Agreement and Plan of Merger - Wild Oats Markets Inc. and Alfalfa's Inc.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated June 4, 1996 (the "Agreement"), by
and among WILD OATS MARKETS, INC. ("Wild Oats"), a Delaware corporation,
ALFALFA'S, INC. ("Alfalfa's"), a Colorado corporation, and WO HOLDINGS, INC.
("Newco"), a Delaware corporation and wholly-owned subsidiary of Alfalfa's.
RECITALS
A. Wild Oats is a corporation duly organized and validly existing
under the corporate laws of Delaware, with its principal executive offices
located at 1668 Valtec Lane, Boulder, Colorado 90301.
B. The authorized capital stock of Wild Oats as of the date of
this Agreement consists of 2,500,000 shares of Common Stock ("Wild Oats Common
Stock"), par value $.001 per share, 1,305,684 shares of which are issued and
outstanding; and 672,000 shares of Preferred Stock, par value $.001 per share,
of which (i) 168,000 shares have been designated "Series A Preferred Stock"
(the "Wild Oats Series A Preferred Stock"), all of which are issued and
outstanding, (ii) 1,600 shares have been designated "Series B Preferred Stock"
(the "Wild Oats Series B Preferred Stock"), none of which are issued and
outstanding, and (iii) 417,983 shares of which have been designated "Series C
Preferred Stock" (the "Wild Oats Series C Preferred Stock" and, together with
the Wild Oats Series A Preferred Stock, the Wild Oats Series B Preferred Stock
and the Wild Oats Series E Preferred Stock (as defined in Section 11.1), the
"Wild Oats Preferred Stock"), 416,007 shares of which are issued and
outstanding.
C. Alfalfa's is a corporation duly organized and validly existing
under the corporate laws of Colorado with its principal executive offices
located at 1645 Broadway, Boulder, Colorado 80302.
D. The authorized capital stock of Alfalfa's as of the date of
this Agreement consists of 20,000,000 shares of Common Stock, par value $.01
per share ("Alfalfa's Common Stock"), 415,979 shares of which are issued and
outstanding; and 5,000,000 shares of Preferred Stock, par value $.01 per share,
of which (i) 200,000 shares have been designated as "Series A Participating
Convertible Preferred Stock" (the "Alfalfa's Old Series A Preferred Stock"),
179,249 shares of which are issued and outstanding, and (ii) 60,000 shares have
been designated as "Series B Convertible Preferred Stock," none of which are
issued and outstanding.
E. Newco is a corporation duly organized and validly existing
under the corporate laws of Delaware, with its principal executive offices
located at 1645 Broadway, Boulder, Colorado 80302.
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F. The authorized capital stock of Newco as of the date of this
Agreement consists of 100 shares of Common Stock, $.01 par value ("Holdings
Common Stock"), 10 shares of which are issued and outstanding and held by
Alfalfa's; prior to the Effective Time (as defined in Article II), the
authorized capital stock of Newco will consist of 4,700,476 shares of Common
Stock, 10 shares of which will be issued and outstanding and held by Alfalfa's,
and 1,799,168 shares of Preferred Stock, $.01 par value ("Holdings Preferred
Stock"), none of which will be outstanding, and of which (i) 168,598 will have
been designated as "Series A Preferred Stock" (the "Holdings Series A Preferred
Stock"), (ii) 1,608 will have been designated "Series B Preferred Stock" (the
"Holdings Series B Preferred Stock"), (iii) 419,471 will have been designated
"Series C Preferred Stock" (the "Holdings Series C Preferred Stock"), (iv)
355,829 will have been designated as "Series D Preferred Stock" (the "Holdings
Series D Preferred Stock") and (v) 853,664 will have been designated "Series E
Preferred Stock" (the "Holdings Series E Preferred Stock").
G. The respective Boards of Directors of Alfalfa's and Newco have
determined that a merger of Alfalfa's into Newco (the "Alfalfa's
Reincorporation Merger") whereby Alfalfa's will be merged with and into Newco,
with Newco surviving the merger and changing its corporate name to "Wild Oats
Markets, Inc." ("Holdings"), is desirable and in the best interests of the
stockholders of the respective companies and have, by resolutions duly adopted,
approved and adopted a merger agreement (the "Reincorporation Merger
Agreement") to effect the Alfalfa's Reincorporation Merger. The
Reincorporation Merger Agreement has been approved by Alfalfa's as the sole
stockholder of Newco by written consent pursuant to Section 228 of the General
Corporation Law of the State of Delaware (the "DGCL") and the Board of
Directors of Alfalfa's has directed that the Reincorporation Merger Agreement
and the Reincorporation Merger be submitted to a vote of the stockholders of
Alfalfa's.
H. The respective Boards of Directors of Wild Oats, Alfalfa's and
Newco have determined that a merger of Wild Oats into Holdings (the "Merger")
following completion of the Alfalfa's Reincorporation Merger is desirable and
in the best interests of the stockholders of the respective companies and have,
by resolutions duly adopted, approved and adopted this Agreement and directed
that the Agreement and the Merger be submitted to a vote of the stockholders of
Wild Oats and Alfalfa's, respectively. This Agreement and the Merger have been
approved by the sole stockholder of Newco by written consent pursuant to
Section 228 of the DGCL.
I. For the purpose of prescribing the terms and conditions of the
Merger, the mode of carrying the same into effect, the manner and basis of
exchanging or adjusting the shares of the constituent corporations, the method
of determining the effective date of the Merger, and such other details and
provisions as are deemed necessary or desirable, Wild Oats, Alfalfa's and Newco
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agree, on the terms and subject to the conditions set forth in this Agreement,
as follows:
ARTICLE I
The Merger
1.1 In accordance with the provisions of the DGCL, and as of the
Effective Time (as defined in Article II), Wild Oats shall be merged into
Holdings, and Holdings shall be, and is referred to in this Agreement as, the
Surviving Corporation, the name of which shall be "WO Holdings, Inc.," unless
and until changed in accordance with the DGCL. The corporate existence of
Holdings, with all its purposes, powers and objects, shall continue unaffected
and unimpaired by the Merger.
1.2 As of the Effective Time, the separate corporate existence of
Wild Oats shall cease, and Holdings, as the Surviving Corporation, shall
thereupon and thereafter possess all the rights, privileges, immunities and
franchises of a public, as well as a private, nature of both Wild Oats and
Holdings, and all property, whether real, personal or mixed, and all debts due
on whatever account, including subscriptions to shares, and all choses in
action, and each and every other interest of or belonging to or due Wild Oats
and Holdings shall be taken and deemed to be transferred to and vested in
Holdings as the Surviving Corporation, without further act or deed; and the
title to any real estate, or any interest therein, vested in Wild Oats and
Holdings shall not revert or be in any way impaired by reason of the Merger.
Holdings, as the Surviving Corporation, shall as of the Effective Time be
responsible and liable for all the obligations and liabilities of Wild Oats and
Holdings, and any claim existing or action or proceeding, whether civil or
criminal, pending by or against Wild Oats or Holdings may be prosecuted as if
the Merger had not taken place, or Holdings, as the Surviving Corporation, may
be substituted in its place. Neither the rights of creditors nor any liens
upon the property of Wild Oats or Holdings shall be impaired by the Merger.
ARTICLE II
Effective Time of Merger
Wild Oats and Holdings shall execute and file an appropriate
Certificate of Merger with the Secretary of State of Delaware pursuant to the
DGCL at the earliest practicable date following the satisfaction or waiver of
all conditions contained in Article XV. The Merger shall become effective at
the time and on the day as of which such Certificate of Merger shall have been
filed in accordance with the DGCL (the "Effective Time").
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ARTICLE III
Surviving Corporation
3.1 The Certificate of Incorporation of Holdings as attached
hereto as Exhibit 3.1(a) (the "Holdings Charter") shall be the Certificate of
Incorporation of the Surviving Corporation. The Bylaws of Holdings as attached
hereto as Exhibit 3.1(b) (the "Holdings Bylaws") shall continue as the Bylaws
of the Surviving Corporation. Holdings, as the Surviving Corporation, shall
continue as a business corporation governed by the laws of the State of
Delaware.
3.2 Subject to action by the Board of Directors and the
stockholders of the Surviving Corporation, (i) the directors and the members of
the compensation committee of the Board of Directors of the Surviving
Corporation shall be as set forth in Section 5.4(a), until their successors
shall have been duly elected and qualified, and the executive officers of the
Surviving Corporation shall be as set forth in Section 5.4(a), all of whom
shall serve in such positions in accordance with the Bylaws of the Surviving
Corporation.
ARTICLE IV
Conversion and Exchange of Wild Oats Shares
4.1 At the Effective Time:
(a) each issued and outstanding share of Wild Oats Common
Stock (other than those shares held by persons who have validly elected to
demand an appraisal of their shares pursuant to the DGCL) shall become and be
converted into, and shall thereafter represent only, the right to receive
1.0035584 shares of Holdings Common Stock in the manner set forth in Section
4.4;
(b) each issued and outstanding share of Wild Oats Series
A Preferred Stock shall become and be converted into, and shall thereafter
represent only, the right to receive 1.0035584 shares of Holdings Series A
Preferred Stock in the manner set forth in Section 4.4;
(c) each issued and outstanding share of Wild Oats Series
B Preferred Stock shall become and be converted into, and shall thereafter
represent only, the right to receive 1.0035584 shares of Holdings Series B
Preferred Stock in the manner set forth in Section 4.4;
(d) each issued and outstanding share of Wild Oats Series
C Preferred Stock shall become and be converted into, and shall thereafter
represent only, the right to receive 1.0035584 shares of Holdings Series C
Preferred Stock in the manner set forth in Section 4.4; and
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(e) each issued and outstanding share of Wild Oats Series E
Preferred Stock shall become and be converted into, and shall thereafter
represent only, the right to receive one share of Holdings' New Series E
Preferred Stock in the manner set forth in Section 4.4.
4.2 At the Effective Time:
(a) each option to purchase a share of Wild Oats Common Stock
outstanding under Wild Oats' 1993 Stock Option Plan (the "Wild Oats Plan")
shall become an option to purchase 1.0035584 shares of Holdings Common Stock.
The vesting schedule and exercise price per share of Holdings Common Stock
shall be equal to the vesting schedule and exercise price per share of Wild
Oats Common Stock under the particular stock option agreement pursuant to which
such stock option was granted as in effect immediately prior to the Effective
Time; and
(b) each outstanding warrant to purchase a share of Wild Oats
Series B Preferred Stock or Wild Oats Series C Preferred Stock shall become a
warrant to purchase 1.0035584 shares of Holdings' New Series B Preferred Stock
or Holdings' New Series C Preferred Stock, as the case may be, on the same
terms as set forth in such outstanding warrants, and each outstanding warrant
to purchase a share of Wild Oats Series E Preferred Stock shall become a
warrant to purchase one share of Holdings' New Series E Preferred Stock, on the
same terms as set forth in such outstanding warrants.
4.3 All certificates which, prior to the Effective Time,
represented issued and outstanding shares of Wild Oats Common Stock and Wild
Oats Preferred Stock shall be cancelled at the Effective Time, which time shall
be the record date for the determination of those stockholders of Wild Oats
entitled to receive Holdings Common Stock and Holdings Preferred Stock as
provided in Section 4.1.
4.4 As soon as practicable after the Effective Time, the Surviving
Corporation shall send a notice and transmittal form to each record holder of
certificates theretofore representing shares of Wild Oats Common Stock or Wild
Oats Preferred Stock advising such holder of the procedure for surrendering
such certificates for exchange pursuant to the terms of Section 4.1 hereof. If
Holdings Common Stock or Holdings Preferred Stock is to be issued pursuant to
Section 4.1 to a person other than a person in whose name the certificates for
shares of Wild Oats Common Stock or Wild Oats Preferred Stock surrendered for
exchange are registered, it shall be a condition to the exchange that the
person requesting such exchange shall pay to the Surviving Corporation any
transfer or other taxes required by reason of such delivery, or shall establish
to the satisfaction of the Surviving Corporation that such tax has been paid or
is not applicable. Notwithstanding the foregoing, no party hereto shall be
liable to a holder of certificates theretofore representing shares of Wild Oats
Common Stock or Wild
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Oats Preferred Stock for any amount paid to a public official pursuant to any
property, escheat or similar law.
4.5 Notwithstanding the foregoing, in the event that (i) fewer
than 229,552 shares of Alfalfa's Common Stock are validly tendered and not
withdrawn in the Tender Offer (as defined in Section 5.2), (ii) the amount of
Wild Oats Series E Preferred Stock sold as contemplated by Section 15.1(f) is
less than 843,125 shares or (iii) less than $8,130,000 of proceeds from the
sale of Wild Oats Series E Preferred Stock is used to repurchase share of Wild
Oats Common Stock, the number of shares (and options and warrants to purchase
shares) of Holdings capital stock into which shares of Wild Oats Common Stock
and Wild Oats Preferred Stock (other than Wild Oats Series E Preferred Stock)
are to be converted pursuant to Sections 4.1 and 4.2 hereof shall be adjusted
(and the corresponding adjustments shall be made to the Holdings Charter) to
reflect the previously agreed allocation of the dilutive effect of the
redemption of certain shares of Alfalfa's Old Series A Preferred Stock
consistent with Exhibit A to the Letter of Intent dated January 18, 1996
between Wild Oats and Alfalfa's, which Exhibit A is attached hereto as Exhibit
4.5; provided, however, that such reduction shall in no event cause the
conversion ratio to be less than 1.0018211 shares of Holdings capital stock for
each share of Wild Oats capital stock.
4.6 Notwithstanding anything in this Agreement to the contrary,
shares of Wild Oats Common Stock that are issued and outstanding immediately
prior to the Effective Time and that are held by stockholders who have not
voted such shares in favor of the Merger or consented thereto in writing and
who have delivered a written demand for payment for such shares in the manner
provided in Section 262 of the DGCL (the "Dissenting Shares") shall not be
converted into or represent a right to receive shares of Holdings Common Stock
pursuant to the Article IV, but the holder thereof shall be entitled only to
such rights as are granted by Section 262 of the DGCL. Each holder of
Dissenting Shares shall receive payment therefor from the Surviving Corporation
in accordance with the DGCL; provided, however, if any such holder of
Dissenting Shares shall have failed to establish his entitlement to receive
payment for such shares as provided in Section 262 of the DGCL, or if any such
holder of Dissenting Shares shall have effectively withdrawn his demand for
payment for such shares of Common Stock or lost his right to receive payment
for his shares of Common Stock under Section 262 of the DGCL, or if neither any
holder of Dissenting Shares nor the Surviving Corporation shall have filed a
petition demanding a determination of the value of all Dissenting Shares within
the time provided in Section 262 of the DGCL, such holder or holders (as the
case may be) shall forfeit the right to receive payment for such shares of Wild
Oats Common Stock pursuant to Section 262 of the DGCL and each such share of
Wild Oats Common Stock shall thereupon be deemed to have been converted, as of
the Effective Time, into the right to receive the number of shares of Holdings
Common Stock as determined pursuant to this Article IV.
