As filed with the Securities and Exchange Commission on August 15, 2002.
Registration No. 333-90096
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________
WILD OATS MARKETS, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1100630
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3375 Mitchell Lane
Boulder, Colorado 80301
(303) 440-5220
(Address, including zip code, and telephone number, including area
code of registrant's principal executive offices)
__________________
Freya R. Brier
Vice President of Legal, General Counsel
Wild Oats Markets, Inc.
3375 Mitchell Lane
Boulder, Colorado 80301
(303) 440-5220
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copy to:
Randall H. Doud, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
(212) 735-3000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
------------------------------------- ------------------- ------------------------ ------------------------- --------------------
Proposed Proposed
Title of Shares to be Registered Amount to be Maximum Aggregate Maximum Aggregate Amount of
Registered Price Per Share (1) Offering Price (1) Registration Fee*
------------------------------------- ------------------- ------------------------ ------------------------- --------------------
Common Stock, par value 3,250,000 $14.275 $46,393,750 $4,258.37(3)
$.001 per share(2)
------------------------------------- ------------------- ------------------------ ------------------------- --------------------
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act, and
based upon the average of the high and low prices of the registrant's
common stock as reported on the Nasdaq National Market on June 6, 2002.
(2) Includes preferred share purchase rights ("Rights"). The Rights are
associated with and trade with the common stock. The value, if any,
attributable to the Rights is reflected in the market price of the common
stock.
(3) Reflects an offset of $9.86 pursuant to Rule 457(p) under the Securities
Act for the unused portion of the filing fee paid by Wild Oats Markets,
Inc. in connection with its Registration Statement on Form S-3
(Registration No. 333-85908) filed with the Securities and Exchange
Commission on April 9, 2002.
* Previously paid.
___________________________________
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
EXPLANATORY NOTE:
The prospectus filed herewith is a combined prospectus pursuant to Rule 429
under the Securities Act, which relates to the shares registered hereby and the
shares registered on a Registration Statement on Form S-3, filed with the
Securities and Exchange Commission on November 14, 1997 (Registration No.
333-40305), by Wild Oats Markets, Inc. Accordingly, upon effectiveness, this
registration statement shall act as a post-effective amendment to such earlier
registration statement.
PRELIMINARY PROSPECTUS, DATED AUGUST 15, 2002. THE INFORMATION IN THIS
PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES
UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
[GRAPHIC OBJECT OMITTED]
WILD OATS
MARKETS, INC.
COMMON STOCK
This prospectus covers the offer and sale of up to 4,450,000 shares of
common stock, $.001 par value per share, of Wild Oats Markets, Inc., a Delaware
corporation (the "Company"), by the Company to investors at a single closing and
at a fixed price per share established by reference to the prevailing market
price as agreed with the investors.
Our executive offices are located at 3375 Mitchell Lane, Boulder, Colorado
80301, and our telephone number is (303) 440-5220.
The common stock is quoted on Nasdaq National Market under the symbol
"OATS." On August 14, 2002, the last reported sale price of our common stock on
the Nasdaq National Market was $13.50 per share.
Investing in the common stock involves a high degree of risk. See "Risk
Factors" beginning on page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
______________________
The date of this prospectus is August 15, 2002.
TABLE OF CONTENTS
Page
Wild Oats Markets..................................................... 1
Risk Factors.......................................................... 3
Special Note Regarding Forward-Looking Information.................... 7
Recent Events and Other Material Information.......................... 8
Use of Proceeds....................................................... 11
Plan of Distribution.................................................. 11
Legal Matters......................................................... 12
Experts............................................................... 13
Where You Can Find More Information................................... 13
WILD OATS MARKETS
Wild Oats Markets, Inc. is one of the largest natural foods supermarket
chains in North America. As of August 14, 2002, we operated 101 natural foods
stores, including two small vitamin stores, in 23 states and British Columbia,
Canada under several names, including:
o Wild Oats Natural Marketplace (nationwide);
o Henry's Marketplace (San Diego and Orange County, California);
o Nature's - A Wild Oats Market (metropolitan Portland, Oregon);
o Sun Harvest Farms (Texas); and
o Capers Community Market (British Columbia, Canada).
We are dedicated to providing a broad selection of high-quality natural,
organic and gourmet foods and related products at competitive prices in an
inviting and educational store environment emphasizing customer service. Our
stores range in size from 2,700 to 45,000 gross square feet and feature natural
alternatives for virtually every product category found in conventional
supermarkets. We provide our customers with a one-stop, full-service shopping
alternative to both conventional supermarkets and traditional health food
stores. We believe we have developed a differentiated concept that appeals to a
broader, more mainstream customer base than the traditional natural foods store.
Our comprehensive selection of natural health foods products appeals to
health-conscious shoppers while we also offer virtually every product category
found in a conventional supermarket, including grocery, produce, meat, poultry,
seafood, dairy, frozen, food service, bakery, vitamins and supplements, health
and body care and household items.
Retail sales of natural products have grown from $7.6 billion in 1994 to
$24.6 billion in fiscal 2000, a 21.6% compound annual growth rate, and total
sales of natural products (including over the internet, by practitioners, by
multi-level marketers and through mail order) reached $32.1 billion in fiscal
2000, according to the Natural Foods Merchandiser. Sales growth in the
traditional grocery industry has remained relatively flat over the same period.
