SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule ss.240.14a or 240.14a-12
RAVENSWOOD WINERY, INC.
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common stock, no par value per share, of Ravenswood Winery, Inc.
(2) Aggregate number of securities to which transaction applies:
5,505,159 shares of common stock comprising: (a) 4,876,067
shares of issued and outstanding common stock; (b) vested and
unvested options to purchase 487,750 shares of common stock; (c)
140,628 shares of common stock issuable upon the conversion of
convertible debentures; and (d) rights to purchase approximately
714 shares of common stock under the Ravenswood Employee Stock
Purchase Plan.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
Each share of common stock will be converted into the right to
receive $29.50 as a result of the merger described in this proxy
statement. For the purposes of calculating the filing fee, each
option to acquire common stock, each debenture convertible into
common stock and each right to purchase shares under the
Employee Stock Purchase Plan has been deemed exercised or
converted into common stock.
(4) Proposed maximum aggregate value of transaction:
$156,912,341, representing $148,013,566 for the acquisition of
outstanding stock, debentures and employee stock purchase plan
rights, $3,155,945 for the acquisition of vested stock options
and $5,742,830 for the acquisition of unvested stock options
post-closing.
(5) Total fee paid:
$31,382 (one-50th of one percent of $156,912,341).
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LOGO TO COME]
RAVENSWOOD WINERY, INC.
26200 Arnold Drive
Sonoma, California 95476
___________, 2001
Dear Shareholder:
We invite you to attend a special meeting of shareholders of Ravenswood Winery,
Inc., to be held at 11:00 a.m., local time, on ______________ , 2001, at the
Quarry Facility, 26200 Arnold Drive, Sonoma, California.
At the special meeting, we will ask you to approve the principal terms of the
merger agreement that we entered into on April 10, 2001 with Constellation
Brands, Inc. pursuant to which our company would be merged with a wholly owned
indirect subsidiary of Constellation Brands. If we complete the merger, you will
receive $29.50 in cash, without interest, for each share of Ravenswood common
stock you own, and Ravenswood will become a 100% owned indirect subsidiary of
Constellation Brands.
The Ravenswood board of directors carefully reviewed and considered the terms
and conditions of the proposed merger. Based on its review, the Ravenswood board
of directors has determined that the terms of the merger agreement and the
merger are in the best interests of Ravenswood and its shareholders. In making
this determination, the Ravenswood board of directors considered, among other
things, the oral opinion given by WR Hambrecht + Co., LLC, Ravenswood's
financial advisor, on April 9, 2001 to the effect that, as of that date and on
the basis of and subject to the assumptions, limitations and qualifications set
forth in its written confirmation, the $29.50 per share to be received in the
merger is fair, from a financial point of view, to our shareholders. The written
opinion of WR Hambrecht + Co., LLC is attached as Annex B to the attached proxy
statement and should be read carefully in its entirety.
Our board of directors has unanimously approved the merger and recommends that
you vote "FOR" the approval of the principal terms of the merger agreement at
the special meeting.
Your vote is very important. Failure to vote will have the same effect as a vote
against approval of the merger agreement. Only holders of our stock of record at
the close of business on ____________ , 2001 are entitled to notice of and to
vote at the special meeting or at any adjournments or postponements of the
special meeting.
Whether or not you plan to attend the special meeting, you are requested to
complete, date, sign and return the proxy card. If you hold your shares in
"street name", you should instruct your broker how to vote in accordance with
your voting instruction form.
The accompanying proxy statement explains the proposed merger and merger
agreement and provides specific information concerning the special meeting.
Please read these materials carefully.
Sincerely,
-----------------------------
W. Reed Foster
Chairman of the Board of Directors and Chief
Executive Officer
RAVENSWOOD WINERY, INC.
26200 Arnold Drive
Sonoma, California 95476
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on , 2001
To the Shareholders of Ravenswood Winery, Inc.:
The special meeting of shareholders of Ravenswood Winery, Inc. will be held at
11:00 a.m., local time, on _____________ , 2001, at the Quarry Facility, 26200
Arnold Drive, Sonoma, California, for the purposes of considering and voting
upon a proposal to approve the principal terms of the Agreement and Plan of
Merger, dated April 10, 2001, among Constellation Brands, Inc., VVV Acquisition
Corp. and Ravenswood. In the merger, each outstanding share of common stock, no
par value per share, of Ravenswood will be converted into the right to receive
$29.50 in cash, without interest. The merger agreement is more fully described
in the accompanying proxy statement and is attached as Annex A to the proxy
statement.
Ravenswood's board of directors has fixed the close of business on
_________________ , 2001 as the record date for determining shareholders
entitled to notice of and to vote at the special meeting and any adjournment or
postponement of the meeting. A list of shareholders entitled to vote at the
special meeting will be available for examination at Ravenswood's headquarters,
during ordinary business hours, from the date of the proxy statement until the
special meeting.
Approval of the merger will require the affirmative vote of the holders of
Ravenswood stock representing a majority of the outstanding shares of Ravenswood
common stock entitled to vote. The holders of approximately 54% of the
outstanding shares of Ravenswood common stock have already agreed to vote in
favor of the merger.
Under California law, Ravenswood's shareholders may demand dissenters' rights in
connection with the merger, but only if Ravenswood receives demands with respect
to five percent or more of the shares of outstanding common stock. In that
event, any shares of Ravenswood common stock as to which dissenters' rights are
properly exercised may be converted into the right to cause Ravenswood to
purchase such shares in cash for their fair market value, as may be determined
pursuant to the laws of the State of California. In order for such shares to
have dissenters' rights, a shareholder must follow the procedures specified by
California law, including, but not limited to, (1) making a written demand
before the special meeting that Ravenswood purchase his or her shares, (2)
voting his or her shares against the proposed merger, and (3) submitting his or
her shares for endorsement within thirty days of receiving notice of the
approval of the merger. Failure to execute a proxy with respect to approval of
the merger will not be sufficient to constitute the demand described above.
Please see "Special Factors--Dissenters' Rights" in the enclosed proxy statement
and Chapter 13 of the California
General Corporation Law attached as Annex D thereto.
The accompanying proxy statement describes the proposed merger, the actions to
be taken in connection with the merger and additional information about the
parties involved and their interests. Please give all this information your
careful attention.
Our board of directors unanimously recommends that shareholders vote "FOR"
approval of the principal terms of the merger agreement.
We urge you to sign and return the enclosed proxy card as promptly as possible,
whether or not you plan to attend the special meeting in person. You may revoke
the proxy at any time prior to its exercise in the manner described in the
attached proxy statement. Any shareholder present at the special meeting,
including any adjournment or postponement of the meeting, may revoke such
shareholder's proxy and vote personally on the merger agreement to be considered
at the special meeting. Executed proxies with no instructions indicated thereon
will be voted "FOR" approval of the principal terms of the merger agreement.
Please do not send your share certificates at this time.
By Order of the Board of Directors,
-----------------------
Justin M. Faggioli
Executive Vice President and Secretary
Sonoma, California
___________, 2001
The proxy statement is dated ____________ , 2001 and is first being
mailed to Ravenswood's shareholders on or about _____________ , 2001.
Table of Contents
Page
Questions & Answers About the Merger....................................
Summary of the Proxy Statement..........................................
The Special Meeting.....................................................
General............................................................
Record Date and Quorum Requirements................................
Voting Procedures; Required Vote; Revocability of Proxy............
Adjournments or Postponements......................................
The Parties.............................................................
Ravenswood Winery, Inc.............................................
Constellation Brands, Inc..........................................
VVV Acquisition Corp...............................................
Special Factors.........................................................
Background of the Merger...........................................
Reasons for the Recommendation of our Board of Directors...........
Opinion of WR Hambrecht + Co., LLC.................................
Voting Agreement...................................................
Interests of Ravenswood Directors and Executive Officers...........
Directors and Officers Insurance...................................
Effects of the Merger..............................................
Federal Income Tax Consequences....................................
Dissenters' Rights.................................................
Approvals..........................................................
Source of Funds....................................................
Shareholder Proposals..............................................
The Merger Agreement....................................................
The Merger.........................................................
Effective Time of the Merger.......................................
Payment for Shares.................................................
Stock Options......................................................
Stock Purchase Plan................................................
Debentures.........................................................
Representations and Warranties.....................................
Covenants..........................................................
Indemnification....................................................
Termination........................................................
No Solicitation of Transactions....................................
Termination Fee Payable to Constellation Brands....................
Employee Benefit Matters...........................................
Conditions to the Merger...........................................
Expenses...........................................................
Amendment and Waiver...............................................
Ownership of Ravenswood.................................................
5% shareholders....................................................
Directors and Executive Officers...................................
Cautionary Statement Regarding Forward-Looking Statements...............
Additional Information..................................................
Solicitation of Proxies/Costs......................................
Shareholder Proposals; Other Matters...............................
Other Shareholder Meetings.........................................
Where You Can Find More Information.....................................
ANNEXES
Agreement and Plan of Merger....................................... A
WR Hambrecht + Co., LLC Fairness Opinion........................... B
Form of Voting Agreement........................................... C
Chapter 13 of the California General Corporation Law............... D
PROXY STATEMENT
Sent to the Shareholders of Ravenswood Winery, Inc. on ____________, 2001
------------------
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF RAVENSWOOD
WINERY, INC. TO BE HELD ________________, 2001
Questions & Answers About the Merger
Q: What am I voting for?
A: We are asking for your vote to approve the principal terms of the merger
agreement that we entered into on April 10, 2001 with Constellation Brands, Inc.
Under the terms of the merger agreement Ravenswood will be merged with a wholly
owned indirect subsidiary of Constellation Brands and Ravenswood will become a
wholly owned indirect subsidiary of Constellation Brands.
Q: What will I receive in the merger?
A: If we complete the merger, you will receive $29.50 in cash for each share of
Ravenswood common stock you own.
Q: What shareholder approval is required?
A: Approval of the merger agreement and the transactions contemplated thereby,
including the merger, requires the affirmative vote of a majority of the
outstanding shares of Ravenswood common stock held by shareholders entitled
to vote on _____________________ , 2001. Shareholders of Ravenswood owning
approximately 54% of the outstanding shares of Ravenswood common stock have
entered into voting arrangements with Constellation Brands and VVV Acquisition
Corp., dated April 10, 2001, in which each of those shareholders agreed, subject
to the terms of the voting agreement, to vote all of their shares of Ravenswood
common stock in favor of the merger. The form of voting agreement is attached to
this proxy statement as Annex C.
Q: What regulatory approvals are required?
A: The merger requires that the waiting period (and any extension thereof)
applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, will have been terminated or will have expired. The State
of California Department of Alcoholic Beverage Control and Board of Equalization
and the United States Bureau of Alcohol, Tobacco and Firearms regulate the
business and operations of each of Ravenswood and Constellation Brands. Although
Ravenswood and Constellation Brands will be required to make filings with both
the state and federal regulators, under the provisions of the merger agreement,
the approval of these regulators is not a condition to the consummation of the
merger.
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Q: When do you expect the merger to be completed?
A: We are working toward completing the merger as quickly as possible. Depending
on the receipt of regulatory approvals, and assuming approval by our
shareholders and satisfaction or waiver of other conditions, we hope to complete
the merger by _____________ , 2001.
Q: Do I have dissenters' rights?
A: Yes. Under California law, shareholders have dissenters' rights in connection
with the merger, if enough shareholders elect to demand dissenters' rights and
follow the procedures specified by California law. See "Special
Factors--Dissenters' Rights" and Chapter 13 of the California General
Corporation Law attached as Annex D.
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
proxy statement, please complete, date and sign your proxy and return it in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting. If you sign and send in your proxy and do
not indicate how you want to vote, we will count your proxy in favor of approval
of the principal terms of the merger agreement. If you abstain from voting or do
not vote, it will have the effect of a vote against the approval of the
principal terms of the merger agreement. However, abstention from voting or
failure to execute a proxy with respect to approval of the merger will not be
sufficient to constitute a vote against the merger for the purpose of asserting
dissenters' rights. See "Special Factors--Dissenters' Rights" and Chapter 13 of
the California General Corporation Law attached as Annex D. The special meeting
will take place on ______________ , 2001. You may attend the special meeting
and vote your shares in person rather than voting by proxy.
Q: Can I change my vote after I have mailed my signed proxy?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can attend the
special meeting and vote in person. Second, you can send a written notice
stating that you would like to revoke your proxy. Third, you can complete and
submit a new proxy. If you choose either of these final two methods, you must
submit your notice of revocation or your new proxy to Ravenswood's solicitation
agent, Mellon Investor Services LLC, at the following address so that your
notice or new proxy is received by the solicitation agent prior to the close of
business on ______________ , 2001:
Mellon Investor Services LLC
44 Wall Street, Seventh Floor
New York, NY 10005
Toll Free: (800) 279-1247
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Q: If my broker holds my shares in "street name", will my broker vote my shares?
A: Your broker will vote your shares only if you provide instructions as to how
to vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. If you do not provide your broker
with instructions on how to vote your shares, it will have the effect of a vote
against the approval of the merger agreement. However, failure to provide your
broker with instructions on how to vote your shares with respect to approval of
the merger will not be sufficient to constitute a vote against the merger for
the purpose of asserting dissenters' rights. See "Special Factors--Dissenters'
Rights" and Chapter 13 of the California General Corporation Law attached as
Annex D.
Q: Should I send in my stock certificates now?
A: No. After the merger is completed, you will receive written instructions for
exchanging your stock certificates. Please do not send in your stock
certificates with your proxy.
Q: Who can help answer my questions?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement or the enclosed proxy, you should contact:
Mellon Investor Services LLC
44 Wall Street, Seventh Floor
New York, NY 10005
Toll Free: (800) 279-1247
or
Investor Relations
Ravenswood Winery, Inc.
26200 Arnold Drive
Sonoma, California 95476
(707) 938-1960
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SUMMARY OF THE PROXY STATEMENT
The following is a summary of information contained elsewhere in this proxy
statement and the attached Annexes. This summary does not purport to contain a
complete statement of all material information relating to the merger agreement,
the merger, and the other matters discussed herein and is subject to, and is
qualified in its entirety by, the more detailed information contained in or
attached to this proxy statement. Where appropriate, items in this summary
contain a cross reference directing you to a more complete description included
elsewhere in this proxy statement. Ravenswood shareholders should carefully read
this proxy statement in its entirety, as well as the merger agreement attached
to this proxy statement as Annex A.
Date, Time and Place of the Special Meeting
The special meeting will be held on ____________ , 2001, at 11:00 a.m. local
time, at the Quarry Facility, 26200 Arnold Drive, Sonoma, California.
Purpose of the Special Meeting
At the special meeting, our shareholders will consider and vote on a proposal to
approve the principal terms of the merger agreement, dated April 10, 2001, among
Constellation Brands, Inc., VVV Acquisition Corp. and Ravenswood. Under the
merger agreement, Ravenswood will be merged with VVV Acquisition Corp., a wholly
owned indirect subsidiary of Constellation Brands, Inc., with Ravenswood
surviving the merger as a wholly owned indirect subsidiary of Constellation
Brands. Each outstanding share of our common stock, no par value per share,
other than shares held by Ravenswood, Constellation Brands or VVV Acquisition
Corp., will be converted automatically into the right to receive $29.50 in cash,
without interest, upon surrender of the certificate formerly representing the
outstanding shares of Ravenswood common stock in the manner set forth in the
merger agreement. See "The Merger Agreement -- The Merger" beginning on page __.
Record Date and Quorum
Our board of directors has fixed the close of business on ____________, 2001, as
the record date for determining shareholders entitled to notice of, and to vote
at, the special meeting and any adjournments or postponements of the special
meeting. Each holder of record of shares of our common stock at the close of
business on the record date is entitled to one vote for each share then held on
each matter submitted to a vote of shareholders. At the close of business on the
record date, shares of our common stock were outstanding. The holders of a
majority of the outstanding shares of common stock must be present in person or
represented by proxy to constitute a quorum for the transaction of business at
the special meeting. See "The Special Meeting -- Record Date and Quorum
Requirements" beginning on page __.
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Required Vote and Proxies
The affirmative vote of the holders of a majority of the outstanding shares of
our common stock is required to approve the principal terms of the merger
agreement. A failure to vote or a vote to abstain generally will have the same
effect as a vote cast against approval of the merger agreement. Brokers who hold
shares as nominees will not have discretionary authority to vote such shares in
the absence of instructions from the beneficial owners, and a broker non-vote
will have the same effect as a vote against approval of the merger agreement.
Shareholders of Ravenswood owning approximately 54% of the outstanding shares of
Ravenswood common stock have entered into voting arrangements with Constellation
Brands and VVV Acquisition Corp., dated April 10, 2001, in which each of those
shareholders agreed, subject to the terms of the voting agreement, to vote all
of their shares of Ravenswood common stock in favor of the merger. The form of
voting agreement is attached to this proxy statement as Annex C. See "Special
Factors -- Voting Agreement" beginning on page __.
Shareholders are requested to promptly complete, date, sign and return the
accompanying proxy card. A shareholder may revoke a proxy at any time prior to
its exercise. See "The Special Meeting-- Voting Procedures; Required Vote;
Revocability of Proxy" beginning on page __.
The Parties
Ravenswood
Ravenswood produces, markets and sells super-premium and ultra-premium
California wines primarily under the Ravenswood brand name. The vast majority of
wines produced and sold by Ravenswood are red wines, including Merlot, Cabernet
Sauvignon and, particularly, Zinfandel. To a lesser extent, Ravenswood produces
white wines, including Chardonnay, French Colombard and Gewurztraminer. Shares
of common stock of Ravenswood are listed on The Nasdaq National Market under the
ticker symbol "RVWD".
Our headquarters are located at 26200 Arnold Drive, Sonoma, California 95476.
Our general telephone number at the headquarters is: (707) 938-1960.
Constellation Brands, Inc.
Constellation Brands, Inc. is a leader in the production, marketing and
distribution of branded beverage alcohol products in North America and the
United Kingdom. As the second largest supplier of wine, the second largest
importer of beer and the fourth largest supplier of distilled spirits,
Constellation Brands is the largest single-source supplier of these products in
the United States. In the United Kingdom, Constellation Brands is a leading
provider of wine and cider, as well as a leading independent wholesaler of
beverage alcohol products. Shares of Class A common stock and Class B common
stock
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of Constellation Brands are listed on the New York Stock Exchange under the
ticker symbols "STZ" and "STZ.B", respectively.
The headquarters of Constellation Brands are located at 300 WillowBrook Office
Park, Fairport, NY 14450. Constellation Brands' general telephone number at the
headquarters is: (716) 218-2169.
VVV Acquisition Corp.
VVV Acquisition Corp. is a newly-formed corporation organized and existing under
the laws of Delaware. Constellation Brands indirectly owns 100% of VVV
Acquisition Corp. VVV Acquisition Corp. was organized solely for the purpose of
entering into the merger agreement with Ravenswood and has not conducted any
business operations.
Special Factors
Background of the Merger
For a description of the events leading to the approval of the merger by our
board of directors and the reasons for such approval, you should refer to
"Special Factors -- Background of the Merger" beginning on page __ and "--
Reasons for the Recommendation of our Board of Directors" beginning on page __.
Recommendation of our Board of Directors
On April 9, 2001, our board of directors, by unanimous vote, approved the merger
agreement and recommended that our shareholders approve the principal terms of
the merger agreement. In connection with the foregoing, our board of directors
determined that the merger and the merger agreement are in the best interests of
Ravenswood and its shareholders. In connection with its recommendation, our
board of directors relied upon, among other things, the fairness opinion of
Ravenswood's financial advisor, WR Hambrecht + Co., LLC. See "Special Factors --
Reasons for the Recommendation of our Board of Directors" beginning on page __
and "-- Opinion of WR Hambrecht + Co., LLC" beginning on page __.
Our board of directors unanimously recommends that our shareholders vote "FOR"
approval of the principal terms of the merger agreement.
Opinion of the Financial Advisor
WR Hambrecht + Co., LLC provided its oral opinion on April 9, 2001 (subsequently
confirmed in writing as of the same date) to our board of directors that, as of
that date, the consideration to be received by our shareholders in connection
with the merger was fair, from a financial point of view, to our shareholders.
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The full text of the written opinion of WR Hambrecht + Co., LLC, which sets
forth assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as Annex B and
incorporated by reference into this proxy statement. The opinion of WR Hambrecht
+ Co., LLC does not constitute a recommendation as to how you should vote with
respect to the merger agreement. We urge you to read the opinion in its
entirety. See "Special Factors -- Opinion of WR Hambrecht + Co., LLC" beginning
on page __.
Reasons for the Merger
The principal purpose of the merger is to enable Constellation Brands to own all
of the equity interests in Ravenswood and provide you the opportunity to receive
liquidity for your shares at a premium cash price over the market price at which
the common stock traded prior to the announcement of the merger agreement. The
closing price per share of our common stock on The Nasdaq National Market on
April 10, 2001, the last trading day prior to announcement of the merger and the
merger agreement, was $17.52. See "Special Factors -- Reasons for the
Recommendation of our Board of Directors" beginning on page __.
Voting Agreement
As a condition to Constellation Brands entering into the merger agreement,
Ravenswood shareholders holding approximately 54% of outstanding common stock of
Ravenswood entered into voting arrangements, dated April 10, 2001, with
Constellation Brands and VVV Acquisition Corp in which each of those
shareholders has agreed to vote their shares of Ravenswood common stock in favor
of the merger. You are urged to read the form of voting agreement, which is
attached as Annex C and incorporated by reference into this proxy statement, in
its entirety. See "Special Factors -- Voting Agreement" beginning on page __.
Interests of Ravenswood Directors and Executive Officers
In considering the recommendation of our board of directors with respect to the
merger agreement, you should be aware that some of our directors and executive
officers have interests in connection with the merger that are different from,
or in addition to, the interests of other Ravenswood shareholders, including the
following:
o The merger agreement provides that all outstanding options for
Ravenswood common stock will be cancelled immediately prior to the
merger and, for each option cancelled, optionholders will receive the
amount by which $29.50 exceeds the exercise price of each such option.
The executive officers and directors hold approximately 77% of the
outstanding options.
o The executive officers will receive cash bonuses immediately prior to
the consummation of the merger.
o The executive officers will continue as employees after the merger.
They will receive salaries, be eligible for bonuses and receive stock
options for Constellation Brands common stock.
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o Ravenswood, as the surviving corporation after the merger, has agreed
to indemnify the Ravenswood directors and executive officers for events
occurring before the merger, including events that are related to the
merger.
See "Special Factors -- Interests of Ravenswood Directors and Executive
Officers" beginning on page __ and "The Merger Agreement -- Indemnification"
beginning on page __.
Federal Income Tax Consequences
The receipt of the cash merger consideration by a holder of our shares will be a
taxable transaction for U.S. federal income tax purposes. We urge you to consult
your tax advisors to determine the effect of the merger under applicable
federal, state, local and foreign tax laws. See "Special Factors-- Federal
Income Tax Consequences" beginning on page __.
Rights of Dissenting Shareholders
Ravenswood shareholders who properly object to the merger by following the
procedures established by California law may exercise dissenters' rights in
connection with the merger, but only if Ravenswood receives demands with respect
to five percent or more of the shares of outstanding common stock. See "Special
Factors--Dissenters' Rights" and Chapter 13 of the California General
Corporation Law attached as Annex D.
Approvals
The obligation of each of Constellation Brands and Ravenswood to consummate the
merger is subject to the expiration or early termination of the required waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The State
of California Department of Alcoholic Beverage Control and Board of Equalization
and the United States Bureau of Alcohol, Tobacco and Firearms regulate the
business and operations of Ravenswood and Constellation Brands. Although
Ravenswood and Constellation Brands will be required to make filings with state
and federal regulators, the approval of these regulators is not a condition to
the consummation of the merger. See "Special Factors -- Approvals" beginning on
page __.
Source of Funds
Constellation Brands has informed us that it has sufficient borrowing
availability under its existing bank credit facilities to meet its closing
obligations, including approximately $148 million to acquire Ravenswood's
outstanding common stock, debentures and rights under the Employee Stock
Purchase Plan, and, to the extent necessary, to assist Ravenswood with its cash
needs if additional cash is needed at the time of the merger to fund
Ravenswood's obligations with respect to vested stock options, certain debt and
other obligations arising in connection with the merger that is not repaid from
Ravenswood's cash in connection with the merger. The amount of debt and these
obligations in excess of cash on hand at the time of the merger is not expected
by Constellation Brands to be significant, and is currently being estimated by
Constellation Brands as between $0 and $3 million
The Merger Agreement
8
The Merger
The merger agreement provides that, subject to satisfaction of various
conditions, VVV Acquisition Corp. will be merged with and into Ravenswood.
Following the merger, the separate existence of VVV Acquisition Corp. will
cease, and Ravenswood will continue as the surviving corporation and a wholly
owned indirect subsidiary of Constellation Brands. As of the effective time of
the merger, each of our issued and outstanding shares, other than any shares
held directly or indirectly by Constellation Brands, VVV Acquisition Corp. or
Ravenswood, will, by virtue of the merger, be canceled and converted into the
right to receive $29.50 in cash, without interest. See "The Merger Agreement --
The Merger" beginning on page __.
Effective Time of the Merger and Payment for Shares
The effective time of the merger will occur no later than two business days
following the satisfaction or waiver of the conditions to the merger contained
in the merger agreement. See "The Merger Agreement -- Conditions to the Merger"
beginning on page __. Detailed instructions with regard to the surrender of
share certificates, together with a letter of transmittal, will be forwarded to
shareholders by the paying agent promptly following the effective time of the
merger. Shareholders should not submit their certificates to the paying agent
until they have received such materials. The paying agent will send payment of
the merger consideration to you as promptly as practicable following receipt by
the paying agent of your certificates and other required documents. No interest
will be paid or accrued on the cash payable upon the surrender of certificates.
See "The Merger Agreement -- Payment for Shares" beginning on page __.
You should not send any share certificates to us at this time.
Conditions to the Merger
Each party's obligation to complete the merger is subject to satisfaction of the
following conditions with respect to one or both parties:
o approval of the merger agreement by holders of a majority of the
outstanding shares of our common stock;
o the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976;
o the absence of any injunction or other legal restraint preventing the
closing of the merger;
o the representations and warranties of Ravenswood, on the one hand, and
Constellation Brands and VVV Acquisition Corp., on the other hand, are
true and correct as of the effective time of the merger (except where
the failure to be so true and correct would not have a material adverse
effect, as defined in the last
9
bullet below, and unless any such representation or warranty refers to
some other time in which case it will be true and correct as of that
time);
o performance by Ravenswood, on the one hand, and Constellation Brands
and VVV Acquisition Corp., on the other hand, in all material respects
of their respective covenants; and
o with respect to the obligations of Constellation Brands, since April
10, 2001, the financial condition, business or results of operations of
Ravenswood will not have suffered a material adverse effect, excluding
changes in the market price or trading volume of Ravenswood's common
stock, the effects of changes in applicable law or accounting
principles, changes in general economic or business conditions on the
wine industry generally which do not disproportionately affect
Ravenswood, and the effects of the announcement of the merger or the
consummation of the merger.
Any or all of the conditions that have not been satisfied may be waived (other
than conditions that are required by law, such as approval of the merger
agreement by our shareholders, required regulatory approvals and the absence of
injunctions enjoining the merger). See "The Merger Agreement -- Conditions to
the Merger" beginning on page __. Even if our shareholders approve the principal
terms of the merger agreement, we cannot assure you that the merger will be
completed.
Termination
The merger agreement contains provisions addressing the circumstances under
which Ravenswood or Constellation Brands may terminate the merger agreement. In
addition, the merger agreement provides that, in several circumstances,
Ravenswood may be required to pay Constellation Brands a termination fee of $8
million. For a more complete discussion, see "The Merger Agreement --
Termination" beginning on page __ and "-- Termination Fee Payable to
Constellation Brands" beginning on page __.
Expenses
All fees and expenses incurred in connection with the merger will be paid by the
party incurring such fees or expenses if the merger is not consummated. If the
merger is consummated the surviving corporation will pay all fees and expenses.
Security Ownership of Ravenswood Directors and Executive Officers
At the close of business on the record date, our directors and executive
officers owned and were entitled to vote, in the aggregate, ________ , or
approximately __ %, of the outstanding shares of our common stock. All of our
directors and executive officers are required under the voting agreement to vote
their beneficially owned shares which are eligible to be voted on the merger
agreement proposal in favor of approval of the merger agreement. See "Ownership
of Ravenswood -- Directors and Executive Officers"
10
beginning on page __ and "Special Factors -- Voting Agreement" beginning on page
__.
Market Prices of Common Stock
Currently, shares of our common stock are listed for trading on The Nasdaq
National Market. As a result of the merger, we will become a wholly owned
indirect subsidiary of Constellation Brands and our shares will cease to trade
on any public trading market. The closing price of our common stock on ________
___ , 2001, was $ __ per share.
On the record date, there were approximately ___ holders of record
of our common stock.
11
THE SPECIAL MEETING
General
This proxy statement is being delivered to you in connection with a special
meeting of shareholders to be held on , 2001, at 11:00 a.m., local time, at the
Quarry Facility, 26200 Arnold Drive, Sonoma, California. The purpose of the
special meeting is for our shareholders to consider and vote upon a proposal to
approve the principal terms of the Agreement and Plan of Merger, dated April 10,
2001, among Ravenswood, Constellation Brands and VVV Acquisition Corp. Each copy
of this proxy statement is accompanied by a proxy card or a voting instruction
card furnished in connection with the solicitation of proxies or voting
instructions by our board of directors for use at the special meeting. This
proxy statement is being mailed on or about ___________ , 2001, to our
shareholders of record on _________ , 2001.
Our board of directors has determined that the merger and the merger agreement
are in the best interest of Ravenswood and its shareholders and has approved the
merger and the merger agreement by unanimous vote of the directors. Accordingly,
our board of directors unanimously recommends that shareholders vote "FOR"
approval of the principal terms of the merger agreement. See "Special Factors --
Background of the Merger" beginning on page __ and "-- Reasons for the
Recommendation of our Board of Directors" beginning on page __.
Shareholders are requested to promptly complete, date, sign and return the
accompanying proxy card. Return of an executed proxy with no instructions
indicated thereon will result in the applicable shares being voted "FOR"
approval of the principal terms of the merger agreement. A vote to abstain or a
failure to return a properly executed proxy card or to vote at the special
meeting will have the effect of a vote "AGAINST" approval of the merger
agreement. However, abstention from voting or failure to execute a proxy with
respect to approval of the merger will not be sufficient to constitute a vote
against the merger for the purpose of asserting dissenters' rights. See "Special
Factors -- Dissenters' Rights" and Chapter 13 of the California General
Corporation Law attached as Annex D.