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ARTICLE V
Actions to be Taken by Alfalfa's, Newco and Holdings
5.1 Prior to the Effective Time, Newco and Alfalfa's shall have
filed with the Secretary of State of Colorado Articles of Merger effecting the
Alfalfa's Reincorporation Merger which will effect a conversion of Alfalfa's
Common Stock and Alfalfa's Old Series A Preferred Stock into Holdings Common
Stock and Holdings Series D Preferred Stock, respectively, whereby each
outstanding share of Alfalfa's Common Stock (other than those shares held by
persons who have validly elected to demand an appraisal of their shares
pursuant to the Colorado Business Corporation Act (the "CBCA") or the DGCL)
prior to the Alfalfa's Reincorporation shall become 1.9851124 shares of
Holdings Common Stock, and each outstanding share of Alfalfa's Old Series A
Preferred Stock (other than those shares held by persons who have validly
elected to demand an appraisal of their shares pursuant to the CBCA or the
DGCL) shall become 1.9851124 shares of Holdings Series D Preferred Stock (the
"Conversion Adjustment"); provided, however that no fractional shares or scrip
will be issued in connection with the Conversion Adjustment, and in lieu of any
fractional interest resulting therefrom, a holder shall receive an amount in
cash determined by multiplying such fractional interest by $29.626.
5.2 Prior to the Effective Time, Alfalfa's shall commence a cash
tender offer for up to 229,552 shares (before giving effect to the Conversion
Adjustment) of Alfalfa's Common Stock at $58.81 per share in cash (the "Tender
Offer") payable at the Effective Time.
5.3 At the Effective Time the 63,264 shares of Alfalfa's Old
Series A Preferred Stock (before giving effect to the Conversion Adjustment)
held by Stolberg Partners, L.P. shall be redeemed for $71.13 per share in cash.
5.4 Newco's and Alfalfa's directors and stockholders shall take
all actions necessary so that, at the Effective Time:
(a) the Board of Directors of Holdings shall be comprised
of John Shields (Chairman), David Chamberlain (Vice Chairman), Michael C.
Gilliland, Elizabeth C. Cook, S.M. Hassan, Peter D. Behrendt, Barnett M.
Feinblum, David L. Ferguson, M. Laird Koldyke, James B. McElwee and one
designee of the holders of the Holdings New Series E Preferred Stock as
contemplated by Section 15.1(f), and the compensation committee of the Board of
Directors of Holdings shall be comprised of David Chamberlain, Barney Feinblum,
David L. Ferguson, M. Laird Koldyke and James B. McElwee, in each case until
their successors shall have been duly elected and qualified, and the executive
officers of Holdings shall be:
Chief Executive Officer - Michael C. Gilliland
President - S.M. Hassan
Vice President and Secretary - Elizabeth C. Cook
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Treasurer and Chief Financial Officer - Mary Beth Lewis
all of whom shall serve in such positions in accordance with the Holdings
Bylaws and the stockholders agreement referred to in Section 15.1(g). Each of
the persons named above as Chairman of the Board and Vice Chairman of the Board
shall be appointed for a minimum term of 24 months from the Effective Time,
subject to removal in the first such 12 months only by the vote of at least
eight of the directors of Holdings, and by the vote of a majority of the
directors of Holdings thereafter; and
(b) The 1996 Stock Option Plan in the form attached
hereto as Exhibit 5.4 shall have been adopted by the board of directors and
stockholders of Holdings.
ARTICLE VI
[Intentionally Omitted]
ARTICLE VII
Additional Documentation
From time to time, as and when requested by the Surviving Corporation,
or by its successors or assigns, Wild Oats shall execute and deliver or cause
to be executed and delivered all such deeds and other instruments, and shall
take or cause to be taken all such further or other action as the Surviving
Corporation, or its successors and assigns, may deem necessary or desirable in
order to vest in and confirm unto the Surviving Corporation, or its successors
or assigns, title to and possession of all the property, rights, privileges,
powers and franchises referred to in Article I hereof and otherwise to carry
out the intent and purpose of this Agreement. After the Effective Time, the
officers of the Surviving Corporation shall have the authority to execute such
documents and take such actions as may be necessary in the name of Wild Oats in
order to give effect to this Article VII.
ARTICLE VIII
Representations and Warranties of Wild Oats
8.1 Wild Oats and each of its subsidiaries are corporations duly
organized, validly existing, and in good standing under the corporate laws of
the jurisdiction of its formation, with full power and authority and all
material licenses, permits and authorizations necessary to own its property and
to carry on its business as presently conducted. Wild Oats and each of its
subsidiaries are duly qualified to do business in every jurisdiction wherein
the failure to so qualify would have a material adverse effect upon the
business, prospects or financial condition of Wild Oats and its subsidiaries,
taken as a whole.
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8.2 Wild Oats has complete and unrestricted power to enter into
and, upon the receipt of such approvals as may be required by law, to
consummate the transactions contemplated by this Agreement.
8.3 The execution, delivery and performance of this Agreement have
been duly and properly authorized and approved by the Board of Directors and
stockholders of Wild Oats. This Agreement constitutes a valid and binding
obligation of Wild Oats, enforceable in accordance with its terms. Except as
contemplated by Sections 8.9 and 15.1, the execution and delivery by Wild Oats
of this Agreement and the fulfillment of and compliance with the respective
terms hereof by Wild Oats do not and will not (a) conflict with or result in a
breach of the terms, conditions or provisions of, (b) constitute a default
under, (c) result in the creation of any lien, security interest, charge or
encumbrance upon Wild Oats' or any of its subsidiaries' capital stock or assets
pursuant to, (d) give any third party the right to accelerate, in whole or in
part, any obligation under, (e) result in a violation of, or (f) except as will
be obtained by the Effective Time, require any material authorization, consent,
approval, exemption or other action by or notice to any court or administrative
or governmental body or other third party pursuant to, the charter or bylaws of
Wild Oats or any of its subsidiaries, any agreement, indenture instrument,
order, judgment or decree to which Wild Oats or any of its subsidiaries is
subject, or any law, statute, rule or regulation to which Wild Oats or any of
its subsidiaries is subject.
8.4 The authorized, issued and outstanding capital stock of Wild
Oats is as set forth in Recital B of this Agreement, and all outstanding shares
of Wild Oats' capital stock have been validly issued and are fully paid and
non- assessable. Except for the conversion rights of the Wild Oats Preferred
Stock, outstanding options and warrants to purchase a total of 176,878 shares
of Wild Oats Common Stock, 1,506 shares of Wild Oats Series B Preferred Stock
and 1,976 shares of Wild Oats Series C Preferred Stock and warrants to purchase
10,539 shares of Wild Oats Series E Preferred Stock to be issued prior to the
Effective Time, Wild Oats does not have outstanding any stock or securities
convertible into or exchangeable for shares of its capital stock, or any rights
or options to subscribe for or to purchase any capital stock or any stock or
securities convertible into or exchangeable for any capital stock. Wild Oats
is not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock otherwise than
pursuant to the terms of the Wild Oats Preferred Stock.
8.5 Wild Oats' (a) unaudited consolidated balance sheet as of
April 27, 1996 (the "Latest Wild Oats Balance Sheet") and the related
consolidated statements of operations and cash flows for the periods then ended
attached hereto as Exhibit 8.5(a), and (b) audited consolidated balance sheet
as of December 30, 1995 and the related audited consolidated statements of
operations,
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stockholders' equity and cash flows for the fiscal year then ended (including
in all cases the notes thereto) attached hereto as Exhibit 8.5(b) are accurate
and complete in all material respects and have been prepared in accordance with
generally accepted accounting principles, consistently applied. Since the date
of the Latest Wild Oats Balance Sheet, except as set forth on Schedule 8.5, (i)
there has been no material adverse change in Wild Oats' consolidated financial
condition, operating results, business prospects, employee relations, customer
relations, or otherwise, other than changes occurring in the ordinary course of
business which in the aggregate have not been materially adverse to Wild Oats
or (ii) Wild Oats has not made any change in accounting principals or practices
from those utilized in the preparation of the balance sheets and related
statements referred to in this Section 8.5.
8.6 Except as set forth on the Latest Wild Oats Balance Sheet or
on Schedule 8.6, Wild Oats has no material obligation or liability (whether
accrued, absolute, contingent, unliquidated or otherwise) other than
liabilities which have arisen after the date of the Latest Wild Oats Balance
Sheet in the ordinary course of business and which do not involve breach of
contract, breach of warranty, torts, infringements, claims or lawsuits.
8.7 Except as set forth on Schedule 8.7 or as contemplated by
Section 15.1(f), Wild Oats has not, since the date of the Latest Wild Oats
Balance Sheet, (a) issued any capital stock, bonds or other securities other
than upon the exercise of existing stock options, (b) borrowed any amount or
incurred or become subject to any liabilities that aggregate in excess of
$100,000, (c) discharged or satisfied any lien or encumbrance or paid any
obligation or liability other than current liabilities paid in the ordinary
course of business, (d) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed any shares of its capital stock, (e) mortgaged or pledged any of its
property or assets, or subjected them to any lien, security interest, charge or
any other encumbrance, except in the ordinary course of business and except
liens for current property taxes not yet due and payable, (f) sold, assigned or
transferred any of its tangible assets, except in the ordinary course of
business, or cancelled any debts or claims, (g) sold, assigned or transferred
any patents, trademarks, trade names, copyrights, trade secrets or other
intangible assets, or disclosed any proprietary confidential information to any
person, (h) suffered any extraordinary losses or waived any rights of material
value, whether or not in the ordinary course of business or consistent with
past practice, (i) made capital expenditures or commitments therefor that
aggregate in excess of $100,000, (j) entered into any other transaction other
than in the ordinary course of business, or entered into any other material
transaction, whether or not in the ordinary course of business, (k) made
charitable contributions or pledges aggregating in excess of $25,000, (l)
suffered any material damage, destruction or casualty
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loss, whether or not covered by insurance, or (m) made any illegal political
contributions, or any bribes, kickback payments or other illegal payments.
8.8 Wild Oats' inventory consists of items of a quality and
quantity salable at Wild Oats' normal profit levels in the ordinary course of
business. The values at which such inventory is carried on the Latest Wild
Oats' Balance Sheet are in accordance with generally accepted accounting
principles. Schedule 8.8 contains a materially complete and accurate summary
of Wild Oats' inventory as of March 30, 1996.
8.9 Except for the investigation by the Attorney General of New
Mexico or as set forth on Schedule 8.9, (a) there are no material actions,
suits, proceedings, orders, investigations or claims pending against Wild Oats
or any of its subsidiaries, and to the best of Wild Oats' knowledge, there are
no such actions, suits, proceedings, orders, investigations or claims
threatened against or affecting Wild Oats or any of its subsidiaries at law or
in equity, or before or by any governmental department, commission, board,
bureau, agency or instrumentality, (b) there are no material arbitration
proceedings pending under collective bargaining agreements or otherwise, and
(c) there are no material governmental inquiries (including inquiries as to the
qualification of Wild Oats or any of its subsidiaries to hold or receive any
license or permit) involving Wild Oats or any of its subsidiaries.
8.10 Except as set forth on Schedule 8.10, there are no labor
controversies pending or, to the best of Wild Oats' knowledge, threatened
against Wild Oats or any subsidiary of Wild Oats. There are no organizational
efforts in progress or, to the best of Wild Oats' knowledge, threatened
involving any employees of Wild Oats or any subsidiary of Wild Oats. To the
best of Wild Oats' knowledge, Wild Oats and each of its subsidiaries has
complied in all material respects with all laws relating to the employment of
labor.
8.11 (a) Except as set forth on Schedule 8.11, Wild Oats and
each of its subsidiaries have filed, or timely applied for extensions of time
in which to file, all returns, declarations, reports, estimates, information
returns, and statements ("Returns") required to be filed or sent by it in
respect of any Taxes (as defined in clause (n) below) or required to be filed
or sent by it by any taxing authority having jurisdiction; (ii) timely and
properly paid (or has had paid on its behalf) all Taxes shown to be due and
payable on such Returns; (iii) established on the Latest Wild Oats Balance
Sheet (and until the Effective Time will establish on its books and records),
in accordance with generally accepted accounting principles, reserves that are
adequate for the payment of any Taxes not yet due and payable; (iv) complied
with all applicable laws, rules, and regulations relating to the withholding of
Taxes and the payment thereof (including, without limitation, withholding of
Taxes under Sections 1441 and 1442 of the Internal Revenue Code (the "Code"),
or similar provisions under
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any foreign laws), and timely and properly withheld from individual employee
wages and paid over to the proper governmental authorities all amounts required
to be so withheld and paid over under all applicable laws;
(b) There are no liens for Taxes upon any assets of Wild
Oats or any of its subsidiaries, except for liens for Taxes not yet due;
(c) No deficiency for any Taxes has been proposed,
asserted or assessed against Wild Oats or any of its subsidiaries that has not
been resolved and paid in full. No waiver, extension or comparable consent
given by Wild Oats or any of its subsidiaries regarding the application of the
statute of limitations with respect to any Taxes or Returns is outstanding, nor
is any request for any such waiver or consent pending. There has been no Tax
audit or other administrative proceeding or court proceeding with regard to any
Taxes or Returns, nor is any such Tax audit or other proceeding pending, nor
has there been any notice to Wild Oats or any of its subsidiaries by Taxing
authority regarding any such Tax, audit or other proceeding, or, to the best
knowledge of Wild Oats, is any such Tax audit or other proceeding threatened
with regard to any Taxes or Returns. Wild Oats does not expect the assessment
of any additional Taxes and is not aware of any unresolved questions, claims or
disputes concerning the liability for Taxes of Wild Oats or its subsidiaries
which would exceed the estimated reserves established on their books and
records;
(d) Neither Wild Oats nor any of its subsidiaries is a
party to any agreement, contract or arrangement that would result, separately
or in the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code and the consummation of the
transactions contemplated by this Agreement will not be a factor causing
payments to be made by Wild Oats or any of its subsidiaries that is not
deductible (in whole or in part) under Section 280G of the Code;
(e) Neither Wild Oats nor any of its subsidiaries has
requested any extension of time within which to file any Return, which Return
has not since been filed;
(f) No property of Wild Oats or any of its subsidiaries
is property that such entity is or will be required to treat as being owned by
another person under the provisions of Section 168(f)(8) of the Code (as in
effect prior to amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Section 168 of the Code;
(g) Wild Oats is not required to include in income any
adjustment under Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by Wild Oats as a result of the Tax Reform Act of
1986 and Wild Oats has no knowledge
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that the Internal Revenue Service has proposed any such adjustment or change in
accounting method;
(h) All transactions that could give rise to an
understatement of federal income tax (within the meaning of Section 6661 of the
Code as it applied prior to repeal) or an underpayment of tax (within the
meaning of Section 6662 of the Code) were reported in a manner for which there
is substantial authority or were adequately disclosed (or, with respect to
Returns filed before the Effective Time, will be reported in such a manner or
adequately disclosed) on the Returns required in accordance with Sections
6661(b)(2)(B) and 6662(d)(2)(B) of the Code;
(i) Neither Wild Oats nor any of its subsidiaries has
engaged in any transaction that would result in a deemed election under Section
338(e) of the Code, and none of such entities will engage in any such
transaction within any applicable "consistency period" (as such term is defined
in Section 338 of the Code);
(j) Neither Wild Oats nor any of its subsidiaries has
filed any consent under Section 341(f) of the Code;
(k) Schedule 8.11 contains a description of all tax
sharing agreements in effect as of the date hereof all of which have previously
been delivered to Alfalfa's;
(l) Neither Wild Oats nor any of its subsidiaries is a
"United States real property holding corporation" (as such term is defined in
Section 897 of the Code);
(m) Wild Oats is not a "foreign person" (as such term is
defined in Section 1445(f)(3) of the Code); and
(n) For purposes of this Agreement, the term "Tax" or
"Taxes" means all taxes, charges, fees, levies, or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, social security, unemployment, excise, estimated,
severance, stamp, occupation, property, or other taxes, customs duties, fees,
assessments, or charges of any kind whatsoever, including, without limitation,
all interest and penalties thereon, and additions to tax or additional amounts
imposed by any taxing authority, domestic or foreign, upon Wild Oats or any of
its subsidiaries.