We believe that this growth reflects a broadening of the natural products
consumer base, which is being propelled by several factors, including healthier
eating patterns, increasing concern regarding food purity and safety and greater
environmental awareness. Our unique positioning, coupled with industry data that
states that the natural products industry comprises less than 5% of the total
grocery industry, offers significant potential for us to continue to expand our
customer base.
Our sales grew from $838.1 million during fiscal 2000 to $893.2 million
during fiscal 2001, an increase of 6.6%, due largely to improvements in
merchandising, marketing and operations in our stores and the opening of four
new stores. We also believe that sales increases, in the face of a number of
store closures and sales, resulted from the implementation in 44 of our natural
foods supermarket format stores of certain new strategic initiatives. These
include strategic banner consolidation to build brand equity, and marketing,
merchandising and pricing initiatives as part of our Fresh Look program. The
Fresh Look program was tested in our Colorado stores on a modified format in
July of 2001, and rolled out to 44 stores in phases during September, October
and November of 2001. The Fresh Look program includes price reductions on up to
2,500 items per store, increased marketing through the introduction of a weekly,
eight-page flyer that is distributed to a broader range of potential customers,
and operational modifications in the stores, including product reorganization,
department reorganization within the store, modification of product mix and
increased labor staffing.
We added 4, 13, 25, 16 and 14 new and acquired stores to our store base in
fiscal years 2001, 2000, 1999, 1998 and 1997, respectively. As a result of our
aggressive growth over the last five years, we have increased our penetration of
existing markets, entered new geographic markets and created a stronger platform
for future growth. We believe our growth has resulted in operating efficiencies
created by:
o warehousing, distribution and administrative economies of scale;
o improved volume purchasing discounts; and
o coordinated merchandising and marketing strategies.
Our aggressive growth has also resulted in operations and acquisition
integration difficulties that had a negative impact on our overall operating
results in fiscal 2001.
At the end of fiscal 2001, we had 107 stores located in 23 states and
Canada, as compared to 106 stores in 22 states and Canada as of the end of
fiscal 2000. A summary of store openings, acquisitions, closures and sales is
as follows:
TOTAL STORE COUNT
-------------------------------------
Fiscal Year Period
Ending Ending
---------------------- ----------
August 14,
2000 2001 2002
--------- --------- ----------
Store count at beginning of period 110 106 107
Stores opened 14 4 1
Stores acquired 2
Stores closed (17) (1) (4)
Stores sold (3) (2) (3)
--------- --------- ----------
Store count at end of period 106 107 101
========= ========= ==========
As part of our strategic repositioning announced in the second and fourth
quarters of fiscal 2000, we identified 22 natural foods stores for closure or
sale due to weak performance. In fiscal 2000, we closed 10 and sold three of
those identified stores. In the second quarter of fiscal 2001, as part of
additional evaluation of our operations by new management, we identified an
additional three stores for closure in fiscal 2001; in the fourth quarter of
fiscal 2001, we extended our evaluation and identified an additional three
stores for closure in fiscal 2001 and 2002. To date, we have closed four of the
identified stores, terminated our lease-related obligations as to two of the
identified locations and sold five of the identified stores, four in related
transactions. We also closed two small vitamin stores in the second and third
quarters of fiscal 2000. Due to a change in estimates related to changes in
facts and circumstances during the fourth quarter of fiscal 2001, we decided to
continue to operate four stores previously identified for closure or sale. A
summary of restructuring activity by store count is as follows:
RESTRUCTURING STORE COUNT
-----------------------------------------
Fiscal Year Period
Ending Ending
-------------------------- -----------
August 14,
2000 2001 2002
----------- ----------- -----------
Stores remaining at commencement of period 9 6
Stores identified in fiscal 2000 for closure or sale 22
Stores identified in fiscal 2001 for closure or sale 6
Stores identified in fiscal 2002 for closure or sale 1
Identified stores closed or abandoned (10) (3) (4)
Identified stores sold (3) (2) (3)
Reversal of stores identified for closure or sale (4)
----------- ----------- -----------
Identified stores remaining at period end 9 6 0
=========== =========== ===========
RISK FACTORS
You should carefully consider the following risk factors, in addition to
the other information included or incorporated by reference in this prospectus,
before making an investment decision. Additional risks that we do not yet know
of or that we currently think are immaterial may also impair our business
operations. If any of the events or circumstances described in the following
risks actually occurs, our business may suffer, the trading price of common
stock could decline, and you may lose all or part of your investment.
Our quarterly financial results and our stock price may fluctuate significantly
Our quarterly results of operations may differ materially from quarter to
quarter for a variety of reasons, including the timing and success of new store
openings, overall store performance, changes in the economy, seasonality and the
timing of holidays, significant increases or decreases in prices for or
availability of goods and services, competitive pressure and labor disturbances,
as well as other factors mentioned in this section.
Our stock price has been and continues to be fairly volatile. Our stock
price is affected by our quarterly and year-end results, results of our major
competitors and suppliers, general market and economic conditions and publicity
about us, our competitors, our vendors or our industry. Volatility in our stock
price may affect our future ability to raise proceeds from equity financings,
renegotiate our existing credit agreement or enter into a new borrowing
relationship, or affect our ability to obtain new store sites on favorable
economic terms.
Our past comparable store sales may not be indicative of future comparable store
sales
A variety of factors affect our comparable store sales results, including,
among others:
o the opening of stores by us or by our competitors in markets where we
have existing stores;
o the relative proportion of new stores to mature stores;
o store remodels; o the timing of promotional events;
o our ability to follow our operating plans effectively;
o changes in consumer preferences for natural foods products; and
o general economic conditions.