Record Date and Quorum Requirements
Our board of directors has fixed the close of business on ___________ , 2001 as
the record date for the determination of shareholders entitled to notice of and
to vote at the special meeting. Each holder of record of common stock at the
close of business on the record date is entitled to one vote for each share then
held on each matter submitted to a vote of shareholders.
The holders of a majority of the outstanding shares entitled to vote at the
special meeting must be present in person or represented by proxy to constitute
a quorum for the transaction of business. Abstentions and shares referred to as
"broker or nominee non-votes" that are represented at the special meeting --
shares held by brokers or nominees
12
as to which instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker or nominee does not have
discretionary voting power on a particular matter -- are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
If less than a majority of outstanding shares are represented at the special
meeting, the special meeting will be adjourned to a time, date and place
designated by our management. As of the record date, there were appoximately __
holders of record of our common stock.
Shareholders should not forward any share certificates with their proxy cards.
In the event the merger is completed, share certificates should be delivered in
accordance with instructions set forth in a letter of transmittal, which will be
sent to shareholders by the paying agent promptly after the effective time of
the merger.
Voting Procedures; Required Vote; Revocability of Proxy
Approval of the merger agreement will require the affirmative vote of the
holders of a majority of the outstanding shares of our common stock. Brokers
and, in many cases, nominees will not have discretionary power to vote on the
merger proposal to be presented at the special meeting. Accordingly, beneficial
owners of shares should instruct their brokers or nominees on how to vote. A
broker or nominee non-vote will have the same effect as a vote against approval
of the merger agreement. If no instructions are indicated on a properly executed
proxy, such proxy will be voted as a vote "FOR" approval of the principal terms
of the merger agreement. A shareholder may revoke a proxy at any time prior to
its exercise.
A shareholder may revoke a proxy by delivering to Ravenswood's solicitation
agent, Mellon Investor Services LLC, either (1) a written notice of revocation
or (2) a duly executed proxy bearing a later date. Such notice or new proxy must
be received by the solicitation agent prior to the close of business on , 2001.
A shareholder may also revoke a proxy by attending the special meeting and
voting in person. The presence of a shareholder at the special meeting will not
in and of itself automatically revoke such shareholder's proxy. The address of
Ravenswood's solicitation agent is:
Mellon Investor Services LLC
44 Wall Street, Seventh Floor
New York, NY 10005
Toll Free: (800) 279-1247
Adjournments or Postponements
Although it is not expected, the special meeting may be adjourned or postponed
for the purpose of soliciting additional proxies or for other reasons as
determined by our board of directors. Any adjournment or postponement may be
made without notice, including by an announcement made at the special meeting,
by approval of the holders of a majority of the voting power represented by the
outstanding shares of Ravenswood's common stock present in person or represented
by proxy at the special meeting, whether or not a quorum exists. Any signed
proxies received by Ravenswood will be voted in
13
favor of an adjournment or postponement in these circumstances unless a written
note on the proxy by the shareholder directs otherwise. Any adjournment or
postponement of the special meeting for the purpose of soliciting additional
proxies or for other reasons will allow Ravenswood's shareholders who have
already sent in their proxies to revoke them at any time prior to their use.
THE PARTIES
Ravenswood Winery, Inc.
Ravenswood Winery, Inc. was founded in 1976, became a limited partnership in
1979, and was subsequently incorporated in the State of California on December
23, 1986. We completed our initial public offering in April 1999 and our common
stock is listed on The Nasdaq National Market System under the symbol "RVWD".
Ravenswood produces, markets and sells super-premium and ultra-premium
California wines primarily under the Ravenswood brand name. The vast majority of
the wines Ravenswood produces and sells are red wines, including Merlot,
Cabernet Sauvignon and, particularly, Zinfandel. To a lesser extent, Ravenswood
produces white wines, including Chardonnay, French Colombard and Gewurztraminer.
Ravenswood had approximately 65 full time and 16 part time, seasonal employees
as of April 18, 2001.
Constellation Brands, Inc.
Constellation Brands, Inc. is a Delaware corporation organized in 1972 as the
successor to a business founded in 1945. Constellation Brands completed its
initial public offering in 1973 and its Class A and Class B common stock are
listed on the New York Stock Exchange under the symbols, "STZ" and "STZ.B,"
respectively.
Constellation Brands, is a leader in the production and marketing of branded
beverage alcohol products in North America and the United Kingdom. As the second
largest supplier of wine, the second largest importer of beer and the fourth
largest supplier of distilled spirits in the United States, Constellation Brands
is the largest single-source supplier of these products in the United States.
Constellation Brands is also a leading provider of wine and cider, as well as a
leading independent wholesaler of beverage alcohol products in the United
Kingdom. With its broad product portfolio, composed of brands in all major
beverage alcohol categories, Constellation Brands believes it is distinctly
positioned to satisfy an array of consumer preferences. Leading brands in
Constellation Brands' portfolio include Franciscan Oakville Estate, Simi,
Estancia, Almaden, Arbor Mist, Talus, Vendange, Alice White, Black Velvet,
Fleischmann's, Schenley, Ten High, Stowells of Chelsea, Blackthorn, Modelo
Especial, St. Pauli Girl and the number one imported beer, Corona Extra. On
September 19, 2000, the company changed its name to Constellation Brands, Inc.
from Canandaigua Brands, Inc.
The internal growth of Constellation Bonds has been driven by leveraging
14
its existing portfolio of leading brands, developing new products, new packaging
and line extensions, and focusing on the faster growing sectors of the beverage
alcohol industry. Since 1991, Constellation Brands has successfully integrated
eleven major acquisitions that have broadened the Constellation Brands portfolio
and increased Constellation Brands' market share, net sales and cash flow.
Constellation Brands' headquarters are located at 300 WillowBrook Office Park,
Fairport, New York 14450. The general telephone number at that location is
(716)218-2169.
VVV Acquisition Corp.
VVV Acquisition Corp. is a newly-formed corporation organized and existing under
the laws of Delaware. Constellation Brands indirectly owns all the outstanding
shares of capital stock of VVV Acquisition Corp. VVV Acquisition Corp. was
organized solely for the purpose of entering into the merger agreement with
Ravenswood and has not conducted any business operations.
SPECIAL FACTORS
Background of the Merger
In November 2000, our board of directors began to evaluate the strategic
direction of the Company in light of several factors, including the Company's
business and operations, especially in light of some of the trends taking place
in the wine industry. Our board of directors discussed strategic alternatives
including acquisitions, joint ventures, debt or equity financing and a sale of
the Company or its assets. Based on these discussions, our board of directors
authorized management to explore strategic alternatives for the Company.
From December 2000 to February 2001, senior management made inquiries and had
informal discussions with industry experts, including representatives from WR
Hambrecht + Co., regarding potential strategic alternatives available to the
Company, including a possible sale of the Company.
On February 9, 2001, members of senior management met with a representative from
Constellation Brands to discuss the possibility of an acquisition of the Company
by Constellation Brands. Both sides agreed to continue discussions in more
depth.
During the week of February 12, 2001, the Company received an indication of
interest to purchase the Company from "Bidder A", a well known winemaking
company other than Constellation Brands. The Company and Bidder A agreed to
continue discussions.
On February 20, 2001, our board of directors met with representatives from WR
Hambrecht + Co. to discuss possible strategic opportunities for the Company. WR
15
Hambrecht + Co. made a presentation to our board of directors regarding the
potential sale of the Company and potential candidates to purchase the Company.
WR Hambrecht + Co. also discussed with our board of directors its preliminary
views with respect to potential valuation of the Company. After extensive
discussion, our board of directors determined that based upon the globalization
of the wine industry, ongoing consolidation in the industry and the Company's
capabilities to raise necessary growth capital and to compete in the existing
business environment, the greatest value for the Company's shareholders could be
derived from a sale of the Company. Our board of directors authorized the
executive officers of the Company to initiate an auction process and enter into
negotiations and discussions with investment banks to assist in such process.
During the last week of February, the Company engaged WR Hambrecht + Co. to act
as its financial advisor in connection with initiating an auction and sale of
the Company. The Company authorized WR Hambrecht + Co. to approach five
potential bidders. The five were chosen on the basis of perceived value of
Ravenswood to their business, experience in acquisitions of this type and the
ability to finance a transaction, and included Constellation Brands and Bidder
A.
WR Hambrecht + Co. approached the five potential bidders, and during the end of
February and the beginning of March 2001 all five potential bidders entered into
confidentiality agreements and conducted due diligence investigations of the
Company. During the first two weeks of March, the Company requested indications
of interest from all five potential bidders and received written indications of
interest from four of the five potential bidders. The proposed valuations from
Constellation Brands and Bidder A were close. The third and fourth potential
bidders, "Bidder B" and "Bidder C," proposed valuations below that received from
Constellation Brands and Bidder A.
On March 15, 2001, our board of directors met via teleconference call with
representatives from WR Hambrecht + Co. to discuss the status of the four
preliminary indications of interest received. After extensive discussions, our
board of directors authorized the Company's executive officers to proceed with
negotiations with Constellation Brands and Bidder A and to terminate further
discussions with Bidder B and Bidder C unless they proposed higher valuations.
On March 21, 2001, WR Hambrecht + Co. presented Constellation Brands and Bidder
A with a form of proposed merger agreement and requested Constellation Brands
and Bidder A to submit, by March 28, 2001, their proposed changes to the merger
agreement and a firm offer price for all of the common stock of the Company.
On March 22, 2001, Bidder B notified WR Hambrecht + Co. that it would be willing
to propose a higher valuation. WR Hambrecht + Co. presented Bidder B with a form
of proposed merger agreement and requested a response, including Bidder B's
proposed changes and comments to the merger agreement and a firm offer price for
all of the common stock of the Company, by March 28, 2001.
On March 27, 2001, Constellation Brands submitted a non-binding proposal for an
all cash bid of $30.75 per share, subject to further due diligence investigation
of the
16
Company, and subject to the Company negotiating exclusively with Constellation
Brands until April 11, 2001. Constellation Brands requested an immediate
response. The Company declined to respond until the following day.
On March 28, 2001, Bidder A submitted a bid with consideration in the form of
stock and cash, with the cash component not to exceed sixty percent of the
overall consideration, at an overall value per share below the Constellation
Brands proposal of $30.75 per share. The exchange ratio in Bidder A's proposal
was to be set by reference to the closing price of Bidder A's stock around the
time of execution of a definitive agreement. Also, Bidder A's proposal involved
a complex transaction structure providing for the formation of a new
corporation, which would acquire both the Company and Bidder A. Bidder B did not
submit a proposal.
Later on March 28, 2001, our board of directors met via teleconference call with
representatives from WR Hambrecht + Co. and its legal advisors. The Company's
legal advisors and WR Hambrecht + Co. reviewed and analyzed the principal terms
and relative merits of the changes proposed by each of Constellation Brands and
Bidder A to the form of merger agreement distributed by WR Hambrecht + Co. on
March 21, 2001. They also reviewed with our board of directors the perceived
likelihood and timing of closing a transaction with both parties. Our board of
directors also discussed a proposed letter agreement from Constellation Brands
to negotiate exclusively until April 11, 2001. After extensive discussion of the
terms of the two remaining proposals and the terms of the proposed letter
agreement, our board of directors authorized management to enter into exclusive
negotiations with Constellation Brands until April 9, 2001, provided that any
definitive agreement reached through such negotiations would be subject to
approval by our board of directors. On March 28, 2001, the Company entered into
an agreement to negotiate exclusively with Constellation Brands until April 9,
2001.
From March 28, 2001 through April 5, 2001, Constellation Brands continued its
due diligence investigation of the Company, and the legal advisors continued
negotiations of the proposed merger agreement.
On April 5, 2001, executive officers of the Company and Constellation Brands,
their legal advisors and representatives of WR Hambrecht + Co. met to address
outstanding issues in the proposed transaction. At that meeting, Constellation
Brands reduced the offer price in its proposal from $30.75 to $29.50 based upon
the results of its due diligence investigation. Constellation Brands' new
proposed price of $29.50 remained above the overall value of Bidder A's stock
and cash proposal received on March 28. In return for the lower price, the
Company received under the terms of the proposed merger agreement greater
limitations on the ability of Constellation Brands to terminate the merger
agreement, a smaller break-up fee than originally required by Constellation
Brands and no financing contingency. In addition, Constellation Brands conceded
that the break-up fee would only be payable upon the consummation of a merger,
consolidation or similar transaction in which another party acquired 25% or more
of the outstanding common stock of the Company or
17
acquired substantially all of the Company's assets.
At a meeting of our board of directors on April 6, 2000, WR Hambrecht + Co. and
the Company's legal advisors reviewed and analyzed the principal terms of
Constellation Brands' proposal, including the reduction in the proposed amount
to be paid to the Company's shareholders and the contractual concessions the
Company negotiated in return. They also reviewed with our board of directors the
perceived likelihood and timing of closing a transaction with Constellation
Brands. The Company's legal advisors also discussed with our board of directors
the fiduciary duties of our board of directors in considering the proposed
transaction. After discussion, our board of directors authorized the executive
officers to continue negotiating with Constellation Brands.
From April 6, 2001 to April 9, 2001, Constellation Brands continued its due
diligence investigation of the Company and continued negotiating the final terms
of the merger agreement with the Company and its legal advisors.
On April 9, 2001, our board of directors met via teleconference call with its
legal and financial advisors. The legal advisors to the Company provided our
board of directors with a report on the revised terms of the proposed merger
agreement. WR Hambrecht + Co. stated its oral opinion, later confirmed in
writing as of the same date, that, as of that date, the merger consideration of
$29.50 per share to be received by holders of common stock in connection with
the merger was fair to the shareholders from a financial point of view. Our
board of directors then approved, by unanimous vote of the directors, the merger
and the proposed merger agreement.
On April 10, 2001, the board of directors of Constellation Brands met to
consider the proposed merger agreement. At that meeting, the Constellation
Brands board of directors unanimously approved the proposed merger and the
definitive merger agreement. The board of directors of VVV Acquisition Corp.
also unanimously approved the proposed merger and the definitive merger
agreement.
On the afternoon of April 10, 2001, the Company, Constellation Brands and VVV
Acquisition Corp. executed the merger agreement. Later that afternoon,
Constellation Brands and the Company issued a press release announcing the
transaction.
Reasons for the Recommendation of our Board of Directors
Our board of directors consulted with the Company's senior management, as well
as its financial advisor and legal counsel, in reaching its decision to approve
the merger and the merger agreement. Among the factors considered by our board
of directors in its deliberations were the following:
o The financial analysis and presentation of WR Hambrecht + Co. to our
board of directors on April 9, 2001 and the opinion of WR Hambrecht +
Co. on April 9, 2001 to the effect that, as of that date, and based
upon and subject to the matters stated in its opinion, the $29.50 per
share cash consideration to be received by
18
holders of the Company's common stock was fair, from a financial point
of view, to the holders of the Company's common stock. The full text of
WR Hambrecht + Co.'s written opinion, which sets forth the assumptions
made, matters considered and limitations on the review undertaken by WR
Hambrecht + Co., is attached as Annex B to this proxy statement and is
incorporated herein by reference in its entirety.
o The premium that the merger price represented to current and historical
market values and various other valuations of the Company, and our
board of directors' view that the other material terms of the merger
agreement, taken as a whole, were as favorable as those found in
comparable acquisition transactions. The closing prices per share of
our common stock on The Nasdaq National Market on April 9, the day our
board of directors approved the merger agreement, and April 10, the day
the merger agreement was signed, were $17.10 and $17.52, respectively.
o The judgment of our board of directors, based on the extended
arm's-length negotiations with Constellation Brands, that the merger
consideration represented the highest price that Constellation Brands
would be willing to pay in acquiring the common stock.
o The purchase price in the merger would be payable in cash, thus
eliminating any uncertainties in valuing the consideration to be
received by the Company's shareholders, which were particularly acute
in light of the recent volatility in the domestic financial markets.
o The Company's financial performance and outlook, the Company's assets,
business, financial condition, business strategy and results of
operations and the Company's prospects if it were to remain an
independent, publicly traded entity, including the risks of competing
against companies that have greater resources, product offerings and
marketing, sales and distribution capacity than the Company. In
particular, our board of directors considered the rapid consolidation
and globalization that had been taking place within the winemaking
industry, and our board of directors' assessment of the Company's
ability to effectively compete in the future as an independent entity
in light of such developments.
o Constellation Brands' representations in the merger agreement that it
will have sufficient funds available to it to satisfy its and VVV
Acquisition Corp.'s obligations to consummate the merger and the
absence of any financing condition on Constellation Brands' obligation
to close the merger.
o The merger agreement permits the Company to furnish information to, and
enter into discussions or negotiations with, any third party that makes
an unsolicited bona fide expression of interest, offer or proposal to
acquire (1) more than 25% of the outstanding common stock of the
Company by means of a tender or exchange offer or from the Company or
through a merger, consolidation, reorganization or similar transaction
or (2) control of all or substantially all the assets of the Company.
19
o Our board of directors' determination that the termination fee was
comparable to termination fees in transactions of a similar size.
o The fact that WR Hambrecht + Co. contacted five potential acquirers and
partners regarding a possible business combination with the Company.
o The merger provides shareholders who are considering selling their
common stock with the opportunity to sell their common stock without
incurring the transaction costs typically associated with open market
sales.
Our board of directors also considered a number of uncertainties and risks in
their deliberations concerning the merger, including the following:
o The possibility that, although the merger consideration gives the
Company's shareholders the opportunity to realize a premium over the
price at which the common stock traded prior to the public announcement
of the merger, the price or value of the common stock might increase in
the future, and the Company's shareholders would not benefit from those
future increases.
o Pursuant to the merger agreement, between the execution of the merger
agreement and effective time, the Company is required to obtain
Constellation Brands' consent before it can take the actions set forth
in the merger agreement.
o The conditions to Constellation Brands' and VVV Acquisition Corp.'s
obligations to consummate the merger, and the possibility that such
conditions might not be satisfied.
In view of the variety of factors considered in connection with its evaluation
of the merger agreement, our board of directors found it impracticable to, and
did not, quantify, rank or otherwise assign relative weights to the factors
considered or determine that any factor was of particular importance in reaching
its determination that the merger agreement and the transactions contemplated by
the merger agreement are fair to, and in the best interests of, the Company's
shareholders. Rather, the members of our board of directors each viewed their
respective recommendations as being based upon their own judgment, in light of
the totality of the information presented and considered, of the overall effect
of the merger agreement and the transactions contemplated by the merger
agreement, including the merger, on the Company's shareholders compared to any
alternative transaction.
Our board of directors believes that the merger is in the best interest of
Ravenswood and our shareholders. Accordingly, our board of directors has, by a
unanimous vote of the directors, approved the merger agreement and the
transactions contemplated by the merger agreement and recommends that our
shareholders vote "FOR" approval of the principal terms of the merger agreement.
Opinion of WR Hambrecht + Co., LLC
WR Hambrecht + Co. acted as financial advisor to Ravenswood in connection with
the merger. At the April 9, 2001 meeting of the Ravenswood board of directors,
20
WR Hambrecht + Co. delivered its oral opinion to the Ravenswood board of
directors, subsequently confirmed in a written opinion dated April 9, 2001, to
the effect that, based upon and subject to various considerations set forth in
the opinion, as of April 9, 2001, the consideration to be received by the
shareholders of Ravenswood in connection with the merger was fair, from a
financial point of view, to Ravenswood shareholders. No limitations were imposed
by the Ravenswood board of directors upon WR Hambrecht + Co. with respect to
investigations made or procedures followed by WR Hambrecht + Co. in rendering
its opinion.
The full text of WR Hambrecht + Co.'s opinion, which sets forth the assumptions
made, procedures followed, matters considered, limitations on and scope of the
review by WR Hambrecht + Co. in rendering its opinion, is attached to this proxy
statement as Annex B and is incorporated by reference herein. WR Hambrecht +
Co.'s opinion is directed only to the fairness, from a financial point of view,
of the consideration to be received by the shareholders of Ravenswood in
connection with the merger, has been provided to our board of directors in
connection with its evaluation of the merger, does not address any other aspect
of the merger and does not constitute a recommendation to any holder of
Ravenswood common stock as to how to vote at the special meeting. The summary of
WR Hambrecht + Co.'s opinion set forth in this proxy statement is qualified in
its entirety by reference to the full text of the opinion. Holders of Ravenswood
common stock are urged to read WR Hambrecht + Co.'s opinion carefully and in its
entirety.
In conducting its investigation and analysis and in arriving at its opinion, WR
Hambrecht + Co. reviewed the information and took into the account financial and
economic factors it deemed relevant under the circumstances. WR Hambrecht + Co.,
among other things:
o reviewed information, primarily financial in nature, including, but not
limited to, internal and non-public information furnished to WR
Hambrecht + Co. on the business and operations of Ravenswood, as well
as publicly available information, including, but not limited to,
Ravenswood's and Constellation Brands' filings with the Securities and
Exchange Commission;
o reviewed the financial terms and conditions of the merger agreement in
the form presented to Ravenswood's board of directors;
o analyzed the pro-forma capital structure of Constellation Brands;
o compared the historical market prices and trading activity of
Ravenswood's common stock with those of other publicly traded companies
WR Hambrecht + Co. deemed relevant;
o compared the proposed financial terms of the merger with the financial
terms of other transactions WR Hambrecht + Co. deemed relevant;
21
o compared the financial position and operating results of Ravenswood
with those of other publicly traded companies WR Hambrecht + Co. deemed
relevant; and
o completed a discounted cash flow analysis on Ravenswood.
WR Hambrecht + Co. held discussions with members of Constellation Brands' and
Ravenswood's respective senior management concerning Constellation Brands' and
Ravenswood's historical and current financial condition and operating results,
as well as the future prospects of Constellation Brands and Ravenswood as a
combined entity. WR Hambrecht + Co. also considered other information, financial
studies, analyses and investigations and financial, economic and market criteria
which WR Hambrecht + Co. deemed relevant for the preparation of its opinion.
In arriving at its opinion, WR Hambrecht + Co. assumed and relied upon the
accuracy and completeness of all the financial and other information that was
publicly available or provided to WR Hambrecht + Co. by or on behalf of
Ravenswood, and did not assume any obligation to independently verify any of
this information. WR Hambrecht + Co. assumed, with Ravenswood's consent, that:
o all material assets and liabilities (contingent or otherwise, known or
unknown) of Ravenswood were as set forth in their most recent financial
statements;
o the merger would be consummated in accordance with the terms of the
merger agreement, without any amendment thereto and without waiver by
the parties of any of the conditions to their respective obligations
thereunder; and
o in the course of consummating the merger and obtaining any regulatory
approvals, no restrictions would be imposed that could have an adverse
effect on the contemplated benefits of the merger.
In conducting its review, WR Hambrecht + Co. did not undertake or obtain an
independent evaluation or appraisal of any of the assets or liabilities,
contingent or otherwise, of Ravenswood, nor did WR Hambrecht + Co. make a
physical inspection of the properties or facilities of Ravenswood. WR Hambrecht
+ Co. relied on advice of counsel and independent accountants to Ravenswood as
to all legal and financial reporting matters with respect to Ravenswood, the
merger and the merger agreement. WR Hambrecht + Co.'s opinion relates solely to
the fairness, from a financial point of view, of the consideration to be
received by Ravenswood shareholders in the merger. In addition, WR Hambrecht +
Co.'s opinion necessarily is based upon economic, monetary and market conditions
as they exist and can be evaluated on the date of WR Hambrecht + Co.'s opinion,
and does not predict or take into account any changes which may occur, or
information which may become available, after the date of WR Hambrecht + Co.'s
opinion. Accordingly, although developments after April 9, 2000 may affect its
opinion, WR Hambrecht + Co. did not assume any obligation to update, revise or
reaffirm its opinion.
22
The following summarizes the significant financial analyses performed by WR
Hambrecht + Co. and presented to the Ravenswood board of directors on April 9,
2001 in connection with the delivery of its opinion:
Analysis of Selected Publicly Traded Comparable Companies. WR Hambrecht + Co.
reviewed and compared selected financial information, ratios and transaction
multiples for Ravenswood to corresponding financial information, ratios and
public market multiples of 14 publicly-traded companies organized into a group
of companies whose primary business is wine making, which are referred to as the
Pure Wine Companies, and a group of companies who maintain multiple lines of
alcoholic beverage businesses, one of which is wine making, which are referred
to as the Wine Distilled Spirits Conglomerates. Companies in the Pure Wine
Companies group are BRL Hardy, Ltd., Chalone Wine Group, Ltd., Robert Mondavi
Corp., Petaluma, Ltd., Scheid Vineyards Inc. and Golden State Vintners, Inc.
Companies in the Wine Distilled Spirits Conglomerates group are Allied Domecq
PLC, Brown-Forman Corp., Diageo PLC, Fortune Brands, Inc., LVMH Moet Hennessy
Louis Vuitton, S.A., Southcorp, Ltd., Constellation Brands and Vincor
International, Inc. The selected companies were chosen because they are
publicly-traded companies with operations that for purposes of analysis may be
considered similar to Ravenswood. WR Hambrecht + Co. calculated and compared
financial multiples and ratios using the closing price for the common stock of
each of the selected companies on April 6, 2001 and the most recent publicly
available information.
WR Hambrecht + Co.'s analyses of the selected companies compared the following
to the results for Ravenswood based on the consideration to be paid to
Ravenswood shareholders in connection with the merger:
o Enterprise value (market valuation of fully diluted common equity plus
outstanding debt, less cash) to revenues for the latest twelve months,
the twelve months ended December 31, 2000 and the twelve months ending
December 31, 2001; and
o Enterprise value to earnings before interest, tax, depreciation and
amortization expense (referred to as "EBITDA") for the latest twelve
months, the twelve months ended December 31, 2000 and the twelve months
ending December 31, 2001.
o Some of the comparable companies may report depreciation on a different
basis than Ravenswood. As a result, WR Hambrecht + Co. calculated a
range for Ravenswood to allow more accurate comparisons to the other
companies.
The results of these analyses are summarized as follows:
Pure Wine Companies
Multiple Range Median Mean Ravenswood
- -------- ----- ------ ---- ----------
Enterprise Value/LTM Revenue 1.2x - 4.3x 2.4x 2.6x 4.3x
Enterprise Value/CY2000 Revenue 1.2x - 4.3x 2.4x 2.6x 4.4x
Enterprise Value/CY2001 Revenue 2.0x - 3.9x 2.4x 2.8x 3.6x
Enterprise Value/LTM EBITDA 6.3x - 14.5x 12.4x 11.2x 13.0x-14.9x
23
Enterprise Value/CY2000 EBITDA 6.3x - 14.5x 12.1x 11.1x 13.3x-15.0x
Enterprise Value/CY2001 EBITDA 8.6x - 12.0x 10.7x 10.4x 10.7x
Wine Distilled Spirits Conglomerates
Multiple Range Median Mean Ravenswood
- -------- ----- ------ ---- ----------
Enterprise Value/LTM Revenue 0.8x - 3.2x 2.1x 2.0x 4.3x
Enterprise Value/CY2000 Revenue 0.8x - 2.7x 2.0x 1.9x 4.4x
Enterprise Value/CY2001 Revenue 1.2x - 3.1x 2.0x 2.1x 3.6x
Enterprise Value/LTM EBITDA 5.4x - 15.3x 11.3x 10.9x 13.0x-14.9x
Enterprise Value/CY2000 EBITDA 5.4x - 14.9x 10.1x 10.4x 13.3x-15.0x
Enterprise Value/CY2001 EBITDA 7.0x - 16.6x 10.5x 10.8x 10.7x
Analysis of Selected Comparable Transactions. WR Hambrecht + Co. reviewed and
compared selected financial information, ratios and transaction multiples for
Ravenswood implied by the consideration to be paid in connection with the
merger, with corresponding financial information, ratios and transaction
multiples of target companies in comparable domestic transactions in the premium
wine industry segment, which are referred to as US Premium Wine, and in the
non-premium wine industry segments, which are referred to as Other Wine. The
following transactions constitute the US Premium Wine group: Constellation
Brands' pending acquisition of Corus Brands, Inc., Chalone Wine Group's
acquisition of a 49.5% equity stake in Canoe Ridge Vineyard, Foster's Brewing
Group, Ltd.'s acquisition of Beringer Wine Estate Holding, Inc., Robert Mondavi
Corporation's acquisition of Arrowood Vineyards, Kendall-Jackson's acquisition
of Mantanzas Creek, Constellation Brands' acquisitions of Simi Winery and
Franciscan Estates, Brown-Forman Corporation's acquisition of Sonoma-Cutrer
Vineyards and Fortune Brands, Inc.'s acquisition of Geyser Peak Winery. The
following transactions constitute the Other Wine group: Allied Domecq PLC's
acquisition of G.H. Mumm and Perrier-Jouet, Constellation Brands' acquisition of
Turner Road Vintners from Sebastiani Vineyards, Southcorp, Ltd.'s acquisition of
Rosemount Estates, Lion Nathan, Ltd.'s acquisition of an additional 4.5%
ownership of Montana Group, Vincor International, Inc.'s acquisition of R.H.
Phillips Inc. and Constellation Brands' acquisition of 95.6% of Mathew Clark.
These transactions were chosen because they represent transactions similar to
the merger. WR Hambrecht + Co.'s analysis of the selected transactions compared
enterprise value to the latest twelve month revenues and latest twelve month
EBITDA for the selected transactions to the results for Ravenswood implied by
the consideration to be paid to Ravenswood's shareholders in connection with the
merger.
The results of these analyses are summarized as follows:
US Premium Wine
Multiple Range Median Mean Ravenswood
- -------- ----- ------ ---- ----------
Enterprise Value/LTM Revenue 1.5x - 6.5x 3.6x 3.8x 4.3x
Enterprise Value/LTM EBITDA 11.0x - 14.7x 11.8x 12.3x 13.0x-14.9x
Other Wine
Multiple Range Median Mean Ravenswood
- -------- ----- ------ ---- ----------
24
Enterprise Value/LTM Revenue 0.5x - 4.3x 2.6x 2.5x 4.3x
Enterprise Value/LTM EBITDA 8.5x - 13.8x 9.6x 10.4x 13.0x-14.9x
Discounted Cash Flow Analysis. WR Hambrecht + Co. performed a discounted cash
flow analysis on Ravenswood. WR Hambrecht + Co. estimated growth rates and
margins for the five year projected period. WR Hambrecht + Co. utilized
perpetuity growth rates ranging from 3% to 6% to apply to cash flow after the
five years. The unlevered free cash flows were then discounted to present value
using discount rates ranging from 10% to 13%. Using perpetuity growth rates of
4% and 5% and discount rates of 11% and 12%, the implied price ranged in value
from $9.91 to $13.24 per share.