8.12 (a) Except for the documentation relating to the sale of
the Wild Oats Series E Preferred Stock as contemplated by Sections 15.1(f) and
(g), Schedule 8.12 lists the following agreements, whether oral or written, to
which Wild Oats or any of its subsidiaries is a party, which is currently in
effect (such list to set forth the commencement date and termination or
expiration date of such agreement): (i) collective bargaining agreement or
contract with any labor union; (ii) bonus, pension, profit sharing,
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retirement or other form of deferred compensation plan; (iii) hospitalization
insurance or other welfare benefit plan or practice, whether formal or
informal; (iv) stock purchase or stock option plan; (v) contract for the
employment of any officer, individual employee or other person on a full-time,
part-time or consulting basis or relating to severance pay for any such person;
(vi) confidentiality agreement; (vii) contract, agreement or understanding
relating to the voting of common stock or the election of directors of Wild
Oats or any of its subsidiaries; (viii) agreement or indenture relating to the
borrowing of money or to mortgaging, pledging or otherwise placing a lien on
any of the assets of Wild Oats or any of its subsidiaries; (ix) guaranty of any
obligation for borrowed money or otherwise; (x) lease or agreement under which
Wild Oats or any of its subsidiaries is lessee of, or holds or operates any
property, real or personal, owned by any other party; (xi) lease or agreement
under which Wild Oats or any of its subsidiaries is lessor of, or permits any
third party to hold or operate, any property, real or personal; (xii) contract
or group of related contracts with the same party for the purchase of products
or services, other than in the ordinary course of business; (xiii) contract or
group of related contracts with the same party (other than any contract or
group of related contracts for the purchase or sale of products or services)
continuing over a period of more than six months from the date or dates
thereof, not terminable by it on 30 days or less notice without penalty; (xiv)
contract which prohibits Wild Oats or any of its subsidiaries from freely
engaging in business anywhere in the world; (xv) contract for the distribution
of any of Wild Oats' products (including any distributor or sales contract);
(xvi) any franchise agreements; (xvii) contract or commitment for capital
expenditures; (xviii) agreement for the sale of any capital asset; (xix)
contract with any affiliate which in any way relates to Wild Oats or any of its
subsidiaries; or (xx) other agreement which is either material to the business
of Wild Oats or was not entered into in the ordinary course of business;
(b) Wild Oats and its subsidiaries have performed all
obligations required to be performed by them in connection with the contracts
or commitments required to be disclosed in Schedule 8.12 and they are not in
receipt of any claim of default under any such contract or commitment; neither
Wild Oats nor any of its subsidiaries has any present expectation or intention
of not fully performing any material obligation pursuant to any such contract
or commitment; and neither Wild Oats nor any of its subsidiaries has knowledge
of any breach or anticipated breach by any other party to any such contract or
commitment; and
(c) Prior to the Effective Time, Alfalfa's or Holdings
shall be supplied with a true and correct copy of each written contract or
commitment disclosed in Schedule 8.12, and a written description of each oral
contract or commitment disclosed in Schedule 8.12, together with all
amendments, waivers or other changes thereto.
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8.13 Schedule 8.13 describes all registrations of, applications for
or rights in patents, trademarks, service marks, trade names, corporate names,
copyrights, trade secrets, know-how or other intellectual property rights owned
by, licensed to or otherwise controlled by Wild Oats or used in, developed for
use in or necessary to the conduct of the business of Wild Oats as now
conducted or planned to be conducted. Wild Oats owns and possesses all right,
title and interest, or holds a valid license, in and to the rights set forth in
Schedule 8.13 and none of such rights has been licensed or assigned to any
third party. Wild Oats has taken all necessary action to protect the
intellectual property rights set forth in Schedule 8.13. Neither Wild Oats nor
any of its subsidiaries has received any notice of, nor are there any facts
known to Wild Oats or any of its subsidiaries which indicate a likelihood of,
any infringement or misappropriation by, or conflict from, any third party with
respect to the intellectual property rights which are listed; no claim by any
third party contesting the validity of any intellectual property rights listed
under such caption has been made, is currently outstanding or, to the best
knowledge of Wild Oats, is threatened; neither Wild Oats nor any of its
subsidiaries has received any notice of any infringement, misappropriation or
violation of any intellectual property rights of any third party and neither
Wild Oats nor any of its subsidiaries has infringed, misappropriated or
otherwise violated any such intellectual property rights; and no infringement,
illicit copying, misappropriation or violation has occurred or will occur with
respect to products currently being sold by Wild Oats or with respect to the
products currently under development (in their present state of development) or
with respect to the conduct of Wild Oats' business as now conducted.
8.14 Except as set forth on Schedule 8.14:
(a) Wild Oats and its subsidiaries have materially
complied with all laws relating to the employment of labor, including
provisions thereof relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other taxes;
(b) neither Wild Oats nor any of its subsidiaries has any
material labor relations problem pending and labor relations are satisfactory;
(c) there are no material workers' compensation claims
pending against Wild Oats or any of its subsidiaries nor is Wild Oats or any of
its subsidiaries aware of any facts that would give rise to such a claim;
(d) no employee of Wild Oats or any of its subsidiaries
is subject to any confidentiality or noncompetition agreement or any other
agreement or restriction of any kind that would impede in any way the ability
of such employee to carry out fully all activities of such employee; and
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<PAGE> 16
(e) no employee or former employee has any claim with
respect to any intellectual property rights of Wild Oats set forth in Schedule
8.13.
8.15 (a) Except as set forth on Schedule 8.15, with respect to
all employees and former employees of Wild Oats or any of its subsidiaries and
all dependents and beneficiaries of such employees and former employees,
neither Wild Oats nor any of its subsidiaries (i) maintains or contributes to
any nonqualified deferred compensation or retirement plans, contracts or
arrangements; (ii) maintains or contributes to any qualified defined
contribution plans (as defined in Section 3(34) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 414(i) of the
Code; (iii) maintains or contributes to any qualified defined benefit plans (as
defined in Section 3(35) of ERISA or Section 414(j) of the Code); and (iv)
maintains or contributes to any employee welfare benefit plans (as defined in
Section 3(1) of ERISA);
(b) To the extent required (either as a matter of law or
to obtain the intended tax treatment and tax benefits), all employee benefit
plans (as defined in Section 3(3) of ERISA) which Wild Oats or any of its
subsidiaries maintains or to which any of them contributes (collectively, the
"Plans") comply with the requirements of ERISA and the Code. With respect to
the Plans, (i) all required contributions which are due have been made and a
proper accrual has been made for all contributions due in the current fiscal
year; (ii) there are no actions, suits or claims pending, other than routine
uncontested claims for benefits; and (iii) there have been no prohibited
transactions (as defined in Section 406 of ERISA or Section 4975 of the Code);
(c) Schedule 8.15 contains true and complete copies of
(i) the most recent determination letter, if any, received by Wild Oats or any
of its subsidiaries from the Internal Revenue Service regarding the Plans and
any amendment to any Plan made subsequent to any Plan amendments covered by any
such determination letter; (ii) the most recent financial statements and annual
report or return for the Plans; and (iii) the most recently prepared actuarial
valuation reports;
(d) Neither Wild Oats nor any of its subsidiaries
contributes (and has not ever contributed) to any multi-employer plan, as
defined in Section 3(37) of ERISA. Neither Wild Oats nor any of its
subsidiaries has actual or potential liabilities under Section 4201 of ERISA
for any complete or partial withdrawal from a multi-employer plan. Neither
Wild Oats nor any of its subsidiaries has actual or potential liability for
death or medical benefits after separation from employment, other than (i)
death benefits under the employee benefit plans or programs (whether or not
subject to ERISA) set forth in Schedule 8.15 and (ii) health care continuation
benefits described in Section 4980B of the Code;
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<PAGE> 17
(e) Neither Wild Oats nor any of their subsidiaries, nor
any of their directors, officers, employees or other "fiduciaries", as such
term is defined in Section 3(21) of ERISA, has committed any breach of
fiduciary responsibility imposed by ERISA or any other applicable law with
respect to the Plans which would subject Wild Oats, any of its subsidiaries or
Alfalfa's or any of their respective directors, officers or employees to any
liability under ERISA or any applicable law; and
(f) Neither Wild Oats nor any of its subsidiaries has
incurred any liability for any tax or civil penalty or any disqualification of
any employee benefit plan (as defined in Section 3(3) of ERISA) imposed by
Sections 4980B and 162(k) and 4975 of the Code and Part 6 of Title I and
Section 502(i) of ERISA.
8.16 Schedule 8.16 lists and briefly describes each insurance
policy maintained by Wild Oats and each of its subsidiaries as of the date of
the Latest Wild Oats Balance Sheet with respect to their properties, assets and
operations and sets forth the date of expiration of each such insurance policy.
All of such insurance policies are, as of the date hereof, and as of the
Effective Time will be, in full force and effect and issued by insurers of
recognized responsibility and are for amounts which have been sufficient to
cover claims that Wild Oats and its subsidiaries have settled within the last
five years. Neither Wild Oats nor any of its subsidiaries is in default with
respect to its obligations under any of such insurance policies.
8.17 Except as set forth on Schedule 8.17:
(a) To the best knowledge of Wild Oats, other than
pursuant to this Agreement, no officer or director, nor any of the employees
identified on Schedule 8.17 hereof who make or are expected to make significant
contributions to the business of Wild Oats (each a "Wild Oats Key Employee") of
Wild Oats or any of its subsidiaries or any member of the immediate family of
any such officer, director or Wild Oats Key Employee, or any entity in which
any of such persons owns any beneficial interest (other than any publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the counter market and less than one percent of the stock of which is
beneficially owned by any of such persons) (collectively "insiders"), has any
agreement with Wild Oats or any of its subsidiaries or any interest in any
property, real, personal or mixed, tangible or intangible, used in or
pertaining to Wild Oats' business. To the best knowledge of Wild Oats, none of
the insiders has any direct or indirect interest in any competitor, supplier or
customer of Wild Oats or any of its subsidiaries or in any person, firm or
entity from whom or to whom Wild Oats or any of its subsidiaries leases any
property, or in any other person, firm or entity with whom Wild Oats or any of
its subsidiaries transacts business of any nature. For purposes of this Section
8.17, the members of the immediate family of an officer, director or employee
shall consist of the spouse, parents,
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<PAGE> 18
children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law,
and brothers- and sisters-in-law of such officer, director or employee; and
(b) Except for the payment of salaries, accrued paid time
off and other normal elements of compensation and reimbursement for
out-of-pocket expenses in the ordinary course of business, neither Wild Oats
nor any of its subsidiaries will immediately following the Effective Time be
indebted to any of their directors, officers or employees on any account
whatsoever.
8.18 Schedule 8.18 lists all officers and directors of the Wild
Oats and its subsidiaries and all bank accounts of Wild Oats and its
subsidiaries (designating each authorized signer).
8.19 (a) The real property demised by the leases described
(including the term thereof) in Schedule 8.19 constitutes all of the real
property used or occupied by Wild Oats or any of its subsidiaries (the "Real
Property"). The Real Property has access, sufficient for the conduct of Wild
Oats' business as now conducted or as presently proposed to be conducted, to
public roads and to all utilities, including electricity, sanitary and storm
sewer, potable water, natural gas and other utilities, used in the operation of
the Business at that location;
(b) The leases described in Schedule 8.19 are in full
force and effect, and Wild Oats or its subsidiary that is a party to each such
lease holds a valid and existing leasehold interest under each of such leases
for the term set forth in Schedule 8.19. Wild Oats has delivered to Alfalfa's
or Holdings complete and accurate copies of each of the leases described in
Schedule 8.19, and none of such leases shall have been modified in any respect,
prior to the Effective Time. None of Wild Oats or its subsidiaries is in
default, and no circumstances exist which, if unremedied, would, either with or
without notice or the passage of time or both, result in a default under any of
such leases; nor, to the best knowledge of Wild Oats and its subsidiaries, is
any other party to any of such leases in default;
(c) Schedule 8.19 discloses the aggregate value of the
tangible properties and tangible assets of Wild Oats and its subsidiaries as
reflected on the Latest Wild Oats Balance Sheet. Wild Oats and its
subsidiaries own good and marketable title to its tangible properties and
tangible assets as described in Schedule 8.19 and reflected on the Latest Wild
Oats Balance Sheet or acquired since the date thereof, free and clear of all
liens and encumbrances, except for (i) liens for current taxes not yet due and
payable, (ii) the properties subject to the leases listed in Schedule 8.19,
(iii) as otherwise disclosed in Schedule 8.19, (iv) inventory disposed of since
the date of the Latest Wild Oats Balance Sheet in the ordinary course of
business, and (v) liens in respect of pledges or deposits under workers'
compensation laws;
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(d) Wild Oats or its subsidiaries own, or lease under
valid leases, all buildings, machinery, equipment and other tangible assets
used in the conduct of their business;
(e) Neither Wild Oats nor any of its subsidiaries is in
violation of any applicable zoning ordinance or other law, regulation or
requirement relating to the operation of any properties used in the operation
of its business, and neither Wild Oats nor any of its subsidiaries has received
any notice of any such violation, or the existence of any condemnation
proceeding with respect to any of the Real Property; and
(f) Neither Wild Oats nor any of its subsidiaries has
knowledge of improvements made or contemplated to be made by any public or
private authority, the costs of which are to be assessed as special taxes or
charges against any of the Real Property, and there are no present assessments.