Past increases in comparable store sales may not reflect future
performance. Comparable store sales for any particular period may decrease in
the future. Due to the factors listed above, we believe that period-to-period
comparisons of our operating results are not necessarily meaningful and that
such comparisons cannot be relied upon as indicators of future financial
performance. Fluctuations in our comparable store sales could cause the price of
our common stock to fluctuate substantially.
Increased competition in the sale of natural foods products could reduce our
profitability
Our competitors currently include other independent and multi-unit natural
foods supermarkets, smaller traditional natural foods stores, conventional
supermarkets and specialty grocery stores. We believe that our primary
competitor is Whole Foods Market, Inc., a national natural foods supermarket
chain based in Texas, which, as of August 7, 2002, had 133 stores and had annual
sales of approximately $2.3 billion in its 2001 fiscal year. A number of other
natural foods supermarkets offer a range of natural foods products similar to
those we offer. While some competitors do not offer as full a range of products
as we do, they do compete with us in some product categories.
Many of our competitors have been in business longer and have greater
financial or marketing resources than we do. Our competitors also may be able to
devote more funds and employees to securing suitable locations for new stores
and to the sourcing, promotion and sale of their products. In addition, should
any of our competitors reduce prices, we may be required to reduce prices to
remain competitive, which could result in lower sales and profitability. As we
open stores in new geographic markets, our success will depend in part on our
ability to gain market share from established competitors. Traditional and
specialty grocery stores are expanding the amount of natural foods they carry
and market, and therefore they now compete directly with us for products,
customers and locations. We expect competition from both new and existing
competitors to increase in our markets and we may not be able to compete
effectively in the future, which could adversely affect our profitability.
Economic conditions may affect us to a greater degree than our competitors
Downturns in general economic conditions in communities, states, regions or
the nation as a whole can negatively affect our results of operations. While
purchases of food generally do not decrease in a slower economy, consumers may
choose less expensive alternative sources for food purchases. In addition,
downturns in the economy make the disposition of excess properties, for which we
continue to pay rent and other carrying costs, substantially more difficult as
the markets become saturated with vacant space and market rents decrease.
Information picketing and other union activities may negatively affect our sales
From time to time, unions will attempt to organize employees or portions of
the employee base at stores or our distribution or manufacturing facilities.
Responses to organization attempts require substantial management and employee
time and are disruptive to operations. In addition, from time to time certain of
our stores may be subject to informational picketing by local trade unions,
which can discourage customer traffic and lower sales volumes.
Loss of key personnel could disrupt our operations
We believe that our continued success will depend to a significant extent
upon the leadership and performance of our key executive personnel, including:
o Perry D. Odak, our Chief Executive Officer and President;
o Stephen P. Kaczynski, our Senior Vice President of Merchandising; and
o Bruce Bowman, our Senior Vice President of Operations.
The loss of the services of these individuals or other of our key personnel
could harm our operations. We do not maintain key person insurance on any of
these personnel. Our continued success is also dependent upon our ability to
attract and retain qualified executives to meet our future growth needs. We face
intense competition for qualified executives, many of whom are subject to offers
from competing employers. We may not be able to attract and retain key executive
personnel as necessary to operate our business.
Disruptions of product supply could reduce store sales and profitability and
disrupt our operations
Our business is dependent on our ability to buy products on a timely basis
and at competitive prices from a small number of distributors and from a large
number of relatively small vendors. We purchase 28.2% of our total goods from
one distributor under an agreement that expires in August 2002. On June 14,
2002, we entered into a new distribution agreement with Tree of Life, Inc., as
distributor, which commences in September 2002 (See "Recent Events and Other
Material Information" beginning on page 8). We may experience short term
disruptions in delivery of goods as the transition from the prior distributor to
Tree of Life is implemented, resulting in reduced sales. Upon expiration of the
existing distribution agreement with our current primary distributor, other than
the new distribution agreement with Tree of Life, we will have no other supply
contracts with the majority of our smaller vendors, who could discontinue
selling to us at any time. Although we believe that we could develop alternative
sources of supply, any such termination may create a short-term disruption in
store-level merchandise selection, resulting in reduced sales. Any significant
disruption in the supply of goods could have a material impact on our overall
sales volume, cost of goods and our profitability. We may not be able to
negotiate future supply agreements with this or other distributors on terms
favorable to us, if at all.
Changes in government regulation could increase our costs and harm our operating
results
We are subject to many laws, regulations and ordinances at the local, state
and national level and problems or failures to comply with these laws could
negatively affect our store sales and operations, or could delay the opening of
a new store. Such laws regulate our operations, including:
o health and sanitation standards;
o food labeling and handling requirements;
o employment and wage levels; and
o food and alcoholic beverage sales regulations.
For example, in the fall of 2002, the U.S.D.A.'s National Organic
Standards, a comprehensive program of regulations governing the growing,
production, handling and sale of goods advertised as "organic", will be fully
implemented. We may experience a disruption in our product offerings if our
suppliers are unable to comply with these standards or our stores require
certification as organic handlers to handle certain organic foods. Additionally,
approximately 17% of our total sales come from the sale of vitamins, supplements
and herbal products and there have been many proposals for new laws on a
national level to restrict sales of certain supplement products or to regulate
information available to consumers regarding these products.