In arriving at its opinion, WR Hambrecht + Co. performed a variety of financial
analyses, the material portions of which are summarized above. The preparation
of a fairness opinion is a complex process involving various determinations as
to the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not necessarily susceptible to a partial analysis or summary
description. In arriving at its opinion, WR Hambrecht + Co. did not attribute
any particular weight to any analysis or factor considered by it, but rather
made qualitative judgments as to significance and relevance of each analysis and
factor. Accordingly, WR Hambrecht + Co. believes that its analysis must be
considered as a whole and that selecting portions of its analysis, without
considering all these analyses, could create an incomplete view of the process
underlying the WR Hambrecht + Co. opinion.
In performing its analyses, WR Hambrecht + Co. relied on numerous assumptions
made by the management of Ravenswood and made numerous judgments of its own with
regard to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Ravenswood. Actual values
will depend upon several factors, including changes in interest rates, dividend
rates, market conditions, general economic conditions and other factors that
generally influence the price of securities. The analyses performed by WR
Hambrecht + Co. are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
these analyses. These analyses were prepared solely as a part of WR Hambrecht +
Co.'s analysis of the fairness, from a financial point of view, of the
consideration to be received by shareholders of Ravenswood in connection with
the merger and were provided to the Ravenswood board of directors in connection
with the delivery of WR Hambrecht + Co.'s opinion.
With regard to the comparable public company analysis and the comparable
transactions analysis summarized above, WR Hambrecht + Co. selected comparable
public companies and comparable transactions on the basis of various factors;
however, no public company or transaction utilized as a comparison is identical
to Ravenswood or the merger. Accordingly, an analysis of the foregoing is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the acquisition or
public trading value of the comparable companies and transactions to which
Ravenswood and the merger are being compared. In addition, as described above,
25
WR Hambrecht + Co.'s opinion and the information provided by WR Hambrecht + Co.
to the Ravenswood board of directors were two of many factors taken into
consideration by the Ravenswood board of directors in making its determination
to approve the merger. Consequently, the WR Hambrecht + Co. analyses described
above should not be viewed as determinative of the opinion of the Ravenswood
board of directors or the view of Ravenswood management with respect to the
value of Ravenswood.
As part of its investment banking activities, WR Hambrecht + Co. is regularly
engaged in the evaluation of businesses and their securities in connection with
mergers and acquisitions, restructurings and valuations for corporate or other
purposes. In the ordinary course of its business, WR Hambrecht + Co. may from
time to time trade the securities of Ravenswood for its own account or the
accounts of its customers and, accordingly, may at any time hold long or short
positions in these securities. WR Hambrecht + Co. currently holds shares of
Ravenswood common stock and debentures convertible into common stock
representing approximately 8.0% of Ravenswood on a fully diluted basis.
Pursuant to the terms of a letter agreement dated March 12, 2001, Ravenswood
retained WR Hambrecht + Co. as its exclusive financial advisor and to render an
opinion to the Ravenswood board of directors with respect to the merger. Under
the terms of the letter agreement, Ravenswood will pay WR Hambrecht + Co. a
fairness opinion fee of $350,000, $175,000 of which is creditable against the
transaction fee that WR Hambrecht + Co. will receive if the merger is completed.
If Ravenswood consummates a transaction or enters into a definitive agreement or
letter of intent or other evidence of commitment, which subsequently results in
a transaction being consummated, Ravenswood will pay to WR Hambrecht + Co. a
transaction fee equal to the greater of (x) one percent (1%) of the aggregate
transaction value or (y) $750,000. In addition to the transaction fee described
above, Ravenswood will pay WR Hambrecht + Co. an incentive fee equal to two
percent (2%) of the amount by which the aggregate transaction value exceeds $148
million plus three percent (3%) of the amount by which the aggregate transaction
value exceeds $175 million. Based on the aggregate transaction value plus the
amount of unpaid debt assumed at the time of the merger, the aggregate
transaction fee payable by Ravenswood will equal approximately $1.6 million plus
2% of the outstanding debt of Ravenswood at the time of the merger, subject to
the $175,000 set-off described above. Ravenswood also has agreed to reimburse WR
Hambrecht + Co. for reasonable expenses incurred by WR Hambrecht + Co. and to
indemnify WR Hambrecht + Co. and its affiliates, counsel and other professional
advisors, and their respective directors, officers, controlling persons, agents
and employees, against some liabilities and expenses, including some liabilities
under the federal securities laws, relating to or arising out of this
engagement.
Voting Agreement
As a condition to Constellation Brands entering into the merger agreement,
shareholders holding approximately 54% of the outstanding common stock of
Ravenswood, including all of the executive officers and directors of Ravenswood,
entered into voting arrangements, dated April 10, 2001, with Constellation
Brands and VVV Acquisition Corp. The voting agreement provides that each
shareholder will vote
26
or cause to be voted all of the shares of Ravenswood common stock beneficially
owned by the shareholder and for which the shareholder has the power to vote or
direct the vote of in favor of approval and adoption of the merger agreement and
in favor of any other matter necessary or appropriate for the consummation of
the transactions contemplated by the merger agreement. The voting agreement also
provides that each shareholder will vote or cause to be voted all such
Ravenswood common stock against:
o any proposal in which a third party seeks to acquire more than 25% of
the outstanding shares of common stock of Ravenswood or all or
substantially all of the assets of Ravenswood;
o any proposal or action that would reasonably be expected to result in a
breach of any covenant, agreement, representation or warranty of
Ravenswood in the merger agreement; and
o other than the merger contemplated by the merger agreement, any
extraordinary corporate transaction involving Ravenswood; a sale, lease
or transfer of a material amount of the assets of, or reorganization,
recapitalization, dissolution or liquidation of, Ravenswood; any change
in the capitalization of Ravenswood or any amendment of its articles of
incorporation or bylaws; and any other action that is intended, or
could reasonably be expected, to interfere with or adversely affect the
merger.
Each shareholder that entered into voting arrangements granted an irrevocable
proxy to Constellation Brands or its designee to vote the Ravenswood common
stock beneficially owned by the shareholder and for which the shareholder has
the power to vote or direct the vote of in accordance with the agreements set
forth above. The voting agreement terminates upon the earlier of the effective
time of the merger or the date the merger agreement is terminated.
The form of voting agreement is incorporated into this proxy statement by
reference and is attached hereto as Annex C. You are urged to read the form of
voting agreement in its entirety.
Interests of Ravenswood Directors and Executive Officers
When you consider the recommendations of our board of directors, you should be
aware that our directors and executive officers may have interests in the merger
that are different from, or in addition to, the interest of other Ravenswood
shareholders. Our board of directors was aware of these interests and considered
them when it approved the merger agreement. These interests are summarized
below.
Executive Employment Offer Letters
Upon consummation of the merger, Constellation Brands, through one of its wholly
owned subsidiaries, will extend offers of employment with the following
compensation packages to the following directors and executive officers of
Ravenswood:
27
Annual
Target Number of Stock Options
Annual Base Bonus for Constellation Brands
Name and Title Compensation Range Class A Common Stock
-------------- ------------ ----- --------------------
W. Reed Foster, Chairman, Chief Executive $100,000 45-90% base 18,300
Officer and director
Joel E. Peterson, President, Winemaker $180,000 45-90% base 20,000
and director
Justin M. Faggioli, Executive Vice $180,000 45-90% base 18,300
President, Secretary and director
Callie S. Konno, Chief Financial Officer $160,000 33-66% base 18,300
and director
The number of stock options listed above that each individual may be granted is
subject to approval by the Human Resources Committee of Constellation Brands'
board of directors. If approved, the stock options will entitle the holder to
purchase Constellation Brands Class A common stock at the market price of the
Class A common stock on the date of the grant.
In addition, each of the above mentioned individuals will receive four weeks
vacation during each calendar year and will be eligible to participate in all
Constellation Brands' existing employee benefit plans, such as health care,
disability insurance, life insurance, profit sharing, 401(k) and employee stock
purchase plans. In the event that employment is terminated without cause, the
terminated employee will be provided with a severance package equal to the
current base compensation for a period of six months.
Executive Bonus Compensation
Although the merger agreement generally prohibits Ravenswood from increasing the
compensation of or paying bonuses to its officers and other employees,
Constellation Brands has agreed to allow Ravenswood, immediately prior to the
consummation of the merger and subject to the approval of the compensation
committee of Ravenswood's board of directors, to pay a one-time bonus in the
following amounts to the following officers and directors:
Name and Title Bonus Amount
-------------- ------------
W. Reed Foster, Chairman, Chief Executive $ 67,000
Officer and director
Joel E. Peterson, President, Winemaker and $ 120,000
director
Justin M. Faggioli, Executive Vice President, $ 67,000
Secretary and director
Callie S. Konno, Chief Financial Officer and $ 67,000
director
The compensation committee of the Ravenswood board of directors has approved the
bonuses subject to completion of the merger. The bonuses are to be paid
immediately
28
prior to the effective time of the merger. In addition, at the effective time of
the merger, the annual bonuses for the fiscal year ending June 30, 2001 for each
Ravenswood employee, including the executive officers, will be fully payable to
the extent not previously paid.
Non-Competition Agreements
As a condition to Constellation Brands entering into the merger agreement, four
executive officers of Ravenswood entered into non-competition agreements with
Constellation Brands which are summarized below:
o Mr. Foster and Mr. Peterson, for a period of 36 months with respect to
all wines and for an additional 24 months with respect to Zinfandel,
and Mr. Faggioli and Ms. Konno, for a period of 36 months, agreed not
to compete with Ravenswood's production and marketing of wine in any
area or territory where Ravenswood currently produces or markets wine,
or currently plans to produce or market wine.
o Mr. Foster and Mr. Peterson, for a period of ten years, and Mr.
Faggioli and Ms. Konno, for a period of five years, agreed not to
purchase any grapes from any of the grape growers that during a
two-year period preceding such a purchase were among the ten largest
suppliers of Zinfandel grapes to Ravenswood, among the ten largest
suppliers of any other wine varietal grapes to Ravenswood, or supplied
grapes to Ravenswood that were used by Ravenswood to produce a
vineyard-designated or county-designated wine.
o Mr. Foster and Mr. Peterson, for a period of 60 months, and Mr.
Faggioli and Ms. Konno, for a period of 36 months, agreed not to
solicit Ravenswood employees to terminate their employment with
Ravenswood or Constellation Brands.
Stock Options
The merger agreement provides that Ravenswood will pay each Ravenswood
optionholder an amount equal to $29.50 less the exercise price for each
Ravenswood option held by such optionholder and the amount of applicable
withholding taxes. The timing of the payments depends upon whether the options
are vested at the effective time of the merger. The merger agreement also
provides that up to 1,000 unvested options per holder will vest immediately
prior to the effective time of the merger. See "The Merger Agreement--Stock
Options" on page __.
The following executive officers and directors have the following number of
options at the following exercise prices as of April 8, 2001:
29
Name of Option
Executive Officer or Director Price Vested Unvested
----------------------------- ----- ------ --------
W. Reed Foster, Chairman, Chief Executive
Officer and director.................... $11.55 20,000 30,000
$12.23 10,000 40,000
Joel E. Peterson, President, Winemaker and
director................................ $11.55 20,000 30,000
$12.23 10,000 40,000
Justin M. Faggioli, Executive Vice
President, Secretary and director....... $11.12 7,500 30,000
$10.50 15,000 22,500
Callie S. Konno, Chief Financial Officer
and director............................ $10.50 15,000 22,500
$11.12 7,500 30,000
James F. Wisner, director............... $11.12 1,000 4,000
$10.50 2,000 3,000
John D. Nichols, director............... $11.12 1,000 4,000
Robert E. McGill, III, director......... $11.12 1,000 4,000
$10.50 2,000 3,000
Certain Transactions
Quarry Facility Lease Agreement. The Company leases land for its Quarry facility
from Sandra D. Donnell and Bruce B. Donnell, the wife and brother-in-law,
respectively, of Mr. Faggioli, a director and current executive vice president
of Ravenswood. The lease, which is dated as of January 1, 1999, and is subject
to annual adjustments, provides for monthly payments and expires on December 31,
2032. The Company's payments to Mr. and Ms . Donnell were approximately $43,800
for calendar year 2000 and are expected to be approximately $45,600 for calendar
year 2001.
Grape Purchase Contracts. Mr. Faggioli, Mr. Faggioli's wife and his
brother-in-law, together, are 15% partners in Sangiacomo-El Novillero Vineyards.
This partnership sells a portion of its grapes to the Company. The Company's
payments to the partnership for these grapes totaled $49,609 in calendar year
1999 and will total approximately $60,000 in calendar year 2000.
Mr. Faggioli and his wife are partners in the Silverado-Carneros Vineyard. When
in production, the vineyard intends to sell a portion of its grapes to the
Company.
Broker Agreement. Mr. Peterson's wife, Madeleine Deininger, serves as one of
Ravenswood's wine brokers in the New England states. Ms. Deininger received
sales commissions of approximately $454,000 in calendar year 2000 and is
expected to receive approximately $355,000 in calendar year 2001. It is expected
that this agreement will be
30
terminated within three months after the consummation of the merger.
Transactions with W. Reed Foster. Reed Foster and Carneros Warehouse are parties
to a warehouse lease. The Company and Mr. Foster store some of the Company's
library wine at the space subject to this lease. Mr. Foster makes the lease
payments, which are $1,820 per month, and is reimbursed by the Company. Either
at the consummation of the merger or shortly afterwards, it is the intention of
the Company and Mr. Foster that the lease be assigned to the Company by Mr.
Foster.
Convertible Debentures. From August until December 1998, the following executive
officers and directors participated in the Company's private placement of an
aggregate of $1.7 million in principal amount of convertible debentures. Under
the merger agreement, the Company is required to use its reasonable best efforts
to provide for the conversion of the debentures prior to the merger. The
executive officers and directors of the Company beneficially own the debentures
described in the following table:
Name of Principal Amount Shares of Common
Executive Officer or Director of Debenture Stock upon Conversion
------------------------------------ ------------------------------- --------------------------------
W. Reed Foster, Chairman, Chief $ 62,500 5,625
Executive Officer and director
Justin M. Faggioli, Executive Vice $134,283 12,086
President, Secretary and
director
Robert E. McGill, III, director $ 62,500 5,625
John D. Nichols, director $500,000 45,000
o With respect to Mr. Foster, the shares issuable upon conversion of
debentures are issuable to a revocable trust, for which Mr. Foster serves
as trustee.
o With respect to Mr. Faggioli, $81,066 principal amount of debentures is
held jointly with Mr. Faggioli's wife and $53,217 principal amount of
debentures is held by Mr. Faggioli's wife.
o With respect to Mr. Nichols, $500,000 principal amount of debentures is
held by a family foundation, for which Mr. Nichols serves as trustee.
Directors and Officers Insurance
See "The Merger Agreement -- Indemnification" on page __ below.
Effects of the Merger
As a result of the merger, our public shareholders will not have an opportunity
to continue their equity interest in Ravenswood as an ongoing corporation and,
therefore,
31
will not share in the future earnings and potential growth of Ravenswood. Upon
consummation of the merger, our shares of common stock will no longer be traded
on The Nasdaq National Market, and the registration of our shares of common
stock under the Securities Exchange Act of 1934 will be terminated. Furthermore,
following the merger we will no longer be a reporting company under the Exchange
Act.
Federal Income Tax Consequences
This section discusses the material United States federal income tax
consequences of the merger to our shareholders whose shares of our common stock
are surrendered in the merger in exchange for the right to receive cash
consideration of $29.50 per share, without interest. The discussion below
applies only to shareholders that hold our shares as capital assets at the time
of the merger, and the discussion may not apply to shareholders that are subject
to special tax rules, such as financial institutions, insurance companies,
dealers in securities, persons that mark-to-market their securities, persons
that hold our shares as part of a "straddle", "hedge" or "synthetic security
transaction" (including a "conversion" transaction), persons with a "functional
currency" other than the U.S. dollar, retirement plans and tax-exempt
organizations, shareholders who acquired our shares pursuant to the exercise of
stock options, pursuant to participation in an employee stock purchase plan or
otherwise as compensation or shareholders that are nonresident alien
individuals, foreign corporations, foreign partnerships, foreign trusts or
foreign estates. The discussion below is based upon federal income tax laws as
now in effect and interpreted and does not take into account possible changes in
these tax laws or interpretations, any of which may be applied retroactively.
The discussion does not include any description of the tax laws of any state,
local or foreign government that may be applicable to our shareholders.
This section does not discuss all aspects of federal income taxation that may be
relevant to a specific shareholder in light of such shareholder's particular
circumstances and income tax situation. Each shareholder should consult his, her
or its own tax advisor as to the specific tax consequences of the merger,
including the application and effect of federal, state, local, foreign and other
tax laws or changes to those laws.
For federal income tax purposes, our shareholders generally will recognize
capital gain or capital loss equal to the difference between the cash received
by the shareholder pursuant to the merger and the shareholder's adjusted tax
basis in the shares surrendered pursuant to the merger. If, at the time of the
merger, a noncorporate shareholder's holding period for our shares is more than
one year, any gain recognized generally will be subject to federal income tax at
a maximum rate of 20%.
Consideration received by our shareholders in the merger may be subject to
backup withholding at a 31% rate. Backup withholding generally will apply only
if the shareholder fails to furnish a correct social security number or other
taxpayer identification number or otherwise fails to comply with applicable
backup
32
withholding rules and certification requirements. Corporations generally are
exempt from backup withholding. Any amounts withheld under the backup
withholding rules will be allowed as a credit against the shareholder's federal
income tax liability and may entitle the shareholder to a refund, provided the
shareholder furnishes specified required information to the Internal Revenue
Service.
Dissenters' Rights
Ravenswood's shareholders may exercise dissenters' rights under Chapter 13 of
the California Corporations Code in connection with the merger. Any shares of
Ravenswood common stock as to which dissenters' rights are properly exercised
may, in circumstances specified in Chapter 13, be converted into the right to
receive such consideration as may be determined to be due with respect to such
dissenting shares pursuant to the laws of the State of California. The following
summary of the provisions of Chapter 13 is not intended to be a complete
statement of such provisions and is qualified in its entirety by reference to
the full text of Chapter 13, a copy of which is attached hereto as Annex D.
The Corporations Code states that, generally, there are no dissenters' rights in
connection with securities that are listed on The Nasdaq National Market System.
Ravenswood's shares of common stock are listed on The Nasdaq National Market
System and therefore, Ravenswood's common stock is not, generally, subject to
dissenters' rights. However, the Corporations Code also provides that
dissenters' rights will exist even for securities listed on The Nasdaq National
Market in the event that demands for payment, as described below, are filed with
respect to five percent or more of the outstanding shares of that class.
If the principal terms of the merger agreement are approved by the required vote
of the shareholders and the merger is not abandoned or terminated, any holder of
Ravenswood common stock outstanding as of the record date may, by complying with
the provisions of Chapter 13 of the Corporations Code, demand that Ravenswood
purchase for cash at fair market value the shares owned by such holder which
were voted against the merger. The fair market value will be determined as of
the day before the first announcement of the terms of the proposed merger,
excluding any appreciation or depreciation in consequence of the proposed
merger. However, Ravenswood will be under no obligation to purchase such shares
unless it receives valid dissenting demands with respect to five percent or more
of the shares of outstanding common stock.
The dissenting shareholder wishing to be eligible to have Ravenswood purchase
his or her shares of Ravenswood common stock must:
o prior to the date of this special meeting, make a written demand upon
Ravenswood or its transfer agent to require Ravenswood to purchase such
dissenting shareholder's shares, setting forth in his or her demand his
or her name and address, and the number and class of shares which he or
she demands that Ravenswood purchase and a statement as to what he or
she believes the fair
33
market value of such shares to have been, based upon the standard set
forth above;
o vote against the merger with respect to any of the shares he or she
wishes to be dissenting shares; and
o submit for endorsement, within 30 days after the date on which notice
of the approval of merger was mailed to the shareholder, at the
principal office of Ravenswood or at the office of the transfer agent
for Ravenswood common stock, the certificates representing any shares
in regard to which demand for purchase is being made, with a statement
regarding which of the shares are dissenting shares.
Failure to execute a proxy with respect to approval of the merger will not be
sufficient to constitute the demand described above. In addition, the dissenting
shareholder may not withdraw his or her demand for purchase of dissenting shares
without Ravenswood's consent.
If Ravenswood has received demands with respect to five percent or more of the
shares of outstanding common stock, within 10 days after the date of the
approval of the merger, Ravenswood will mail to each shareholder who has made
such a demand and voted against the merger a notice of approval of the merger
together with a statement of the price determined by Ravenswood to represent the
fair market value of dissenting shares, and a brief description of the procedure
to be followed if the shareholder desires to exercise dissenters' rights under
the Corporations Code. The statement of the price of the shares will constitute
an offer by Ravenswood to purchase at the price stated therein any dissenting
shares.
If Ravenswood and the dissenting shareholder agree that the shares are
"dissenting shares" and agree upon the price of the shares, the dissenting
shareholder will be entitled to the agreed price plus interest at the legal rate
on judgments from the date of the agreement. Subject to the provisions of the
Corporations Code, payment of the fair market value of the dissenting shares
will be made within 30 days after the agreement or after satisfaction of any
statutory or contractual condition to the merger, whichever is later, and upon
surrender of the certificates therefor.
If Ravenswood denies that the shares are dissenting shares or if Ravenswood and
the dissenting shareholder fail to agree upon the fair market value of the
shares, then the dissenting shareholder, within six months after the date on
which notice of approval of the merger is mailed to such shareholder, and not
thereafter, may file a complaint in superior court, requesting the court to
determine whether the shares are dissenting shares, or the fair market value of
the dissenting shares, or both, or may intervene in any pending action for the
appraisal of any shares of Ravenswood common stock. If a complaint is not filed
within six months, the shares will lose their status as dissenting shares. If
the eligibility of the shares is at issue, the court will first decide this
issue. If the fair market value of the shares is in dispute, the court will
determine, or will appoint one or more impartial appraisers to assist in the
determination of, the fair market value. The costs of
34
the action will be assessed or apportioned as the court considers equitable, but
if the appraisal exceeds the price offered to the shareholder, Ravenswood will
be required to pay such costs (including, in the discretion of the court,
attorneys' fees, expert witnesses' fees and interest if the value awarded by the
court for the shares is more than 125% of the price offered by Ravenswood to the
shareholder).
Any demands, notices, certificates or other documents required to be delivered
to Ravenswood described herein may be sent by mail to:
Investor Relations
Ravenswood Winery, Inc.
26200 Arnold Drive
Sonoma, California 95476
Failure to comply fully with these procedures will cause the shareholder to lose
his or her dissenters' rights.
In view of the complexity of these provisions of California law, shareholders
who are considering dissenting from the merger should consult their legal
advisors. This discussion is qualified in its entirety by Chapter 13, which is
attached as Annex D and incorporated by reference into this proxy statement.
Approvals
Constellation Brands and Ravenswood have filed the required notification and
report forms with the Antitrust Division of the Justice Department or the
Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and have requested early termination of the required 30-day waiting
period. Unless the waiting period is terminated earlier, or we or Constellation
Brands receive a request for additional information or documentary material
prior to that time, the waiting period will expire on 11:59 p.m. on May 18,
2001. If within the 30-calendar-day waiting period either the Federal Trade
Commission or the Antitrust Division requests additional information or
documentary material from Constellation Brands or us, the waiting period will be
extended for an additional 30 calendar days (or the next regular business day if
such additional 30 days would otherwise expire on a Saturday, Sunday, or legal
public holiday) following the date of our substantial compliance with the
request, unless the waiting period is sooner terminated by the Federal Trade
Commission or the Antitrust Division.
The State of California Department of Alcoholic Beverage Control and Board of
Equalization and the United States Bureau of Alcohol, Tobacco and Firearms
regulate the business and operations of each of Ravenswood and Constellation
Brands. Although Ravenswood and Constellation Brands will be required to make
filings with both the state and federal regulators, under the provisions of the
merger agreement, the approval of these regulators is not a condition to the
consummation of the merger.
35
We are not aware of any other significant government or regulatory approvals
that need to be obtained, or waiting periods with which we need to comply, to
complete the merger. If we discover that other approvals or waiting periods are
required, we will seek to obtain or comply with them. If any approval or action
is needed, however, we may not be able to obtain it. Even if we could obtain the
approval, conditions may be placed on it that could cause us or Constellation
Brands to abandon the merger even if we receive shareholder approval.
Source of Funds
Constellation Brands' obligations to complete the merger are not subject to any
financing condition. Constellation Brands has represented in the merger
agreement that it will have, as and when required, the funds available as are
necessary to consummate the contemplated transactions. Constellation Brands has
informed us that it has sufficient borrowing availability under its existing
bank credit facilities to meet its closing obligations, including approximately
$148 million to acquire Ravenswood's outstanding common stock, debentures and
rights under our employee stock purchase plan; and, to the extent necessary, to
assist Ravenswood with its cash needs if additional cash is needed at the time
of the merger to fund Ravenswood's obligations with respect to vested stock
options and certain debt and other obligations arising in connection with the
merger that are not repaid from Ravenswood's cash on hand in connection with the
merger. The amount of this debt and these obligations in excess of cash on hand
at the time of the merger is not expected by Constellation Brands to be
significant, and is currently being estimated by Constellation Brands as between
$0 and $3 million, however, there can be no assurance that the amount of debt
and obligations will not exceed this range.
The Merger Agreement
This is a summary of the material provisions of the merger agreement, a copy of
which is attached as Annex A and incorporated by reference into this proxy
statement. You should refer to the full text of the merger agreement for details
of the merger and the terms and conditions of the merger agreement.
The Merger
When the merger occurs, VVV Acquisition Corp., an indirect, wholly-owned
subsidiary of Constellation Brands, will be merged with and into Ravenswood.
Ravenswood will survive the merger and will be indirectly wholly owned by
Constellation Brands.
Upon consummation of the merger, each outstanding share of our common stock
(except for any dissenting shares and shares held directly or indirectly by
Constellation Brands or VVV Acquisition Corp.) will be converted into the right
to receive an amount equal to $29.50 in cash, without interest. Each shareholder
(other than Constellation Brands and VVV Acquisition Corp.) will no longer have
any rights with respect to the shares of the Company's common stock, except for
the right to receive the merger consideration and any declared and unpaid
dividends with respect to such common stock.
Effective Time of the Merger
On the closing date of the merger, the parties will file an agreement of merger
36
with the Secretary of State of the State of California and a certificate of
merger with the Secretary of State of the State of Delaware. The merger will be
effective upon the filing of the agreement of merger with the Secretary of State
of the State of California and the certificate of merger with the Secretary of
State of the State of Delaware, or on such later date as may be specified in
filings with the secretaries of state.
Payment for Shares
Prior to the effective time of the merger, Constellation Brands is required to
designate a bank or trust company to act as paying agent for the purpose of
exchanging shares of Ravenswood common stock for the cash payable as a result of
the merger. Constellation Brands will, from time to time, make available, or
cause to be made available, to the paying agent funds in such amounts and at
such times necessary for the payments to be made to Ravenswood shareholders
Promptly after the effectiveness of the merger, the paying agent will mail to
each holder of record of the Company's common stock a letter of transmittal and
instructions for the surrender of share certificates to the paying agent for the
merger consideration. After surrendering a share certificate to the paying agent
for cancellation, together with a properly completed letter of transmittal and
all other documents and materials required by the paying agent, the holder of
such share certificate will be entitled to receive an amount equal to $29.50 per
share with respect to the shares represented by such certificate. Each
surrendered share will be canceled. No interest will be paid or accrued on the
merger consideration.
In the event of a transfer of ownership of any shares of common stock not
registered in the transfer records of the Company, the merger consideration will
be paid to the transferee if the certificate representing such share is
presented to the paying agent, accompanied by all documents required to evidence
and effect such transfer and to evidence that all applicable stock transfer
taxes have been paid.
All cash paid upon the surrender of share certificates in accordance with the
merger agreement will be deemed to have been paid in full satisfaction of all
rights pertaining to the shares, other than any rights pertaining to any
declared and unpaid dividends on the Company's common stock.
If your share certificate has been lost, stolen or destroyed, you will be
entitled to obtain payment only by signing an affidavit and, if required by
Constellation Brands, posting a bond in an amount sufficient to protect
Constellation Brands against claims related to your share certificate.
Stock Options
The merger agreement provides that Ravenswood will pay each Ravenswood
optionholder an amount equal to $29.50 less the exercise price for each
Ravenswood option held by such optionholder and the amount of applicable
withholding taxes.
37
Therefore, in accordance with the terms of the Ravenswood Winery, Inc. 1999
Incentive Plan, the following will occur:
o immediately prior to the effective time of the merger, for each
optionholder, unvested options to purchase up to 1,000 shares of common
stock will accelerate and fully vest;
o immediately prior to the effective time of the merger, each outstanding
option, whether vested or unvested will be cancelled; and
o payments for cancelled vested options will be paid as soon as
practicable after the merger and payments for cancelled unvested
options will be paid as soon as practicable after the date upon which
the unvested options would have otherwise vested.
Stock Purchase Plan
Each purchase right under the terms of the Ravenswood Employee Stock Purchase
Plan outstanding immediately prior to the merger will accelerate and fully vest
and automatically be fully exercised. The Company will terminate the Employee
Stock Purchase Plan at the effective time of the merger. Participants in the
Employee Stock Purchase Plan who have their rights automatically exercised
immediately prior to the merger, will be shareholders of the Company as of the
effective time of the merger. Accordingly, the shares purchased under the
Employee Stock Purchase Plan will be treated in the same manner as other shares
of common stock outstanding as of the effective time of the merger, as described
above under "--Payment for Shares."
Debentures
The Company has outstanding convertible debentures in the approximate principal
amount of $1.6 million. The debentures are convertible into common stock at a
rate of 900 shares of common stock per $10,000 of principal amount. Prior to the
effective time of the merger the Company is required to use its reasonable best
efforts to provide for the conversion of the debentures prior to the merger. The
shares issued upon such conversion will be treated in the same manner as other
shares of common stock outstanding as of the effective time of the merger, as
described above under "--Payment for Shares."
Any convertible debenture remaining outstanding as of the effective time of the
merger will remain an obligation of the Company. However, as of the effective
time, any outstanding convertible debenture will cease to be convertible into
shares of common stock or any other capital stock of the Company. Instead, each
convertible debenture will be convertible into the right to receive cash in an
amount equal to the product of $29.50 multiplied by the number of shares of
common stock into which the convertible debenture would have otherwise been
convertible in accordance with its terms.