8.20 Except as set forth on Schedule 8.20, (a) each of Wild Oats
and its subsidiaries and their officers, directors, agents and employees have
complied in all material respects with all applicable laws, regulations and
other requirements, including, but not limited to, federal, state, local and
foreign laws, ordinances, rules, regulations and other requirements pertaining
to product labeling, consumer products safety, equal employment opportunity,
employee retirement, affirmative action and other hiring practices,
occupational safety and health, workers' compensation, unemployment,
environmental and building and zoning codes, which affect Wild Oats' business
or any real Property and to which any of them may be subject. No claims have
been filed against Wild Oats or any of its subsidiaries alleging a violation of
any such laws, regulations or other requirements. There is no action pending
or, to Wild Oats' knowledge threatened, to change the zoning or building
ordinances or any other laws, rules, regulations or ordinances affecting the
Real Property. Neither Wild Oats nor any of its subsidiaries is relying on any
exemption from or deferral of any such applicable law, regulation or other
requirement that would not be available to Alfalfa's after the Merger;
(b) Each of Wild Oats and its subsidiaries have in full
force and effect, all licenses, permits and certificates, from federal, state,
local and foreign authorities (including, without limitation, federal and state
agencies regulating occupational health and safety) necessary to conduct their
business and own and operate their properties (collectively, the "Permits").
Wild Oats and its subsidiaries have conducted their business in compliance with
all material terms and conditions of the Permits; and
(c) Neither Wild Oats nor any of its subsidiaries has
made or has agreed to make gifts of money, other property or similar benefits
(other than incidental gifts of articles of nominal value) to any actual or
potential customer, supplier, governmental employee or any other person in a
position to assist
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or hinder Wild Oats in connection with any actual or proposed transaction.
8.21 None of the information relating to Wild Oats or its
subsidiaries, this Agreement or the transactions contemplated by this Agreement
which has been supplied or is to be supplied by Wild Oats for inclusion in (a)
a Private Placement Memorandum relating to the offering of shares of Wild Oats
Series E Preferred Stock (the "Private Placement Memorandum"), (b) a proxy
statement/offer to purchase to be mailed to Alfalfa's stockholders in
connection with the Tender Offer and the meeting to be called pursuant to
Section 12.1 (the "Proxy Statement"), or (c) any other document to be filed
with any regulatory authority in connection with the transactions contemplated
by this Agreement will, at the respective times such documents are filed,
become effective or are mailed to stockholders, as the case may be, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein not misleading or, in
the case of the Proxy Statement or any amendment or supplement thereto, at the
time of the meetings of stockholders referred to in Section 12.1, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for the meeting in connection with
which the Proxy Statement shall be mailed. All documents which Wild Oats is
responsible for filing in connection with the Merger will comply as to form in
all material respects with the applicable requirements of the statutes, rules
and regulations pursuant to which they are filed.
ARTICLE IX
Representations and Warranties of Alfalfa's
Alfalfa's hereby represents, warrants and covenants to Wild Oats as
follows:
9.1 Alfalfa's and each of its subsidiaries are corporations duly
organized, validly existing, and in good standing under the corporate laws of
the jurisdiction of its formation, with full power and authority and all
material licenses, permits and authorizations necessary to own its property and
to carry on its business as presently conducted. Alfalfa's and each of its
subsidiaries are duly qualified to do business in every jurisdiction wherein
the failure to so qualify would have a material adverse effect upon the
business, prospects or financial condition of Alfalfa's and its subsidiaries,
taken as a whole.
9.2 Alfalfa's has complete and unrestricted power to enter into
and, upon the receipt of such approvals as may be required by law, to
consummate the transactions contemplated by this Agreement.
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<PAGE> 21
9.3 The execution, delivery and performance of this Agreement have
been duly and properly authorized and approved by the Board of Directors of
Alfalfa's. Upon stockholder approval of this Agreement as provided in Section
15.1, this Agreement will constitute a valid and binding obligation of
Alfalfa's enforceable in accordance with its terms. Except as contemplated by
Sections 9.9 and 15.1, the execution and delivery by Alfalfa's of this
Agreement and the fulfillment of and compliance with the respective terms
hereof by Alfalfa's do not and will not (a) conflict with or result in a breach
of the terms, conditions or provisions of, (b) constitute a default under, (c)
result in the creation of any lien, security interest, charge or encumbrance
upon Alfalfa's or any of its subsidiaries' capital stock or assets pursuant to,
(d) give any third party the right to accelerate, in whole or in part, any
obligation under, (e) result in a violation of, or (f) except as will be
obtained by the Effective Time, require any material authorization, consent,
approval, exemption or other action by or notice to any court or administrative
or governmental body or other third party pursuant to, the charter or bylaws of
Alfalfa's or any of its subsidiaries, any agreement, indenture, instrument,
order, judgment or decree to which Alfalfa's or any of its subsidiaries is
subject, or any law, statute, rule or regulation to which Alfalfa's or any of
its subsidiaries is subject.
9.4 The authorized, issued and outstanding capital stock of
Alfalfa's is as set forth in Recital D of this Agreement, and all outstanding
shares of Alfalfa's capital stock have been validly issued and are fully paid
and non- assessable. Except for the conversion rights of the Alfalfa's Old
Series A Preferred Stock and outstanding options to purchase 43,900 shares of
Alfalfa's Common Stock, Alfalfa's does not have outstanding any stock or
securities convertible into or exchangeable for shares of its capital stock, or
any rights or options to subscribe for or to purchase any capital stock or any
stock or securities convertible into or exchangeable for any capital stock.
Alfalfa's is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock other
than pursuant to the terms of the Alfalfa's Old Series A Preferred Stock.
9.5 Alfalfa's (a) unaudited consolidated balance sheet as of April
28, 1996 (the "Latest Alfalfa's Balance Sheet") and the related consolidated
statements of income and cash flows for the periods then ended attached hereto
as Exhibit 9.5(a), and (b) audited consolidated balance sheet as of June 30,
1995 and the related audited consolidated statements of income, stockholders'
equity and cash flows for the fiscal year then ended (including in all cases
the notes thereto) attached hereto as Exhibit 9.5(b) are accurate and complete
in all material respects and have been prepared in accordance with generally
accepted accounting principles, consistently applied. Since the date of the
Latest Alfalfa's Balance Sheet, except as set forth on Schedule 9.5, (i) there
has been no material adverse change in Alfalfa's consolidated
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<PAGE> 22
financial condition, operating results, business prospects, employee relations,
customer relations or otherwise, other than changes occurring in the ordinary
course of business which in the aggregate have not been materially adverse to
Alfalfa's or (ii) Alfalfa's has not made any change in accounting principals or
practices from those utilized in the preparation of the balance sheets and
related statements referred to in this Section 9.5.
9.6 Except as set forth on the Latest Alfalfa's Balance Sheet or
on Schedule 9.6, Alfalfa's has no material obligation or liability (whether
accrued, absolute, contingent, unliquidated or otherwise) other than
liabilities which have arisen after the date of the Latest Alfalfa's Balance
Sheet in the ordinary course of business and which do not involve breach of
contract, breach of warranty, torts, infringements, claims or lawsuits.
9.7 Except as set forth on Schedule 9.7, Alfalfa's has not, since
the date of the Latest Alfalfa's Balance Sheet, (a) issued any capital stock,
bonds or other securities other than upon the issuance of existing stock
options, (b) borrowed any amount or incurred or become subject to any
liabilities that aggregate in excess of $100,000, except current liabilities
incurred in the ordinary course of business and liabilities under contracts
entered into in the ordinary course of business, (c) discharged or satisfied
any lien or encumbrance or paid any obligation or liability other than current
liabilities paid in the ordinary course of business, (d) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its stock, or purchased or redeemed any shares of its capital stock, (e)
mortgaged or pledged any of its property or assets, or subjected them to any
lien, security interest, charge or any other encumbrance, except liens for
current property taxes not yet due and payable, (f) sold, assigned or
transferred any of its tangible assets, except in the ordinary course of
business, or cancelled any debts or claims, (g) sold, assigned or transferred
any patents, trademarks, trade names, copyrights, trade secrets or other
intangible assets, or disclosed any proprietary confidential information to any
person, (h) suffered any extraordinary losses or waived any rights of material
value, whether or not in the ordinary course of business or consistent with
past practice, (i) made capital expenditures or commitments therefor that
aggregate in excess of $100,000, (j) entered into any other transaction other
than in the ordinary course of business, or entered into any other material
transaction, whether or not in the ordinary course of business, (k) made
charitable contributions or pledges aggregating in excess of $25,000, (l)
suffered any material damage, destruction or casualty loss, whether or not
covered by insurance, or (m) made any illegal political contributions, or any
bribes, kickback payments or other illegal payments.
9.8 Alfalfa's inventory consists of items of a quality and
quantity salable at Alfalfa's normal profit levels in the ordinary course of
business. The values at which such inventory is carried
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on the Latest Alfalfa's Balance Sheet are in accordance with generally accepted
accounting principles. Schedule 9.8 contains a materially complete and
accurate summary of Alfalfa's inventory as of March 24, 1996.
9.9 Except for the investigation by the Attorney General of New
Mexico or as set forth on Schedule 9.9, (a) there are no material actions,
suits, proceedings, orders, investigations or claims pending against Alfalfa's
or any of its subsidiaries, and to the best of Alfalfa's knowledge, there are
no such actions, suits, proceedings, orders, investigations or claims
threatened against or affecting Alfalfa's or any of its subsidiaries at law or
in equity, or before or by any governmental department, commission, board,
bureau, agency or instrumentality, (b) there are no material arbitration
proceedings pending under collective bargaining agreements or otherwise, and
(c) there are no material governmental inquiries (including inquiries as to the
qualification of Alfalfa's or any of its subsidiaries to hold or receive any
license or permit) involving Alfalfa's or any of its subsidiaries.
9.10 Except as set forth on Schedule 9.10, there are no labor
controversies pending or, to the best of Alfalfa's knowledge, threatened
against Alfalfa's or any subsidiary of Alfalfa's. There are no organizational
efforts in progress or, to the best of Alfalfa's knowledge, threatened
involving any employees of Alfalfa's or any subsidiary of Alfalfa's. To the
best of Alfalfa's knowledge, Alfalfa's and each of its subsidiaries has
complied in all material respects with all laws relating to the employment of
labor.
9.11 (a) Except as set forth on Schedule 9.11, Alfalfa's and
each of its subsidiaries have filed, or timely applied for extensions of time
in which to file, all returns, declarations, reports, estimates, information
returns, and statements ("Returns") required to be filed or sent by it in
respect of any Taxes (as defined in clause (n) below) or required to be filed
or sent by it by any taxing authority having jurisdiction; (ii) timely and
properly paid (or has had paid on its behalf) all Taxes shown to be due and
payable on such Returns; (iii) established on the Latest Alfalfa's Balance
Sheet (and until the Effective Time will establish on its books and records),
in accordance with generally accepted accounting principles, reserves that are
adequate for the payment of any Taxes not yet due and payable; (iv) complied
with all applicable laws, rules, and regulations relating to the withholding of
Taxes and the payment thereof (including, without limitation, withholding of
Taxes under Sections 1441 and 1442 of the Internal Revenue Code (the "Code"),
or similar provisions under any foreign laws), and timely and properly withheld
from individual employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws;
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(b) There are no liens for Taxes upon any assets of
Alfalfa's or any of its subsidiaries, except for liens for Taxes not yet due;
(c) No deficiency for any Taxes has been proposed,
asserted or assessed against Alfalfa's or any of its subsidiaries that has not
been resolved and paid in full. No waiver, extension or comparable consent
given by Alfalfa's or any of its subsidiaries regarding the application of the
statute of limitations with respect to any Taxes or Returns is outstanding, nor
is any request for any such waiver or consent pending. There has been no Tax
audit or other administrative proceeding or court proceeding with regard to any
Taxes or Returns, nor is any such Tax audit or other proceeding pending, nor
has there been any notice to Alfalfa's or any of its subsidiaries by Taxing
authority regarding any such Tax, audit or other proceeding, or, to the best
knowledge of Alfalfa's, is any such Tax audit or other proceeding threatened
with regard to any Taxes or Returns. Alfalfa's does not expect the assessment
of any additional Taxes and is not aware of any unresolved questions, claims or
disputes concerning the liability for Taxes of Alfalfa's or its subsidiaries
which would exceed the estimated reserves established on their books and
records;
(d) Neither Alfalfa's nor any of its subsidiaries is a
party to any agreement, contract or arrangement that would result, separately
or in the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code and the consummation of the
transactions contemplated by this Agreement will not be a factor causing
payments to be made by Alfalfa's or any of its subsidiaries that is not
deductible (in whole or in part) under Section 280G of the Code;
(e) Neither Alfalfa's nor any of its subsidiaries has
requested any extension of time within which to file any Return, which Return
has not since been filed;
(f) No property of Alfalfa's or any of its subsidiaries
is property that such entity is or will be required to treat as being owned by
another person under the provisions of Section 168(f)(8) of the Code (as in
effect prior to amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Section 168 of the Code;
(g) Alfalfa's is not required to include in income any
adjustment under Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by Alfalfa's as a result of the Tax Reform Act of
1986 and Alfalfa's has no knowledge that the Internal Revenue Service has
proposed any such adjustment or change in accounting method;
(h) All transactions that could give rise to an
understatement of federal income tax (within the meaning of Section 6661 of the
Code as it applied prior to repeal) or an underpayment
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<PAGE> 25
of tax (within the meaning of Section 6662 of the Code) were reported in a
manner for which there is substantial authority or were adequately disclosed
(or, with respect to Returns filed before the Effective Time, will be reported
in such a manner or adequately disclosed) on the Returns required in accordance
with Sections 6661(b)(2)(B) and 6662(d)(2)(B) of the Code;
(i) Neither Alfalfa's nor any of its subsidiaries has
engaged in any transaction that would result in a deemed election under Section
338(e) of the Code, and none of such entities will engage in any such
transaction within any applicable "consistency period" (as such term is defined
in Section 338 of the Code);
(j) Neither Alfalfa's nor any of its subsidiaries has
filed any consent under Section 341(f) of the Code;
(k) Schedule 9.11 contains a description of all tax
sharing agreements in effect as of the date hereof all of which have previously
been delivered to Wild Oats;
(l) Neither Alfalfa's nor any of its subsidiaries is a
"United States real property holding corporation" (as such term is defined in
Section 897 of the Code);
(m) Alfalfa's is not a "foreign person" (as such term is
defined in Section 1445(f)(3) of the Code); and
(n) For purposes of this Agreement, the term "Tax" or
"Taxes" means all taxes, charges, fees, levies, or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, social security, unemployment, excise, estimated,
severance, stamp, occupation, property, or other taxes, customs duties, fees,
assessments, or charges of any kind whatsoever, including, without limitation,
all interest and penalties thereon, and additions to tax or additional amounts
imposed by any taxing authority, domestic or foreign, upon Alfalfa's or any of
its subsidiaries.