Modifications in existing laws and the implementation of new laws governing
components of our business operations may be triggered by consumer and
regulatory concerns regarding food safety issues, new technology or competitive
pressures. Such modifications could require the reformulation of certain
products to meet new standards, the recall or discontinuance of certain products
not able to be reformulated, additional record keeping, expanded documentation
of the properties of certain products, expanded or different labeling and/or
scientific substantiation. Any of these requirements could harm our sales
volume, costs of goods and direct store expenses. In addition, from time to time
we are audited by various governmental agencies for compliance with existing
laws, and we could be subject to fines or operational modifications as a result
of noncompliance.
Our Fresh Look program may not be successful, which would harm our operating
results
In 2001, we introduced our Fresh Look program in 44 of our natural
supermarket stores, and as part of such program reduced everyday prices on up to
2,500 items per store and implemented a weekly flyer program, with an expanded
selection of sale items. As of August 14, 2002, we have implemented the Fresh
Look program in 16 additional stores and as a result as of that date have
implemented the Fresh Look program in a total of 60 of our natural foods
supermarket stores. Our Fresh Look program may not be successful, in which case
we will experience an increase in costs and a decrease in gross margins without
a corresponding increase in gross sales. For example, after analysis of results
from the Fresh Look stores and additional customer research, we determined that
some pricing reductions on certain items were overly aggressive, resulting in
greater margin erosion without corresponding customer recognition and item
movement, and we are evaluating a modest price increase on selected products.
Successfully opening and operating new stores is a critical component of our
growth strategy
We have grown considerably in size and geographic scope since 1992. Between
1997 and 2001, we added 72 new and acquired stores to our store base. We plan to
continue growing, primarily through the opening of new stores. If we are unable
to successfully open and operate new stores our growth strategy will be
restricted and our operating results will be harmed. We are currently restricted
by our bank covenants in the number of new leases we can sign and the amount of
aggregate new store capital expenditures we can make; however, the bank
covenants allow us to add additional leases and make additional capital
expenditures if we are successful in raising $30.0 million or more in new equity
financings. Our ability to successfully open and operate new stores depends on
many factors, including our ability to:
o raise sufficient equity financing to allow us to execute new leases
and spend additional capital in accordance with the terms of our
current bank covenants;
o hire and train new personnel, including administrative and accounting
personnel, departmental, regional and store managers, store employees
and other personnel in our corporate organization;
o expand into areas of the country where we have no operating
experience; o identify areas of the country that meet our criteria for
new store sites; o locate suitable store sites and negotiate
acceptable lease terms;
o obtain governmental and other third party consents, permits and
licenses needed to operate new stores; o integrate new stores into our
existing operations; o expand our existing systems or acquire and
implement new systems, including information systems, hardware and
software, and distribution infrastructure, to include new, relocated
and acquired stores; and
o obtain adequate funding for operations.
New stores build their sales volumes and refine their merchandise selection
gradually and, as a result, generally have lower gross margins and higher
operating expenses as a percentage of sales than more mature stores. We
anticipate that the stores we opened in 2001 and 2002 will experience operating
losses for the first six to 12 months of operation, in accordance with
historical trends; however, given the continued weakening of the U.S. economy in
the wake of the events of September 11, 2001, operating losses may be extended
for additional periods of time. Additionally, we incur significant pre-opening
expenses and, as a result, the opening of a significant number of new stores in
a single period will negatively affect our operating results.
We may grow our business through the acquisition of other stores, which we may
be unable to successfully accomplish
We will continue to consider acquisitions of natural foods retailers where
attractive opportunities exist. Acquisitions of operating stores involve risks
which could have a negative effect on our business and financial results such
as:
o short-term declines in our reported operating results;
o diversion of management's attention;
o unanticipated problems or legal liabilities;
o inclusion of incompatible operations, particularly management
information systems; and
o inexperience in operating different store formats.
Further, acquired stores, while generally profitable as of the acquisition
date, generate lower gross margins and store contribution margins than our
company average due to their substantially lower volume purchasing discounts and
the integration of the acquired stores into our operating systems. Over time, we
expect the gross margin and store contribution margin of acquired stores to
approach our company average. Other factors that could cause acquired stores to
perform at lower-than-expected levels include, among other things, difficulties
in integrating existing employees, turnover of regional and store management,
disruption of advertising, changes in product mix and delays in the integration
of purchasing programs.
Our remodeling efforts may cause an extended reduction in the sales volumes of
our remodeled stores
We completed the remodeling of 15 of our older stores in 2001, and
remerchandised a number of our stores in the second, third and fourth quarters
of 2001, with the goal of eliminating slower-selling products, reducing excess
SKU counts in certain categories of products, and giving greater emphasis to
produce, meat and seafood and grocery departments. We plan to remodel and
remerchandise a number of our older remaining stores, subject to the limitations
of our bank covenants and the availability of capital. Remodels and
remerchandising typically cause short-term disruption in sales volume and
related increases in certain expenses as a percentage of sales, such as payroll.
Current and future remodeled or remerchandised stores may experience sales
disruptions and the related impact on earnings to a greater degree than we have
projected.
Our strategy of clustering stores may cause an extended decrease in sales of
clustered stores
As part of our growth strategy, we strive to locate stores in clusters in
select regional markets to increase overall sales, reduce operating costs and
increase customer awareness. Our comparable store sales results have been
negatively affected in the past by, among other factors, planned
cannibalization, which is the loss of sales at an existing store when we open a
new store nearby, resulting from the implementation of our store clustering
strategy. Some new stores opened in the past two years have caused a greater
degree of cannibalization than previously expected, and we currently believe
that the store contribution margins at the older, affected stores in these
regions will not rebound to their prior levels. In other existing markets, the
sales and operating results trends for other stores may continue to experience
temporary declines related to the clustering of stores. We are currently
reevaluating our clustering strategy in response to greater-than-expected sales
cannibalization in certain existing markets where we opened new stores.