38
Representations and Warranties
The merger agreement contains representations and warranties by us relating to:
o the Company's corporate organization and similar corporate matters;
o the capital structure of the Company;
o the authorization, execution, delivery, performance and enforceability
of the merger agreement and related matters;
o compliance with the Company's articles and bylaws and all applicable
law, as well as compliance with the Company's contracts with third
parties;
o the obtaining of the required governmental approvals and consents;
o litigation involving the Company;
o finders' and brokers' fees payable in connection with the merger;
o the accuracy of the Company's reports and financial statements filed
with the Securities and Exchange Commission;
o the absence of specified changes to the Company since December 31,
2000;
o the Company's tax returns and other tax matters;
o the Company's employee benefit plans and other employment matters;
o the Company's contracts;
o compliance with applicable law and regulations;
o real property owned or leased by us;
o the intellectual property necessary for the Company's operations, as
well as the ownership status of such intellectual property;
o environmental matters affecting us, as well as the Company's compliance
with applicable environmental laws;
o the title to and condition of the Company's personal property;
o product recalls;
39
o the condition of the Company's grape vines;
o labor matters affecting us;
o the opinion of the Company's financial advisor;
o the application of state takeover laws;
o insurance policies maintained by the Company;
o relations with the Company's five largest customers;
o relations with the Company's five largest suppliers; and
o transactions with related parties.
The merger agreement also contains representations and warranties by
Constellation Brands and VVV Acquisition Corp. relating to:
o corporate organization and similar corporate matters;
o the authorization, execution, delivery, performance and enforceability
of the merger agreement and related matters;
o compliance with their respective articles and bylaws and all applicable
laws, as well as compliance with their contracts with third parties;
o the obtaining of the required governmental approvals and consents;
o litigation involving either party;
o the availability of adequate funds to consummate the transaction, as
and when contemplated by the merger agreement; and
o finders' and brokers' fees payable in connection with the merger.
Covenants
The Company has agreed that during the period from the date of the merger
agreement until the closing of the merger, the Company, or the Company's board
of directors, will:
o conduct the Company's business in the usual and ordinary course of
business, consistent with past practices;
40
o not, without the prior consent of Constellation Brands, which consent
will not be unreasonably withheld or delayed, amend the Company's
articles or in any way alter the capital structure of the Company;
o not, without the prior consent of Constellation Brands, which consent
will not be unreasonably withheld or delayed, transfer, purchase, or
encumber any Company assets, enter into any material transaction
outside the ordinary course of business, or modify any existing
material contract except in the ordinary course of business;
o use the Company's best efforts to preserve intact the organization of
the business, retain key employees, and preserve existing business
relationships;
o use the Company's best efforts to prevent any representation or
warranty from becoming untrue or incorrect in any material respect;
o not, without the prior consent of Constellation Brands, which consent
will not be unreasonably withheld or delayed, and with exceptions set
forth in the merger agreement, enter into, adopt or amend any Company
employee plans to materially increase benefits;
o not, without the prior consent of Constellation Brands, which consent
will not be unreasonably withheld or delayed, grant or become obligated
to grant any increase in the compensation or fringe benefits of
directors, officers or employees or any increase in the compensation to
be paid to any officer, except for increases in compensation in the
ordinary course of business consistent with past practice;
o not, without the prior consent of Constellation Brands, which consent
will not be unreasonably withheld or delayed, make any material change
in the Company's employee benefit plans or enter into any employment or
similar agreement or arrangement with any employee; and
o not, without the prior consent of Constellation Brands, which consent
will not be unreasonably withheld or delayed, enter into or renew any
contract, agreement, commitment or arrangement providing for the
payment to any director, officer or employee of compensation or
benefits contingent, or the terms of which are materially altered in
favor of such individual, upon the occurrence of any of the
transactions contemplated by the merger agreement.
Constellation Brands and VVV Acquisition Corp. have agreed that during the
period from the date of the merger agreement until the closing of the merger,
they will not engage in any action or enter into any transaction or permit any
action to be taken or transaction to be entered into that could reasonably be
expected to
41
delay the consummation of, or otherwise adversely affect, any of the
transactions contemplated by this Agreement.
Indemnification
The merger agreement provides that Constellation Brands will ensure that each
current and former officer and director of the Company will continue to be
indemnified to the extent permitted by the Company's current articles of
incorporation and bylaws for a period of six years after the effective time of
the merger for his or her acts or omissions occurring prior to the effective
time of the merger. In addition, the merger agreement requires Constellation
Brands to maintain the directors and officers insurance policies of the Company
(or equivalent policies) for at least six years after the consummation of the
merger. Constellation Brands, however, will not be required to pay premiums
which on an annual basis exceed 200% of the current annual premium of such
policies.
Termination
The merger agreement may be terminated, whether before or after receiving
shareholder approval, and the merger may be abandoned by mutual consent or as
follows:
o by either party, if the merger is not consummated by September 28,
2001;
o by either party, if a court or governmental agency if either issues a
final, nonappealable order or any other action that prohibits
consummation of the merger;
o by the Company, if the board of directors in its good faith judgment
decides to accept an unsolicited superior offer by a third party,
assuming proper notice is given to Constellation Brands and the Company
engages in good faith negotiations with Constellation Brands before
accepting the third party offer;
o by either party, if approval of the Company's shareholders is not
obtained at the Company's shareholder's meeting; or
o by either party, if the other party breaches or fails to perform, as
applicable, any of its representations and warranties or covenants in a
manner that would breach a condition to the merger, and such breach or
failure has gone uncured for 30 days following notice.
In addition, Constellation Brands may terminate the merger agreement if the
Ravenswood board of directors has withdrawn or amended, in any manner adverse to
Constellation Brands, its recommendation and approval of the merger agreement.
No Solicitation of Transactions
We have agreed to use our reasonable best efforts to cause our
directors, officers,
42
employees, agents and representatives to immediately cease any discussions or
negotiations conducted prior to the date of the merger agreement with any
parties other than Constellation Brands with respect to any transaction
involving a merger, consolidation or similar transaction in which a party other
than Constellation Brands would acquire 25% or more of the common stock of the
Company or substantially all of the Company's assets. Except as provided in the
merger agreement, we have agreed not to, and to not authorize our directors,
officers, employees, agents and other representatives to: (1) initiate, solicit
or knowingly encourage any inquiries, or the making of an proposal relating to,
or enter into discussion or negotiate with any person for the purpose of
facilitating, any such alternative transaction; (2) agree to, or recommend, any
such alternative transaction; or (3) enter into any agreement, arrangement or
understanding requiring us to abandon or fail to consummate the merger.
Ravenswood and its officers, directors, employees, agents and other
representatives, though, may refer a third party to the non-solicitation
provisions of the merger agreement, and may furnish information, enter into a
confidentiality agreement with, or enter into discussions or negotiations with,
a third party in connection an unsolicited bona fide proposal relating to an
alternative transaction, if our board of directors, after consultation with its
financial advisors, believes in good faith that such proposal could lead to an
alternative transaction reasonably likely to be more favorable to Ravenswood's
shareholders than the merger and prior to furnishing information or entering
into discussions or negotiations Ravenswood provides written notice to
Constellation Brands that it is furnishing such information or entering into
such discussions or negotiations.
We have also agreed that our board of directors will not withdraw or modify in a
manner adverse to Constellation Brands the recommendation of the board of
directors with respect to the merger, or approve or recommend any alternative
transaction. However, if the board of directors determines, in its good faith
judgment, taking into account the advice of its financial advisor and legal
counsel, that Ravenswood has received a bona fide unsolicited proposal for an
alternative transaction that is more favorable to the shareholders of Ravenswood
than the merger, or, after consultation with its outside counsel, that due to
other circumstances its fiduciary obligations require it, the board of directors
may withdraw or modify its recommendation, or approve or recommend the
alternative transaction, provided that Ravenswood provides Constellation Brands
with prior notice of such action.
Also, in response to a bona fide unsolicited proposal with respect to a proposal
for an alternative transaction, if our board of directors determines, in its
good faith judgment, taking into account the advice of its financial advisor and
outside counsel, that the proposal is for a transaction that would be or is
reasonably likely to be more favorable to the shareholders of Ravenswood, our
board of directors may terminate the merger agreement; provided that Ravenswood
provides Constellation Brands with notice of such action at least two business
days prior to taking such action and, if requested, engages in good faith
negotiations with Constellation Brands.
43
Termination Fee Payable to Constellation Brands
We have agreed to pay Constellation Brands an $8 million termination fee upon
the occurrence of both of the following events:
o the termination of the merger agreement by Constellation Brands or the
Company (1) if the Company does not receive shareholder approval of the
merger agreement or the Company's board of directors changes their
recommendation of the merger agreement in a manner adverse to
Constellation Brands; provided, that a transaction involving a merger,
consolidation or similar transaction in which a party other than
Constellation Brands would acquire 25% or more of the common stock of
the Company or substantially all of the assets of the Company was
publicly announced prior to the time the Company seeks the approval and
adoption of the merger agreement by its shareholders and such proposed
alternative transaction has not been withdrawn by the third party or
otherwise rejected by the Company's board of directors; or (2) either
the Company's board of directors has recommended an alternative
transaction to the Company's shareholders or the Company terminates the
merger agreement after the receipt of a proposal for a transaction that
would be more favorable to the shareholders of the Company, assuming
the granting to Constellation Brands of proper notice and the
opportunity for good faith negotiations; and
o the proposed alternative transaction is consummated within eighteen
months of the date of such termination.
Employee Benefit Matters
With regard to employee benefit matters Constellation Brands has agreed:
o that all employees, other than the Company's current directors, who
continue employment with Constellation Brands, the Company or any
subsidiary thereof after the merger will be employed on wage and salary
terms and conditions that, in the aggregate, are substantially as
favorable as those wage and salary terms and conditions provided by the
Company at the time of the merger;
o to establish and maintain until February 28, 2002, for all employees of
the Company, other than the current directors, compensation and benefit
plans and arrangements that in the aggregate are no less favorable than
those currently provided by the Company, other than stock options or
other stock-based compensation;
o to treat from March 1, 2002, until February 28, 2004, all employees,
other than the current directors, no less favorably in the aggregate
than employees of Constellation Brands who are in comparable positions
and at comparable
44
locations;
o immediately prior to the effective time of the merger, the annual bonus
for the fiscal year ending June 30, 2001, will accrue and be payable to
each employee of the Company.
Constellation Brands will honor, or cause the surviving corporation in the
merger to honor, in accordance with their respective terms, all of the Company's
employee benefit obligations to current and former employees accrued as of the
effective time of the merger.
Solely for purposes of eligibility and vesting under the employee benefit plans
of Constellation Brands, any employees of the Company after the completion of
the merger will be credited with their years of service with the Company before
the completion of the merger, to the same extent as such employees were
entitled, before the completion of the merger, to credit for such service under
any similar benefit plan of the Company.
Nothing in the merger agreement is intended to change the existing at will
employment status of any Company employees.
Conditions to the Merger
The obligations of Constellation Brands and the Company to complete the merger
are subject to the satisfaction or waiver of various conditions, including the
following:
o the absence of any law, order or injunction preventing the completion
of the merger;
o the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976; and
o the required approval of the Company's shareholders.
Each party's obligation to complete the merger is further subject to the
satisfaction or waiver of the following additional conditions:
o the representations and warranties of the other party will be true and
correct as of the effective time of the merger, except for changes
contemplated by the merger agreement, those representations and
warranties which address matters as of a particular date other than the
effective time, and for failures (without giving effect to the
materiality and knowledge qualifiers in the particular representations
and warranties) that would not have a material adverse effect, as
defined below.
o performance by the other party or compliance with in all material
respects of all agreements and covenants required by the merger
agreement to be
45
performed or complied with prior to the consummation of the merger.
In addition, it is a condition to Constellation Brands' obligation to complete
the merger that there will not have occurred a material adverse effect on the
Company.
For the purposes of the merger agreement material adverse effect means a
material adverse effect (or combination of effects materially adverse in the
aggregate) on the financial condition, business or results of operations of the
Company, taken as a whole. However, a material adverse effect does not include
changes in the market price or trading volume of the Company's securities or any
effect resulting from any change in law, generally accepted accounting
principles, in general economic or business conditions or in the wine industry
generally (which changes do not disproportionately affect the Company), or due
to the public announcement of the merger agreement or the transactions
contemplated by the merger agreement, or the consummation of such transactions.
Expenses
The merger agreement provides that all fees and expenses incurred in connection
with the merger will be paid by the party incurring such fees or expenses if the
merger is not consummated, unless the termination fee payable to Constellation
Brands discussed above is triggered. If the merger is consummated the surviving
corporation will pay all fees and expenses.
Amendment and Waiver
The merger agreement may be amended only by written agreement of the parties.
After the Company's shareholders approve the principal terms of the merger
agreement, however, no amendment may be made without the approval of the
Company's shareholders to the extent such approval is required by law. Any party
may waive its rights under the merger agreement only in writing, signed by the
party to be bound. Any such amendment or waiver may be made at any time prior to
the completion of the merger.
Ownership of Ravenswood
5% Shareholders
The following table sets forth information regarding beneficial ownership of
Ravenswood's equity at the close of business on April 8, 2001, as to each person
known by Ravenswood to beneficially own, within the meaning of the Securities
Exchange Act of 1934, 5% or more of the outstanding shares of our common stock.
This information is based on our records and on reports filed by the following
persons with the Securities and Exchange Commission.
46
Number of Shares Percentage of
of Common Stock Common Stock
Name Beneficially Owned Outstanding
---- ------------------ -----------
W. Reed Foster......................... 461,681 9.4%
Joel E. Peterson....................... 1,334,870 27.2%
WR Hambrecht + Co., LLC................ 388,500 8.0%
Austin W. Marxe and David Greenhouse... 394,353 8.1%
The disclosure regarding the number of shares of common stock beneficially owned
in the preceding table:
o with respect to Mr. Foster, includes 30,000 shares issuable upon the
exercise of outstanding vested options, 283,500 shares held in a limited
liability company, for which Mr. Foster is a managing member, 142,556
shares held in a revocable trust, for which Mr. Foster serves as trustee,
and 5,625 shares issuable upon the conversion of outstanding convertible
debentures (all of which are issuable to the aforementioned trust) and does
not include 137,000 shares held by an irrevocable trust managed by an
independent trustee and established for the benefit of Mr. Foster's
children or shares issuable upon the exercise of unvested options to
purchase 70,000 shares of common stock.
o with respect to Mr. Peterson, includes 30,000 shares issuable upon the
exercise of outstanding vested options but does not include 151,200 shares
held by an irrevocable trust managed by two independent trustees and
established for the benefit of Mr. Peterson's children or shares issuable
upon the exercise of unvested options to purchase 70,000 shares of common
stock.
o with respect to WR Hambrecht + Co., includes 382,875 shares of common stock
and 5,625 shares issuable upon the conversion of outstanding convertible
debentures.
o Austin W. Marxe and David Greenhouse beneficially own 394,353 shares of
Ravenswood common stock, 285,900 of which are held indirectly through
Special Situations Fund III, L.P. and 108,453 are held indirectly through
Special Situations Cayman Fund, L.P.
Directors and Executive Officers
The following table sets forth the number of shares of our common stock
beneficially owned, within the meaning of the Securities Exchange Act of 1934,
by all directors and executive officers of Ravenswood as of April 8, 2001.
Unless otherwise indicated in the footnotes below, each person had sole voting
and investment power with respect to such shares (other than any unissued
shares, the ownership of which has been imputed to such owner).
47
Number of Shares Percentage of
of Common Stock Common Stock
Name Beneficially Owned Outstanding
---- ------------------ -----------
W. Reed Foster.......................... 461,681 9.4%
Joel E. Peterson........................ 1,334,870 27.2%
Justin M. Faggioli...................... 169,561 3.4%
Callie S. Konno......................... 82,350 1.7%
James F. Wisner......................... 142,500 2.9%
Robert E. McGill, III................... 28,750 *
John D. Nichols......................... 171,265 3.5%
All Directors and Executive Officers as a
Group............................... 2,390,977 47.3%
<FN>
*owns less than 1%
</FN>
The disclosure regarding the number of shares of common stock beneficially owned
in the preceding table:
o with respect to Mr. Foster, includes 30,000 shares issuable upon the
exercise of outstanding vested options, 283,500 shares held in a limited
liability company, for which Mr. Foster is a managing member, 142,556
shares held in a revocable trust, for which Mr. Foster serves as trustee,
and 5,625 shares issuable upon the conversion of outstanding convertible
debentures (all of which are issuable to the aforementioned trust) and does
not include 137,000 shares held by an irrevocable trust managed by an
independent trustee and established for the benefit of Mr. Foster's
children or shares issuable upon the exercise of unvested options to
purchase 70,000 shares of common stock.
o with respect to Mr. Peterson, includes 30,000 shares issuable upon the
exercise of outstanding vested options but does not include 151,200 shares
held by an irrevocable trust managed by two independent trustees and
established for the benefit of Mr. Peterson's children or shares issuable
upon the exercise of unvested options to purchase 70,000 shares of common
stock.
o with respect to Mr. Faggioli, includes 22,500 shares issuable upon the
exercise of outstanding vested options and 12,086 shares issuable upon the
conversion of outstanding convertible debentures (4,790 of which are
issuable to Mr. Faggioli's spouse), 2,000 shares held by Mr. Faggioli in an
individual retirement account, 2,000 shares held by Mr. Faggioli's spouse
and 6,000 shares held in trusts for Mr. Faggioli's children, for which Mr.
Faggioli serves as trustee, but does not include unvested options to
purchase 52,500 shares of Ravenswood common stock nor 2,000 shares held in
an IRA brokerage account.
o with respect to Ms. Konno, includes 22,500 shares issuable upon the
exercise of outstanding vested options, but does not include unvested
options to purchase 52,500 shares of Ravenswood common stock.
48
o with respect to Mr. Wisner, includes 3,000 shares issuable upon the
exercise of outstanding vested options and 31,500 shares held by Mr.
Wisner's spouse, but does not include unvested options to purchase 7,000
shares of Ravenswood common stock.
o with respect to Mr. McGill, includes 3,000 shares issuable upon the
exercise of outstanding vested options and 5,625 shares issuable upon the
conversion of outstanding convertible debentures and 20,125 shares held in
a trust established for the benefit of Mr. McGill, but does not include
unvested options to purchase 7,000 shares of Ravenswood common stock.
o with respect to Mr. Nichols, includes 1,000 shares issuable upon the
exercise of outstanding vested options, 45,000 shares issuable upon the
conversion of outstanding convertible debentures and 125,265 shares held by
a family foundation, for which Mr. Nichols serves as trustee, but does not
include unvested options to purchase 4,000 shares of Ravenswood common
stock.
o with respect to our directors and executive officers as a group, includes
68,336 shares issuable upon the conversion of immediately convertible
debentures and 112,000 shares issuable upon the exercise of vested options.
Price Range of Common Stock and Dividends
Our common stock is listed on The Nasdaq National Market under the symbol
"RVWD". The following table sets forth, for the periods indicated, the high and
low sales prices per share of our common stock as reported on The Nasdaq
National Market. For current price information, shareholders are urged to
consult publicly available sources.
CALENDAR PERIOD HIGH LOW
--------------- ---- ---
1999
Second Quarter (from April 9 (date of IPO))..... 11.12 10.25
Third Quarter................................... 10.87 10.37
Fourth Quarter.................................. 11.00 10.44
2000
First Quarter................................... 12.00 10.50
Second Quarter.................................. 14.25 10.37
Third Quarter................................... 15.37 12.75
Fourth Quarter (through December 29, 2000)...... 14.87 11.87
2001
First Quarter................................... 16.98 11.37
Second Quarter (through ______, 2001)...........
On _______________ , 2001, the most recent practicable date prior to the
printing of this proxy statement, the closing price of our common stock as
reported on The Nasdaq National Market was $__ . As of the record date, there
were approximately holders of record of our common stock. The Company has never
paid out dividends.
49
Cautionary Statement Regarding Forward-Looking Statements
This proxy statement contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, regarding future events and
Ravenswood's plans and expectations that involve risks and uncertainties. When
used in this proxy statement, the words "estimate," "project," "intend,"
"expect" and "anticipate" and similar expressions are intended to identify such
forward-looking statements. Such statements are subject to risks and
uncertainties, including those discussed below, that could cause actual results
to differ materially from those projected. Factors that may cause actual results
to vary include, but are not limited to: (1) future and past weather and general
farming conditions affecting the annual grape harvest; (2) variations in
consumer taste and preference: (3) changes in the wine industry regulatory
environment; and (4) changes in the market value of Ravenswood's common stock.
Other factors that may cause or contribute to such differences include, but are
not limited to, those discussed under "Risk Factors," in our Annual Report on
Form 10-KSB for the fiscal year ended June 30, 2000 and in our Quarterly Reports
on Forms 10-QSB for the fiscal quarters ended September 30, 2000 and December
31, 2000 as well as those discussed elsewhere in this proxy statement. In light
of the important factors that can materially affect results, including those set
forth in this paragraph and below, the inclusion of forward-looking information
herein should not be regarded as a representation by Ravenswood or any other
person that the objectives or plans for Ravenswood will be achieved. The reader
is therefore cautioned not to place undue reliance on the forward-looking
statements contained herein, which speak only as of the date hereof. Ravenswood
undertakes no obligation to publicly release updates or revisions to these
statements.
Additional Information
Solicitation of Proxies/Costs
Ravenswood is making this proxy solicitation. We will bear the cost of the
solicitation of proxies. We have retained Mellon Investor Services LLC to
coordinate the solicitation of proxies. Mellon Investor Services LLC will
solicit proxies by personal interview, mail, telephone or telegram and will
request brokerage houses and other custodians, nominees and fiduciaries to
forward solicitation material to the beneficial owners of the common stock held
of record by such persons. Ravenswood will pay Mellon Investor Services LLC a
customary fee covering its services, expected to be approximately $6,500, and
will reimburse Mellon Investor Services LLC for payments made to brokers and
other nominees for their expenses in forwarding solicitation material as well as
other reasonable out-of-pocket expenses. Further solicitation may be made by our
directors, officers and employees personally, by telephone or otherwise, but
they will not be specifically compensated for these services.
Shareholder Proposals; Other Matters
We know of no other matters that will be presented for consideration at the
50
special meeting. If any other matters properly come before the special meeting,
it is the intention of the persons named in the enclosed form of proxy to vote
the shares they represent as the board of directors may recommend. Discretionary
authority with respect to such other matters is granted by the execution of the
enclosed proxy.
Other Shareholder Meetings
If we complete the merger, we will no longer have public shareholders or any
public participation in our shareholder meetings. If we do not complete the
merger, we intend to hold our next annual shareholder meeting in 2001. In that
case, if you are still a shareholder as of the record date of such meeting, you
would continue to be entitled to attend and participate in our shareholder
meetings. If the annual meeting is to be held, any Ravenswood shareholder who
wishes to submit a proposal for inclusion in the proxy materials relating to the
annual meeting must deliver that proposal to the Secretary of Ravenswood, Justin
M. Faggioli. The proposal must be received at our offices (26200 Arnold Drive,
Sanoma, California, 95476) no later than July 10, 2001.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC under the
Securities Exchange Act of 1934. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. You may read and copy this
information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
at prescribed rates. The SEC also maintains an Internet world wide web site that
contains reports, proxy statements and other information about issuers,
including Ravenswood and Constellation Brands, who file electronically with the
SEC. The address of that site is http://www.sec.gov. You can also inspect
reports, proxy statements and other information about us at the offices of The
Nasdaq Stock Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" information into this document.
This means that we can disclose important information to you by referring you to
another document we filed with the SEC. The information incorporated by
reference is considered to be a part of this document, except for any
information that is superseded by information that is included directly in this
document.
This document incorporates by reference the documents listed below that we have
previously filed with the SEC. It contains important information about the
Company and its financial condition.
51
SEC Filing..........................................Period
- ---------- ------
Annual Proxy Statement..............................Filed October 10, 2000
Annual Report on Form 10-KSB........................Filed September 28, 2000
Quarterly Report on Form 10-QSB.....................Filed November 11, 2000
Quarterly Report on Form 10-QSB.....................Filed February 14, 2001
Current Report on Form 8-K..........................Filed April 11, 2001
We incorporate by reference additional documents that we may file with the SEC
between the date of this document and the date of the special meeting.
You can obtain any of the documents incorporated by reference in this document
through us or from the SEC through the SEC's web site at the address provided
above. Documents incorporated by reference are available from us, upon oral or
written request, without charge, excluding any exhibits to those documents
unless the exhibit is specifically incorporated by reference into those
documents. You can obtain documents incorporated by reference in this document
by contacting us at:
Investor Relations
Ravenswood Winery, Inc.
26200 Arnold Drive
Sonoma, California 95476
(707) 938-1960
A copy will be provided by first class mail or other equally prompt means within
one business day after receipt of your request.
By Order of the Board of Directors,
-----------------------
Justin M. Faggioli
Executive Vice President and Secretary
52
ANNEX A
AGREEMENT AND PLAN OF MERGER
by and among
CONSTELLATION BRANDS. INC.,
VVV ACQUISITION CORP.
and
RAVENSWOOD WINERY, INC.
Dated as of
April 10, 2001
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND TERMS..........................................................................1
Section 1.1 Definitions...................................................................1
Section 1.2 Other Terms...................................................................7
Section 1.3 Other Definitional Provisions.................................................7
ARTICLE II THE MERGER....................................................................................7
Section 2.1 The Merger....................................................................7
Section 2.2 The Closing...................................................................8
Section 2.3 Effective Time................................................................8
Section 2.4 Effect of Merger..............................................................8
Section 2.5 Procedure for Payment........................................................12
Section 2.6 Subsequent Actions...........................................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................14
Section 3.1 Due Organization of Company..................................................14
Section 3.2 Capitalization...............................................................15
Section 3.3 Due Authorization of Transaction; Binding Obligation.........................16
Section 3.4 NonContravention.............................................................16
Section 3.5 Government Approvals, Consents and Filings...................................16
Section 3.6 Litigation...................................................................17
Section 3.7 Brokers' Fees................................................................17
Section 3.8 Reports and Financial Information............................................17
Section 3.9 Absence of Certain Changes or Events.........................................18
Section 3.10 Taxes........................................................................18
Section 3.11 Employee Matters.............................................................19
Section 3.12 Material Contracts...........................................................21
Section 3.13 Regulatory Compliance........................................................22
Section 3.14 Real Property................................................................23
Section 3.15 Intellectual Property........................................................24
Section 3.16 Environmental Matters........................................................25
Section 3.17 Title to and Condition of Assets.............................................26
Section 3.18 Product Recall...............................................................26
Section 3.19 Grape Vines..................................................................26
Section 3.20 Labor Matters................................................................26
Section 3.21 Opinion of Financial Advisor.................................................27
Section 3.22 Takeover Statutes............................................................27
Section 3.23 Insurance....................................................................27
Section 3.24 Distributor Relations........................................................27
Section 3.25 Suppliers....................................................................28
Section 3.26 Related Party Transactions...................................................28
Section 3.27 No Other Representations or Warranties.......................................28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......................................29
Section 4.1 Due Incorporation............................................................29
Section 4.2 Due Authorization of Transaction; Binding Obligation.........................29
Section 4.3 NonContravention.............................................................29
Section 4.4 Government Approvals, Consents, and Filings..................................30
Section 4.5 Litigation...................................................................30
Section 4.6 Financing....................................................................30
Section 4.7 Finder's Fees; Brokers.......................................................30
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER........................................................30
Section 5.1 Conduct of Business of the Company Pending the Merger........................30
Section 5.2 Compensation Plans...........................................................32
Section 5.3 Voting Agreements............................................................32
Section 5.4 No Solicitation..............................................................33
Section 5.5 Conduct of Business by Parent and Merger Sub Pending the Merger..............35
ARTICLE VI ADDITIONAL AGREEMENTS........................................................................35
Section 6.1 Shareholder Approvals........................................................35
Section 6.2 Proxy Statement..............................................................35
Section 6.3 Access to Information; Confidentiality.......................................36
Section 6.4 Consents; Approvals..........................................................37
Section 6.5 Notification of Certain Matters..............................................38
Section 6.6 Further Assurances...........................................................38
Section 6.7 Public Announcements.........................................................38
Section 6.8 Conveyance Taxes.............................................................39
Section 6.9 Director and Officer Liability...............................................39
Section 6.10 Action by Parent and Company's Boards........................................39
Section 6.11 Employee Benefits............................................................40
Section 6.12 Payment of Accrued Bonuses...................................................40
ARTICLE VII CONDITIONS TO THE MERGER....................................................................41
Section 7.1 Conditions to Obligations of Each Party to Effect the Merger.................41
Section 7.2 Additional Conditions to Obligations of Parent and Merger Sub................41
Section 7.3 Additional Conditions to Obligation of the Company...........................42
ARTICLE VIII TERMINATION................................................................................42
Section 8.1 Termination..................................................................42
Section 8.2 Effect of Termination........................................................43
Section 8.3 Fees and Expenses............................................................43
ARTICLE IX GENERAL PROVISIONS...........................................................................44
Section 9.1 Effectiveness of Representations, Warranties and Agreements; Knowledge, Etc..44
Section 9.2 Notices......................................................................44
Section 9.3 Amendment....................................................................46
Section 9.4 Waiver.......................................................................46
Section 9.5 Headings.....................................................................46
Section 9.6 Severability.................................................................46
Section 9.7 Entire Agreement.............................................................47
Section 9.8 Assignment, Merger Sub.......................................................47
Section 9.9 Parties in Interest..........................................................47
Section 9.10 Governing Law................................................................47
Section 9.11 Counterparts.................................................................47
Section 9.12 WAIVER OF JURY TRIAL.........................................................47
Exhibits
Exhibit A Form of Voting Agreement
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 10, 2001, (this
"Agreement"), by and among Ravenswood Winery, Inc., a California corporation
(the "Company"), Constellation Brands, Inc., a Delaware corporation ("Parent"),
and VVV Acquisition Corp., a Delaware corporation and an indirect, whollyowned
subsidiary of Parent ("Merger Sub").
W I T N E S S E T H :
WHEREAS, the board of directors of each of Parent, Merger Sub and the
Company have each determined that it is advisable and in the best interests of
their respective shareholders for Parent to enter into a strategic business
combination with the Company upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance of such combination, the boards of directors of
Parent, Merger Sub and the Company have each approved the merger of Merger Sub
with and into the Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to Parent and Merger Sub to enter
into this Agreement, certain shareholders of the Company have entered into
Voting Agreements with Parent;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Definitions.
(a) The following terms, as used herein, have the following
meanings:
"Affiliate" shall have the meaning set forth in Rule 12b2 of the
regulations promulgated under the Exchange Act.
"Agreement" means this Agreement and Plan of Merger, as the same may be
amended or supplemented from time to time in accordance with the terms hereof.