9.12 (a) Schedule 9.12 lists the following agreements, whether
oral or written, to which Alfalfa's or any of its subsidiaries is a party,
which is currently in effect (such list to set forth the commencement date and
termination or expiration date of such agreement): (i) collective bargaining
agreement or contract with any labor union; (ii) bonus, pension, profit
sharing, retirement or other form of deferred compensation plan; (iii)
hospitalization insurance or other welfare benefit plan or practice, whether
formal or informal; (iv) stock purchase or stock option plan; (v) contract for
the employment of any officer, individual employee or other person on a
full-time, part-time or consulting basis or relating to severance pay for any
such person; (vi) confidentiality agreement; (vii) contract, agreement or
understanding relating to the voting of common stock or the
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<PAGE> 26
election of directors of Alfalfa's or any of its subsidiaries; (viii) agreement
or indenture relating to the borrowing of money or to mortgaging, pledging or
otherwise placing a lien on any of the assets of Alfalfa's or any of its
subsidiaries; (ix) guaranty of any obligation for borrowed money or otherwise;
(x) lease or agreement under which Alfalfa's or any of its subsidiaries is
lessee of, or holds or operates any property, real or personal, owned by any
other party; (xi) lease or agreement under which Alfalfa's or any of its
subsidiaries is lessor of, or permits any third party to hold or operate, any
property, real or personal; (xii) contract or group of related contracts with
the same party for the purchase of products or services, other than in the
ordinary course of business; (xiii) contract or group of related contracts with
the same party (other than any contract or group of related contracts for the
purchase or sale of products or services) continuing over a period of more than
six months from the date or dates thereof, not terminable by it on 30 days or
less notice without penalty; (xiv) contract which prohibits Alfalfa's or any of
its subsidiaries from freely engaging in business anywhere in the world; (xv)
contract for the distribution of any of Alfalfa's' products (including any
distributor or sales contract); (xvi) any franchise agreements; (xvii) contract
or commitment for capital expenditures; (xviii) agreement for the sale of any
capital asset; (xix) contract with any affiliate which in any way relates to
Alfalfa's or any of its subsidiaries; or (xx) other agreement which is either
material to the business of Alfalfa's or was not entered into in the ordinary
course of business;
(b) Alfalfa's and its subsidiaries have performed all
obligations required to be performed by them in connection with the contracts
or commitments required to be disclosed in Schedule 9.12 and they are not in
receipt of any claim of default under any such contract or commitment; neither
Alfalfa's nor any of its subsidiaries has any present expectation or intention
of not fully performing any material obligation pursuant to any such contract
or commitment; and neither Alfalfa's nor any of its subsidiaries has knowledge
of any breach or anticipated breach by any other party to any such contract or
commitment; and
(c) Prior to the Effective Time, Wild Oats shall be
supplied with a true and correct copy of each written contract or commitment
disclosed in Schedule 9.12, and a written description of each oral contract or
commitment disclosed in Schedule 9.12, together with all amendments, waivers or
other changes thereto.
9.13 Schedule 9.13 describes all registrations of, applications for
or rights in patents, trademarks, service marks, trade names, corporate names,
copyrights, trade secrets, know-how or other intellectual property rights owned
by, licensed to or otherwise controlled by Alfalfa's or used in, developed for
use in or necessary to the conduct of the business of Alfalfa's as now
conducted or planned to be conducted. Alfalfa's owns and possesses all right,
title and interest, or holds a valid license, in and to
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<PAGE> 27
the rights set forth in Schedule 9.13 and none of such rights has been licensed
or assigned to any third party. Alfalfa's has taken all necessary action to
protect the intellectual property rights set forth in Schedule 9.13. Neither
Alfalfa's nor any of its subsidiaries has received any notice of, nor are there
any facts known to Alfalfa's or any of its subsidiaries which indicate a
likelihood of, any infringement or misappropriation by, or conflict from, any
third party with respect to the intellectual property rights which are listed;
no claim by any third party contesting the validity of any intellectual
property rights listed under such caption has been made, is currently
outstanding or, to the best knowledge of Alfalfa's, is threatened; neither
Alfalfa's nor any of its subsidiaries has received any notice of any
infringement, misappropriation or violation of any intellectual property rights
of any third party and neither Alfalfa's nor any of its subsidiaries has
infringed, misappropriated or otherwise violated any such intellectual property
rights; and no infringement, illicit copying, misappropriation or violation has
occurred or will occur with respect to products currently being sold by
Alfalfa's or with respect to the products currently under development (in their
present state of development) or with respect to the conduct of Alfalfa's'
business as now conducted.
9.14 Except as set forth on Schedule 9.14:
(a) Alfalfa's and its subsidiaries have materially
complied with all laws relating to the employment of labor, including
provisions thereof relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other taxes;
(b) neither Alfalfa's nor any of its subsidiaries has any
material labor relations problem pending and labor relations are satisfactory;
(c) there are no material workers' compensation claims
pending against Alfalfa's or any of its subsidiaries nor is Alfalfa's or any of
its subsidiaries aware of any facts that would give rise to such a claim;
(d) no employee of Alfalfa's or any of its subsidiaries
is subject to any confidentiality or noncompetition agreement or any other
agreement or restriction of any kind that would impede in any way the ability
of such employee to carry out fully all activities of such employee; and
(e) no employee or former employee has any claim with
respect to any intellectual property rights of Alfalfa's set forth in Schedule
9.13.
9.15 (a) Except as set forth on Schedule 9.15, with respect to
all employees and former employees of Alfalfa's or any of its subsidiaries and
all dependents and beneficiaries of such employees
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<PAGE> 28
and former employees, neither Alfalfa's nor any of its subsidiaries (i)
maintains or contributes to any nonqualified deferred compensation or
retirement plans, contracts or arrangements; (ii) maintains or contributes to
any qualified defined contribution plans (as defined in Section 3(34) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 414(i) of the Code; (iii) maintains or contributes to any qualified
defined benefit plans (as defined in Section 3(35) of ERISA or Section 414(j)
of the Code); and (iv) maintains or contributes to any employee welfare benefit
plans (as defined in Section 3(1) of ERISA);
(b) To the extent required (either as a matter of law or
to obtain the intended tax treatment and tax benefits), all employee benefit
plans (as defined in Section 3(3) of ERISA) which Alfalfa's or any of its
subsidiaries maintains or to which any of them contributes (collectively, the
"Plans") comply with the requirements of ERISA and the Code. With respect to
the Plans, (i) all required contributions which are due have been made and a
proper accrual has been made for all contributions due in the current fiscal
year; (ii) there are no actions, suits or claims pending, other than routine
uncontested claims for benefits; and (iii) there have been no prohibited
transactions (as defined in Section 406 of ERISA or Section 4975 of the Code);
(c) Schedule 9.15 contains true and complete copies of
(i) the most recent determination letter, if any, received by Alfalfa's or any
of its subsidiaries from the Internal Revenue Service regarding the Plans and
any amendment to any Plan made subsequent to any Plan amendments covered by any
such determination letter; (ii) the most recent financial statements and annual
report or return for the Plans; and (iii) the most recently prepared actuarial
valuation reports;
(d) Neither Alfalfa's nor any of its subsidiaries
contributes (and has not ever contributed) to any multi-employer plan, as
defined in Section 3(37) of ERISA. Neither Alfalfa's nor any of its
subsidiaries has actual or potential liabilities under Section 4201 of ERISA
for any complete or partial withdrawal from a multi-employer plan. Neither
Alfalfa's nor any of its subsidiaries has actual or potential liability for
death or medical benefits after separation from employment, other than (i)
death benefits under the employee benefit plans or programs (whether or not
subject to ERISA) set forth in Schedule 9.15 and (ii) health care continuation
benefits described in Section 4980B of the Code;
(e) Neither Alfalfa's nor any of their subsidiaries, nor
any of their directors, officers, employees or other "fiduciaries", as such
term is defined in Section 3(21) of ERISA, has committed any breach of
fiduciary responsibility imposed by ERISA or any other applicable law with
respect to the Plans which would subject Alfalfa's, any of its subsidiaries or
Alfalfa's or any of their
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<PAGE> 29
respective directors, officers or employees to any liability under ERISA or any
applicable law; and
(f) Neither Alfalfa's nor any of its subsidiaries has
incurred any liability for any tax or civil penalty or any disqualification of
any employee benefit plan (as defined in Section 3(3) of ERISA) imposed by
Sections 4980B and 162(k) and 4975 of the Code and Part 6 of Title I and
Section 502(i) of ERISA.
9.16 Schedule 9.16 lists and briefly describes each insurance
policy maintained by Alfalfa's and each of its subsidiaries as of the date of
the Latest Alfalfa's Balance Sheet with respect to their properties, assets and
operations and sets forth the date of expiration of each such insurance policy.
All of such insurance policies are, as of the date hereof, and as of the
Effective Time will be, in full force and effect and issued by insurers of
recognized responsibility and are for amounts which have been sufficient to
cover claims that Alfalfa's and its subsidiaries have settled within the last
five years. Neither Alfalfa's nor any of its subsidiaries is in default with
respect to its obligations under any of such insurance policies.
9.17 Except as set forth on Schedule 9.17:
(a) To the best knowledge of Alfalfa's, other than
pursuant to this Agreement, no officer or director, nor any of the employees
identified on Schedule 8.17 hereof who make or are expected to make significant
contributions to the business of Alfalfa's (each an "Alfalfa's Key Employee")
of Alfalfa's or any of its subsidiaries or any member of the immediate family
of any such officer, director or Alfalfa's Key Employee, or any entity in which
any of such persons owns any beneficial interest (other than any publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the counter market and less than one percent of the stock of which is
beneficially owned by any of such persons) (collectively "insiders"), has any
agreement with Alfalfa's or any of its subsidiaries or any interest in any
property, real, personal or mixed, tangible or intangible, used in or
pertaining to Alfalfa's' business. To the best knowledge of Alfalfa's, none of
the insiders has any direct or indirect interest in any competitor, supplier or
customer of Alfalfa's or any of its subsidiaries or in any person, firm or
entity from whom or to whom Alfalfa's or any of its subsidiaries leases any
property, or in any other person, firm or entity with whom Alfalfa's or any of
its subsidiaries transacts business of any nature. For purposes of this Section
9.17, the members of the immediate family of an officer, director or employee
shall consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law of
such officer, director or employee; and
(b) Except for the payment of salaries, accrued paid time
off and other normal elements of compensation and
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<PAGE> 30
reimbursement for out-of-pocket expenses in the ordinary course of business,
neither Alfalfa's nor any of its subsidiaries will immediately following the
Effective Time be indebted to any of their directors, officers or employees on
any account whatsoever.
9.18 Schedule 9.18 lists all officers and directors of Alfalfa's
and its subsidiaries and all bank accounts of Alfalfa's and its subsidiaries
(designating each authorized signer).
9.19 (a) The real property demised by the leases described
(including the term thereof) in Schedule 9.19 constitutes all of the real
property used or occupied by Alfalfa's or any of its subsidiaries (the "Real
Property"). The Real Property has access, sufficient for the conduct of
Alfalfa's' business as now conducted or as presently proposed to be conducted,
to public roads and to all utilities, including electricity, sanitary and storm
sewer, potable water, natural gas and other utilities, used in the operation of
the Business at that location;
(b) The leases described in Schedule 9.19 are in full
force and effect, and Alfalfa's or its subsidiary that is a party to each such
lease holds a valid and existing leasehold interest under each of such leases
for the term set forth in Schedule 9.19. Alfalfa's has delivered to Wild Oats
complete and accurate copies of each of the leases described in Schedule 9.19,
and none of such leases shall have been modified in any respect, prior to the
Effective Time. None of Alfalfa's or its subsidiaries is in default, and no
circumstances exist which, if unremedied, would, either with or without notice
or the passage of time or both, result in a default under any of such leases;
nor, to the best knowledge of Alfalfa's and its subsidiaries, is any other
party to any of such leases in default;
(c) Schedule 9.19 discloses the aggregate value of the
tangible properties and tangible assets of Alfalfa's and its subsidiaries as
reflected on the Latest Alfalfa's Balance Sheet. Alfalfa's and its
subsidiaries own good and marketable title to its tangible properties and
tangible assets as described in Schedule 9.19 and reflected on the Latest
Alfalfa's Balance Sheet or acquired since the date thereof, free and clear of
all liens and encumbrances, except for (i) liens for current taxes not yet due
and payable, (ii) the properties subject to the leases listed in Schedule 9.19,
(iii) as otherwise disclosed in Schedule 9.19, (iv) inventory disposed of since
the date of the Latest Alfalfa's Balance Sheet in the ordinary course of
business, and (v) liens in respect of pledges or deposits under workers'
compensation laws;
(d) Alfalfa's or its subsidiaries own, or lease under
valid leases, all buildings, machinery, equipment and other tangible assets
used in the conduct of their business;
(e) Neither Alfalfa's nor any of its subsidiaries is in
violation of any applicable zoning ordinance or other law,
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<PAGE> 31
regulation or requirement relating to the operation of any properties used in
the operation of its business, and neither Alfalfa's nor any of its
subsidiaries has received any notice of any such violation, or the existence of
any condemnation proceeding with respect to any of the Real Property; and
(f) Neither Alfalfa's nor any of its subsidiaries has
knowledge of improvements made or contemplated to be made by any public or
private authority, the costs of which are to be assessed as special taxes or
charges against any of the Real Property, and there are no present assessments.
9.20 Except as set forth on Schedule 9.20, (a) each of Alfalfa's
and its subsidiaries and their officers, directors, agents and employees have
complied in all material respects with all applicable laws, regulations and
other requirements, including, but not limited to, federal, state, local and
foreign laws, ordinances, rules, regulations and other requirements pertaining
to product labeling, consumer products safety, equal employment opportunity,
employee retirement, affirmative action and other hiring practices,
occupational safety and health, workers' compensation, unemployment,
environmental and building and zoning codes, which affect Alfalfa's' business
or any real Property and to which any of them may be subject. No claims have
been filed against Alfalfa's or any of its subsidiaries alleging a violation of
any such laws, regulations or other requirements. There is no action pending
or, to Alfalfa's' knowledge threatened, to change the zoning or building
ordinances or any other laws, rules, regulations or ordinances affecting the
Real Property. Neither Alfalfa's nor any of its subsidiaries is relying on any
exemption from or deferral of any such applicable law, regulation or other
requirement that would not be available to Alfalfa's after the Merger;
(b) Each of Alfalfa's and its subsidiaries have in full
force and effect, all licenses, permits and certificates, from federal, state,
local and foreign authorities (including, without limitation, federal and state
agencies regulating occupational health and safety) necessary to conduct their
business and own and operate their properties (collectively, the "Permits").
Alfalfa's and its subsidiaries have conducted their business in compliance with
all material terms and conditions of the Permits; and
(c) Neither Alfalfa's nor any of its subsidiaries has
made or has agreed to make gifts of money, other property or similar benefits
(other than incidental gifts of articles of nominal value) to any actual or
potential customer, supplier, governmental employee or any other person in a
position to assist or hinder Alfalfa's in connection with any actual or
proposed transaction.