Our growth strategy has placed, and will continue to place, a significant strain
on our management
Although we believe that we have the management, operational and
information systems, distribution infrastructure and other resources required to
implement our growth strategy, we may not be able to execute our new store
expansion plans within the expected time frame. Our continued growth may place a
significant strain on our management, our ability to distribute products to our
stores, working capital, and financial and management control systems. In order
for us to manage our expanding store base successfully, our management will be
required to anticipate the changing demands of our growing operations and to
adapt systems and procedures accordingly. If we are not able to do so, our
business, sales and overall profitability will be materially and negatively
affected.
We do not intend to pay cash dividends for the foreseeable future
We have never paid cash dividends on shares of our common stock. We do not
intend to pay cash dividends in the foreseeable future. Our credit facilities
contain various financial covenants which restrict, among other things, our
ability to pay cash dividends.
Legal proceedings could materially impact our results
From time to time we are party to legal proceedings including matters
involving personnel and employment issues, distribution relationships, real
estate leases, and other proceedings arising in the ordinary course of business.
Although not currently anticipated by management, our operating results could be
harmed by the decisions and expenses related to such proceedings.
We may be subject to product liability claims if people are harmed by the
products we sell
There is increasing governmental scrutiny of and public awareness regarding
food safety. We believe that many customers choose to shop at our stores because
of their interest in health, nutrition and food safety. We believe that our
customers hold us to a higher standard than conventional supermarkets. The real
or perceived sale of contaminated food products by us could result in decreased
sales and product liability claims, which would harm our operating results.
Information system upgrades or integrations may disrupt our operations or
financial reporting
We continually evaluate and upgrade our management information systems. We
have completed a number of acquisitions in recent years, and the information
systems of some of the acquired operations have not been fully integrated with
our information systems. Although we do not anticipate any disruption in our
operations or financial reporting as a result of system upgrades or system
integrations, there can be no assurance that such disruption will not occur or
that the desired benefits from the system upgrades will be realized.
We May Be Unable to Refinance Our Bank Debt on Attractive Terms
Our $125,000,000 bank credit facility matures in August 2003 and contains
some covenants which are more restrictive on our operational and financial
flexibility than we believe could be achieved in a new facility. Following the
sale of the shares of common stock offered by this prospectus, we hope to
arrange and issue up to $100,000,000 in senior and/or subordinated debt, the
proceeds of which will be used, together with operating cash and a portion of
the proceeds from the sale of the shares of common stock offered by this
prospectus, to refinance our existing facility. We have begun the process of
investigating possible debt refinancing opportunities, but there can be no
assurance as to whether the debt markets will be receptive to a refinancing on
terms that would be attractive to us or as to the timing of arranging any such
refinancing.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. In some cases, you can identify these forward-looking statements by words
such as "may," "will," "expect," "intend," "anticipate," "believe," "estimate,"
"plan," "could," "should" and "continue" and other similar words and
expressions. Specifically, this prospectus contains forward-looking statements
regarding:
o our plans to open, acquire, relocate or close additional stores;
o the anticipated performance of such stores;
o the impact of competition and current economic uncertainty;
o the sufficiency of funds to satisfy our cash requirements through the
remainder of fiscal 2002;
o our expectations for comparable store sales;
o our plans for redesigning our natural foods supermarket store format;
o the impact of changes resulting from implementation of our Fresh Look
merchandising, advertising and pricing program;
o levels of cannibalization caused by clustering stores; and
o expected pre-opening expenses and capital expenditures;
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Important
factors that could cause such differences include, among other things, the
following:
o our ability to conclude a private placement of our stock;
o the timing and success of the implementation of the Fresh Look
program;
o the timing and execution of new store openings, relocations, remodels,
sales and closures;
o the impact of competition;
o changes in product supply or suppliers;
o changes in management information needs;
o changes in customer needs and expectations;
o governmental and regulatory actions;
o general industry or business trends or events;
o changes in economic or business conditions in general or affecting the
natural foods industry in particular;
o competition for and the availability of sites for new stores and
potential acquisition candidates; and
o other factors referenced in this prospectus.
You should also consider carefully the risk factors described on pages 3
through 7 of this prospectus, which address additional factors that could cause
our results to differ from those set forth in the forward-looking statements. We
undertake no obligation to update any of the forward-looking statements after
the date of this prospectus to conform such statements to actual results, except
to the extent required by law.
RECENT EVENTS AND OTHER MATERIAL INFORMATION
Perry D. Odak's Right to Receive Additional Options - Perry D. Odak, the
Company's Chief Executive Officer and President and a director of the Company,
is a party to an employment agreement under the terms of which he will be
entitled, by virtue of the sale of the common stock offered pursuant to this
prospectus, to receive options to purchase sufficient additional shares of
common stock (but not in excess of 294,144 shares) to maintain his percentage
interest at 5% of the outstanding common stock (determined as if such options
were issued). The options will be issued under our stock option plan with a term
of ten years vesting ratably on a monthly basis over four years, subject to
accelerated vesting in the case of certain changes of control or in the event
that the average closing sale prices of the common stock over a 90 trading day
period trades above specified targets. The exercise price of the options will be
issued at the fair market value on the date of grant, which will be deemed to be
the closing sale price of the shares of common stock on the day before the date
of grant.
