended by Amendment of Partnership Agreement hereto dated
November 9, 1993
10.6(2) (P) Stock Agreement, dated July 21, 1993, by and between JNJ
Distributors, Inc. and Saratoga Spring Water Company
10.7(2) (P) Distribution Agreement, dated March 25, 1993, by and between
Joseph Victori Wines, Inc. and JNJ Distributors, Inc.
10.8(5) Termination Agreement dated as of January 31, 1997 between
Saratoga and Triarc
10.9(3) (P) Cott Co-pack Agreement dated as of June 8, 1995
10.10(4) Manufacturing and Distribution Agreement, dated as of July 23,
1996, by and between Saratoga and Mistic Brands, Inc.
10.11(6) Bottling Agreement, dated April 16, 1997, by and among Saratoga,
Hype Corporation, Hype Beverage Corporation, World Wide Beverage
Inc., Hype Water Company, Inc., Hyperholics Inc., R.J. Barry Cox
and Nigel Spiro
10.12(6)+ Line of Credit dated as of April 10, 1997 to Saratoga from Robin
Prever and Anthony Malatino
10.13(7) Saratoga Splash Agreement, dated as of June 30, 1997, by and
between Saratoga and Mistic Brands, Inc.
10.14(7) Master Distribution Agreement dated as of June 16, 1997 by and
among Saratoga Beverage Group, Inc., Hype Corporation, World
Wide Beverage Inc., Global Brands AG, Hype Water Company, Inc.
and Hyperholics Inc.
10.15(8) Loan Agreement, Securities Purchase Agreement, Secured
Promissory Note, and Warrants for Messrs. Holliday, Merhi and
Barr in connection with the loan to Onyx Management Services,
LLC
10.16(9)+ Securities Purchase Agreement dated February 12, 1998 between
Saratoga and Carl T. Wolf
10.17(9)+ Stock Option Agreement dated February 25, 1998 between Saratoga
and Steel Partners II, L.P.
10.18(9)+ Securities Purchase Agreement dated February 25, 1998 between
Saratoga and Carl T. Wolf
10.19(9) Option Agreement dated March 16, 1998 between Saratoga and
Steven Smith
10.20(9) Letter agreement dated March 29, 1998 between Saratoga and The
Fresh Juice Company, Inc.
10.21(9)+ Amended and Restated Stock Option Agreement dated April 17, 1998
between Saratoga and Carl T. Wolf
10.22(9) Letter agreement dated April 24, 1998 between Saratoga and The
Fresh Juice Company, Inc.
10.23(11)+ Form of the Saratoga Beverage Group, Inc. 1998 Stock Option Plan
10.24(12) Commitment letter dated September 24, 1998 between Saratoga and
NationsBank, N.A.
10.25(11) Restated Agreement and Plan of Merger dated as of October 13,
1998 by and among Saratoga, Rowale Corp. and The Fresh Juice
Company, Inc.
10.26(11)+ Employment Agreement dated October 13, 1998 between Saratoga and
Jeffrey Heavirland
10.27(11) Letter agreement dated October 13, 1998 among Saratoga, Fresh
Juice and Steven Smith (amending the agreement set forth in
Exhibit 10.30 hereof)
10.28(12)+ Letter agreements dated December 2, 1998 among Saratoga, Fresh
Juice and Steven Bogen (amending the agreement set forth in
Exhibit 10.31 hereof)
10.29(12)+ Letter agreement dated December 2, 1998 among Saratoga, Fresh
Juice and Jeffrey Heavirland
10.30(12) Employment Agreement effective April 1, 1996 between The Fresh
Juice Company, Inc. and Steven Smith
10.31(12) Employment Agreement effective April 1, 1996 between The Fresh
Juice Company, Inc. and Steven M. Bogen
10.32(12) Supply Agreement dated March 31, 1996 between The Fresh Juice
Company, Inc. and Natural Juice Company, Inc.
10.33(12) Agreement of Lease dated November 24, 1997 between The Fresh
Juice Company of New York, Inc. and 280 Wilson Avenue
Associates, L.L.C. and guaranteed by The Fresh Juice Company,
Inc.
10.34(12) Industrial Real Estate Lease dated June 17, 1992 between
Hansen's Juices, Inc. and Pruco Life Insurance Company
21.1(11) Subsidiaries of Saratoga
23.1(12) Consent of Swidler Berlin Shereff Friedman, LLP (included in
Exhibit 5.1)
23.2(12) Consent of PricewaterhouseCoopers LLP
23.3(12) Consent of KPMG Peat Marwick LLP
23.4(12) Consent of Steven Bogen
23.5(12) Consent of Ladenburg Thalmann & Co. Inc.
24.1(12) Power of Attorney (included on page II-6 hereof)
-------------
(1) Incorporated herein by reference to Saratoga's Registration Statement on
Form SB-2 filed with the SEC on June 16, 1993 (Registration No.
33-62038NY).
(2) Incorporated herein by reference to Saratoga's Form 10-KSB filed with the
SEC on March 30, 1994.
(3) Incorporated herein by reference to Saratoga's Form 10-KSB filed with the
SEC on March 29, 1996.
(4) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on November 12, 1996.
(5) Incorporated herein by reference to Saratoga's Form 10-KSB filed with the
SEC on April 15, 1997.
(6) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on May 13, 1997.
(7) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on August 8, 1997.
(8) Incorporated herein by reference to Saratoga's Form 10-KSB filed with the
SEC on March 20, 1998.
(9) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on May 11, 1998.
(10) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on August 5, 1998.
(11) Incorporated herein by reference to Saratoga's Form 10-QSB filed with the
SEC on November 5, 1998.
(12) Filed herewith.
(+) Management agreement.
(P) Paper filing.
Dates Referenced Herein and Documents Incorporated by Reference
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