"Alternative Transaction" means any of the following: (i) a transaction
pursuant to which any Third Party (or group of Third Parties) seeks to acquire,
directly or indirectly, more than 25 percent of the outstanding shares of
Company Common Stock, whether from the Company or pursuant to a tender offer or
exchange offer or otherwise (other than upon exercise of the Company Stock
Options, upon exercise of Purchase Rights under the Company ESPP or conversion
of the Company Debentures), (ii) a merger, recapitalization, consolidation or
other business combination involving the Company pursuant to which any Third
Party acquires more than 25 percent of the
1
outstanding equity securities of the Company or the entity surviving such merger
or business combination, (iii) any other transaction pursuant to which any Third
Party acquires control of all or substantially all of the assets of the Company,
or (iv) any combination of the foregoing.
"Applicable Law" means, with respect to any Person, any domestic,
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority applicable to such Person or
any of its Affiliates or any of their respective properties, assets, officers,
directors, employees, consultants or agents (in connection with such officer's,
director's, employee's, consultant's or agent's activities on behalf of such
Person or any of its Affiliates).
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in San Francisco, California are authorized or
required by law to close.
"California Code" means the California Corporations Code and all
amendments and additions thereto.
"Certificate" means a stock certificate representing shares of Company
Common Stock.
"Closing" has the meaning set forth in Section 2.2 hereof.
"Closing Date" has the meaning set forth in Section 2.2 hereof.
"COBRA" has the meaning set forth in Section 3.11(a)(vii) hereof.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Company" has the meaning set forth in the Preamble hereof.
"Company Common Stock" means the Common Stock, no par value, of the
Company.
"Company Debenture" means each of the Convertible Subordinated
Debentures of the Company due December 31, 2008, in the aggregate principal
amount of $1,687,500.
"Company's Disclosure Letter" means the written disclosure schedule
delivered by the Company to Parent and Merger Sub in connection with and prior
to the execution and delivery of this Agreement.
"Company Employee Plans" means all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, unemployment,
severance, vacation, insurance or hospitalization program and any other fringe
or employee benefit plans, programs or arrangements for any current or former
Employee, director, consultant
2
or agent, and any current or former employment or executive compensation or
severance agreements, written or otherwise, for the benefit of, or relating to,
any employee of the Company, and excluding agreements with former employees
under which the Company has no remaining monetary obligations.
"Company ESPP" means the Employee Stock Purchase Plan for Ravenswood
Winery, Inc.
"Company Permits" has the meaning set forth in Section 3.13(b) hereof.
"Company Preferred Stock" means the Preferred Stock, no par value, of
the Company.
"Company SEC Reports" has the meaning set forth in Section 3.8(a)
hereof.
"Company Stock Options" means the outstanding options to purchase
shares of Company Common Stock under the Company Stock Plan.
"Company Stock Plan" means the Ravenswood Winery, Inc. 1999 Equity
Incentive Plan.
"Confidentiality Agreement" has the meaning set forth in Section 6.3(a)
hereof.
"Continuing Employees" has the meaning set forth in Section 6.11(a)
hereof.
"Contract" means any contract, agreement, undertaking, indenture, note,
bond, loan, instrument, lease, mortgage, commitment or other binding agreement,
whether written or oral.
"Damages" means the amount of any loss, damage, injury, liability,
claim, fee, demand, settlement, judgment, award, fine, penalty, tax, charge or
cost.
"Dissenting Shares" has the meaning set forth in Section 2.4(h)(i)
hereof.
"Effective Time" has the meaning set forth in Section 2.3 hereof.
"Employee" means an employee of the Company, including any employee of
the Company who is on leave of absence or on layoff status.
"Environmental Laws" means any federal, state or local laws (whether
under common law, statute, rule, regulation or otherwise), requirements under
permits issued with respect thereto, and other requirements of Governmental
Authorities relating to the environment, any Hazardous Substance, or to any
activities involving Hazardous Substances or occupational health and safety,
including, but not limited to, the Clean Air Act, As Amended, 42 U.S.C. Section
7401 Et Seq.; The Federal Water Pollution Control Act, As Amended, 33 U.S.C.
Section 1251 Et Seq.; The Resource Conservation And Recovery Act Of 1976, As
Amended, 42 U.S.C. Section 6901 Et Seq.; The Comprehensive Environment Response,
Compensation And Liability Act Of 1980, As
3
Amended (Including The Superfund Amendments And Reauthorization Act Of 1986,
"CERCLA"), 42 U.S.C. Section 9601 Et Seq.; The Toxic Substances Control Act, As
Amended, 15 U.S.C. Section 2601 Et Seq.; The Occupational Safety And Health Act,
As Amended, 29 U.S.C. Section 651, The Emergency Planning And Community
RightToKnow Act Of 1986, 42 U.S.C. Section 11001 Et Seq.; The Safe Drinking
Water Act, As Amended, 42 U.S.C. Section 300f Et Seq.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Final Date" has the meaning set forth in Section 8.1(b) hereof.
"GAAP" means United States generally accepted accounting principles
applied on a consistent basis throughout the periods involved.
"Governmental Authority" means any territorial, federal, state or
local, whether domestic, foreign or supranational, governmental or
quasigovernmental authority, instrumentality, court, commission, tribunal or
organization; any regulatory, administrative or other agency; any
selfregulatory organization; or any political or other subdivision, department
or branch of any of the foregoing.
"Hazardous Substance" means any substance, material, chemical or waste
that is listed, or contains material amounts of one or more components that are
defined, designated or classified as hazardous, acutely hazardous, toxic,
radioactive or dangerous under any applicable Environmental Law, as well as any
"solid waste", industrial waste, industrial wastewater sewage, asbestos or
asbestos containing material, petroleum and any derivative or byproducts
thereof, crude oil or any fraction thereof, natural gas, natural gas liquids,
liquefied natural gas, synthetic gas useable as fuel, or polychlorinated
biphenyls (PCBs).
"HSR Act" means the HartScottRodino Antitrust Improvements Act of
1976, as amended.
"IRS" means the United States Internal Revenue Service.
"Knowledge of the Company" means the actual knowledge of the directors
of the Company and Kimberly Dryer.
"Law" means any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree.
"Lease Agreements" has the meaning set forth in Section 3.14(a) hereof.
"Leased Personal Property" has the meaning set forth in Section 3.17(a)
hereof.
"Leased Real Property" has the meaning set forth in Section 3.14(a)
hereof.
4
"Liens" means liens, security interests, options, rights of first
refusal, easements, mortgages, charges, pledges, deeds of trust, rightsofway,
restrictions, encroachments, licenses, leases, permits, security agreements, or
any other encumbrances, restrictions or limitations on the use of real or
personal property, whether or not they constitute specific or floating charges.
"Material Adverse Effect" means a material adverse effect (or
combination of effects materially adverse in the aggregate) on the financial
condition, business or results of operations of the Company, taken as a whole;
provided, however, that a Material Adverse Effect shall not include changes in
the market price or trading volume of the Company's securities or any effect
resulting from any change (i) in Law, GAAP or interpretations thereof that apply
to the Company, (ii) in general economic or business conditions or in the wine
industry generally (which changes do not disproportionately affect the Company),
or (iii) due to the public announcement of this Agreement or the transactions
contemplated by this Agreement, or the consummation of such transactions.
"Material Contracts" has the meaning set forth in Section 3.12(a)
hereof.
"Merger" has the meaning set forth in Section 2.1.
"Merger Consideration" has the meaning set forth in Section 2.4(e)(i)
hereof.
"Merger Sub" has the meaning set forth in the Preamble hereof.
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" means the Nasdaq National Market.
"NYSE" means the New York Stock Exchange.
"Owned Real Property" has the meaning set forth in Section 3.14(a)
hereof.
"Parent" has the meaning set forth in the Preamble hereof.
"Parent Material Adverse Effect" means a material adverse effect (or
combination of effects materially adverse in the aggregate) on the financial
condition, business or results of operations of Parent, taken as a whole;
provided, however, that a Parent Material Adverse Effect shall not include
changes in the market price or trading volume of the Parent's securities or any
effect, resulting from any change in Law, GAAP or interpretations thereof that
apply to Parent, in general economic or business conditions or in the wine
industry (which changes do not disproportionately affect Parent), or due to the
public announcement of the transactions contemplated under this Agreement or the
consummation of such transactions.
"Parent's Disclosure Letter" means the written disclosure schedule
delivered to Company by the Parent in connection with and prior to the execution
and delivery of this Agreement.
5
"Paying Agent" has the meaning set forth in Section 2.5(a) hereof.
"Payment Fund" has the meaning set forth in Section 2.5(a) hereof.
"Permitted Liens" means mechanics', carriers', workmen's, repairmen's
or other like Liens arising or incurred in the ordinary course of business
(which are not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings), Liens arising under
original purchase price conditional sales Contracts and equipment leases with
Third Parties entered into in the ordinary course of Business (which are not
overdue for a period of more than 60 days or which are being contested in good
faith by appropriate proceedings), Liens for taxes and other governmental
charges, if adequate reserves are maintained, which are not due and payable or
which may thereafter be paid without penalty, imperfections of title,
restrictions or encumbrances, which imperfections of title, restrictions and
encumbrances do not, individually or in the aggregate, materially impair the
continued use and operation of the business of the Company, taken as a whole, as
presently conducted.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Proprietary Asset" means any patent, patent application, trademark
(whether registered or unregistered), service mark application, copyright
(whether registered or unregistered), copyright application, maskwork, maskwork
application, computer software, internet domain registrations or other
internetrelated assets such as websites, invention or design.
"Proxy Statement" means the proxy statement or information statement to
be used by the Company to obtain the approval and adoption of this Agreement and
the Merger by the shareholders of the Company.
"Purchase Right" has the meaning set forth in Section 2.4(f)(iii).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder Meeting" has the meaning set forth in Section 6.1 hereof.
"Superior Proposal" means a bona fide unsolicited written proposal made
by a Third Party relating to an Alternative Transaction on terms that the board
of directors of the Company determines in good faith and after consultation with
counsel would be, or is reasonably likely to be, more favorable to the Company's
shareholders than the transactions contemplated by this Agreement (taking into
account the legal, financial, regulatory and other aspects of the proposal and
the Person making the proposal and such Person's ability to finance the
Alternative Transaction).
"Surviving Corporation" has the meaning set forth in Section 2.1
hereof.
6
"Tax" or "Taxes" means taxes, fees, levies, duties, tariffs, imposts
and governmental impositions or charges of any kind in the nature of (or similar
to) taxes, payable to any federal, state, local or foreign taxing authority,
including (without limitation) (i) income, franchise, profits, gross receipts,
ad valorem, net worth, goods and services, fringe benefits, withholding, sales,
use, service, real or personal property, special assessments, license, payroll,
withholding, employment, social security, accident compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes and (ii) interest,
penalties, additional taxes and additions to tax imposed with respect thereto.
"Tax Returns" means returns, reports and information statements with
respect to Taxes required to be filed with the IRS or any other taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns.
"Third Party" means any Person other than a Party to this Agreement or
an Affiliate of such a Party.
"Voting Agreements" has the meaning set forth in Section 5.3 hereof.
"WARN Act" means the Worker Adjustment Retraining Notification Act of
1988, as amended.
Section 1.2 Other Terms. Other terms may be defined elsewhere in the
text of this Agreement and, unless otherwise indicated, shall have such meanings
throughout this Agreement.
Section 1.3 Other Definitional Provisions.
(a) The words "herein," "hereof," "hereto" and "hereunder" and
words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The words "will" and "shall" have the same meaning and
mean "must" unless the context otherwise requires.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Subject to and in accordance with the terms and
conditions of this Agreement, the Merger Sub will merge with and into the
Company (the "Merger") at the Effective Time. The Company shall be the
corporation surviving the Merger (the "Surviving Corporation").
Section 2.2 The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Morrison &
Foerster LLP, in
7
San Francisco, California, commencing at 10:00 a.m. local time on the second
Business Day following the satisfaction or waiver of all conditions to the
obligations of the parties hereto to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective parties
hereto will take at the Closing itself) or such other date and location as the
parties hereto may mutually determine (the "Closing Date").
Section 2.3 Effective Time. On the Closing Date the parties hereto
shall cause the Merger to be consummated by filing all necessary documentation,
including an agreement of merger in the form reasonably acceptable to the
parties hereto with the Secretary of State of the State of California and a
certificate of merger in the form reasonably acceptable to the parties hereto
with the Secretary of State of the State of Delaware. The Merger shall be
effective upon such filing of the agreement of merger with the Secretary of
State of the State of California and the certificate of merger with the
Secretary of State of the State of Delaware, or on such later date as may be
specified therein (the time of such effectiveness being, the "Effective Time").
Section 2.4 Effect of Merger.
(a) General. The Merger shall have the effects set forth in
Sections 1107 and 1108 of the California Code. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time all property,
rights, powers, privileges and franchises of Merger Sub shall vest in the
Company as the Surviving Corporation, and all debts, liabilities and duties of
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation. The Surviving Corporation may, at any time after the Effective
Time, take any action (including executing and delivering any document) in the
name and on behalf of either the Company or Merger Sub in order to carry out and
effectuate the transactions contemplated by this Agreement.
(b) Articles of Incorporation. The Articles of Incorporation
of the Company, as in effect immediately prior to the Effective Time, shall be
the Articles of Incorporation of the Surviving Corporation until amended as
provided by law and such Articles of Incorporation and the Bylaws.
(c) Bylaws. The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by law and such Bylaws and the Articles of
Incorporation of the Company.
(d) Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. The officers of the
Surviving Corporation at and after the Effective Time shall be the officers of
the Company, each to hold office in accordance with the Bylaws of the Surviving
Corporation. The Company shall use reasonable best efforts to cause each
director of the Company to tender such director's resignation prior to the
Effective Time, each such resignation to be effective as of the Effective Time.
8
(e) Conversion of Company Shares. At and as of the Effective
Time,
(i) each outstanding share of Company Common Stock
(other than Dissenting Shares and shares of Company Common Stock held by Parent
or Merger Sub) shall be converted into the right to receive an amount (the
"Merger Consideration") equal to $29.50 in cash (without interest), upon
surrender of the Certificate formerly representing such outstanding share of
Company Common Stock in the manner set forth in Section 2.5, and as of the
Effective Time, each outstanding share of Company Common Stock shall no longer
be issued and outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a Certificate shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration without interest (or, if applicable, to be treated as a Dissenting
Share);
(ii) each Dissenting Share shall be treated as
described in Section 2.4 (h); or
(iii) each share of Company Common Stock held by the
Parent or Merger Sub shall be cancelled and retired, and no consideration shall
be paid or delivered in exchange therefor; provided, however, that the Merger
Consideration shall be subject to equitable adjustment in the event of any stock
split, stock dividend, reverse stock split, or other change in the number of
shares of Company Common Stock outstanding to which Parent consents pursuant to
Section 5.1. No share of Company Common Stock shall be deemed to be outstanding
or to have any rights other than those set forth above in this Section 2.4(e)
after the Effective Time.
(f) Options; Stock Purchase Plan.
(i) Immediately prior to the Effective Time, each
outstanding and vested portion of a Company Stock Option shall be cancelled as
of immediately prior to the Effective Time, and in consideration for such
cancellation, the holder thereof shall become entitled to receive from the
Company an amount of cash equal to the product of (A) the number of vested
shares subject to the Company Stock Option and (B) the excess of the Merger
Consideration over the per share exercise price of the Company Stock Option,
less the amount of applicable foreign, federal, state and local taxes required
to be withheld from such payment. The Company shall pay the amounts payable to
each holder of a vested Company Stock Option as soon as reasonably practicable
following the Effective Time. The Company shall pay promptly any amounts
withheld for applicable foreign, federal, state and local taxes to the
appropriate Governmental Authority on behalf of such holder of such Company
Stock Option.
(ii) Immediately prior to the Effective Time, a
number of unvested Company Stock Options held by each holder thereof equal to
the lesser of (i) unvested Company Stock Options to purchase 1,000 shares of
Company Common Stock or (ii) the number of unvested Company Stock Options held
by such holder, shall accelerate, fully vest and be treated immediately prior to
the Effective Time as vested Company Stock Options under Section 2.4(f)(i);
provided that such Company Stock Options to be vested shall be the unvested
Company Stock Options which would have
9
otherwise vested at the earliest dates following the Effective Time. Immediately
prior to the Effective Time, except as provided in the preceding sentence, each
outstanding and unvested portion of a Company Stock Option shall be cancelled
immediately prior to the Effective Time, and in consideration for such
cancellation, the holder thereof shall become entitled to receive at the time
such unvested portion of a Company Stock Option would have vested, if such
unvested portion had not been cancelled in accordance with this Section 2.4
(f)(ii), an amount of cash equal to the product of (A) the number of unvested
shares subject to the Company Stock Option that would have vested on such date
and (B) the excess of the Merger Consideration (without interest) over the per
share exercise price of the Company Stock Option, less the amount of applicable
foreign, federal, state and local taxes required to be withheld from such
payment, provided that the right of the holder of the Company Stock Option to
receive this sum is not conditioned on the Employee's continued employment or
provision of services after the Effective Time. The Company shall pay the
amounts payable to each holder of an unvested Company Stock Option as soon as
reasonably practicable following the date or dates the unvested portions of the
Company Stock option would have otherwise vested if such unvested portions had
not been cancelled in accordance with this Section 2.4(f)(ii). The Company shall
pay promptly any amounts withheld or due for applicable foreign, federal, state
and local taxes to the appropriate Governmental Authority on behalf of the
holder of such Company Stock Option.
(iii) Each purchase right (a "Purchase Right") under the Company ESPP
outstanding immediately prior to the Effective Time shall accelerate, fully vest
and automatically be exercised immediately prior to the Effective Time in
accordance with the provisions of the Company ESPP.
Shares of Company Common
Stock issuable upon such acceleration, vesting and exercise of each Purchase
Right shall be issued and outstanding immediately prior to the Effective Time
and shall therefore be subject to the terms of this Agreement. The Company shall
use its best efforts to provide written notice of the Merger to holders of a
Purchase Right at least ten (10) days prior to the Effective Time.
(iv) Prior to the Effective Time the Company shall
use its reasonable best efforts to obtain any consents from all holders of
Company Stock Options and to make any amendments to the terms of such stock
options or compensations plans or arrangements that are necessary to give effect
to the transactions contemplated by this Section 2.4(f). At the Effective Time
the Company shall terminate the Company Stock Option Plan and the Company ESPP.
(v) No interest shall be paid on any amounts to be
paid pursuant to this Section 2.4(f).
(vi) The Company will use reasonable best efforts so
that, immediately following the Effective Time, none of Merger Sub, the Company
or the Surviving Corporation is or will be bound by the Company Stock Option
Plan, the Company ESPP, Purchase Right, any Company Stock Option or any other
options, warrants, rights or agreements which would entitle any Person, other
than Parent or its Affiliates, to own any capital stock of the Company, Merger
Sub or the Surviving
10
Corporation or to receive any payment in respect thereof, except as otherwise
provided herein.
(g) Company Debentures.
(i) Prior to the Effective Time the Company shall use
reasonable best efforts to obtain consents from the holders of the Company
Debentures or otherwise to amend each Company Debenture to provide for the
automatic conversion immediately prior to the Merger of such Company Debenture
into Company Common Stock in accordance with the terms of the Company Debentures
as of the date hereof. Shares of Company Common Stock issuable upon such
conversion shall be deemed issued and outstanding as of the Effective Time for
purposes of this Agreement.
(ii) Any Company Debenture outstanding immediately
prior to the Effective Time and which is not subject to automatic conversion
pursuant to Section 2.4(g)(i) or otherwise as of the Merger shall be deemed
assumed by the Surviving Corporation and to constitute an obligation of the
Surviving Corporation; provided that, on the terms and conditions as were
applicable under such Company Debenture prior to the Effective Time, each
Company Debenture shall cease to be convertible into shares of Company Common
Stock or shares of capital stock of the Surviving Corporation, but shall be
convertible into the right to receive cash in an amount equal to the product of
(i) the number of shares of Company Common Stock into which such Company
Debenture would have been convertible in accordance with its terms, multiplied
by (ii) the Merger Consideration payable per share of Company Common Stock.
(h) Dissenting Shares.
(i) Notwithstanding any provision of this Agreement
to the contrary, any shares of Company Common Stock held by a holder who has
demanded and perfected dissenters' rights for such shares in accordance with the
California Code and who, as of the Effective Time, has not effectively withdrawn
or lost such dissenters' rights ("Dissenting Shares") shall not be converted
into or represent a right to receive the Merger Consideration pursuant to
Section 2.4(e), but the holder thereof shall only be entitled to such rights as
are granted by the California Code.
(ii) Notwithstanding the provisions of subsection (i)
above, if any holder of shares of Company Common Stock who demands purchase of
such shares under the California Code shall effectively withdraw or lose
(through failure to perfect or otherwise) such holder's dissenters' rights,
then, as of the later of (A) the Effective Time or (B) the occurrence of such
event, such holder's shares shall automatically be converted into and represent
only the right to receive the Merger Consideration as provided in Section
2.4(e), without interest thereon, upon surrender to the Company of the
Certificate representing such shares in accordance with this Agreement.
(iii) The Company shall give Parent (A) prompt notice
of its receipt of any written demands for dissenters' rights and any withdrawals
of such
11
demands and (B) the opportunity to participate in and control all negotiations
and proceedings with respect to demands for dissenters' rights under the
California Code. The Company shall not, except with the prior written consent of
Parent or as may be required under Applicable Law, voluntarily make any payment
with respect to any demands for purchase of Company Common Stock pursuant to
dissenters' rights or offer to settle or settle any such demands.
(i) Conversion of Capital Stock of the Merger Sub. At and as
of the Effective Time, each share of Common Stock, $.00001 par value per share,
of Merger Sub shall be converted into one share of Common Stock, no par value
per share, of the Surviving Corporation.
Section 2.5 Procedure for Payment.
(a) Paying Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company to act as paying agent (the "Paying Agent")
for the purpose of exchanging Certificates for the Merger Consideration. Parent
or Merger Sub shall, from time to time, make available or cause to be made
available to the Paying Agent funds (the "Payment Fund") in such amounts and at
times necessary for the payment of the Merger Consideration in the manner
provided herein. The Paying Agent shall invest portions of the Merger
Consideration as Parent directs (it being understood that any and all interest
earned on funds made available to the Paying Agent pursuant to this Agreement
shall be the property of, and shall be turned over to, Parent), provided, that
such investments shall be in obligations of or guaranteed by the United States
of America or of any agency thereof and backed by the full faith and credit of
the United States of America, in commercial paper obligations rated A1 or P1 or
better by Moody's Investors Services, Inc. or Standard & Poor's Corporation,
respectively, or in deposit accounts, certificates of deposit or banker's
acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar
time deposits purchased from, commercial banks with capital, surplus and
undivided profits aggregating in excess of US$100 million (based on the most
recent financial statements of such bank which are then publicly available).
(b) Letter of Transmittal. Promptly after the Effective Time,
the Surviving Corporation shall instruct the Paying Agent to mail to each holder
of record of one or more shares of Company Common Stock, (i) a letter of
transmittal, which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent, and which shall have such other provisions as
Parent shall reasonably specify, and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration.
(c) Entitlement of Shares. Upon surrender of a Certificate for
cancellation to the Paying Agent, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration payable in respect of the shares of Company Common Stock
previously represented by such Certificates, after giving effect to any
withholding tax required by Applicable Law, and the Certificates so
12
surrendered shall forthwith be cancelled. Until surrendered as contemplated by
this Section 2.5, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration.
No interest will be paid or accrued on the Merger Consideration.
(d) Payments to Other Persons. If Merger Consideration is to
be paid to any Person other than the Person in whose name the Certificates for
shares surrendered for conversion are registered, it shall be a condition of the
payment that such Certificates be properly endorsed and the signatures thereon
properly guaranteed and otherwise in proper form for transfer and that the
Person requesting such payment shall have paid to the Paying Agent any transfer
or other taxes required by reason of the delivery of Merger Consideration to a
Person other than the registered holder of such Certificate, or shall have
established to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable.
(e) Termination. Any portion of the Payment Fund held by the
Paying Agent for delivery pursuant to this Section 2.5 and unclaimed at the end
of six months after the Effective Time shall be paid or delivered to the
Surviving Corporation, upon demand, and any holders of Certificates who have not
theretofore complied with this Section 2.5 shall, subject to Applicable Law,
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration in respect of shares of Company Common Stock and shall have no
rights against Parent with respect to such payments. Notwithstanding the
foregoing, none of Parent, the Surviving Corporation or the Paying Agent shall
be liable to any holder of shares of Company Common Stock for any amount paid to
any Governmental Authority pursuant to any applicable abandoned property,
escheat or similar law. Any amounts unclaimed by holders of shares of Company
Common Stock two years after the Effective Time (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to or
become the property of any Governmental Authority) shall, to the extent
permitted by Applicable Law, become the property of the Surviving Corporation
free and clear of any claims or interest of any Person previously entitled
thereto.
(f) Stock Transfer Books; No Further Ownership Rights. At and
after the Effective Time, the stock transfer books of the Company shall be
closed, and there shall be no further registrations of transfers of shares of
Company Common Stock thereafter on the records of the Company. From and after
the Effective Time, the holders of Certificates evidencing ownership of the
shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Company Common Stock, except as otherwise provided for herein or by Applicable
Law. If, after the Effective Time, Certificates are presented to the Surviving
Corporation, Parent or the Paying Agent for any reason, they shall be cancelled
and exchanged for the Merger Consideration as provided in this Section 2.5,
subject to Section 2.5(e).
(g) Lost, Stolen or Destroyed Certificates. Notwithstanding
anything here to the contrary herein, in the event any Certificates shall have
been lost, stolen or
13
destroyed, Parent shall pay the Merger Consideration in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof; provided, that Parent may, in its discretion and as a
condition precedent to the payment thereof, require the owner of such lost,
stolen or destroyed Certificates to provide an indemnity or deliver a bond in
such sum as Parent may reasonably direct as indemnity against any claim that may
be made against Parent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
Section 2.6 Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either Merger Sub or the Company acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement and the Merger, the officers
and directors of the Surviving Corporation are hereby authorized to execute and
deliver, in the name and on behalf of each of Merger Sub or the Company or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of Merger Sub or the Company or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement and the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent, except as set
forth in the Company SEC Reports or the Company's Disclosure Letter, as follows:
Section 3.1 Due Organization of Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted and to own, operate or lease all of its
properties and assets. True and complete copies of the Articles of Incorporation
and Bylaws of the Company with all amendments and restatements thereto through
the date hereof have been provided to Parent prior to the date hereof. The
Company is duly qualified as a foreign corporation to do business, and is in
good standing (to the extent the concept of good standing exists), in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified has not had a Material Adverse Effect.
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock and 1,000,000 shares of Company
Preferred Stock. As of the close of business on April 8 , 2001, 4,876,067 shares
of Company Common Stock were issued and outstanding, no shares of Company
Preferred Stock were issued or outstanding, and Company Stock Options to acquire
487,750 shares
14
of Company Common Stock were outstanding under the Company Stock Plan. The
Company has outstanding the Company Debentures which are convertible upon the
request of the holders at any time prior to December 31, 2003, into shares of
Company Common Stock at a rate of 900 shares of Company Common Stock per $10,000
of principal amount. Under the Company ESPP, all outstanding employee Purchase
Rights under the Company ESPP shall automatically be exercised or cancelled
pursuant to Section 2.4(f)(iii), immediately prior to the Effective Time, and
shares of Company Common Stock shall be purchased accordingly. As of April 8,
2001, the Company had accrued deposits of not more than $10,000 for the purchase
of Company Common Stock under the Company ESPP. The maximum number of shares of
Company Common Stock that may be issued under the Company ESPP is 50,000.
Section 3.2(a) of the Company's Disclosure Letter sets forth as of the close of
business on April 8, 2001, the name of each holder of an outstanding Company
Stock Option or Company Debenture, and with respect to each Company Stock Option
held by any such holder, the exercise price and number of shares of Company
Common Stock for which such Company Stock Option is exercisable and with respect
to each Company Debenture held by any such holder, the number of shares of
Company Common Stock into which such Company Debenture is convertible as of
April 8, 2001. Except as set forth in this Section 3.2(a), the Company has no
existing (i) options, warrants, calls, preemptive rights, subscriptions or other
rights, convertible securities, agreements or commitments of any character
obligating the Company to issue, transfer or sell any shares of capital stock or
other equity interest in the Company or securities convertible into or
exchangeable for such shares or equity interests, (ii) contractual obligations
of the Company to repurchase, redeem or otherwise acquire any capital stock of
the Company, or (iii) voting trusts or similar agreements to which the Company
is a party with respect to the voting of the capital stock of the Company. The
Company since April 8, 2001, has not issued any shares of Company Common Stock
except in connection with the exercise of a Company Stock Option, conversion of
a Company Debenture, or exercise of a Purchase Right.
(b) All of the issued and outstanding shares of Company Common
Stock are, and all shares of Company Common Stock which may be issued pursuant
to the exercise of outstanding Company Stock Options, the conversion of
outstanding Company Debentures or upon the exercise of Purchase Rights under the
Company ESPP will be, when issued in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights or similar rights created by statute, the Articles of
Incorporation or Bylaws of the Company or any agreement to which the Company is
a party or by which the Company is bound.
(c) The Company does not own, directly or indirectly, any
interest in a corporation, limited liability company, partnership or other
business organization, and is not obligated to make any capital contribution to
or other investment in any other Person.
Section 3.3 Due Authorization of Transaction; Binding Obligation. The
Company has full corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the approval and adoption of this Agreement
and the Merger by the Company's shareholders to perform its obligations
hereunder, and the execution, delivery and performance of this Agreement by the
Company have been duly authorized
15
by all necessary corporate action on the part of the Company (other than the
approval and adoption of this Agreement and the Merger by the Company's
shareholders). This Agreement has been duly executed and delivered by the
Company and this Agreement is the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject to
the qualification, however, that enforcement of the rights and remedies created
hereby is subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general equity principles.
Section 3.4 NonContravention. The execution, delivery and performance
of this Agreement by the Company and the consummation of the transactions
contemplated hereby do not and will not (a) contravene the Articles of
Incorporation or Bylaws or other charter or organizational documents of the
Company, (b) conflict with or violate any Applicable Law or Company Permit, or
(c) conflict with or result in a breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in any loss of any benefit, or the creation of any
Lien on any of the property or assets of the Company pursuant to any Contract,
judgment, decree, order or ruling to which the Company is a party or by which
the Company or its assets or properties is bound or affected, except for such
contraventions, violations, conflicts, breaches, defaults, rights creation, or
Lien creation which individually or in the aggregate, have not had, or are not
reasonably likely to have, a Material Adverse Effect.
Section 3.5 Government Approvals, Consents and Filings. No approval,
authorization, consent, order, filing, registration or notification is required
to be obtained by the Company from, or made or given by the Company to, any
Governmental Authority or any other Person in connection with the execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby, except for such approvals,
authorizations, consents, orders, filings, registrations or notifications of
which the failure to obtain is not reasonably likely to have a Material Adverse
Effect.