In August of 2002, the Company's Board of Directors approved a third
amendment to Mr. Odak's employment agreement, pursuant to which up to 70,000
of the stock options to which Mr. Odak would otherwise be entitled under his
employment agreement as a result of the closing of this offering may be
granted to other employees of the Company designated by Mr. Odak. The options
only would be granted upon the closing of this offering (or another
capital-raising transaction), have a 10-year term, vest over four years and
have an exercise price equal to the closing price of the Company's stock on
the date the offering (or other such capital-raising transaction) is
concluded. An equal number of options would be granted simultaneously to Mr.
Odak; provided that the options granted to Mr. Odak only would be exercisable
as the options granted to other employees terminated (as opposed to expired)
without exercise. At the time the options are issued as proposed under the
amendment to the employment agreement, a simultaneous matching grant by the
Company of up to 70,000 additional options from the Company's 1996 Equity
Incentive Plan will be made to the same employees. The Company may incur
quarterly compensation expense, based on any increase in the then-current
stock price over the exercise price, as a result of the issuance of the
initial 70,000 options to the designated employees and Mr. Odak.
John A. Shields Director Compensation - John A. Shields, who has been
Chairman of the Board of Directors of the Company since July 1996, was recently
granted by our Board of Directors a payment of $60,000 in recognition of
significant efforts made by him on our behalf over the past year, including in
connection with negotiating a settlement of certain disputes with our founders
and related transition issues, as well as increase in his monthly compensation
from us from $1,000 to $5,000 effective as of May 1, 2002. Mr. Shields has
received, and expressed his preference to continue to receive, all such payments
in the form of options to purchase common stock. The options, consistent with
past practice, are fully vested, have a term of ten years and are granted at an
exercise price equal to 85% of the fair market value on the date of grant
(deemed to be the closing sale price of the shares of common stock on the day
before the date of grant) such that the aggregate spread in the options on such
date will be equal to the amount of his monthly compensation.
Capitalization - As of the date of this prospectus, we have 25,154,104
outstanding shares of common stock and 3,050,225 options to purchase common
stock at exercise prices ranging from $3.13 per share to $26.50 per share. The
number of outstanding shares reflects the shares issued to our founders as
part of a settlement agreement with them and the number of options reflects
grants of director options for all meetings through the date of this
prospectus and grants of options to Mr. Shields in respect of his monthly
compensation through July 2002. Assuming that a total of 4,450,000 shares of
common stock are sold pursuant to this prospectus, Mr. Odak would be granted
options to purchase an additional 234,211 shares of common stock and other
employees of the Company would be granted options to purchase 140,000 shares
of common stock, in each case with the terms described above.
Possible New Severance Agreements - In recognition of their value in
retaining valuable employees, our Board of Directors has approved in principle
the granting of severance agreements to a group of key members of our
management, other than Mr. Odak, whose employment agreement already provides
for severance arrangements. The terms of the proposed severance agreements are
under review, but are expected to be finalized and implemented within the next
several months.
Refinancing of Credit Facility - Our $125,000,000 bank credit facility
matures in August 2003 and contains some covenants which are more restrictive on
our operational and financial flexibility than we believe could be achieved in a
new facility. Following the sale of the shares of common stock offered by this
prospectus, we hope to arrange and issue up to $100,000,000 in senior and/or
subordinated debt, the proceeds of which will be used, together with operating
cash and a portion of the proceeds from the sale of the shares of common stock
offered by this prospectus, to refinance our existing facility. We have begun
the process of investigating possible debt refinancing opportunities, but there
can be no assurance as to whether the debt markets will be receptive to a
refinancing on terms that would be attractive to us or as to the timing of
arranging any such refinancing.
New Distribution Agreement - As disclosed in a Current Report on Form 8-K,
filed with the SEC on July 1, 2002, on June 14, 2002, we entered into an
Agreement for Distribution of Products (the "Distribution Agreement") with Tree
of Life, Inc., as distributor. The distribution arrangement commences effective
September 1, 2002, which is the date upon which our existing primary
distribution contract with United Natural Foods, Inc. expires. The Distribution
Agreement has no specified term, although either party can terminate the
Agreement after three years upon 120 days' prior written notice to the other
party. Either party also may terminate the Distribution Agreement for defaults,
as defined in the Distribution Agreement, by the other party of certain
provisions of the Distribution Agreement. Under the terms of the Distribution
Agreement, we are obligated to purchase 90% of the total cost of specified
categories of goods for sale in our U.S. stores from Tree of Life, except in
certain defined circumstances when such percentage purchasing obligation is
excused We currently are implementing a transition plan designed to switch the
primary distribution of goods from our existing distributor to Tree of Life with
minimal disruption to our store operations.
New Accounting Standard - Goodwill and Other Intangible Assets
Effective December 30, 2001, the Company implemented SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS No. 142 was issued in July 2001,
supersedes Accounting Principles Bulletin No. 17, Intangible Assets, and is
effective for fiscal years beginning after December 15, 2001. SFAS No. 142
primarily addresses the accounting for goodwill and intangible assets
subsequent to their initial recognition. SFAS No. 142 (1) prohibits the
amortization of goodwill and indefinite-lived intangible assets, (2) requires
testing of goodwill and indefinite-lived intangible assets on an annual basis
for impairment (and more frequently if the occurrence of an event or
circumstance indicates an impairment), (3) requires that reporting units be
identified for the purpose of assessing potential future impairments of
goodwill and (4) removes the 40-year limitation on the amortization period of
intangible assets that have finite lives.