9.21 None of the information relating to Alfalfa's or its
subsidiaries, this Agreement or the transactions contemplated by
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<PAGE> 32
this Agreement has been supplied or is to be supplied by Alfalfa's for
inclusion in (a) the Private Placement Memorandum, (b) the Proxy Statement, and
(c) any other documents to be filed with any regulatory authority in connection
with the transactions contemplated by this Agreement will, at the respective
times such documents are filed, become effective or are mailed to stockholders,
as the case may be, be false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the statements
therein not misleading or, in the case of the Proxy Statement or any amendment
or supplement thereto, at the time of the meeting of stockholders referred to
in Section 12.1 hereof, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
meeting in connection with which the Proxy Statement shall be mailed. All
documents which Alfalfa's or Holdings is responsible for filing in connection
with the Merger will comply as to form in all material respects with the
applicable requirements of the statutes, rules and regulations pursuant to
which they are filed.
ARTICLE X
Representations and Warranties of Newco
10.1 Newco is a corporation duly organized, validly existing, and
in good standing under the corporate laws of Delaware, with full power and
authority and all material licenses, permits and authorizations necessary to
own its property and to carry on its business as presently conducted. Newco
was formed in April, 1996 and has conducted no business and has no
subsidiaries.
10.2 Newco has complete and unrestricted power to enter into and,
upon the receipt of such approvals as may be required by law, to consummate the
transactions contemplated by this Agreement.
10.3 The execution, delivery and performance of this Agreement have
been duly and properly authorized and approved by the Board of Directors of
Newco and its sole stockholder, Alfalfa's. This Agreement constitutes a valid
and binding obligation of Newco enforceable in accordance with its terms.
Except as contemplated by Sections 9.9 and 15.1, the execution and delivery by
Newco of this Agreement and the fulfillment of and compliance with the
respective terms hereof by Newco do not and will not (a) conflict with or
result in a breach of the terms, conditions or provisions of, (b) constitute a
default under, (c) result in the creation of any lien, security interest,
charge or encumbrance upon Newco's capital stock or assets pursuant to, (d)
give any third party the right to accelerate, in whole or in part, any
obligation under, (e) result in a violation of, or (f) require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body or other third party pursuant to,
the charter or bylaws of Newco, any agreement,
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<PAGE> 33
indenture, instrument, order, judgment or decree to which Newco is subject, or
any law, statute, rule or regulation to which Newco is subject.
10.4 The authorized, issued and outstanding capital stock of Newco
is as set forth in Recital F of this Agreement, and all outstanding shares of
Newco's capital stock have been validly issued and are fully paid and non-
assessable. Newco does not have outstanding any stock or securities
convertible into or exchangeable for shares of its capital stock, or any rights
or options to subscribe for or to purchase any capital stock or any stock or
securities convertible into or exchangeable for any capital stock. Newco is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock.
10.5 Newco has no material obligation or liability (whether
accrued, absolute, contingent, unliquidated or otherwise) other than
liabilities pursuant to this Agreement.
10.6 All documents which Newco or Holdings is responsible for
filing in connection with the Merger will comply as to form in all material
respects with the applicable requirements of the statutes, rules and
regulations pursuant to which they are filed.
ARTICLE XI
Covenants of Wild Oats
11.1 Prior to the Effective Time, Wild Oats shall file with the
Secretary of State of Delaware an Amended and Restated Certificate of
Incorporation (the "New Wild Oats Charter") substantially in the form of
Exhibit 11.1, which will contain the rights, preferences and privileges of the
Wild Oats Series E Preferred Stock.
11.2 During the period from the date of this Agreement to the
Effective Time, Wild Oats shall, and shall cause each of its subsidiaries to,
conduct its operations according to its ordinary and usual course of business
consistent with past practices and use all commercially reasonable efforts to
maintain and preserve its business organization, employees and relationships
with agents and others and to retain the services of its officers and Wild Oats
Key Employees.
11.3 During the period from the date of this Agreement to the
Effective Time, neither Wild Oats nor any subsidiary of Wild Oats shall,
without the prior written consent of Alfalfa's:
(a) Adjust, split, combine or reclassify its capital
stock; make, declare or pay any dividend (except for subsidiary dividends paid
to Wild Oats in the ordinary course of business); declare or make any other
distribution on, or directly or
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<PAGE> 34
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for,
any shares of its capital stock other as contemplated by Section 15.1(f); grant
any options or stock appreciation rights or give any person any right to
acquire from Wild Oats or any subsidiary any shares of its capital stock; or
issue or agree to issue any additional shares of capital stock of Wild Oats;
(b) Sell, transfer, pledge, mortgage, encumber or
otherwise dispose of any material property or assets of Wild Oats or any of its
subsidiaries or the stock of any subsidiary;
(c) Adopt or amend to increase materially compensation or
benefits payable under any collective bargaining, bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
severance or termination, employment or other plan, agreement, trust, fund
arrangement for the benefit of employees; or grant any severance or termination
pay (otherwise than pursuant to policies or agreements of Wild Oats in effect
on the date hereof) to, or enter into any employment agreement with, any
executive officer or director of Wild Oats; or
(d) Make any material changes in the Restated Certificate
of Incorporation or Bylaws of Wild Oats or in the articles of incorporation or
bylaws of any subsidiary of Wild Oats except as contemplated by Section
15.1(f).
ARTICLE XII
Covenants of Alfalfa's
12.1 Alfalfa's, as soon as reasonably practicable, but no later
than July 11, 1996, shall call and hold one or more meetings of its
stockholders for the purposes of:
(a) considering and approving the Alfalfa's
Reincorporation Merger and the Reincorporation Merger Agreement; at such
meeting, Alfalfa's will submit and recommend approval of the Reincorporation
Merger Agreement to its stockholders and, if the requisite approval by such
stockholders is obtained, will undertake promptly to consummate the Alfalfa's
Reincorporation Merger, and will cause Newco to consummate the Alfalfa's
Reincorporation Merger; and
(b) considering and approving this Agreement and the
Merger; at such meeting, Alfalfa's will submit and recommend approval of this
Agreement to its shareholders and, if the requisite approval by such
shareholders is obtained, will undertake promptly to consummate the Merger.
12.2 Alfalfa's will cause Holdings to have available to it at the
Effective Time sufficient shares of duly authorized Holdings
- 34 -
<PAGE> 35
Common Stock and Holdings Preferred Stock to exchange for the outstanding Wild
Oats Common Stock and Wild Oats Preferred Stock to be surrendered pursuant to
Article IV hereof.
12.3 During the period from the date of this Agreement to the
Effective Time, Alfalfa's shall, and shall cause each of its subsidiaries and
Holdings to, conduct its operations according to its ordinary and usual course
of business consistent with past practices and use all commercially reasonable
efforts to maintain and preserve its business organization, employees and
relationships with agents and others and to retain the services of its officers
and Alfalfa's Key Employees.
12.4 During the period from the date of this Agreement to the
Effective Time, except as contemplated by Article V, none of Alfalfa's, any
subsidiary of Alfalfa's nor Holdings shall, without the prior written consent
of Wild Oats:
(a) Other than in connection with the Conversion
Adjustment, adjust, split, combine or reclassify its capital stock; make,
declare or pay any dividend (except for subsidiary dividends paid in the
ordinary course of business); declare or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for, any shares of its capital stock; grant any options or stock appreciation
rights or give any person any right to acquire from Alfalfa's or any subsidiary
any shares of its capital stock; or issue or agree to issue any additional
shares of capital stock of Alfalfa's (other than issuances of its Common Stock
pursuant to the options and warrants described in Section 9.4);
(b) Sell, transfer, pledge, mortgage, encumber or
otherwise dispose of any material property or assets of Alfalfa's or any of its
subsidiaries or the stock of any subsidiary;
(c) Adopt or amend to increase materially the
compensation or benefits payable under any collective bargaining, bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, severance or termination, employment or other plan, agreement,
trust, fund or arrangement for the benefit of employees; or grant any severance
or termination pay (otherwise than pursuant to policies or agreements of
Alfalfa's in effect on the date hereof) to, or enter into any employment
agreement with, any executive officer or director of Alfalfa's; or
(d) Other than as contemplated by this Agreement, make
any material change in the Amended and Restated Articles of Incorporation or
Bylaws of Alfalfa's or in the articles of incorporation or bylaws of any
subsidiary of Alfalfa's.
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<PAGE> 36
ARTICLE XIII
Covenants of Newco
13.1 During the period from the date of this Agreement to the
Effective Time, Newco shall conduct no operations or activities other than in
furtherance of this Agreement.
13.2 During the period from the date of this Agreement to the
Effective Time Newco shall not, without the prior written consent of Wild Oats:
(a) Other than in connection with the Conversion
Adjustment or as contemplated by this Agreement, adjust, split, combine or
reclassify its capital stock; make, declare or pay any dividend (except for
subsidiary dividends paid in the ordinary course of business); declare or make
any other distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any securities or
obligations convertible into or exchangeable for, any shares of its capital
stock; grant any options or stock appreciation rights or give any person any
right to acquire from Newco or any subsidiary any shares of its capital stock;
or issue or agree to issue any additional shares of capital stock of Newco;
(b) Sell, transfer, pledge, mortgage, encumber or
otherwise dispose of any material property or assets of Newco;
(c) Pay or agree to pay any compensation to any officer,
director or employee of Newco; or
(d) Except as contemplated by this Agreement, make any
material change in the Articles of Incorporation or Bylaws of Newco.
ARTICLE XIV
Additional Covenants
14.1 Wild Oats, Alfalfa's and Newco will cooperate in good faith
and use reasonable efforts to prepare all documentation, promptly to effect all
filings and to obtain all permits, consents, approvals and authorizations of
all third parties and governmental bodies necessary to consummate the
transactions contemplated by this Agreement. Wild Oats, Alfalfa's and Newco
shall, as soon as practicable, file, or use their respective best efforts to
cause any other party to file, all Notification and Report Forms under the
Hart-Scott-Rodino Act ("HSR") with the Federal Trade Commission ("FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division")
required by this Agreement or to permit the consummation of the share exchanges
contemplated by Article IV hereof or the offering of Wild Oats Series E
Preferred Stock contemplated by Section 15.1(f) hereof and shall use best
efforts to respond as promptly as practicable, and to cause such other
- 36 -
<PAGE> 37
parties to respond as promptly as practicable, to all inquiries or requests
received from the FTC or the Antitrust Division for additional information or
documentation, and shall take all reasonable actions necessary to cooperate
promptly with and furnish information to the other parties hereto in connection
with any such inquiries or requests directed at them in connection with the
Merger.
14.2 Wild Oats and Alfalfa's agree that following the Effective
Time (a) the organizational structure for Holdings will be as set forth in
Exhibit 14.2, and (b) a search committee comprised of Michael Gilliland, S.M.
Hassan, and the Chairman and Vice Chairman of the Board of Directors of
Holdings will conduct a search for a Chief Operating Officer under the guidance
of the Holdings Board of Directors.
14.3 Wild Oats and Alfalfa's agree that following the Effective
Time, Holdings will honor the existing contracts that Alfalfa's has entered
into with Barry Perzow, Russell Precious, Teresa Precious and Caryn Ellison
attached hereto as Exhibits 14.3(a), (b) and (c) and will pay the reasonable
fees and disbursements of Hopkins and Sutter, counsel to the holders of a
majority of the Alfalfa's Old Series A Preferred Stock, incurred in connection
with the Merger.
14.4 Prior to the Effective Time, Wild Oats and Alfalfa's will
agree upon the terms of severance agreements for officers and other employees
of Wild Oats and Alfalfa's whose positions are eliminated in connection with
the Merger.
14.5 Between the date hereof and the Effective Time,
representatives of each of Wild Oats and Alfalfa's and their respective
accountants and attorneys shall be given full access at reasonable times to all
books, accounting and financial records, corporate records, tax returns and
other business files of the other party (except for information which is not
material and which is restricted solely to protect the attorney-client
privilege), and each shall cooperate fully in making its officers and personnel
available to such representatives at reasonable times. Each of Wild Oats and
Alfalfa's agrees that it and its representatives will hold in strict confidence
and will not use for any purpose other than in connection with the
reorganization, any confidential or proprietary information obtained from the
other party or its stockholders with respect to the business or financial
condition of such party. If the Merger is not consummated, each party will
return to the other party (or certify that it has destroyed) all copies of
documents containing proprietary or confidential information furnished by the
other party or its stockholders. The obligations set forth in this Section
14.5 shall survive the termination of this Agreement.
14.6 Prior to the termination of this Agreement pursuant to Section
16.1, neither Wild Oats nor Alfalfa's, nor their respective
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<PAGE> 38
stockholders nor any of their representatives, will directly or indirectly
solicit, encourage, assist, initiate discussions with, engage in negotiations
with, provide any information to, or enter into or perform any confidentiality
agreement or other agreement or transaction with any person other than the
other party relating to (a) any possible investment in such party, (b) the
purchase of any significant assets of such party, or (c) any form of merger,
acquisition, or other business combination transaction (other than acquisition
by a party of another entity that does not represent more than 10% of such
party's total assets).
14.7 No disclosure of the terms of this Agreement or the
transactions contemplated hereby shall be made by any party without the prior
consent of the other parties except as required by law, and each party shall
furnish to the others advance copies of any releases or statements which it
proposes to make concerning the transaction, which shall be subject to approval
by such parties (such approval not to be unreasonably withheld).
14.8 If the Merger shall not become effective or shall be
abandoned, then (a) Wild Oats on the one hand and Alfalfa's and Newco on the
other hand shall each bear their expenses separately incurred in connection
therewith, except that (i) Wild Oats shall pay all fees and expenses incurred
in marketing the Wild Oats Series E Preferred Stock, (ii) Wild Oats shall pay
all filing fees in connection with all HSR filings and (iii) Wild Oats shall
pay 50% and Alfalfa's shall pay 50% of any expenses directly relating to the
investigation by the Attorney General of New Mexico, including the fees of
economists, public relations specialists, local New Mexico counsel and legal
antitrust specialists engaged in connection with the investigation other than
Brownstein Hyatt Farber & Strickland, P.C., Cooley Godward Castro Huddleson &
Tatum or Latham & Watkins, and (b) Wild Oats and Alfalfa's shall each return to
the other all non-public documents and other materials obtained from the other,
without retaining any copies thereof, and shall hold confidential and not use
in any manner any non-public information so obtained.
14.9 Each of Wild Oats, Alfalfa's and Newco will use all
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Wild Oats and Alfalfa's will, and
will cause each of their respective subsidiaries to, use their commercially
reasonable efforts to obtain consents of all third parties and governmental
bodies necessary or, in the opinion of Wild Oats or Alfalfa's, desirable for
the consummation of the transactions contemplated by this Agreement.