Section 3.6 Litigation. As of the date hereof, the Company is not
engaged in, or a party to, or to the Knowledge of the Company, threatened with,
any legal action or other proceeding, at law or in equity, before any
Governmental Authority. The Company is not subject to any outstanding judgment,
injunction, order or decree of any court or Government Authority to which the
Company is a party which adversely affects the operations of the Company.
Section 3.7 Brokers' Fees. Except for fees payable to WR Hambrecht +
Co., LLC, the Company has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which the Company, Parent or Merger Sub could
become liable or obligated. A true and correct copy of the Company's engagement
letter with WR Hambrecht + Co., LLC has been provided to Parent.
16
Section 3.8 Reports and Financial Information.
(a) The Company has filed all forms, reports, proxy statements
and documents required to be filed with the SEC pursuant to the Exchange Act
since April 8, 1999, including, without limitation, Annual Report on Form 10KSB
for the fiscal year ended June 30, 2000 and Quarterly Reports on Form 10QSB for
the quarters ended December 31, 1999, March 31, 2000, September 30, 2000 and
December 31, 2000, respectively (all such reports and amendments thereto,
collectively, the "Company SEC Reports"), and has previously furnished or made
available to Parent true and complete copies of all of the Company SEC Reports
filed with the SEC (including any exhibits thereto). As of their respective
dates, the Company SEC Reports complied in all material respects with the
requirements of the Exchange Act or the Securities Act and the rules and
regulations of the SEC promulgated thereunder, as the case may be, applicable to
such Company SEC reports, and none of the Company SEC Reports, as of their
respective dates (as amended through the date hereof), contained any untrue
statement of a material fact or omitted a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Each of the balance sheets (including the related notes)
included in the Company SEC Reports fairly presents the financial position of
the Company as of the date thereof, and the other related financial statements
(including the related notes) included therein fairly present the results of
operations and the changes in cash flows of the Company for the respective
periods set forth therein, all in conformity with GAAP consistently applied
during the periods involved, except as otherwise noted therein and subject, in
the case of the unaudited interim financial statements, to (i) normal year end
adjustments; and (ii) the permitted exclusion of all footnotes that would
otherwise be required by GAAP.
(c) The Company does not have any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on, or reserved against in, a balance sheet of the
Company or described or referred to in the notes thereto, prepared in accordance
with GAAP, except for (i) liabilities or obligations that were so reserved on,
or reflected in (including the notes to), the balance sheets included in the
Company SEC Reports, (ii) liabilities or obligations arising in the ordinary
course of business (including trade indebtedness) since December 31, 2000, and
(iii) liabilities or obligations to WR Hambrecht + Co., LLC, pursuant to the
financial arrangements described in Section 3.7, expenses and costs of counsel
and other advisers incurred by the Company in connection with the transactions
contemplated by this Agreement, and (iv) liabilities or obligations which do not
constitute a Material Adverse Effect.
Section 3.9 Absence of Certain Changes or Events. Since December 31,
2000, the Company has not:
(a) taken any of the actions prohibited in Section 5.1 hereof;
17
(b) incurred any material liability, except in the ordinary
course of its business, consistent with past practices;
(c) made any change in accounting principles except insofar as
may have been required by a change in GAAP or Applicable Law; or
(d) suffered or incurred any Damages (whether or not covered
by insurance) with respect to any of the tangible assets of the Company which
have had a Material Adverse Effect.
Section 3.10 Taxes.
(a) The Company has made available to Parent all Tax Returns
filed by the Company for all periods ending on or after June 30, 1997 and before
the date of this Agreement, and supporting information, claims for refunds of
Taxes and any amendments, supplements, or other information supplied to the
taxing authorities for all such periods. The Company has filed all Tax Returns
required by law to be filed by it prior to the date of this Agreement, and such
Tax Returns are true, complete and correct in all material respects. The Company
has paid or made adequate provision in accordance with GAAP in the financial
statements included in the Company SEC Reports for the payment of all material
Taxes which have accrued or have become payable. All Taxes that the Company has
been required to withhold or to collect have been duly withheld or collected and
all withholdings and collections either have been duly and timely paid over to
the appropriate Governmental Authorities or are, together with the payments due
or to become due in connection therewith, duly reflected on the financial
statements of the Company. There are no audits, examinations, administrative
proceedings or court proceedings, pending or proposed with regard to any Taxes
or Tax Returns filed by the Company. The Company has not given or been requested
to give waivers or extensions of any statute of limitations relating to the
filing of Tax Returns or the assessment of Taxes for which the Company may have
any undisclosed liability, except for any waiver or extension which has expired
or any extensions resulting from the filing of a Tax Return after its original
due date in the ordinary course of business. To the Knowledge of the Company no
claim has ever been made by any Governmental Authority in a jurisdiction where
the Company does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. The Tax Returns of the Company have not been audited by
the IRS (or the appropriate statute of limitations has expired) for any fiscal
years through the fiscal year ending June 30, 2000.
(b) The Company (i) is not a party to any agreement providing
for the allocation, payment or sharing of Taxes between the Company, on the one
hand, and any Third Party, on the other hand; (ii) does not have an application
pending with respect to any Tax requesting permission for a change in accounting
method; (iii) has not filed a consent to the application of Code Section 341(f)
or any similar state or local tax elections; (iv) has no liability for Taxes for
any Person (other than the Company) under Treasury Regulation Section 1.15026
(or any similar provision of state, local or foreign income tax law), as
transferee, successor, by contract or otherwise; and (v) has maintained its
records with respect to Taxes in a commercially reasonable manner.
18
(c) Section 3.10 of the Company's Disclosure Letter lists (i)
all Tax Returns required to be filed within 45 days after the date of this
Agreement, and (ii) all states where the Company files income or franchise Tax
Returns.
Section 3.11 Employee Matters.
(a) Company Employee Plans.
(i) Section 3.11(a) of the Company's Disclosure
Letter sets forth a true and complete list of each Company Employee Plan. A true
and correct copy of each Company Employee Plan as currently in effect and, if
applicable, the most recent annual report, summary plan description, trust
agreement and any determination letter issued by the IRS for each Company
Employee Plan have been delivered to or will be made available for review by
Parent.
(ii) None of the Company Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any Person other
than coverage mandated by applicable law or benefits, the full cost of which is
borne by the retiree.
(iii) The Company has complied in all material
respects with ERISA, the Code and all laws and regulations applicable to the
Company Employee Plans, and each Company Employee Plan has been maintained and
administered in material compliance with its terms.
(iv) Each Company Employee Plan intended to qualify
under Section 401(a) of the Code has been determined by the IRS to so qualify
pursuant to a favorable determination letter after January 1, 1989, and each
trust maintained pursuant thereto has been determined by the IRS to be exempt
from taxation under Section 501 of the Code. Nothing has occurred to the
Knowledge of the Company which may reasonably be expected to impair such
determination of any Company Employee Plan and its related trust.
(v) No Company Plan is covered by Title IV of ERISA
or Section 412 of the Code. No fact or event exists which could give rise to any
liability under Title IV of ERISA or Section 412 of the Code.
(vi) With respect to each Company Employee Plan:
(1) no prohibited transactions (as defined in
Section 406 or 407 of ERISA or Section 4975 of the Code) have occurred for which
a statutory, administrative or class exemption is not available; and
(2) no action or claims (other than routine
claims for benefits made in the ordinary course of Company Employee Plan
administration for which Company Employee Plan administrative review procedures
have not been exhausted) are pending or, to the Knowledge of the Company,
threatened or imminent against or with respect to any Company Employee Plan, any
employer who is
19
participating (or who has participated) in any Company Employee Plan or any
fiduciary (as defined in Section 3(21) of ERISA), of the Company Employee Plan.
(vii) All of the Company Employee Plans, to the
extent applicable, are in compliance in all material respects with the
continuation of group health coverage provisions continued in Section 4980B of
the Code and Sections 601 through 608 of ERISA ("COBRA"). The Company does not
maintain or contribute to any plan that provides health benefits to an employee
after the employee's termination of employment or retirement except as required
under COBRA.
(viii) All reports, forms and other documents
required to be filed with any Government Authority or furnished to employees,
former employees or beneficiaries with respect to any Company Employee Plan
(including summary plan descriptions, Forms 5500 and summary annual reports)
have been timely filed and finished and are accurate.
(ix) The Company has made all contributions due and
payable as of or prior to the date hereof to the Company Employee Plans for all
periods ending prior to the date hereof.
(x) All insurance premiums due and payable as of or
prior to the date hereof for insurance coverages under the Company Employee
Plans have been paid in full, subject only to normal retrospective adjustments
in the ordinary course, with regard to the Company Employee Plans for plan years
ending on or before the Closing Date.
(xi) All expenses and liabilities relating to all of
the Company Employee Plans have been, and will on the Closing Date be, fully and
properly accrued on the Company's books and records and disclosed in accordance
with GAAP and in the financial statements of the respective Company Employee
Plans.
(xii) Each of the Company Employee Plans provides
that it may be amended or terminated at any time and, except for benefits
protected under Section 411(d) of the Code, all benefits payable to current,
terminated employees or any beneficiary may be amended or terminated by Parent
or the Company at any time without liability.
(xiii) The Company does not have liability nor is it
threatened with any liability (whether joint or several) (1) for any excise tax
imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code, or (2) to a fine
under Section 502 of ERISA.
(xiv) There are no negotiations, demands or proposals
which are pending or have been made which concern matters now covered, or that
would be covered, by the type of agreement required to be listed in Section
3.11(a) of the Company's Disclosure Letter.
20
(b) Employees. The employment of each Employee is terminable
by the Company at will. The Company is not a party to, nor is it bound by any
employment agreement. Section 3.11(b) of the Company's Disclosure Letter sets
forth the aggregate accrued vacation pay of the Employees as of March 31, 2001.
Section 3.12 Material Contracts.
(a) Section 3.12(a) of the Company's Disclosure Letter
includes a list of the following agreements, Contracts or other instruments in
effect and binding upon the Company (including all amendments thereto)
(collectively, the "Material Contracts"): (i) agreements, Contracts or other
instruments which have been filed by the Company with the SEC pursuant to the
requirements of the Exchange Act as "material contracts"; (ii) agreements,
Contracts or other instruments which are required to be filed by the Company
with the SEC pursuant to the requirements of the Exchange Act as "material
contracts" and have not been filed; (iii) each Company Employee Plan; (iv) any
agreement or indenture relating to the borrowing of money in excess of $150,000
in principal amount or mortgaging, pledging or otherwise placing a Lien (other
than a Permitted Lien) on any portion of the Company's assets to secure an
obligation in excess of $150,000 in principal amount; (v) guaranty of any
obligation for borrowed money in excess of $150,000 in principal amount; (vi)
all of the leases, subleases, licenses and other material agreements relating to
or constituting real property; (vii) any lease or agreement under which it is
lessee of or holds or operates any personal property owned by any other party
with annual payments of at least $150,000; (viii) contract or group of related
contracts with the same party for the supply of wine to any Person or providing
for deliveries extending beyond December 31, 2001 with annual payments in excess
of $150,000; (ix) any contract or group of related contracts with the same party
for the purchase of goods (including grapes or bulk wine), inventories, supplies
or services, under which the undelivered balance of such goods, inventories,
supplies or services has a purchase price in excess of $150,000; (x) any
contract or group of related contracts with the same party for the sale of
products or services in an amount in excess of $150,000; (xi) manufacturer's
representative, sales agency and distribution contracts and agreements that have
a term of one year or more and are not terminable by the Company on notice of
six months or less without penalty; (xii) contracts and agreements prohibiting
or materially restricting the ability of the Company to compete in any
geographic area with any Person, other than (A) distribution (including
independent sales representative) contracts and agreements that have a term of
less than one year or are terminable by the Company on notice of six months or
less without penalty, and, in each case, which are not material to the Company
and (B) supplier and customer agreements relating to nondisclosure of
confidential information of the other party which are not material to the
Company; (xiii) any other contract or commitment involving the payment by or to
the Company of $150,000 or more (whether in cash or other assets) in any twelve
month period or more (whether in cash or other assets) than $150,000 in the
aggregate over the life of the contract; (xiv) stockholder, voting trust or
similar contracts and agreements relating to the voting of shares or other
equity or debt interests of the Company known to the Company; or (xv) joint
venture agreements, partnership agreements and other similar contracts and
agreements involving a sharing of profits and expenses. The Company has made
available to Parent, prior to the date hereof, true,
21
correct and complete copies in all material respects of each such Material
Contract. To the Knowledge of the Company, the representations made in this
Section 3.12(a) would also be true and correct if the references to $150,000 in
this Section 3.12(a) were reduced to $50,000, so long as Material Contracts for
the purchase or sale of grapes and wine are not included.
(b) (i) The Company has not breached, is not in default under,
and has not received written notice of any breach of or default under (or, would
be in default, breach or violation with notice or lapse of time, or both), any
Material Contract, (ii) to the Knowledge of the Company, no other party to any
of the Material Contracts has breached or is in default of any of its
obligations thereunder, and (iii) each of the Material Contracts is in full
force and effect, and will continue to be in full force and effect following
consummation of the transactions contemplated hereby, except in any such case
for breaches, defaults or failures that in the aggregate do not have a Material
Adverse Effect.
Section 3.13 Regulatory Compliance.
(a) The Company is in compliance with all Applicable Laws,
except for instances of noncompliance that individually or in the aggregate have
not had a Material Adverse Effect. The Company has not received from any
Governmental Authority any written notice alleging any violation of Applicable
Laws, except for instances of noncompliance that individually or in the
aggregate have not had a Material Adverse Effect, or claiming any liability of
the Company as a result of any such alleged violation which is reasonably likely
to have a Material Adverse Effect.
(b) The Company holds all permits, licenses, variances,
exemptions, consents, certificates, orders and approvals from Governmental
Authorities which are necessary to the operation of the Company as it is now
being conducted (collectively, the "Company Permits"). The Company is in
compliance with the terms of the Company Permits, except for failures to comply
which have not had a Material Adverse Effect. The Company has not received
written notice that any Company Permit will be terminated or modified or cannot
be renewed in the ordinary course of business, and to the Knowledge of the
Company there is no reasonable basis for any such termination, modification or
nonrenewal. Section 3.13(b) of the Company's Disclosure Letter sets forth a
complete and accurate listing of all of the Company Permits issued to, possessed
by, or otherwise in effect with respect to the Company.
(c) The subject matters of Sections 3.5, 3.6, 3.8, 3.10, 3.11,
3.15, 3.16, 3.18, 3.20 and 3.22 are excluded from the provisions of this Section
3.13.
Section 3.14 Real Property.
(a) Section 3.14(a) of the Company's Disclosure Letter lists
(i) all leases entered into by the Company for any real property to which the
Company is a party as a lessee as of the date hereof (the "Lease Agreements"),
setting forth in the case of any such lease, the location of such real property
and (ii) all real properties to which the
22
Company owns fee simple title (the "Owned Real Property"), setting forth the
legal description of each such Owned Real Property. To the knowledge of the
Company, (iii) the Company has good and marketable title to all of its Owned
Real Property and valid leasehold interests of record in and to all real
property that is the subject of the Lease Agreements (the "Leased Real
Property"), and (iv) neither the Owned Real Property nor the Leased Real
Property is subject to any rights of any other Person or entity that are
superior to such interests of the Company, other than easements of record and
the matters set forth in Section 3.14(a) and Section 3.14(b) of the Company's
Disclosure Letter provided that these items in the Disclosure Letter do not
materially interfere with the present use or occupation of the Owned Real
Property or Leased Real Property.
(b) Each of the Lease Agreements is in full force and effect
and constitutes a valid and binding obligation of the Company. To the Knowledge
of the Company, no default of the landlord or the Company has occurred under any
Lease Agreement nor has any event occurred which, with the giving of notice or
the passage of time or both, would constitute a default of the landlord or the
Company thereunder. The Company has not received any written notice alleging
that the Company is in default under any Lease Agreement.
(c) The Company has received no written notice that any entity
or governmental authority considers the operation, use or ownership of the Owned
Real Property or the Leased Real Property to have violated any zoning, land use
or similar laws, ordinances, rules, regulations or administrative
interpretations applicable thereto, or that any investigation has been commenced
regarding such possible violation. To the Knowledge of the Company, and except
as noted in the Company's Disclosure Letter, the present use and operation of
the Owned Real Property and the Leased Real Property is in compliance with all
existing zoning, land use and similar laws, ordinances, rules, regulations or
administrative interpretations applicable thereto.
(d) No condemnation or eminent domain proceeding against any
part of the Owned Real Property or Leased Real Property is pending or, to the
Knowledge of the Company, threatened.
(e) All operating facilities located on the Owned Real
Property and the Leased Real Property are supplied with utilities and other
services, assuming the operation of such utilities, in such amounts as are
reasonably necessary for the current operation of such facilities, including
gas, electricity, water, waste water, irrigation, drainage, and similar
reasonably required services.
Section 3.15 Intellectual Property.
(a) Attached as Section 3.15(a) of the Company's Disclosure
Letter is a list of each material Proprietary Asset owned by or licensed to the
Company which is necessary or required for the operation of the business of the
Company as currently conducted, together with a designation of ownership. The
Company is, or upon consummation of the transactions contemplated hereby will
be, the owner of all right,
23
title and interest in and to each such Proprietary Asset or has the right to use
each such Proprietary Asset as required to conduct its business as now operated.
No registration of a Proprietary Asset listed on Section 3.15(a) of the
Company's Disclosure Letter has expired, been cancelled or abandoned. None of
the past or present Employees, officers, directors or shareholders of the
Company have any ownership rights in any of the Proprietary Assets.
(b) All registered trademarks listed in Section 3.15(a) of the
Company's Disclosure Letter are registered, solely in the name of the Company,
(i) on the Principal or Supplemental Register of the United States Patent and
Trademark Office, and (ii) with the appropriate foreign authorities necessary
for protection of the trademarks in all foreign markets where the Company's
trademarks are used, and each registration is valid, in full force and effect,
and enforceable.
(c) To the Knowledge of the Company, the Company is not
infringing, and has not at any time infringed or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement of, any Proprietary Asset owned or used by any other
Person. To the Knowledge of the Company, no other Person is infringing any
Proprietary Asset owned or used by the Company.
(d) The Company has not licensed or sublicensed any party to
use any of the Proprietary Assets identified in Section 3.15(a) of the Company's
Disclosure Letter.
(e) There are no judgments, decrees or orders pending against
or affecting any Proprietary Asset owned or used by the Company.
Section 3.16 Environmental Matters.
(a) The operations of the Company have been and are in
compliance in all material respects with all applicable Environmental Laws,
including without limitation the possession of and compliance with all permits,
licenses, authorizations and approvals required under applicable Environmental
Laws. There are, and have been, no past or present events, conditions,
circumstances, activities, practices, incidents or actions which could
reasonably be expected to interfere with or prevent continued compliance with
any applicable Environmental Law in any material respect.
(b) The Company has not received any written complaint, claim,
notice or request for information concerning any violation, or any liability
under, any applicable Environmental Laws during the past seven years.
(c) There are no writs, injunctions, decrees, orders or
judgments outstanding, relating to compliance by the Company with, or liability
of the Company under, any applicable Environmental Laws.
(d) There are no environmental liens, declarations or deed
restrictions affecting the properties of the Company.
24
(e) No Hazardous Substances have been stored or otherwise held
or released on, under or about any properties owned by, leased by or leased to,
or operated by the Company during the Company's period of ownership, lease or
operation of the property, and to the Knowledge of the Company, no Hazardous
Substances had been stored or otherwise held or released on, under or about any
properties owned by, leased by or leased to, or operated by the Company prior to
the Company's period of ownership, lease or operation of the property.
(f) No underground storage tanks currently exist or, to the
Knowledge of the Company, have existed on any properties currently owned by,
leased by or leased to, or operated by the Company. No underground storage tanks
existed on any properties previously owned by, leased by or leased to, or
operated by the Company during the Company's period of ownership, lease, or
operation of the property, and to the Knowledge of the Company, no underground
storage tanks existed on any properties previously owned by, leased by or leased
to, or operated by the Company prior to the Company's period of ownership,
lease, or operation of the property.
(g) The Company (i) has not disposed of or buried any
Hazardous Substances located in or on any properties currently or previously
owned by, leased by or to, or operated by the Company, nor have any been
released except in full compliance with all applicable Environmental Laws; (ii)
has not received any written notice from any Person or entity alleging that the
Company has disposed of any Hazardous Substance on any properties currently or
previously owned by, leased by or to, or operated by the Company; or (iii) has
not disposed of any Hazardous Substance on thirdparty sites in violation of any
Environmental Law or incurred any liability for the unlawful generation,
treatment, storage or disposal, of Hazardous Substances.
Section 3.17 Title to and Condition of Assets.
(a) Section 3.17 of the Company's Disclosure Letter lists all
leases entered into by the Company for any personal property to which the
Company is a party as a lessee ("Leased Personal Property").
(b) The assets as reflected in the balance sheet included in
the Company's Quarterly Report on Form 10QSB for the quarterly period ended
December 31, 2000, and the Leased Personal Property constitute all of the assets
held for use or used primarily in connection with the business of the Company
and are adequate to carry on the business of the Company as currently conducted
other than those assets that have been disposed of in the ordinary course of
business consistent with past practice. All of the tangible personal property
used in the operation of the business of the Company is in good operating
condition and repair, except for ordinary wear and tear. Except for any Leased
Personal Property, the Company has legal title to each of its tangible personal
property assets, free and clear of any Lien, other than Permitted Liens.
(c) Each lease for Leased Personal Property is in full force
and effect and constitutes a valid and binding obligation of the Company, except
to the extent failure to constitute a valid and binding obligation would not
reasonably be expected to
25
have a Material Adverse Effect. No default of the Company has occurred under any
such leases nor has any event occurred which, with the giving of notice or the
passage of time or both, would constitute a default of the Company thereunder,
except to the extent that any such default would not reasonably be expected to
have a Material Adverse Effect. As of the date hereof, there is no pending or,
to the Knowledge of the Company, threatened action that would interfere with the
quiet enjoyment of such leaseholds by the Company.
Section 3.18 Product Recall. The Company has not, for the past three
years, recalled any products made, bottled, distributed or sold by the Company
and it is not now nor has it ever been under any obligation to do so, and there
is no reasonable basis known to the Company for any such recall.
Section 3.19 Grape Vines. The grape vines on the vineyard portion of
the Owned Real Property and Leased Real Property are in good condition, and free
in all material respects of disease, infestation or other defects.
Section 3.20 Labor Matters.
(a) The Company is not a party to or otherwise bound by any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization and has not received written notice of
any proposed union certification or recognition election with respect to the
Company, nor is the Company the subject of any proceeding asserting that Company
has committed an unfair labor practice pending, or, to the Knowledge of the
Company, threatened before the National Labor Relations Board or any court of
law or is seeking to compel the Company to bargain with any labor union or labor
organization nor is there pending or, to the Knowledge of the Company,
threatened, nor has there been for the past five years, any labor strike,
dispute, walkout, work stoppage, slowdown or lockout involving the Company.
(b) The Company is in compliance with all Applicable Laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except for instances of noncompliance that
individually or in the aggregate have not had a Material Adverse Effect. There
are no charges, investigations, administrative proceedings or formal complaints
of discrimination (including discrimination based upon sex, age, marital status,
race, color, religion, national origin, sexual preference, disability, handicap
or veteran status) pending or, to the Knowledge of the Company, threatened
before the Equal Employment Opportunity Commission or any federal, state or
local agency or court against the Company.
Section 3.21 Opinion of Financial Advisor. The Company has received the
opinion of WR Hambrecht + Co., LLC, to the effect that, as of the date thereof,
the Merger Consideration is fair to the holders of the Company Common Stock from
a financial point of view.
26
Section 3.22 Takeover Statutes. No "fair price," "moratorium," "control
share acquisition" or other similar antitakeover statute is applicable to the
Merger, except for such statutes or regulations as to which all necessary action
has been taken by the Company and its board of directors to permit the
consummation of the Merger in accordance with the terms hereof.
Section 3.23 Insurance. Section 3.23 of the Company's Disclosure Letter
sets forth the insurance policies maintained by the Company and their respective
coverage and renewal dates. All of such insurance policies are in full force and
effect and the Company is not in material default with respect to its
obligations under any of such insurance policies. No notice of cancellation or
termination or rejection of any claim has been received by the Company with
respect to any such policy in the last year. The Company has been covered during
the past five years by insurance in scope and amount customary and reasonable
for the businesses in which it has been engaged during such period, and, to the
Knowledge of the Company, no contractor, lessee or licensee which performed
services and/or engaged in the production of wine on behalf of the Company was
not or are not covered by insurance in scope and amount customary and reasonable
for the business in which they have engaged during such period.
Section 3.24 Distributor Relations. Section 3.24 of the Company's
Disclosure Letter sets forth the Company's five largest customers (measured by
revenues) as of February 28, 2001, and the revenues from each such customer and
from all customers (in the aggregate) for the eight month period then ended.
None of such five largest customers of the Company has advised the Company that
it is (x) terminating or considering terminating the handling of its business by
the Company (prior to or after the Effective Time) as a whole or in respect of
any particular product, or (y) planning to reduce, in any material amount, its
future spending with the Company (prior to or after the Effective Time).
Section 3.25 Suppliers. Section 3.25 of the Company's Disclosure Letter
sets forth the Company's five largest suppliers (measured by expense) as of
February 28, 2001, and the expense from each such supplier for the eight month
period then ended. None of such suppliers of the Company has advised the Company
that it is (x) terminating or considering terminating its business with the
Company (prior to or after the Effective Time) as a whole or in respect of any
particular product, or (y) planning to reduce, in any material amount, its
future sales to the Company (prior to or after the Effective Time).
Section 3.26 Related Party Transactions. No executive officer or
director of the Company or, to the Knowledge of the Company, any individual in
such officer's or director's immediate family is a party to any agreement,
contract, commitment or transaction with the Company or has any interest in any
real or personal property used by the Company.
27
Section 3.27 No Other Representations or Warranties
(a) Except for the representations and warranties contained in
this Article III and the Company's Disclosure Letter, neither the Company nor
any other Person makes any express or implied representation or warranty on
behalf of the Company, and the Company hereby disclaims any such other
representation or warranty.
(b) In particular, without limiting the foregoing disclaimer,
except as stated in this Article III and the Company's Disclosure Letter, no
Person makes or has made any representation or warranty to Parent or Merger Sub
with respect to (i) any financial projection or forecast relating to the Company
or its business or (ii) any oral or written information presented to Parent or
Merger Sub during any management presentation including any question and answer
session thereto or any oral or written information provided to Parent or Merger
Sub in the course of its due diligence investigation of Parent or its business,
the negotiation of this Agreement or in the course of the transaction
contemplated hereby. Further to the extent that the Company has provided or may
provide to Parent or Merger Sub information from any inspection, engineering or
environmental report, the Company makes no representations or warranties with
respect to the accuracy, completeness or methodology of preparation or otherwise
concerning such reports. With respect to any projection or forecast delivered by
or on behalf of the Company to Parent or Merger Sub, each of Parent and Merger
Sub acknowledges that (i) there are uncertainties inherent in attempting to make
such projection and forecasts, (ii) it is familiar with such uncertainties,
(iii) it is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all such projections and forecasts so furnished to it
and (iv) it shall have no claim against any Person with respect thereto other
than a claim for fraud, bad faith or intentional misrepresentation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly each and severally, hereby represent and
warrant to the Company, except as set forth in the Parent's SEC Reports or the
Parent's Disclosure Letter:
Section 4.1 Due Incorporation. Each of the Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted and to own, operate or lease all of its
properties and assets. True and complete copies of the Certificate of
Incorporation or Articles of Incorporation and Bylaws of the Parent and Merger
Sub with all amendments and restatements thereto through the date hereof have
been provided to the Company prior to the date hereof.
Section 4.2 Due Authorization of Transaction; Binding Obligation. Each
of Parent and Merger Sub has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder, and the
execution, delivery and performance of this Agreement by Parent and Merger Sub
have been duly authorized by
28
all necessary corporate action on the part of Parent and Merger Sub; this
Agreement has been duly executed and delivered by Parent and Merger Sub and is
the valid and binding obligation of Parent and Merger Sub enforceable in
accordance with its terms, subject to the qualification, however, that
enforcement of the rights and remedies created hereby is subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general application relating to or affecting creditors' rights and to general
equity principles. No further approval by the board of directors, shareholders
or other security holders of Parent or Merger Sub is required for the execution,
delivery and performance of this Agreement by Parent or Merger Sub, including
without limitation the consummation of the Merger.
Section 4.3 NonContravention. The execution, delivery and performance
of this Agreement by Parent and Merger Sub and the consummation of the
transactions contemplated hereby do not and will not (a) contravene the
Certificate of Incorporation or Bylaws or other charter or organizational
documents of Parent or Merger Sub, (b) conflict with or violate any Applicable
Law, and (c) conflict with or result in a breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in any loss of any material benefit, or the creation
of any Lien on any of the property or assets of the Parent and each of its
subsidiaries pursuant to any Contract, judgment, decree, order or ruling to
which Parent and each of its subsidiaries is a party or by which it or any of
its assets or properties is bound or affected, except for such contraventions,
violations, conflicts, breaches, defaults, rights creation or Lien creation
which individually or in the aggregate have not had, or is not reasonably likely
to have a Parent Material Adverse Effect.
Section 4.4 Government Approvals, Consents, and Filings. No approval,
authorization, consent, order, filing, registration or notification is required
to be obtained by Parent or any of its subsidiaries from, or made or given by
Parent or any of its subsidiaries to, any Governmental Authority or other Person
in connection with the execution, delivery and performance of this Agreement by
Parent or any of its subsidiaries and the consummation of the transactions
contemplated hereby, except for such approvals, authorizations, orders, filings,
registrations or notifications of which the failure to obtain, individually or
in the aggregate, is not reasonably likely to have a Parent Material Adverse
Effect.
Section 4.5 Litigation. As of the date hereof, Parent and Merger Sub
are not engaged in, or a party to, or threatened with, any legal action or other
proceeding before any Governmental Authority, which seeks to restrain,
materially modify or invalidate the transactions contemplated by this Agreement.
Section 4.6 Financing. Parent and Merger Sub will have, as and when
required, the funds available as is necessary to consummate the transactions
contemplated hereby in accordance with the terms hereof.
Section 4.7 Finder's Fees; Brokers. Neither Parent nor Merger Sub has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with
29
respect to the transactions contemplated by this Agreement for which the Company
could become liable or obligated.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Conduct of Business of the Company Pending the Merger. The
Company agrees that except as expressly contemplated by this Agreement, or as
contemplated by the Company's Disclosure Letter, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time:
(a) The business of the Company shall be conducted only in the
ordinary and usual course of business and consistent with past practices.