In conjunction with its purchase acquisitions, the Company historically
had recorded goodwill at the store level; however, based on the Company's
recent consolidation of its brands to increase synergy and awareness, the
Company has changed its goodwill accounting policy and accordingly has
assigned the carrying value of its goodwill to one reporting unit at the
enterprise level to recognize goodwill for the brand, as opposed to the past
practice of recording goodwill at the store level. During the second quarter
of fiscal year 2002, the Company completed the impairment test prescribed by
SFAS No. 142 and concluded that no impairment of goodwill existed as of
December 30, 2001. The Company anticipates an annual decrease in amortization
of goodwill of approximately $3.0 million and a corresponding annual increase
to net income of $1.8 million. The Company intends to test goodwill for
impairment annually or more frequently if the occurrence of an event or
circumstance indicates potential impairment.
Also, upon implementation of SFAS No. 142, the Company identified
intangible assets related to leasehold interest resulting from store lease
agreements with a carrying value of approximately $7.9 million at December 30,
2001. The Company determined that there is no indication of impairment of these
assets and that the average 20-year life assigned to these assets is
appropriate. Going forward, the Company will test these intangibles for
impairment annually or more frequently if the occurrence of an event or
circumstance indicates impairment.
The amortization of intangibles expense (net of tax) and net income (loss)
available to common stockholders are as follows (in thousands):
SIX MONTHS ENDED FISCAL YEAR
------------------------------ ------------------------------------
June 29, 2002 June 30, 2001 2001 2000 1999
------------- ------------- -------- --------- --------
Goodwill amortization $ -- $ 946 $ 1,883 $ 1,967 $ 1,783
Leasehold interest amortization $ 149 $ 120 $ 270 $ 254 $ 82
Net income (loss) available $ 2,166 $ (38,238) $(43,912) $(15,021) $ 12,488
to common stockholders
The following table illustrates net income (loss) available to common
stockholders as if SFAS No. 142 had been implemented as of January 3, 1999 (in
thousands):
SIX MONTHS ENDED FISCAL YEAR
-------------------------------- -------------------------------------------
June 29, 2002 June 30, 2001 2001 2000 1999
------------- ------------- -------------------------------------------
Reported net income (loss)
available to common stockholders $ 2,166 $ (38,238) $ (43,912) $(15,021) $ 12,488
Goodwill amortization -- 946 1,883 1,967 1,783
---------- ---------- ---------- -------- --------
Adjusted net income available
to common stockholders $ 2,166 $ (37,292) $ (42,029) $(13,054) $ 14,271
========== ========== ========== ======== ========
EARNINGS PER SHARE -
BASIC AND DILUTED
Reported net income (loss)
available to common stockholders $ 0.09 $ (1.58) $ (1.80) $ (0.65) $ 0.53
Goodwill amortization -- 0.04 0.08 0.08 0.08
---------- ---------- ---------- -------- --------
Adjusted net income available
to common stockholders $ 0.09 $ (1.54) $ (1.72) $ (0.57) $ 0.61
========== ========== ========== ======== ========
During the three months and six months ended June 29, 2002, amortization
of intangible assets expense was $119,000 and $237,000, respectively. The
estimated amortization of intangible assets for each of the five fiscal years
ending in fiscal 2006 is as follows (in thousands):
Fiscal Year Amortization Expense
------------------- --------------------
2002 $ 472,000
2003 472,000
2004 472,000
2005 472,000
2006 472,000
USE OF PROCEEDS
After payment of approximately $____ in expenses, we expect to have net
proceeds of approximately $____ from the sale of the shares of the common
stock offered by this prospectus. The net proceeds from the sale of the common
stock offered pursuant to this prospectus will be used for general corporate
purposes, including capital expenditures, purchases of equipment and general
operations, with approximately 65% of such proceeds used for the funding of
new store expansion plans (as outlined in our annual report on Form 10-K for
the year ended December 29, 2001), approximately 30% of such proceeds used for
remodeling of certain of our 101 existing stores and maintenance of store
capital equipment and other leasehold improvements, and approximately 5% of
such proceeds used for the development of information systems and
infrastructure aimed at reducing costs and improving operating margins. If
necessary, a portion of the net proceeds also may be used in connection with
the refinancing of our existing bank credit facility as described above.
PLAN OF DISTRIBUTION
All of the shares of the common stock offered pursuant to this prospectus
will be sold by us, with the assistance of our sole placement agent as described
below, directly to investors to be identified. It is expected that all of the
shares of the common stock will be sold at a single closing and at the same
price. The price will be established by reference to the prevailing market price
as agreed with investors. Such price might reflect a discount from the then
prevailing market price.
We have engaged J.P. Morgan Securities Inc. ("JPMorgan") to act as the sole
placement agent on a best efforts basis for this offering. In this capacity,
JPMorgan is an underwriter for purposes of the Securities Act, but will not be
obligated to purchase the shares from us. Instead, JPMorgan will use its best
efforts to facilitate the sale of all of the shares by us to the investors. As a
result, it is possible that not all of the shares offered pursuant to this
prospectus will be sold at the closing, in which case we would issue only a
portion of the shares offered hereby and our expected net proceeds would be
proportionally reduced. JPMorgan's engagement expires on March 26, 2003 unless
earlier terminated by either JPMorgan or us at any time upon ten days' prior
written notice. JPMorgan is affiliated with J.P. Morgan Partners (SBIC), LLC,
which holds approximately 9.4% of our outstanding common stock and has a
representative on our Board of Directors.