14.10 In connection with any proceedings under or relating to HSR or
any other federal or state antitrust or fair trade law, the parties will
consult and cooperate with one another and consider in
- 38 -
<PAGE> 39
good faith the views of one another in connection with any analysis,
presentation, memorandum, brief, argument, appearance, opinion or proposal made
or submitted by or on behalf of any party hereto; provided however that nothing
herein shall prevent any party hereto or their authorized representatives from
(i) making or submitting any such analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal in response to a subpoena or
other legal process or as otherwise required by law, or (ii) submitting factual
information to the Antitrust Division, the FTC, state attorney general, any
other governmental agency or any court or administrative law judge in response
to a request therefor or as otherwise required by law.
14.11 Any document attached hereto as an Exhibit may be revised prior
to the Effective Time, provided that any material revision shall have been
approved by each of Michael C. Gilliland and S.M. Hassan.
ARTICLE XV
Conditions Precedent to Consummation of the Merger
15.1 The obligations of each of Wild Oats, Alfalfa's and Newco to
consummate the Merger shall be subject to the fulfillment of the following
conditions precedent:
(a) The Alfalfa's Reincorporation Merger shall have
occurred and the New Wild Oats Charter shall have been filed with the Secretary
of State of Delaware;
(b) This Agreement shall have been duly and validly
approved and adopted (i) at a meeting of the stockholders of Alfalfa's by
two-thirds of the stockholders present in person or by proxy at such meeting
and (ii) by the holders of all outstanding Wild Oats Preferred Stock and by the
holders of 75% of all outstanding Wild Oats Common Stock;
(c) The applicable waiting period under the HSR relating
to all transactions contemplated by this Agreement, including without
limitation the consummation of the share exchanges contemplated by Article IV
hereof and the offering of Wild Oats Series E Preferred Stock contemplated by
Section 15.1(f) hereof shall have expired or been terminated;
(d) Each of Wild Oats and Alfalfa's shall be satisfied
with the status of the investigation by the Attorney General of New Mexico,
provided that this condition shall terminate on June 17, 1996 unless either of
Wild Oats or Alfalfa's shall notify the other in writing that it does not
consent to the termination of this condition;
- 39 -
<PAGE> 40
(e) Each of Wild Oats and Alfalfa's shall have received
all material consents or approvals necessary or advisable in connection with
the transactions contemplated by this Agreement;
(f) A minimum of 539,503 shares (the "Minimum Series E
Sale"), but no more than 843,125 shares, of Wild Oats Series E Preferred Stock
shall have been issued for $33.364 cash per share and a warrant to purchase no
more than 10,539 shares of Wild Oats Series E Preferred Stock shall have been
issued to the placement agent with respect to the issuance of the Wild Oats
Series E Preferred Stock; and the first $8,130,000 of the proceeds of such sale
in excess of the Minimum Series E Sale shall have been used to repurchase
shares of Wild Oats Common Stock from existing holders of such shares at
$29.626 per share pursuant to the Stock Redemption Agreement in the form set
forth in Exhibit 15.1(f), and those shares of Wild Oats Common Stock shall be
treated as treasury stock and shall not be exchanged for Holdings Common Stock
pursuant to Section 4.1;
(g) The stockholders agreement and registration rights
agreement, in the forms of Exhibit 15.1(g)(i) and 15.1(g)(ii), respectively,
shall have been entered into by the parties thereto;
(h) The employment agreements attached hereto as Exhibits
15.1(h)(i), (ii) and (iii) between Holdings and each of Michael C. Gilliland,
Elizabeth C. Cook and S.M. Hassan shall not have been amended and shall be in
full force and effect;
(i) The compensation agreements attached hereto Exhibits
15.1(i)(i) and (ii) between Holdings and each of John Shields and David
Chamberlain shall not have been amended and shall be in full force and effect;
(j) The actions required to be taken by Alfalfa's, Newco
and Holdings pursuant to Article V shall have been taken;
(k) The matters referred to in Section 14.4 shall have
been agreed upon by Wild Oats and Alfalfa's;
(l) There (i) shall not be in effect a temporary
restraining order or a preliminary injunction or other order, decree or ruling
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission which (A) restrains or prohibits the Merger
or the consummation of the transactions contemplated hereby, or (B) prohibits
or restricts the ownership or operation by Holdings of any portion of its (or
Wild Oats' or Alfalfa's) business or assets or compels Holdings, Wild Oats or
Alfalfa's to dispose of or hold separate any portion of its business or assets,
or (C) imposes any limitations on the ability of Holdings effectively to
control in any respect its business or operations or those of Wild Oats or
Alfalfa's; or (ii) shall not be pending before any court of competent
jurisdiction or before any administrative law judge or court or
- 40 -
<PAGE> 41
before any federal or state governmental, regulatory or administrative agency
or commission, any action or proceedings, whether in law or in equity or
otherwise, brought by any federal or state governmental, regulatory or
administrative agency, commission or authority, which seeks as relief a result
described in clause (i) above; provided however, that the parties shall use
their best efforts to litigate against the entry of, or to obtain the lifting
of, such temporary restraining order or preliminary or permanent injunction or
other governmental action. In no event shall a party be required to sell or
otherwise dispose of, hold separate or otherwise divest itself of, any shares
or any portion of the retail stores, business or assets of Holdings, Wild Oats
or Alfalfa's;
(m) Holders of no more than 10% of the outstanding
capital stock of either Wild Oats or Alfalfa's shall have validly elected to
demand an appraisal of their shares pursuant to the DGCL or the CBCA in
connection with the Merger.
15.2 The obligation of Wild Oats to consummate the Merger shall be
subject to the fulfillment of the following additional conditions precedent:
(a) Each of Alfalfa's, Newco and Holdings shall have
performed its obligations contained in this Agreement required to be performed
at or prior to the Effective Time in all material respects, and the
representations and warranties made by Alfalfa's in Article VIX and made by
Newco in Article X shall be true and correct in all material respects as though
such representations and warranties had been made or given on and as of the
Effective Time by Holdings; and
(b) Wild Oats shall have received an opinion letter from
Brownstein Hyatt Farber & Strickland, P.C., dated the Effective Time,
substantially in the form set forth in Exhibit 15.2.
15.3 The obligation of Holdings to consummate the Merger shall be
subject to the fulfillment of the following additional conditions precedent:
(a) Wild Oats shall have performed its obligations
contained in this Agreement required to be performed at or prior to the
Effective Time in all material respects, and the representations and warranties
made by Wild Oats in Article VIII shall be true and correct in all material
respects as though such representations and warranties had been made or given
on and as of the Effective Time;
(b) Wild Oats shall have negotiated a successor line of
credit to its existing credit facility with Bank One, Indianapolis, National
Association that is adequate to fund the proposed business plan of Holdings;
- 41 -
<PAGE> 42
(c) William Blair & Co. shall not have withdrawn its
opinion attached hereto as Exhibit 15.3(c) as of the Effective Time; and
(d) Holdings shall have received an opinion letter from
Elizabeth C. Cook, Esq., dated the Effective Time, substantially in the form
set forth in Exhibit 15.3.
ARTICLE XVI
Termination and Waiver
16.1 Anything contained in this Agreement to the contrary
notwithstanding, the Merger may be terminated and abandoned at or prior to the
Effective Time, notwithstanding approval of this Agreement by stockholders of
Alfalfa's:
(a) By mutual consent of the respective Boards of
Directors of Wild Oats and Alfalfa's (or Holdings);
(b) By either party if the Effective Time has not
occurred by July 12, 1996;
(c) By either party if any action, suit or proceeding
shall have been instituted before any court or other governmental body or by
any public authority to challenge, restrain, enjoin or prohibit the Merger, or
to restrict the operation of the business of Wild Oats or Alfalfa's (or
Holdings) following the Merger, or to subject any of the parties to this
Agreement or their directors or officers to any liability, fine, forfeiture or
penalty.
16.2 Any of the terms or conditions of this Agreement may be
waived in writing at any time by the party which is entitled to the benefit
thereof.
ARTICLE XVII
Termination of Representations and Warranties
The respective representations and warranties of the parties to this
Agreement shall expire with, and be terminated and extinguished by, the Merger
at the Effective Time. None of the parties shall be under any liability
whatsoever with respect to any such representation or warranty which does not
so survive, it being intended that the sole remedy of the parties for a breach
of any such representation or warranty shall be to elect not to proceed with
the Merger.
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<PAGE> 43
ARTICLE XVIII
Miscellaneous
18.1 This Agreement (a) embodies the entire agreement among Wild
Oats, Alfalfa's and Newco with respect to the Merger, and supersedes all
previous written or oral proposals or communications concerning the
transactions contemplated herein, and there are no other binding agreements,
representations or warranties, written or oral, between the parties with
respect to the subject matter of this Agreement, (b) is not intended to confer
upon any person not a party to this Agreement any rights or remedies under this
Agreement, and (c) shall not be assigned by operation of law or otherwise.
18.2 This Agreement may be executed in two or more counterparts and
each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one instrument.
18.3 Wild Oats, Alfalfa's and Newco agree that if it becomes
necessary or desirable to execute further instruments or to make such other
assurances as are deemed necessary, the party requested to do so will use its
best efforts to provide such executed instruments or do all things necessary or
proper to carry out this Agreement.
18.4 Wild Oats, Alfalfa's and Newco, by mutual consent of their
respective Boards of Directors, may amend, modify, supplement and interpret
this Agreement in such manner as may be mutually agreed upon by them in writing
at any time.
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<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first written above.
WILD OATS MARKETS, INC.
By: /s/ Michael C. Gilliland
------------------------------------
Michael C. Gilliland
Chief Executive Officer
ALFALFA'S, INC.
By: /s/ S.M. Hassan
------------------------------------
S.M. Hassan
President and Chief Executive Officer
WO HOLDINGS, INC.
By: /s/ S.M. Hassan
------------------------------------
S.M. Hassan
President
- 44 -
<PAGE> 45
SCHEDULE 9.5
MATERIAL ADVERSE CHANGES
NONE.
<PAGE> 46
SCHEDULE 9.6
MATERIAL OBLIGATIONS OR LIABILITIES
NONE.
<PAGE> 47
SCHEDULE 9.7
STOCK OR DEBT ISSUANCES, PAYMENTS, ETC.
NONE.
<PAGE> 48
SCHEDULE 9.8
SUMMARY OF INVENTORY
Physical count of inventory as of April 28, 1996 - $3,573,840.
<PAGE> 49
SCHEDULE 9.9
MATERIAL LITIGATION, CLAIMS, ETC.
I. Investment Canada Review. The acquisition of Capers
Management Holdings Inc. in July, 1994 was subject to review by
Investment Canada, an agency of the Canadian government, a review
process customarily required in connection with the acquisition of
Canadian companies by foreign investors. The focus of the review has
been a commitment on behalf of the Company for the continued sale of
Canadian "cultured products", which primarily consist of books,
magazines, periodicals and similar publications. A copy of the Letter
of Undertaking regarding the continued sale of Canadian cultural
products is attached. Also attached is a letter dated February 20,
1995 from Canadian counsel describing the status and outstanding
issues in the review process. The Company has been informed by
Canadian counsel that while Investment Canada retains the theoretical
right to disapprove the acquisition of Capers, that such a result can
be avoided, in the worst case, by agreeing to the undertakings
proposed by Investment Canada with respect to Canadian cultural
products.
II. Liability Claims. The following claims exceed the $5,000
reserve and have been filed with the Company's insurance company.
These claims are not in litigation.
Claimant DOL Reserve Description
-------- --- ------- -----------
Erika Horing 3/4/96 $7,500 Claimant struck by cart pushed by employee
Ann Harvey 2/27/96 $5,000 Claimant fell in parking lot
Katherine Casades 1/5/96 $7,000 Claimant accidently hit with boxes from employee
Jane Montgomery 7/5/95 $7,500 Claimant fell from water in meat department
III. Civil Investigative Demand with the New Mexico Attorney
General's Office. In February, 1996, Alfalfa's received a Civil
Investigative Demand and Request for Production of Documents from the
New Mexico Attorney General's Office alleging possible violations of
anti-trust laws as a result of the proposed Combination with
Alfalfa's. On Monday, March 4, 1996, Alfalfa's met with the New
Mexico Assistant Attorney General and determined the focus and scope
of the investigation. The focus of the investigation is on the
effect, if any, of the Combination on competition in Santa Fe,
<PAGE> 50
New Mexico. Alfalfa's responded in full to the New Mexico Attorney
General's document request on March 19, 1996. On May 13, 1996,
Alfalfa's received a letter from the New Mexico Attorney General's
office stating that they have concluded that the merger will
substantially lessen competition in Santa Fe and suggesting
divestiture of either the St. Francis or Cordova Road store. On May
15, 1996, Wild Oats responded with its economist's (David Scheffman)
white paper which analyzes the industry and Wild Oats counsel provided
a legal brief summarizing case law supporting our position. We expect
to schedule a meeting with the New Mexico Attorney General's office
within the next two weeks to formally present our position. After
this meeting, we will have a clearer picture of New Mexico's intent or
interest in settling, and the likelihood that we will prevail if we
end up in litigation over the divestiture of a larger store (which we
would vigorously oppose). The merger agreement as currently drafted
proposes that the merger will close with the New Mexico situation
unresolved, unless either party objects before June 15, 1996.
<PAGE> 51
SCHEDULE 9.10
LABOR CONTROVERSIES
NONE.
<PAGE> 52
SCHEDULE 9.11
TAX DISCLOSURES
NONE.
<PAGE> 53
SCHEDULE 9.12
MATERIAL AGREEMENTS
# Management and Cost Sharing Agreement dated March 12, 1993, by
and between Alfalfa's, Inc. and Alfalfa's Boulder, Inc.
# Management and Cost Sharing Agreement dated March 12, 1993, by
and between Alfalfa's, Inc. and Alfalfa's Littleton, Inc.
# Management and Cost Sharing Agreement dated March 12, 1993, by
and between Alfalfa's, Inc. and Alfalfa's Cherry Creek, Inc.
# Management and Cost Sharing Agreement dated March 12, 1993, by
and between Alfalfa's, Inc. and Alfalfa's FC, Inc.
# Management and Cost Sharing Agreement dated March 12, 1993, by
and between Alfalfa's, Inc. and Alfalfa's Capitol Hill, Inc.
# Letter Agreement dated July 23, 1994 by and between Alfalfa's,
Inc., Alfalfa's Canada, Inc., Capers Management Holdings Inc.,
Encore Resources Ltd. and Barry Perzow, as amended by that
certain Letter Agreement dated December 28, 1994.
# Letter Agreement dated July 23, 1994 by and between Alfalfa's,
Inc., Alfalfa's Canada, Inc., Capers Management Holdings Inc.,
Encore Resources Ltd. and Russell Precious, as amended by that
certain Letter Agreement dated January 6, 1995.