(b) The Company shall not without the prior consent of Parent
(which consent shall not be unreasonably withheld or delayed) (i) amend its
Articles of Incorporation or Bylaws; or (ii) split, combine or reclassify any
shares of its outstanding capital stock, declare, set aside or pay any dividend
or other distribution payable in cash, stock or property in respect of its
capital stock, or directly or indirectly redeem, purchase or otherwise acquire
any shares of its capital stock or other securities.
(c) The Company shall not without the prior consent of Parent
(which consent shall not be unreasonably withheld or delayed) (i) authorize for
issuance, issue, sell, pledge, dispose of, encumber, deliver or agree or commit
to issue, sell, pledge, or deliver any additional shares of, or rights of any
kind to acquire any shares of, its capital stock of any class (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) other than shares of Company Common Stock
issued to holders of Company Stock Options or Company Debentures or issued
pursuant to the Company ESPP; (ii) acquire, dispose of, transfer, lease,
license, mortgage, pledge or encumber any fixed or other assets other than in
the ordinary course of business and consistent with past practices; (iii) incur,
assume or prepay any material indebtedness, liability or obligation or any other
material liabilities or issue any debt securities; (iv) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person in a material
amount; (v) make any loans, advances or capital contributions to, or investments
in, any other Person; (vi) fail to maintain insurance consistent with past
practices for its business; (vii) change any accounting method or practice of
the Company except insofar as may be required by a change in GAAP or Applicable
Law; (viii) make or enter into any binding commitment for any capital
expenditures or related group of capital expenditures in excess of $10,000; (ix)
prior to the submission by the Company of its grape and bulk wine purchase plans
for calendar year 2001, and the approval of these plans by Parent, the Company
will not enter into any grape or bulk wine purchase agreement involving more
than $25,000; (x) modify, amend or terminate any Material Contract, except in
the ordinary course of business consistent with past practices; (xi) initiate
any new product promotions, product discounts or other material price changes,
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or (xii) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing.
(d) The Company shall use its reasonable best efforts to
preserve intact its business organization, to keep available the services of its
present officers and key Employees, and to preserve the goodwill of those having
business relationships with it; provided, however, that no breach of this
covenant shall be deemed to have occurred as a result of any matter arising out
of the transactions contemplated by this Agreement or the public announcement
thereof.
(e) The Company shall use reasonable best efforts to prevent
any representation or warranty of the Company herein from becoming untrue or
incorrect in any material respect.
Section 5.2 Compensation Plans. During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees that it
will not do any of the following without the prior written consent of Parent
(which consent shall not be unreasonable withheld or delayed), except as
required by Applicable Law or pursuant to existing contractual arrangements.
(a) enter into, adopt or amend any Company Employee Plans to
materially increase the benefits thereunder;
(b) grant or become obligated to grant any increase in the
compensation or fringe benefits of directors, officers or Employees (including
any such increase pursuant to any Company Employee Plans) or any increase in the
compensation payable or to become payable to any officer, except for increases
in compensation in the ordinary course of business consistent with past
practice, or enter into any contract, commitment or arrangement to do any of the
foregoing, except for normal increases and nonstock benefit changes in the
ordinary course of business consistent with past practice;
(c) make any material change in any Company Employee Plans
arrangement or enter into any employment or similar agreement or arrangement
with any employee; or
(d) enter into or renew any contract, agreement, commitment or
arrangement providing for the payment to any director, officer or employee of
compensation or benefits contingent, or the terms of which are materially
altered in favor of such individual, upon the occurrence of any of the
transactions contemplated by this Agreement.
(e) Notwithstanding anything to the contrary in this Section
5.2, the Company (i) shall be permitted to pay cash bonuses to its Employees in
the ordinary course of business in amounts consistent with past practice and to
make any changes to comply with Applicable Law; provided, however, that the
Company shall advise Parent of any such payments or changes; and (ii) shall, or
cause the plan administrator under the Company ESPP to, (y) amend the terms of
the Company ESPP effective as soon as practicable after the execution and
delivery of this Agreement such that as of the date
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hereof there shall be no new Participants (as defined in the Company ESPP) to
the plan and no existing Participant shall be allowed to increase his or her
rate of participation within the Company ESPP and (z) suspend immediately the
Company ESPP following the close of the current Purchase Period (as defined in
the Company ESPP).
Section 5.3 Voting Agreements. Concurrently herewith certain of the
Company's shareholders entered into a Voting Agreement with Parent in
substantially the form attached hereto as Exhibit A (the "Voting Agreements").
Section 5.4 No Solicitation.
(a) The Company shall not, and shall not authorize the
Company's officers, directors, Employees, Affiliates, agents or other
representatives (including any investment banker, financial advisor, attorney or
accountant retained by it) to, (i) initiate, solicit or knowingly encourage
(including by way of furnishing nonpublic information) or take any other action
to facilitate, any inquiries or the making of any proposal relating to, or that
may reasonably be expected to lead to, an Alternative Transaction, or enter into
discussions (except as to the existence of this Section 5.4) or negotiate with
any Person for the purpose of facilitating an Alternative Transaction, (ii)
agree to, or recommend, any Alternative Transaction, or (iii) enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger.
(b) The Company shall promptly notify Parent of all material
terms of any proposals for an Alternative Transaction received by the Company or
by any officer, director, Employee, agent, investment banker, financial advisor,
attorney, accountant or other representative of the Company relating to any of
such matters, and if such proposal is in writing, the Company shall promptly
deliver or cause to be delivered to Parent a copy of such proposal. The Company
shall keep Parent reasonably apprised of the status and material terms of any
proposal relating to an Alternative Transaction on a current basis.
(c) The Company shall use its reasonable best efforts to cause
its directors, officers, Employees, agents and representatives immediately to
cease all existing activities, discussions and negotiations with any parties
conducted heretofore with respect to any Alternative Transaction and use its
reasonable best efforts to ensure that no directors, officers, Employees, agents
or representatives, directly or indirectly, undertakes any such activities
during the term of this Agreement. If the board of directors of the Company
learns of any such action, the Company shall use reasonable best efforts to
cause the party or parties undertaking such action to cease such action
immediately. The Company shall promptly notify the officers, directors and
Employees of the Company and any investment banker or other advisor or
representative retained by the Company of the restrictions described in this
Section 5.4.
(d) Nothing contained in this Agreement shall prohibit the
board of directors of the Company, the Company, and each of its officers,
directors, Employees, Affiliates, agents or other representatives (including any
investment banker, financial advisor, attorney or accountant retained by the
Company) from (i) referring a Third Party
32
to this Section 5.4, (ii) furnishing information to, entering into a
confidentiality agreement with, or entering into discussions or negotiations
with, any Person in connection with an unsolicited bona fide proposal by such
Person relating to an Alternative Transaction if, and only to the extent that
(A) the board of directors of the Company, after consultation with the Company's
financial advisors, believes in good faith that such proposal could lead to a
Superior Proposal and (B) prior to furnishing such information to, or entering
into discussions or negotiations with, such Person the Company provides written
notice to Parent to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such Person, (iii) complying with Rule
14e2 promulgated under the Exchange Act or making such disclosure to the
Company's shareholders as, in the good faith determination of the Company's
board of directors, is required by Applicable Law, (iv) recommending a Superior
Proposal, provided, that the terms of Section 5.4(e) are met, or (v) entering
into an agreement or understanding with respect to a Superior Proposal,
provided, that the terms of Section 5.4(f) are met.
(e) The Company agrees that neither the board of directors of
the Company nor any committee thereof will (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent, the
recommendation of the board of directors of the Company with respect to the
Merger or (ii) approve or recommend, or propose publicly to approve or
recommend, any Alternative Transaction. Notwithstanding the foregoing or any
other provision of this Agreement to the contrary, if, prior to the Effective
Time, (x) in response to a bona fide unsolicited proposal with respect to an
Alternative Transaction (including following any actions permitted by paragraph
(d)), the board of directors of the Company determines, in its good faith
judgment taking into account the advice of its financial advisor and outside
counsel, that such proposal is a Superior Proposal, or (y) under circumstances
not related to an Alternative Transaction, the Company's board of directors,
after consultation with outside counsel, determines in good faith that failure
to take such action would breach its fiduciary duties to the Company's
shareholders under Applicable Law, the board of directors of the Company may
(subject to this and the following sentences) take any or all of the actions
described in the preceding sentence; provided, that the Company shall
immediately inform Parent orally and in writing of the material terms and
conditions of such Alternative Transaction and the identity of the Person making
it, or such other circumstances, and if any Alternative Transaction is in
writing, the Company shall immediately deliver a copy thereof to Parent, if the
Company has not already done so pursuant to Section 5.4(b). Nothing in this
Section 5.4(e) shall in any way limit or otherwise affect Parent's right to
terminate this Agreement pursuant to Section 8.1. Any withdrawal or modification
of the recommendation of the board of directors of the Company shall not change
the approval of the board of directors of the Company for purposes of causing
any state takeover statute or other state law to be inapplicable to the
transactions contemplated hereby, including the Merger.
(f) Notwithstanding any other provision of this Agreement, if,
prior to the Effective Time, in response to a bona fide unsolicited proposal
with respect to an Alternative Transaction (including following any actions
permitted by paragraph (d)), if the board of directors of the Company
determines, in its good faith judgment taking into
33
account the advice of its financial advisor and outside counsel, that such
proposal is a Superior Proposal, the board of directors of the Company may
(subject to this and the following sentence) terminate this Agreement; provided,
that the Company gives Parent at least two Business Days prior written notice of
its intention to terminate this Agreement, during which two Business Day or
longer period, the Company if requested by Parent engages in good faith
negotiations with Parent with respect to such changes as Parent may propose to
the terms of this Agreement. Nothing in this Section 5.4(f) shall in any way
limit or otherwise affect Parent's right to terminate this Agreement pursuant to
Section 8.1.
Section 5.5 Conduct of Business by Parent and Merger Sub Pending the
Merger. During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, Parent
and Merger Sub shall not engage in any action or enter into any transaction or
permit any action to be taken or transaction to be entered into that could
reasonably be expected to delay the consummation of, or otherwise adversely
affect, any of the transactions contemplated by this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Shareholder Approvals. The Company shall promptly call a
meeting of its shareholders (the "Shareholder Meeting") for the purpose of
obtaining the approval and adoption of this Agreement and the Merger. The
Shareholder Meeting shall be held as soon as practicable following the date upon
which the Proxy Statement becomes effective, and the Company will, through its
board of directors (except to the extent that the board of directors of the
Company would otherwise be allowed to withdraw or modify its recommendation
pursuant to Section 5.4(e)) recommend to its shareholders the approval and
adoption of this Agreement and the Merger.
Section 6.2 Proxy Statement.
(a) The Company shall prepare and file with the SEC a
preliminary Proxy Statement relating to the Merger and this Agreement, and use
its reasonable best efforts (x) to obtain and furnish the information required
to be included by Applicable Law in the preliminary Proxy Statement and, after
consultation with Parent, to respond promptly to any comments made by the SEC
with respect to the Proxy Statement, and (y) to cause the Proxy Statement and
any amendment or supplement thereto, to be mailed to its shareholders, provided,
that the Company (1) will promptly notify Parent of its receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements of the Proxy Statement or for additional information;
(2) will promptly provide Parent with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement or the Merger and
(3) will not amend or supplement the Proxy Statement without first consulting
with Parent and its counsel, and (z) to obtain the necessary approvals of the
Merger and this Agreement by its shareholders to the extent required by the
California Code.
34
(b) The Company shall prepare and revise the Proxy Statement
so that, at the date mailed to Company shareholders and at the time of the
Shareholder Meeting, the Proxy Statement will (x) not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order that the statements made therein, in light
of the circumstances under which they are made, are not misleading (except that
the Company shall not be responsible under this clause (b) with respect to
statements made therein based on information supplied by Parent or Merger Sub
expressly for inclusion in the Proxy Statement), and (y) comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
(c) The Company shall include in the Proxy Statement (except
to the extent that the or board of directors of the Company would otherwise be
allowed to withdraw or modify its recommendation pursuant to Section 5.4(e)) the
recommendation of such Board that shareholders of the Company vote in favor of
the approval of the Merger and the adoption of this Agreement.
(d) Parent shall furnish to the Company such information
concerning itself and Merger Sub, for inclusion in the Proxy Statement, as may
be requested by the Company and required to be included in the Proxy Statement.
Such information provided by Parent and Merger Sub in writing expressly for
inclusion in the Proxy Statement will not, at the date the Proxy Statement is
filed with the SEC, and mailed to Company shareholders and (including any
corrections or modifications made by Parent or Merger Sub to such information)
at the time of the Shareholder Meeting, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order that the statements made therein, in light of the
circumstances under which they were made, are not misleading.
(e) Parent shall vote or cause to be voted all shares of
Company Common Stock beneficially owned by Parent or Merger Sub, or which Parent
or Merger Sub have the power to vote or direct the vote of in favor of, adoption
of the Merger and the Merger.
Section 6.3 Access to Information; Confidentiality.
(a) Upon reasonable notice and subject to restrictions
contained in confidentiality agreements to which such party is subject, the
Company shall afford to the officers, Employees, accountants, counsel and other
representatives of Parent reasonable access, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and
records. The Company shall furnish promptly to the Parent all information
concerning its business, properties and personnel as Parent may reasonably
request, and the Company shall make available to Parent the appropriate
individuals (including attorneys, accountants and other professionals) for
discussion of the Company's business, properties and personnel as Parent may
reasonably request. Prior to the Closing, at the request of Parent, the Company
will deliver to Parent an unaudited balance sheet as of the most recent month
ending at least 15 Business Days prior to the then scheduled Closing Date and
the related financial statements for such
35
month. Subject to Section 6.3(b), Parent shall keep such information
confidential in accordance with the terms of the letter agreement, dated
February 16, 2001 (the "Confidentiality Agreement") between Parent and the
Company. Neither Parent nor the Company shall disclose to any sales
representatives, distributors, brokers, customers, suppliers or Employees of the
Company any information concerning the transactions contemplated by this
Agreement without the prior written consent of the other party.
(b) The Company agrees that Parent may use, and the Company
shall deliver, such consents of the Company and shall request the Company's
outside public accountants to deliver such consents as may be reasonably
requested by Parent to the use of the financial and other information provided
pursuant to Section 6.3(a); provided that the Company shall have the right, not
to be unreasonably withheld, to consent in advance to the public disclosure by
Parent of the Company's confidential information.
(c) The Company and Parent shall file all reports required to
be filed by each of them with the SEC between the date of this Agreement and the
Effective Time and shall deliver to the other party copies of such reports
promptly after the same are filed. Such reports will comply in all material
respects with the requirements of the Exchange Act or the Securities Act and the
rules and regulations promulgated thereunder, as applicable, and none of such
reports, as of their respective dates, will contain any untrue statement of
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
Section 6.4 Consents; Approvals.
(a) The Company and Parent shall coordinate and cooperate with
one another and shall each use their reasonable best efforts to promptly obtain
(and shall each refrain from taking any willful action that would impede
obtaining) all consents, waivers, approvals, authorizations or orders
(including, without limitation, all rulings, decisions or approvals by any
Governmental Authority), and the Company and Parent shall each use their
reasonable best efforts to promptly make all filings (including, without
limitation, the premerger notification filings required under the HSR Act, and
all other filings with Governmental Authorities), required in connection with
the authorization, execution and delivery of this Agreement by the Company and
Parent and the consummation by them of the transactions contemplated hereby.
(b) Each party hereby agrees to use its reasonable best
efforts to file the premerger notification report, and all other documents to be
filed in connection therewith, required by the HSR Act and the Premerger
Notification Rules promulgated thereunder with the United States Federal Trade
Commission and the United States Department of Justice as soon as practicable
following the date hereof, but in any event within five days following the date
hereof. Each party shall respond promptly to any request for additional
information that may be issued by either Federal Trade Commission or Department
of Justice and shall use reasonable best efforts to assure that the waiting
period required by the HSR Act has expired or been terminated prior to the date
that is 30 days after such filing.
36
(c) The Company and Parent shall furnish all information
required to be included in any Proxy Statement, or for any application or other
filing to be made pursuant to the rules and regulations of any Governmental
Authority in connection with the transactions contemplated by this Agreement.
Except where prohibited by applicable statutes and regulations, and subject to
the Confidentiality Agreement, each party shall coordinate with one another in
preparing and exchanging such information, and shall promptly provide the other
(or its counsel) with copies of all filings, presentations or submissions made
by such party with any Governmental Authority in connection with this Agreement
or the transactions contemplated hereby. Each of Parent and Company shall
promptly make all necessary filings with Governmental Authorities and shall
promptly provide the other party with copies of filings made by such party
between the date hereof and the Effective Time.
Section 6.5 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause any representation or warranty contained in
this Agreement to be materially untrue or inaccurate and (ii) any failure of the
Company, Parent or Merger Sub, as the case may be, to materially comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.5 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice and further provided that failure
to give such notice shall not be treated as a breach of a covenant hereunder
unless the failure to give such notice results in material prejudice to the
other party.
Section 6.6 Further Assurances. Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, and
to assist and cooperate with the other parties hereto in doing, as promptly as
practicable, all other things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and to
otherwise satisfy or cause to be satisfied all conditions precedent to its
obligations under this Agreement.
Section 6.7 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release with respect to the Merger or
this Agreement and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which shall not
be unreasonably withheld or delayed; provided, however, that a party may,
without the prior consent of the other party, issue such press release or make
such public statement as may upon the advice of counsel be required by law or
the NASD or the NYSE if it has used reasonable best efforts to consult with the
other party.
Section 6.8 Conveyance Taxes. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added,
37
stock transfer and stamp taxes, any transfer, recording, registration and other
fees, and any similar Taxes which become payable in connection with the
transactions contemplated hereby that are required or permitted to be filed on
or before the Effective Time.
Section 6.9 Director and Officer Liability.
(a) For a period of six years after the Effective Time, Parent
will, and will cause the Surviving Corporation to, indemnify and hold harmless
(and make advances as incurred to) the present and former officers and directors
of the Company in respect of acts or omissions occurring at or prior to the
Effective Time to the extent provided under the Company's Articles of
Incorporation and Bylaws in effect on the date hereof.
(b) Parent will and will cause the Surviving Corporation to
perform any indemnification agreements between the Company and any of its
directors, officers and Employees in force as of immediately prior to the
Effective Time.
(c) For a period of six years after the Effective Time, Parent
shall cause to be maintained in effect the policies of directors' and officers'
liability insurance maintained by the Company for the benefit of those Persons
who are covered by such policies at the date hereof or the Effective Time (or
Parent and/or the Surviving Corporation may substitute therefor policies of at
least the same coverage with respect to matters occurring prior to the Effective
Time); provided, that the Parent and/or the Surviving Corporation shall not be
required to pay an annual premium in excess of two hundred percent (200%) of the
last annual premium paid by the Company prior to the date hereof which is set
forth in Section 3.23 of the Company's Disclosure Letter and if the Surviving
Corporation is unable to obtain the insurance required by this Section 6.9(c) it
shall obtain as much comparable insurance as possible for an annual premium
equal to such maximum amount.
(d) The provisions of this Section 6.9 are intended for the
benefit of, and may be enforced by, each Person entitled to indemnification
under this Section 6.9.
Section 6.10 Action by Parent and Company's Boards. Prior to the
Effective Time, the boards of directors of Parent and the Company shall each
comply as applicable with the provisions of the SEC's noaction letter dated
January 12, 1999 addressed to Skadden, Arps, Slate, Meagher and Flom LLP
relating to Section 16(b) of the Exchange Act.
Section 6.11 Employee Benefits.
(a) Parent agrees that all Employees of the Company other than
the Company's current directors who continue employment with Parent, the
Surviving Corporation or any subsidiary thereof after the Effective Time (the
"Continuing Employees") shall be provided such employment on terms and
conditions that, in the aggregate, substantially as favorable as provided by the
Company as of the Effective
38
Time with respect to wages and salaries, provided, that the Company has not
otherwise breached Section 5.2 hereof with respect to increases in wages and
salaries.
(b) As of the Effective Time through the period ending
February 28, 2002, Parent shall, or shall cause the Surviving Corporation to,
establish and maintain compensation and benefit plans and arrangements for
Continuing Employees that, in the aggregate, are no less favorable than those
currently provided by the Company to the Continuing Employees as of the
Effective Time (excluding any stock options or other stockbased compensation),
except as required by Applicable Law. From and after March 1, 2002, and until
February 28, 2004, Parent shall, or shall cause the Surviving Corporation to,
treat Continuing Employees no less favorably than employees of Parent, in the
aggregate, who are in comparable positions and at comparable locations and shall
give each Continuing Employee past service credit under its compensation and
benefit plans and arrangements and for all employee benefits purposes for
service with the Company prior to the Effective Time as if such service had been
with Parent; provided, that such credit for past service with the Company shall
be solely for purposes of vesting and eligibility, but not benefit accrual.
Parent shall honor, or cause the Surviving Corporation to honor, in accordance
with their terms and bear any cost associated with all employee benefit
obligations to current and former Employees of the Company accrued as of the
Effective Time. Through February 28, 2002, Parent agrees to provide, or cause
the Surviving Corporation to provide, to Continuing Employees the currently
provided coverage under the Company's existing medical, dental and health plans
or under comparable plans or arrangements. Parent agrees that the Surviving
Corporation shall be responsible for providing all legallymandated continuation
coverage for Continuing Employees and their covered dependents who experience a
loss of coverage due to a "qualifying event" (within the meaning of Section 603
of ERISA) which occurs at any time on or after the Effective Time. Nothing in
this Section 6.11 is intended to create any employment obligation other than as
employees at will who may be terminated with or without cause.
Section 6.12 Payment of Accrued Bonuses. As of the Effective Time, the
annual bonus for the fiscal year ending June 30, 2001, for each Employee shall
accrue in full and be payable by the Company to the extent not previously paid
by the Company. Parent shall cause the Surviving Corporation to pay such bonuses
as soon as practicable after the Effective Time.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; and there shall
not be any action taken, or any statute,
39
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated and any other applicable waiting period under any
other premerger notification statute of a foreign jurisdiction, to the extent
material, has either expired or been terminated.
(c) Shareholder Approval. This Agreement and the Merger shall
have been approved and adopted by the shareholders of the Company.
Section 7.2 Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are also subject to
the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
on and as of the Effective Time (except (i) for changes contemplated by this
Agreement, (ii) those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such date
(subject to the qualifications in clause (iii) below)); and (iii) where the
failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "material
adverse effect" or "Knowledge of the Company" set forth therein) would not have
a Material Adverse Effect) with the same force and effect as if made on and as
of the Effective Time, and Parent and Merger Sub shall have received a
certificate to such effect signed by the President and Chief Financial Officer
of the Company.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed by the President and Chief Financial Officer of the Company.
(c) Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred a Material Adverse Effect.
Section 7.3 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct on and as of the Effective Time (except (i) for changes contemplated
by this Agreement, (ii) those representations and warranties which address
matters only as of a particular date), and the Company shall have received a
certificate to such effect signed by the President and Chief Financial Officer
of Parent.
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(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed by the President and Chief Financial Officer of Parent.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company:
(a) by mutual written consent duly authorized by the boards of
directors of Parent and the Company; or
(b) by either Parent or the Company, if the Merger shall not
have been consummated by September 28, 2001 (the "Final Date"), (provided that
the right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been a principal cause of or resulted in the failure of the Merger
to occur on or before such date and such action or failure to act constitutes a
material breach of this Agreement); or
(c) by either Parent or the Company, if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a nonappealable final order, decree or ruling or taken any
other action, in each case having become final and nonappealable, having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, except if the party relying on such order, decree or ruling or other
action has not complied with its obligations under Sections 6.4; or
(d) by Parent or the Company if, at the Shareholder Meeting
(including any adjournment or postponement thereof), the requisite vote of the
shareholders of the Company for approval and adoption of this Agreement and the
Merger shall not have been obtained; or
(e) by Parent, if (i) the board of directors of the Company
shall withdraw, modify or change its recommendation of this Agreement or the
Merger in a manner adverse to Parent or shall have resolved to do any of the
foregoing; or (ii) the board of directors of the Company shall have recommended
to the shareholders of the Company an Alternative Transaction; or
(f) by the Company, pursuant to Section 5.4(f); or
(g) by Parent or the Company, upon a material breach of any
representation, warranty, covenant or agreement on the part of the Company or
Parent, respectively, set forth in this Agreement such that the conditions set
forth in Section 7.2(a) or 7.2(b), or Section 7.3(a) or 7.3(b), would not be
satisfied, provided, that
41
if such breach is curable through the exercise of reasonable best efforts, then
the other party may not terminate pursuant to this Section 8.1(g) in respect of
such breach if such breach shall have been cured within 30 days following notice
by the other party of such breach, provided the breaching party continues to use
reasonable best efforts to cure such breach during the 30 day period (it being
understood that (i) the other party may not terminate this Agreement pursuant to
this Section 8.1(g) after notice of such breach if such breach shall have been
cured within 30 days or the party seeking to terminate shall then be in material
breach of this Agreement and (ii) no cure period shall be required for a breach
which by its nature cannot be cured).
Section 8.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or shareholders; provided, however, that
nothing in this Section 8.2 shall relieve any party from liability for breach of
this Agreement or for fees and expenses as set forth in Section 8.3, and that
this Section 8.2 and Section 8.3 shall survive indefinitely any termination of
this Agreement.
Section 8.3 Fees and Expenses.
(a) Except as set forth in this Section 8.3, (i) all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, if the
Merger is not consummated, or (ii) if the Merger is consummated, then the
Surviving Corporation shall pay all such fees and expenses.
(b) The Company shall pay Parent a fee of $8,000,000 in cash
(the "Fee") upon the occurrence of both of the following events:
(i) the termination of this Agreement by Parent or
the Company pursuant to (A) Section 8.1(d) or 8.1(e)(i), provided, that an
Alternative Transaction shall have been publicly announced prior to the time the
Company seeks the approval and adoption of this Agreement and the Merger by its
shareholders and such proposed Alternative Transaction has not been withdrawn by
the Third Party or otherwise affirmatively rejected by the Board of Directors of
the Company; (B) Section 8.1(e)(ii) or (C) Section 8.1(f); and
(ii) the proposed Alternative Transaction is
consummated within eighteen months of the date of such termination.
(c) The Fee payable pursuant to Section 8.3(b) shall be paid
within one business day after the consummation of the Alternative Transaction
which gives rise to the obligation to make such payment.
42
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Effectiveness of Representations, Warranties and
Agreements; Knowledge, Etc.
(a) Except as otherwise provided in this Section 9.1, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any Person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that the agreements set
forth in Article II and Section 6.3 shall survive the Effective Time
indefinitely and the agreements and liabilities set forth or otherwise described
in Section 8.2 or Section 8.3 shall survive termination indefinitely. The
Confidentiality Agreement shall survive termination of this Agreement as
provided therein.
(b) Any disclosure made with reference to one or more Sections
of the Company's Disclosure Letter or the Parent Disclosure Letter shall be
deemed disclosed with respect to each other section therein as to which such
disclosure is relevant provided that such relevance is reasonably apparent;
provided, that the Company, with respect to the Company's Disclosure Letter, and
Parent, with respect to the Parent Disclosure Letter, shall exercise reasonable
best efforts to cross reference the sections where a disclosure made in the
applicable Disclosure Letter is applicable to more than one representation or
warranty.
Section 9.2 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered if delivered personally, the third Business Day after
deposit in the U.S. mail, if mailed by registered or certified mail (postage
prepaid, return receipt requested), or the next Business Day if delivered by a
commercial courier guaranteeing overnight delivery to the parties at the
following addresses (or at such other address for a party as shall be specified
by like changes of address which shall be effective upon receipt) or as of the
date delivered if sent by facsimile transmission, with confirmation received, to
the facsimile number specified below:
(a) If to Parent or Merger Sub:
Constellation Brands, Inc.
300 Willowbrook Office Park
Fairport, NY 14450
Attention: Richard Sands
Facsimile No.: (716) 2182160
Telephone No.: (716) 2182110
43
With copies to:
Farella, Braun & Martel LLP
Russ Building, 30th Floor
235 Montgomery Street
San Francisco, CA 94104
Attention: Jeffrey P. Newman, Esq.
Daniel E. Cohn, Esq.
Facsimile No.: (415) 9544482
Telephone No.: (415) 9544480
Constellation Brands, Inc.
300 Willowbrook Office Park
Fairport, NY 14450
Attention: Tom Mullin, Esq.
Facsimile No.: (716) 2182165
Telephone No.: (716) 2182112
(b) If to the Company:
Ravenswood Winery, Inc.
18701 Gehricke Road
Sonoma, CA 95476
Attention: Joel Peterson
Facsimile No.: (707) 9389459
Telephone No.: (707) 9381960
With copies to:
Ravenswood Winery, Inc.
26200 Arnold Dr.
Sonoma, CA 95476
Attention: Justin Faggioli
Facsimile No.: (707) 9389496
Telephone No.: (707) 9381960
Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
Attention: Robert Townsend, Esq.
Facsimile No.: (415) 2687522
Telephone No.: (415) 2687080
Section 9.3 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective boards of directors
at any time prior to the Effective Time; provided, however, that, after approval
of the Merger by the shareholders of the Company, no amendment may be made which
by law requires further
44
approval by such shareholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed by the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
Section 9.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 9.7 Entire Agreement. This Agreement (including the documents
and instruments referred to herein) constitute the entire agreement and
supersede all prior agreements and undertakings (other than the Confidentiality
Agreement), both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and, except as otherwise expressly provided
herein, are not intended to confer upon any other Person any rights or remedies
hereunder.
Section 9.8 Assignment, Merger Sub. This Agreement shall not be
assigned by operation of law or otherwise without the prior written consent of
Parent and the Company, except that Parent and Merger Sub may assign all or any
of their rights hereunder to any Affiliate of Parent provided that no such
assignment shall relieve the assigning party of its obligations hereunder.
Section 9.9 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, except as provided in Sections 2.4(f), 6.9 and 6.12 hereof.
Section 9.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of California
applicable to
45
contracts executed and fully performed within the State of California, without
regard to the conflicts of laws provisions thereof.
Section 9.11 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
Section 9.12 WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
[SIGNATURE PAGE FOLLOWS]
46
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement and Plan Merger to be executed as of the date first written above by
their respective officers thereunto duly authorized.
CONSTELLATION BRANDS, INC.
By: /s/ Richard Sands
--------------------------------
Name: Richard Sands
--------------------------------
Title: President
--------------------------------
VVV ACQUISITION CORP.
By: /s/ Agustin Francisco Huneeus
--------------------------------
Name: Agustin Francisco Huneeus
--------------------------------
Title: President
--------------------------------
RAVENSWOOD WINERY, INC.