# Voting Agreement dated November 4, 1991, as amended February
28, 1995, by and between Shahid Hassan, Lyle Davis, William
Rothacker, Barney M. Feinblum, Denis Nock ("Shareholders") and
WPG Corporate Development Associates III, L.P., WPG Corporate
Development Associates III (Overseas), Ltd., WPG Enterprise
Fund, L.P., Weiss, Peck & Greer Venture Associates II, L.P.,
and Weiss, Peck & Greer Venture Associates II (Overseas), Ltd.
("Purchasers").
# Shareholders' Rights and Standstill Agreement dated November
4, 1991, as amended February 28, 1995, by and between
Alfalfa's, Inc. and WPG Corporate Development Associates III,
L.P., WPG Corporate Development Associates III (Overseas),
Ltd., WPG Enterprise Fund, L.P., Weiss, Peck & Greer Venture
<PAGE> 54
Associates II, L.P., and Weiss, Peck & Greer Venture
Associates II (Overseas), Ltd.
# Co-Sale Agreement dated November 4, 1991, as amended February
28, 1995, by and between Shahid Hassan and John Payne and WPG
Corporate Development Associates III, L.P., WPG Corporate
Development Associates III (Overseas), Ltd., WPG Enterprise
Fund, L.P., Weiss, Peck & Greer Venture Associates II, L.P.,
and Weiss, Peck & Greer Venture Associates II (Overseas), Ltd.
# A Shareholder's Agreement exists between Alfalfa's, Inc. and
each shareholder substantially in the form attached.
# Incentive Stock Option Agreements relating to 43,900
unexercised common shares between Alfalfa's Inc. and various
employees and directors.
# Asset Purchase Agreement dated December 8, 1992 by and between
Alfalfa's, Inc. and Fruit Basket Company, Emery Dorsey and
Vivian Dorsey.
# Management Agreement dated July 23, 1994, as amended, by and
between Capers Management Holdings Inc., Alfalfa's, Inc. and
Russell Precious.
# Management Agreement dated ____, 1995, by and between Capers
Management Holdings Inc., Alfalfa's, Inc. and Teresa
Precious.
# Severance Agreements dated March 15, 1996, by and between
Alfalfa's Canada, Inc., Alfalfa's, Inc. and each of Russell
Precious and Teresa Precious.
# Letter Agreement dated January 18, 1995 by and between
Alfalfa's, Inc. and Deloitte & Touche for consulting services.
# Agreement dated as of January 2, 1996 between Alfalfa's, Inc.
and Caryn D. Ellison.
# Amendment to Stock Option Agreements dated as of January 2,
1996 between Alfalfa's, Inc. and Caryn D. Ellison.
# Series A Preferred Stock Purchase Agreement dated as of
February 28, 1995 by and between Alfalfa's, Inc. and the
Purchasers named therein.
# Shareholders Agreement dated as of February 28, 1995 by and
between Alfalfa's, Inc. and the shareholders named therein.
<PAGE> 55
# Registration Agreement dated as of February 28, 1995
Alfalfa's, Inc. and the Investors named therein.
# Management Agreement dated July 23, 1994, as amended May ____,
1996, by and between Capers Management Holdings Inc.,
Alfalfa's, Inc. and Barry Perzow.
<PAGE> 56
SCHEDULE 9.13
INTELLECTUAL PROPERTY
Alfalfa's, Inc.:
# Alfalfa's, Inc. - Service Mark. The Alfalfa's name has not
been registered as a service mark with the U.S. Patent and
Trademark Office and may not be available in every
jurisdiction.
# Alfalfa's has certain rights to recipes developed by employees
as provided in the employee handbook.
Alfalfa's Canada, Inc.:
Trademark Application/Registration No. Registration Date
--------- ---------------------------- -----------------
Capers Design* TMA 429,017 June 17, 1994
CAPERS TMA 429,970 July 1, 1994
Capers Design* Appn. No. 724,331 N/A (Notice of Allowance dated April 15,
1994)
* See attached page for copies of design marks.
<PAGE> 57
SCHEDULE 9.14
EMPLOYMENT ISSUES
UFCW Local Number 110005 is attempting to unionize the workers at the Seattle
store, and have been picketing the store two to four days a week.
<PAGE> 58
SCHEDULE 9.15
ERISA DISCLOSURES
#Alfalfa's Inc. Employees' 401(K) Plan
#Health Insurance Plan (self-insured), including Manufacturers Life Insurance
Company Group Insurance Policy - Third Party Administrator for claims with
insured stop/loss aggregates
#Gainsharing Plan taken from Employee Handbook
#Amended and Restated Employee Stock Ownership Plan effective June 28, 1993,
executed July 15, 1993
# 1991 Stock Option Plan
# Incentive Stock Option Agreements exist between Alfalfa's,
Inc. and all employees participating in the 1991 Stock Option
Plan, substantially in the form attached.
# Flexible Spending Plan
# Store and Executive Management Bonus (Cash) Program (Sample
bonus computation attached)
<PAGE> 59
SCHEDULE 9.16
INSURANCE POLICIES
See attached schedules.
<PAGE> 60
SCHEDULE 9.17
INSIDER DISCLOSURES
John Shields - Chairman of the Board, Chief Executive Officer and lead
investor in Delray Farms Markets
Barnet M. Feinblum - President and Chief Executive Officer of Natural Horizons
Director of Allegro Coffee Company
Director of White Wave Vegetarian Foods
Director of Zand Pharmaceuticals
Owns a minority interest in each of these companies
S.M. Hassan - Director of Zand Pharmaceuticals
Owns 1,000 shares of Zand Pharmaceuticals
Caryn D. Ellison - Director of Rudy's Bakery
Frontenac VI Limited An affiliate owns Health Valley
Partnership - A Frontenac employee is a director of Health Valley
The key employees of Alfalfa's, Inc. are S.M. Hassan, Barry Perzow and Caryn D.
Ellison.
<PAGE> 61
SCHEDULE 9.18
OFFICERS, DIRECTORS, BANK ACCOUNT INFORMATION
ALFALFA'S, INC.
Directors:
Barney Feinblum
S. M. Hassan
M. Laird Koldyke
Barry Perzow
John A. Shields
E. Theodore Stolberg
Officers:
S. M. Hassan - President
Caryn D. Ellison - Vice President, Secretary and Treasurer
ALFALFA'S ROCKY MOUNTAIN, INC.:
Directors:
S. M. Hassan
Caryn D. Ellison
Officers:
S. M. Hassan - President
Caryn D. Ellison - Vice President and Secretary
<PAGE> 62
ALFALFA'S SANTA FE, INC.:
Directors:
S. M. Hassan
M. Laird Koldyke
E. Theodore Stolberg
Officers:
S. M. Hassan - President
Caryn D. Ellison - Secretary and Treasurer
ALFALFA'S NORTHWEST, INC.:
Directors:
S. M. Hassan
M. Laird Koldyke
E. Theodore Stolberg
Officers:
S. M. Hassan - President
Caryn D. Ellison - Secretary and Treasurer
ALFALFA'S CANADA, INC.:
Directors:
S. M. Hassan
Barry Perzow
Russell Precious
Officers:
S. M. Hassan - President
Caryn D. Ellison - Secretary
<PAGE> 63
SCHEDULE 9.19
LEASES
Leased Property:
# Lease Agreement dated October 5, 1992 by and between
Alfalfa's, Inc. and BWay Property Limited Partnership for the
property located at 1645 Broadway, Boulder, Colorado, as
amended by that certain Amendment to Lease Agreements dated
March 9, 1995.
# Lease dated October 11, 1982 by and between Alfalfa's Boulder,
Inc. and Bway Property Limited Partnership for the property
located at 1651 Broadway, Boulder, CO, as amended by that
certain Amendment to Lease Agreement dated September 10, 1991,
and as amended by that certain Amendment to Lease Agreements
dated March 9, 1995.
# Lease Agreement dated May 16, 1984 by and between Overland
Sheepskin Co. and Colorado National Bank for the property
located at 1655 Broadway, Boulder, CO, as amended by that
certain Sublease Agreement dated August 7, 1984 by and between
Natural Horizons, Inc. and Overland Sheepskin, Inc., and that
certain Assignment Agreement dated April 10, 1989 by and
between Alfalfa's Boulder, Inc. and Overland Outfitters, Inc.,
and that certain Amendment to Lease dated September 10, 1991.
# Building Lease dated February 8, 1984 by and between Fruit
Basket Company and Midtown 900 Associates for the property
located at 900 E. 11th Ave., Denver, CO, as amended by that
certain Amendment to Building Lease dated October 9, 1991,
that certain Assignment and Second Amendment of Building Lease
dated January 13, 1993 by and between Alfalfa's Capitol Hill,
Inc., Fruit Basket Company and Midtown 900 Associates, and
that certain Third Amendment to Building Lease dated September
15, 1993. Guaranty dated January 13, 1993, executed by
Alfalfa's, Inc.
# Business Lease dated November 9, 1993 by and between
Alfalfa's, Inc. and McNeil-Meyer Investment Co. for the
property located at 9355 Elm Ct., Federal Heights, CO.
# Shopping Center Lease dated January 19, 1990 by and between
Alfalfa's Cherry Creek, Inc. and Country Club Plaza Associates
for the property located at 201 University Blvd., Denver, CO,
as amended by that certain First Amendment to
<PAGE> 64
Shopping Center Lease dated February 20, 1990, and that
certain Second Amendment to Shopping Center Lease dated March
20, 1991. Guaranty dated January 19, 1990 executed by
Alfalfa's, Inc.
# Shopping Center Lease dated May 1, 1992 by and between
Alfalfa's Littleton, Inc. and Trustees under the Will and of
the Estate of James Campbell, Deceased for the property
located at 5910 S. University Blvd., Littleton, CO., as
amended by that certain Lease Amendment dated September 6,
1995, Guaranty of Lease dated May 1, 1992 executed by
Alfalfa's, Inc., Ground Lease dated September 6, 1995 between
Alfalfa's Rocky Mountain, Inc. and Development Corp. of the
Rockies II, Inc., Guaranty of Ground Lease dated September 6,
1995, executed by Alfalfa's, Inc.
# Lease dated February 20, 1992 by and between Alfalfa's FC,
Inc. and Shirley DeSautels and Alfred DeSautels for the
property located at 216 W. Horsetooth Rd., Fort Collins, CO.
Limited Guaranty of Alfalfa's, Inc. executed by Alfalfa's FC,
Inc.
# Lease Agreement dated July 9, 1993 by and between Alfalfa's
Vail, Inc. and Trevina L.P. for the property located at 141 E.
Meadow Dr., F109 & F103, Vail, CO. Guaranty dated July 9,
1993 executed by Alfalfa's, Inc.
# Lease Agreement dated June 29, 1994 by and between Alfalfa's
Santa Fe, Inc. and First Interstate Bank of New Mexico, N.A.,
as Trustee of the Joseph M. Montoya Trust, the Patrick Montoya
Trust, and the Lynda M. Haran Trust for the property located
at 333 W. Cordova Rd., Santa Fe, NM. Lease Guaranty dated
June 29, 1994 executed by Alfalfa's, Inc.
# Lease Agreement dated January 12, 1984 by and between Pacific
Gamble Robinson Co. and Walter Griffin, Agnes Griffin, Robert
McAusland, Donald McAusland and Lucia Wood for the property
located at 5440 Sandpoint Way N.E., Seattle, WA, as amended by
that certain Amended and Restated Sublease Agreement dated
September 30, 1994 by and between Alfalfa's, Inc., Food
Services of America, Inc. and Cap Food Services Company.
# Lease Agreement dated November 6, 1992 by and between Encore
Resources Ltd. and 306283 British Columbia Ltd. for the
property located at 2211 W. 4th Ave., Vancouver, BC (office),
as amended by that certain Assignment of Lease dated November
1, 1993.
# Lease Agreement dated November 6, 1992 by and between Encore
Resources Ltd. and 306283 British Columbia Ltd. for the
property located at 2211 W. 4th
<PAGE> 65
Ave., Vancouver, BC (retail), as amended by that certain
Assignment of Lease dated November 1, 1993.
# Lease dated February 28, 1993 by and between Encore Resources
Ltd. and Camgornik Equities Ltd. and Hoopp Realty Inc. for the
property located at 2494-2496 Marine Dr., West Vancouver, B.C.
# Lease dated January 17, 1995 between Amon Investments Ltd. and
Encore Resources Ltd. for the property located at 1675 Robson
Street, Vancouver, B.C.
# Parking Agreement dated November 23, 1992 by and between
Alfalfa's Market, Inc. and Bank Western for the use of thirty
(30) parking spaces in the multi-story structure adjacent to
the store located at 210 University Boulevard, Denver, CO.
# Rental Agreement for Storage Space dated December 16, 1993 by
and between Alfalfa's Vail, Inc. and Trevina L.P. for storage
space located in the west building in the Crossroads of Vail
Shopping Center in Vail, CO.
# Lease Agreement dated March 23, 1993 by and between Alfalfa's,
Inc. ("Lessor") and Fred Miller, Shavano Valley Crop & Pork
Producers, and Cedaredge Meats ("Lessee"), as amended by that
certain Equipment Lease Addendum dated March 28, 1994, and
that certain Equipment Lease Addendum dated September 29,
1994, and that certain Equipment Lease Addendum dated March
20, 1995, and that certain Equipment Lease Addendum dated
October 31, 1995 until March 31, 1996.
Real Property Owned
# A part of Lot 23, South Mesa Subdivision, City of Fort
Collins, County of Larimer, State of Colorado, which begins at
the Southwest corner of said Lot 23, and run thence N 00
degrees 54'E 103.01 feet to the Northwest corner of said Lot
23, thence N 38 degrees 55'E 189.23 feet along the North line
of said Lot 23; thence S 00 degrees 05'E 103.00 feet to a
point on the South line of said Lot 23; thence S 89 degrees
55'W 191.00 feet to the point of beginning; which has a street
address of 3517 South Mason Street, Fort Collins, Colorado.
<PAGE> 66
SCHEDULE 9.20
PERMITS
None.
<PAGE> 67
SUPPLEMENT TO DISCLOSURE SCHEDULES
TO
AGREEMENT AND PLAN OF MERGER
DATED JUNE 4, 1996
AMONG WILD OATS MARKETS, INC.
ALFALFA'S, INC.
AND
WO HOLDINGS, INC.
The following updates Schedules 9.8, 9.12 and 9.19 of the above
captioned Merger Agreement:
Schedule 9.8 (Summary of Inventory)
Physical count of inventory as of May 26, 1996 - $3,602,515
Schedule 9.12 (Material Agreements)
Letter Agreement dated March 1, 1996 between Alfalfa's, Inc. and Ted Tannenbaum
& Associates
Schedule 9.19 (Leases)
Equipment Lease Addendum, dated April 22, 1996, to the Lease Agreement dated as
of March 23, 1996 by and between Alfalfa's, Inc., Fred Miller, Shavano Valley
Crop & Pork Products and Cedaredge Meats.