By: /s/ W. Reed Foster
--------------------------------
Name: W. Reed Foster
--------------------------------
Title: Chairman and CEO
--------------------------------
ANNEX B
April 9, 2001
Board of Directors
Ravenswood Winery, Inc.
18701 Gehricke Road
Sonoma, California
Ladies and Gentlemen:
We understand that Ravenswood Winery, Inc., a California corporation
("Ravenswood" or the "Company"), Constellation Brands, Inc., a Delaware
corporation ("Constellation" or the "Parent") and VVV Acquisition Corp., a
Delaware corporation and wholly-owned subsidiary of Parent ("Merger Sub"),
propose to enter into an Agreement and Plan of Merger, a draft of which has been
provided to us (the "Agreement"), pursuant to which Merger Sub will be merged
with and into the Company, which will be the surviving entity and which will
become a wholly-owned subsidiary of Parent (the "Merger"). In the Merger, as
more fully described in the Agreement, the consideration (the "Consideration")
for each outstanding share of Common Stock of the Company will be $29.50 in
cash. The terms and conditions of the Merger are set forth in more detail in the
Agreement.
You have asked our opinion as investment bankers as to whether the
Consideration to be received by the shareholders of the Company under the
Agreement pursuant to the Merger is fair to such shareholders from a financial
point of view, as of the date of the Agreement. As you are aware, we were
retained to assist the Company in soliciting indications of interest from
certain designated third parties for all of the Company. Furthermore, we helped
advise the Company with respect to alternative offers and the Company's
underlying decision to proceed with the Parent to effect the Merger.
In connection with our opinion, we have, among other things: (i) reviewed
certain information, primarily financial in nature, including but not limited to
internal and non-public information furnished to us by the Company on the
business and operations of the Company, as well as publicly available
information, including but not limited to, the Company's and Parent's filings
with the Securities and Exchange Commission; (ii) held discussions with members
of the Company's and Parent's respective management teams concerning the
historical and current operations of the Company and Parent, as well as the
future prospects of the Company and the Parent; (iii) reviewed the financial
terms and conditions of the Agreement in the form presented to the Company's
Board of Directors; (iv) analyzed the pro-forma financial position of the
Parent; (v) compared the trading range of the Company's common stock with the
market prices of certain other publicly traded companies we deemed relevant;
(vi) compared the proposed financial terms of the Merger with the financial
terms of certain other transactions we deemed relevant; (vii) completed a
discounted cash flow analysis on the Company on a stand-alone basis;
Board of Directors
Ravenswood Winery, Inc.
April 9, 2001
Page Two
and (viii) performed such other analyses and examinations as we have deemed
appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. We have also assumed that there
have been no material changes in the Company's assets, financial condition,
results of operations, business or prospects since the respective dates of their
last financial statements made available to us. We have relied on advice of
counsel and independent accountants to the Company as to all legal and financial
reporting matters with respect to the Company, the Merger and the Agreement. We
have assumed that the Merger will be consummated in a manner that complies in
all respects with the applicable provisions of the Securities Act of 1933 (the
"Securities Act"), the Securities Exchange Act of 1934 and all other applicable
federal and state statutes, rules and regulations. In addition, we have not
assumed responsibility for reviewing any trademarks, licenses, agreements,
individual credit files, etc. or making an independent evaluation, appraisal or
physical inspection of any of the assets or liabilities (contingent or
otherwise) of the Company, nor have we been furnished with any such appraisals.
Finally, our opinion is based on economic, monetary and market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Accordingly, although subsequent developments may affect this
opinion, we have not, by delivering this opinion, assumed any obligation to
update, revise or reaffirm this opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the Agreement, without any
further amendments thereto, and without waiver by the Company of any of the
conditions to its obligations thereunder. We also have assumed that in the
course of obtaining the necessary regulatory approvals for the Merger, no
restrictions will be imposed that could have a material adverse effect on the
contemplated benefits of the Merger.
We will receive a fee for our services in rendering this opinion. In
addition, we will receive an additional fee upon consummation of the Merger. In
the ordinary course of our business, we have from time to time traded the
securities of the Company for our own account or the accounts of our customers
and, accordingly, may at any time hold long or short positions in such
securities. Currently, W.R. Hambrecht + Co., LLC holds shares and debentures
representing approximately 7.6% of the Company on a fully diluted basis.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
the Company pursuant to the Merger is fair to such shareholders from a financial
point of view, as of the date hereof.
Board of Directors
Ravenswood Winery, Inc.
April 9, 2001
Page Three
This opinion is directed to the Board of Directors of the Company in its
consideration of the Merger and is not a recommendation to any shareholder as to
whether such shareholder should vote to approve and adopt the Agreement and the
Merger, nor is any person or entity entitled to rely hereon other than the Board
of Directors of the Company. Further, this opinion addresses only the financial
fairness of the Consideration to be received by the shareholders of the Company
and does not address the relative merits of the Merger and any alternatives to
the Merger, the Company's underlying decision to proceed with or affect the
Merger or any other aspect of the Merger. Except as set forth in the engagement
letter dated March 12, 2001, this opinion may not be used or referred to by the
Company, or quoted or disclosed to any person in any manner, or filed with any
regulatory authority without our prior written consent.
Very truly yours,
W.R. HAMBRECHT+CO, LLC
ANNEX C
VOTING AGREEMENT
VOTING AGREEMENT, dated as of April 10, 2001 (this "Agreement"), among
Constellation Brands, Inc., a Delaware corporation ("Parent"), VVV Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger
Sub") and each of the shareholders of the Company set forth on Schedule A hereto
(each, a "Shareholder" and, collectively, the "Shareholders").
RECITALS:
A. Parent, Merger Sub and Ravenswood Winery, Inc., a California
corporation (the "Company"), propose to enter into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Parent will acquire the Company through a merger of Merger Sub with and into the
Company on the terms and subject to the conditions set forth in the Merger
Agreement. Except as otherwise defined herein, terms used herein with initial
capital letters have the respective meanings ascribed thereto in the Merger
Agreement.
B. As of the date hereof, each Shareholder beneficially owns (as such
term is defined in Rule 13d-3 of the Exchange Act) and is entitled to vote (or
to direct the voting of) the number of shares of common stock of the Company
("Shares") set forth in the column entitled "Common Shares" opposite such
Shareholder's name on Schedule A hereto (such Shares, together with any Shares
of which the Shareholder acquires beneficial ownership with entitlement to vote
(or to direct the voting of) during the period from and including the date
hereof through and including the date on which this Agreement is terminated
pursuant to Section 4.2 hereof, are collectively referred to herein as such
Shareholder's "Subject Shares").
C. As a condition and inducement to their willingness to enter into
the Merger Agreement, Parent and Merger Sub have requested that each Shareholder
agree, and each Shareholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
I. VOTING OF SUBJECT SHARES
1.1 Agreement to Vote Subject Shares.
--------------------------------
(a) Merger Agreement. From the date hereof until this
Agreement is terminated pursuant to Section 4.2, at any meeting of the
shareholders of the Company called to consider and vote upon the adoption of the
Merger Agreement (and at any and all postponements and adjournments thereof),
and in connection with any action to be taken in respect of the adoption of the
Merger Agreement by written consent of shareholders of the Company, each
Shareholder will vote or cause to be voted (including by written consent, if
applicable) all of such Shareholder's Subject Shares which such Shareholder has
the right to vote in favor of the adoption of the Merger Agreement and in favor
of any other matter necessary or appropriate for
the consummation of the transactions contemplated by the Merger Agreement that
is considered and voted upon at any such meeting or made the subject of any such
written consent, as applicable.
(b) Adverse Proposal. From the date hereof until this
Agreement is terminated pursuant to Section 4.2, at any meeting of the
shareholders of the Company called to consider and vote upon any Adverse
Proposal (and at any and all postponements and adjournments thereof), and in
connection with any action to be taken in respect of any Adverse Proposal by
written consent of shareholders of the Company, each Shareholder at Parent's or
Merger Sub's request will vote or cause to be voted (including by written
consent, if applicable) all of such Shareholder's Subject Shares which it has
the right to vote against the adoption of such Adverse Proposal. For purposes of
this Agreement, the term "Adverse Proposal" means (a) any Alternative
Transaction, (b) any proposal or action that would reasonably be expected to
result in a breach of any covenant, agreement, representation or warranty of the
Company set forth in the Merger Agreement, or (c) the following actions (other
than the Merger and the other transactions contemplated by the Merger
Agreement): (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company; (ii) a sale,
lease or transfer of a material amount of assets of the Company, or a
reorganization, recapitalization, dissolution or liquidation of the Company; or
(iii) (1) any change in the present capitalization of the Company or any
amendment of the Company's articles of incorporation or bylaws, as amended to
date; or (2) any other action that is intended, or could reasonably be expected,
to impede, interfere with, delay, postpone, or adversely affect the Merger and
the other transactions contemplated by this Agreement and the Merger Agreement.
1.2 Irrevocable Proxy.
-----------------
(a) Grant of Proxy. Each Shareholder hereby appoints Parent
and any designee of Parent, each of them individually, such Shareholder's proxy
and attorney-in-fact, with full power of substitution and resubstitution, to
vote or act by written consent with respect to all of such Shareholder's Subject
Shares which it has the right to vote (i) in accordance with Section 1.1 hereof
and (ii) to sign its name (as a shareholder) to any consent, certificate or
other document relating to the Company that the law of the State of California
may permit or require in connection with any matter referred to in Section 1.1.
This proxy is given to secure the performance of the duties of such Shareholder
under this Agreement and its existence will not be deemed to relieve the
Shareholders of their obligations under Section 1.1. Each Shareholder affirms
that this proxy is coupled with an interest and is irrevocable until termination
of this Agreement pursuant to Section 4.2, whereupon such proxy and power of
attorney shall automatically terminate. Each Shareholder will take such further
action or execute such other instruments as may be necessary to effectuate the
intent of this proxy. For Subject Shares as to which the Shareholder is the
beneficial but not the record owner, the Shareholder will use reasonable best
efforts to cause any record owner of such Subject Shares to grant to Parent a
proxy to the same effect as that contained herein. The proxy granted herein is
intended to comply with the requirements of Section 705 of the California
Corporations Code applicable to irrevocable proxies.
(b) Other Proxies Revoked. Each Shareholder represents that
any proxy heretofore given in respect of such Shareholder's Subject Shares is
not irrevocable, and hereby revokes any and all such proxies.
II. REPRESENTATIONS AND WARRANTIES
2.1 Certain Representations and Warranties of the Shareholders.
Each Shareholder, severally and not jointly, represents and warrants to Parent
and Merger Sub, as of the date hereof, as follows:
(a) Ownership. Such Shareholder is the beneficial owner of the
number of Shares, the options to acquire the number of Shares ("Existing
Options") and the principal amount of the Convertible Debentures (the
"Convertible Debentures") convertible into Shares set forth opposite such
Shareholder's name on Schedule A hereto. Such Shareholder has full and
unrestricted power to vote pursuant to this Agreement the Shares described in
the column entitled "Common Shares" opposite such Shareholder's name on Schedule
A hereto. Such Shareholder will, upon exercise of the Existing Options, have
full and unrestricted power to vote pursuant to this Agreement any Shares for
which the Existing Options are exercisable ("Option Shares"). Such Shareholder
will, upon conversion of the Convertible Debentures, have full and unrestricted
power to vote pursuant to this Agreement any Shares for which such Convertible
Debenture may be converted ("Debenture Shares"). Except as set forth opposite
such Shareholder's name on Schedule A hereto, such Shareholder (i) does not
beneficially own any securities of the Company on the date hereof; (ii) does
not, directly or indirectly, beneficially own or have any option, warrant or
other right to acquire any securities of the Company that are or may by their
terms become entitled to vote or any securities that are convertible or
exchangeable into or exercisable for any securities of the Company that are or
may by their terms become entitled to vote, nor is such Shareholder subject to
any contract, commitment, arrangement, understanding or relationship (whether or
not legally enforceable), other than this Agreement, that allows or obligates
him to vote or acquire any securities of the Company; and (iii) holds exclusive
power to vote the Subject Shares pursuant to this Agreement, subject to the
limitations set forth in this Agreement.
(b) Power and Authority; Execution and Delivery. Such
Shareholder, if it is not a natural person, is a limited partnership, limited
liability company, corporation or other entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization.
Such Shareholder has all requisite partnership, corporate or individual, as
applicable, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement.
This Agreement has been duly executed and delivered by such Shareholder and
constitutes a valid and binding obligation of such Shareholder, enforceable
against such Shareholder in accordance with its terms, except that
enforceability may be limited by bankruptcy, reorganization, insolvency or other
laws affecting the enforceability of creditors' rights generally.
(c) No Conflicts. The execution and delivery of this Agreement
do not, and, subject to compliance with the HSR Act and appropriate filings
under securities laws (which such Shareholder agrees to make promptly), to the
extent applicable, the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, result in a violation or breach of, or constitute a default
(or an event that, with notice or lapse of time or both, would result in a
default) or give rise to any right of termination, amendment, cancellation,
notice or acceleration under, (i) if applicable, such Shareholder's certificate
of incorporation, certificate of limited partnership, articles of organization,
operating agreement, partnership agreement or similar constituent documents,
(ii) any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which such Shareholder is a party or by which such
Shareholder is bound, (iii) any injunction, judgment, writ, decree, order or
ruling applicable to such Shareholder or (iv) any law, statute, rule or
regulation applicable to the Shareholder; except in the case of clauses (ii),
(iii) and (iv) for conflicts, violations, breaches or defaults that would not
impair the ability of such Shareholder timely to perform its obligations under
this Agreement.
2.2 Representations and Warranties of Parent and Merger Sub.
Parent and Merger Sub hereby jointly and severally represent and warrant to each
Shareholder, as of the date hereof, that:
(a) Organization; Authority. Each of Parent and Merger Sub is
a corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation. Each of Parent and Merger Sub has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
(b) Execution and Delivery. This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and, assuming that this
Agreement constitutes a valid and binding obligation of the other parties
hereto, constitutes a valid and binding obligation of each of Parent and Merger
Sub, enforceable against Parent and Merger Sub in accordance with its terms,
except that enforceability may be limited by bankruptcy, reorganization,
insolvency or other laws affecting the enforceability of creditors' rights
generally.
(c) No Conflicts. Neither the execution and delivery of this
Agreement nor the performance by Parent or Merger Sub of its respective
obligations hereunder will conflict with, result in a violation or breach of, or
constitute a default (or an event that, with notice or lapse of time or both,
would result in a default) or give rise to any right of termination, amendment,
cancellation, or acceleration under, (i) Parent's or Merger Sub's certificate of
incorporation, bylaws or similar constituent documents, (ii) any contract,
commitment, agreement, understanding, arrangement or restriction of any kind to
which Parent or Merger Sub is a party or by which Parent or Merger Sub is bound,
(iii) any judgment, writ, decree, order or ruling applicable to Parent or Merger
Sub, or (iv) any law, statute, rule or regulation applicable to Parent or Merger
Sub; except in the case of clauses (ii), (iii) and (iv) for conflicts,
violations, breaches or defaults that would not impair the ability of Parent or
Merger Sub timely to perform its respective obligations under this Agreement.
III. CERTAIN COVENANTS OF SHAREHOLDERS
3.1 Restriction on Transfer of Subject Shares, Proxies and
Noninterference. No Shareholder will, directly or indirectly: (a) except
pursuant to the terms of this Agreement and for the conversion of Subject Shares
at the Effective Time pursuant to the terms of the Merger Agreement, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of such
Shareholder's Subject Shares, other than any sale, transfer or assignment to
members of such Shareholder's family, a family trust of such Shareholder or a
charitable institution if the transferee of such Subject Shares agrees in
writing to be bound by the terms hereof and notice of such sale, transfer or
assignment, including the name and address of the purchaser, transferee or
assignee, is delivered to Parent pursuant to Section 4.6. hereof; (b) except
pursuant to the terms of this Agreement, grant any proxies or powers of
attorney, deposit any Subject Shares into a voting trust or enter into a voting
agreement with respect to any Subject Shares; or (c) take any action that would
reasonably be expected to make any of its representations or warranties
contained herein untrue or incorrect or have the effect of impairing the ability
of such Shareholder to perform such Shareholder's obligations under this
Agreement or preventing or delaying the consummation of any of the transactions
contemplated hereby. Notwithstanding the other provisions of this Section 3.1,
Robert McGill, III, may transfer his Subject Shares to a charitable institution
at any time following the shareholder record date established by the Company for
the special meeting of the Company's shareholders to consider approval and
adoption of the Merger and the Merger Agreement; provided that any such transfer
shall not alter the obligations of Mr. McGill, as a Shareholder under this
Agreement, to otherwise vote for and support the Merger Agreement in accordance
with the terms of this Agreement.
3.2 Adjustments.
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(a) In the event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares of capital
stock or other securities of the Company on, of or affecting the Shares or the
like or any other action that would have the effect of changing a Shareholder's
ownership of the Company's capital stock or other securities or (ii) a
Shareholder becomes the beneficial owner of any additional Shares or other
securities of the Company, then the terms of this Agreement will apply to the
shares of capital stock held by the Shareholder immediately following the
effectiveness of the events described in clause (i) or the Shareholder becoming
the beneficial owner thereof, as described in clause (ii), as though they were
Shares hereunder.
(b) Each Shareholder hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of any new Shares acquired by
the Shareholder, if any, after the date hereof.
3.3 No Solicitation. No Shareholder will take, or authorize any of
its officers, directors, employees, agents or representatives (including any
investment banker, financial advisor, attorney or accountant for such
Shareholder) ("Representatives") to take, any action that the Company would be
prohibited from taking under Section 5.4(a) of the Merger Agreement. Each
Shareholder will, and will use its reasonable best efforts to cause its
Representatives to,
immediately cease all existing discussions or negotiations with respect to any
of the foregoing and promptly (and in any event within one business day) advise
Parent in writing of the receipt by such Shareholder of a request for
information or any inquiries or proposals relating to an Acquisition
Transaction. Notwithstanding any provision herein to the contrary, (a) if any
Shareholder is a member of the Board of Directors of the Company, such member of
the Board of Directors of the Company may take actions in such capacity to the
extent permitted by Section 5.4 of the Merger Agreement, and (b) if any
Shareholder is an officer of the Company, such officer may take actions in such
capacity to the extent directed to do so by the Board of Directors of the
Company.
3.4 Disclosure. Each Shareholder hereby authorizes Parent and
Merger Sub to publish and disclose in any announcement or disclosure required by
the SEC or the NASDAQ Stock Market and, if approval of the Company's
shareholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC in connection with either of the
foregoing), its identity and ownership of the Shares and the nature of its
commitments, arrangements and understandings under this Agreement. Parent and
Merger Sub hereby authorize each Shareholder to make such disclosure or filings
as may be required by the SEC.
IV. MISCELLANEOUS
4.1 Fees and Expenses. Each party hereto will pay its own expenses
incident to preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
4.2 Amendment; Termination. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto. This Agreement will terminate on the earliest to occur of (a) the
Effective Time or (b) the date the Merger Agreement is terminated in accordance
with its terms. This Agreement may be earlier terminated with respect to any
Shareholder by the mutual consent of Parent or Merger Sub and such Shareholder.
Except as set forth below, in the event of termination of this Agreement
pursuant to this Section 4.2, this Agreement will become null and void and of no
effect with no liability on the part of any party hereto and all proxies granted
hereby will be automatically revoked; provided, however, that no such
termination will relieve any party hereto from any liability for any breach of
this Agreement occurring prior to such termination.
Notwithstanding anything to the contrary contained in this Agreement,
if this Agreement is terminated for any reason, Sections 4.1, 4.5, 4.15 and 4.16
and this Section 4.2 will survive any termination of this Agreement
indefinitely.
4.3 Extension; Waiver. Any agreement on the part of a party to
waive any provision of this Agreement, or to extend the time for any performance
hereunder, will be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise will not constitute a waiver of
such rights. Any waiver by any party of a breach of any provision of this
Agreement will not operate as or be construed as a waiver of any other breach of
such provision or of any breach of any other provision of this Agreement. The
failure of a party to insist upon strict
adherence to any term of this Agreement or one or more sections hereof will not
be considered a waiver or deprive that party of a right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
4.4 Entire Agreement; No Third-Party Beneficiaries; Several
Obligations. This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to such matters. This Agreement is not intended to confer upon any
Person other than the parties hereto any rights or remedies. The obligations of,
and the representations and warranties made by, each Shareholder shall be
several and not joint and shall relate only to such Shareholder.
4.5 Governing Law. This Agreement will be governed by, and
construed in accordance ith, the laws of the State of California regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
4.6 Notices. Any notice required to be given hereunder will be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to Parent or Merger Sub:
Constellation Brands, Inc.
300 Willowbrook Office Park
Fairport, NY 14450
Attention: Richard Sands
Facsimile No.: (716) 218-2160
Telephone No.: (716) 218-2110
With copies to:
Farella, Braun & Martel LLP
Russ Building, 30th Floor
235 Montgomery Street
San Francisco, California 94104
Attention: Jeffrey P. Newman, Esq.
Daniel E. Cohn, Esq.
Facsimile No.: (415) 954-4482
Telephone No: (415) 954-4480
Constellation Brands, Inc.
300 Willowbrook Office Park
Fairport, NY 14450
Attention: Tom Mullin, Esq.
Facsimile No.: (716) 218-2165
Telephone No.: (716) 218-2112
If to any Shareholder, to the address for such Shareholder
indicated on the signature page hereto,
With copies to:
Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105
Attention: Robert S. Townsend, Esq.
Facsimile No.: (415) 268-7522
Telephone No.: (415) 268-7080
or to such other address as any party specifies by written notice, such notice
being deemed to have been delivered as of the date so telecommunicated,
personally delivered or mailed.
4.7 Assignment. Neither this Agreement nor any of the rights,
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by any Shareholder without
the prior written consent of Parent or by Parent without the consent of the
applicable Shareholder (and then only with respect to such Shareholder), and any
such assignment or delegation that is not consented to will be null and void;
provided that this Agreement, together with any rights, interests, or
obligations of Parent
hereunder, may be assigned or delegated, in whole or in part, by Parent to any
direct or indirect wholly owned subsidiary of Parent without the consent of or
any action by any Shareholder upon notice by Parent to each Shareholder affected
thereby as herein provided; provided further, that any such assignment shall not
relieve Parent of its obligations hereunder. 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 (including, without
limitation, any Person to whom any Subject Shares are sold, transferred or
assigned).
4.8 Further Assurances. Each Shareholder will execute and deliver
such other documents and instruments and take such further actions as may be
necessary or appropriate or as may be reasonably requested by Parent in order to
ensure that Parent and Merger Sub receive the full benefit of this Agreement
with respect to such Shareholder, all at the expense of Parent.
4.9 Publicity. Parent, and each Shareholder will consult with each
other party before issuing any press release or otherwise making any public
statements with respect to this Agreement or the Merger Agreement or the other
transactions contemplated hereby or thereby and will not issue any such press
release or make any such public statement before such consultation, except as
may be required by law or applicable stock exchange rules.
4.10 Enforcement. 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. Accordingly, the parties
will be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they are entitled
at law or in equity.
4.11 Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such a manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
4.12 Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same instrument and
will become effective when one or more counterparts have been signed by each
party and delivered to the other parties.
4.13 Headings. The descriptive headings contained herein are for
convenience and reference only and will not affect in any way the meaning or
interpretation of this Agreement.
4.14 Remedies Not Exclusive. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity will be cumulative and not alternative, and the exercise of any
thereof by either party will not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
4.15 Jurisdiction; Consent to Service of Process.
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(a) Each party hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of the
federal and state courts of the State of California (a "California Court"), and
any appellate court from any such court, in any suit, action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment resulting from any suit, action or proceeding, and each party
hereby irrevocably and unconditionally agrees that all claims in respect of any
such suit, action or proceeding may be heard and determined in a California
Court.
(b) It will be a condition precedent to each party's right to
bring any such suit, action or proceeding that such suit, action or proceeding,
in the first instance, be brought in a California Court (unless such suit,
action or proceeding is brought solely to obtain discovery or to enforce a
judgment), and if each such court refuses to accept jurisdiction with respect
thereto, such suit, action or proceeding may be brought in any other court with
jurisdiction.
(c) No party may move to (i) transfer any such suit, action
or proceeding from a California Court to another jurisdiction, (ii) consolidate
any such suit, action or proceeding brought in a California Court with a suit,
action or proceeding in another jurisdiction, or (iii) dismiss any such suit,
action or proceeding brought in a California Court for the purpose of bringing
the same in another jurisdiction.
(d) Each party hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, (i) any objection
which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in a California Court,
(ii) the defense of an inconvenient forum to the maintenance of such suit,
action or proceeding in any such court, and (iii) the right to object, with
respect to such suit, action or proceeding, that such court does not have
jurisdiction over such party. Each party irrevocably consents to service of
process in any manner permitted by law.
4.16 Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUR OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
4.17 Fiduciary Duties. Each Shareholder is signing this Agreement
solely in such Shareholder's capacity as the beneficial owner of Subject Shares.
Nothing contained herein shall limit or affect any actions taken by such
Shareholder in his or her capacity as an officer or director of the Company and
none of such actions in any such capacity shall be deemed to constitute a breach
of this Agreement.
4.18 Obligations Several. The obligations of the Shareholders
hereunder are several and not joint.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the day and year first written above.
CONSTELLATION BRANDS, INC.
By: ____________________________
Its: ___________________________
VVV ACQUISITION CORP.
By: ____________________________
Its: ___________________________
[SHAREHOLDER]
________________________________
ANNEX D
Chapter 13 of the General Corporation Law of the State of California
DISSENTERS' RIGHTS
1300. Right to Require Purchase--"Dissenting Shares and "Dissenting Shareholder"
Defined.
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (B) listed on the National Market System of The Nasdaq Stock Market,
and the notice of meeting of shareholders to act upon the reorganization
summarizes this section and Sections 1301, 1302, 1303 and 1304; provided,
however, that this provision does not apply to any shares with respect to which
there exists any restriction on transfer imposed by the corporation or by any
law or regulation; and provided, further, that this provision does not apply to
any class of shares described in subparagraph (A) or (B) if demands for payment
are filed with respect to five percent or more of the outstanding shares of that
class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in subparagraph (A) or (B) of
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
of a short-form merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the approval
required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the record
holder of dissenting shares and includes a transferee of record.
1301. Demand for Purchase.
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to
purchase their shares for cash, such corporation shall mail to each such
shareholder a notice of the approval of the reorganization by its outstanding
shares (Section 152) within 10 days after the date of such approval, accompanied
by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of
the price determined by the corporation to represent the fair market value of
the dissenting shares, and a brief description of the procedure to be followed
if the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation to
purchase at the price stated any dissenting shares as defined in subdivision (b)
of Section 1300, unless they lose their status as dissenting shares under
Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
1302. Endorsement of Shares.
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to
the shareholder, the shareholder shall submit to the corporation at its
principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
1303. Agreed Price--Time for Payment.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
1304. Dissenter's Action to Enforce Payment.
(a) If the corporation denies that the shares are dissenting shares, or
the corporation and the shareholder fail to agree upon the fair market value of
the shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court shall
first determine that issue. If the fair market value of the dissenting shares is
in issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
1305. Appraisers' Report--Payment--Costs.
(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. ___ Within the
time fixed by the court, the appraisers, or a majority of them, shall make and
file a report in the office of the clerk of the court. Thereupon, on the motion
of any party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereon at the
legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
1306. Dissenting Shareholder's Status as Creditor.
To the extent that the provisions of Chapter 5 prevent the payment to
any holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
1307. Dividends Paid as Credit Against Payment.
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
1308. Continuing Rights and Privileges of Dissenting Shareholders.
Except as expressly limited in this chapter, holders of dissenting
shares continue to have all the rights and privileges incident to their shares,
until the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
1309. Termination of Dissenting Shareholder Status.
Dissenting shares lose their status as dissenting shares and the
holders thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
1310. Suspension of Proceedings for Payment Pending Litigation.
If litigation is instituted to test the sufficiency or regularity of
the votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
1311. Exempt Shares.
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
1312. Attaching Validity of Reorganization or Merger.
(a) No shareholder of a corporation who has a right under this chapter
to demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have
been legally voted in favor thereof; but any holder of shares of a class whose
terms and provisions specifically set forth the amount to be paid in respect to
them in the event of a reorganization or short-form merger is entitled to
payment in accordance with those terms and provisions or, if the principal terms
of the reorganization are approved pursuant to subdivision (b) of Section 1202,
is entitled to payment in accordance with the terms and provisions of the
approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF RAVENSWOOD WINERY, INC.
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _________________, 2001
The undersigned shareholder of RAVENSWOOD WINERY, INC., a California
corporation (the "Company"), hereby acknowledges receipt of the Notice of
Special Meeting of Shareholders and Proxy Statement, each dated ___________,
2001, and hereby appoints W. Reed Foster, Joel E. Peterson, Justin M. Faggioli
and Callie S. Konno, or any one of them, proxies, with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Special Meeting of Shareholders of the Company, to be held on
______________, 2001, at 11:00 a.m. local time, at the Company's Quarry
Facility, at 26200 Arnold Drive, Sonoma, California, and at any adjournment or
adjournments thereof, and to vote all shares of stock that the undersigned would
be entitled to vote if then and there personally present, on the matters set
forth below, all in accordance with and as more fully described in the
accompanying Notice of Special Meeting of Shareholders and Proxy Statement. The
undersigned hereby revokes any proxy previously given with respect to such
shares.
THIS PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, WILL BE VOTED
AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR THE
PROPOSAL SET FORTH BELOW.
Proposal: To approve the principal terms of an Agreement and Plan of
Merger, dated April 10, 2001, among the Company, Constellation Brands, Inc. and
VVV Acquisition Corp. providing for the merger of VVV Acquisition Corp. with and
into the Company, with the Company being the surviving corporation.
_____ FOR _____ AGAINST _____ ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the special meeting or any adjournment or
postponement thereof.
[PROXY SIGNATURE PAGE]
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Name of Shareholder Name of Co-Shareholder, if any
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Authorized Signature Authorized Signature
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Name of Authorized Signatory Name of Authorized Signatory
(if different from Name of Shareholder) (if different from Name of Co-Shareholder)
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Title of Authorized Signatory Title of Authorized Signatory
(if Shareholder is not an individual) (if Co-Shareholder is not an individual)
Date: Date:
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This Proxy should be marked, dated and signed by the shareholder(s), and
returned promptly in the enclosed envelope. Persons signing in a fiduciary
capacity should so indicate. If shares are held by joint tenants or as community
property, both should sign.
Whether or not you plan to attend the special meeting, you are urged to mark,
sign, date and promptly return this proxy, using the enclosed envelope.