As compensation for its services as the sole placement agent, we have
agreed to pay JPMorgan a fee equal to 5.0% of the value of the common stock sold
under this prospectus, except in the case of common stock sold to certain
investors that we previously had identified to JPMorgan, in which case the fee
will be 3.25%. We also have agreed to reimburse JPMorgan up to $50,000 (or such
greater amount as we specifically may approve) for all of its reasonable
out-of-pocket costs and expenses in connection with its engagement. JPMorgan's
fee compensation may be deemed to be underwriter commissions.
Prior to engaging JPMorgan to act as our sole placement agent, we had
explored the possibility of conducting a private placement of our common stock,
or securities convertible into common stock, with prospective investors,
including several of our current stockholders and other eligible investors who
expressed interest in such a private placement. This proposed private placement
sought to raise net proceeds in the same general range as the net proceeds
sought by this offering for the same use described under the heading "Use of
Proceeds" above. None of our common stock was sold in the proposed private
placement and this prospectus supersedes any selling material used in the
proposed private placement. We terminated all offering activity related to the
private placement by May 1, 2002, the date by which we had determined to pursue
this offering in lieu of a private placement and had engaged JPMorgan to act as
our sole placement agent. In negotiating JPMorgan's fees for this engagement,
JPMorgan agreed to a reduced fee to the extent that the previously identified
prospective investors participate in this offering. We anticipate that one or
more of these previously identified prospective investors will purchase a
portion of the shares offered hereby and, accordingly, JPMorgan's fee will be
3.25% for that portion of the shares sold to the previously identified investors
and 5.0% for the balance of the shares sold in this offering.
In connection with JPMorgan's engagement, we also have agreed to indemnify
and hold harmless JPMorgan, its affiliates and their respective officers,
directors, employees, agents and controlling persons (each an "Indemnified
Person") from and against any and all losses, claims, damages, liabilities and
expenses, joint or several, to which any such Indemnified Person may become
subject arising out of or in connection with its engagement, or any claim,
litigation, investigation or proceedings relating to the foregoing regardless of
whether any of such Indemnified Persons is a party thereto, and to reimburse
such Indemnified Persons for any legal or other out-of-pocket expenses as they
are incurred in connection with investigating, responding to or defending any of
the foregoing, provided that the foregoing indemnification will not, as to any
Indemnified Person, apply to losses, claims, damages, liabilities or expenses to
the extent that they are finally judicially determined to have resulted from the
gross negligence or willful misconduct of such Indemnified Person.
We anticipate that one or more investors purchasing shares of common stock
offered by this prospectus already will own shares of our common stock. We do
not anticipate that any of the investors purchasing shares of common stock
offered by this prospectus will have any other business relationships with us or
our subsidiaries or affiliates.
We are bearing all costs relating to the registration of the shares offered
by this prospectus (other than fees and expenses, if any, of counsel or other
advisors to the investors).
LEGAL MATTERS
The validity of the common stock being offered hereby will be passed upon
by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-K for the year ended December 29, 2001 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The report of Ernst & Young LLP, independent auditors, on the financial
statements of Sun Harvest Farms, Inc. as of September 28, 1999, December 29,
1998, December 30, 1997, and for the nine-month period ended September 28, 1999
and the fiscal years ended December 29, 1998, December 30, 1997, and December
31, 1996, which report appears in the Form 10-K of Wild Oats Markets, Inc. for
the year ended December 29, 2001 is incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
You should rely only on the information provided or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
any different information. This prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, these securities in any state where the
offer or sale is prohibited. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of the document.
We are a reporting company and file annual, quarterly and current
reports, proxy statements and other information with the Securities and
Exchange Commission, or SEC. We have filed with the SEC a registration
statement on Form S-3 under the Securities Act with respect to the shares of
common stock we are offering under this prospectus. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits to the registration statement. For further information regarding our
company and the common stock being offered under this prospectus, we refer you
to the registration statement and the exhibits and schedules filed as a part
of the registration statement. You may read and copy the registration
statement, as well as our reports, proxy statements and other information
filed with the SEC, at the SEC's Public Reference Room at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these
documents by writing to the SEC and paying a fee for the copying cost. Please
call the SEC at 1-800-SEC-0330 for more information about the operation of the
public reference rooms. Our SEC filings are also available at the SEC's web
site at "http://www.sec.gov." In addition, you can read and copy our SEC
filings at the office of the National Association of Securities Dealers, Inc.
at 1735 K Street, N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" information that we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus. Information in this prospectus supersedes
information incorporated by reference that we filed with the SEC prior to the
date of this prospectus, while information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
into this registration statement and prospectus the documents listed below and
any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of the initial registration statement
but prior to effectiveness of the registration statement and after the date of
this prospectus but prior to the termination of the offering of the shares
covered by this prospectus.
The following documents filed with the SEC are incorporated by reference in
this prospectus:
1. Our annual report on Form 10-K for the year ended December 29, 2001;
2. Our quarterly reports on Form 10-Q for the quarters ended March 30,
2002 and June 29, 2002;
3. Our current report on Form 8-K, filed with the SEC on July 1, 2002;
4. The description of our common stock set forth in our registration
statement on Form 8-A, filed with the SEC on October 17, 1996; and
5. The description of the rights to purchase our Series A junior
participating preferred stock set forth in our registration statement
on Form 8-A, filed with the SEC on May 21, 1998.
We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference, including exhibits to
these documents. You should direct any requests for documents to Wild Oats
Markets, Inc., Attention: Chief Financial Officer, 3375 Mitchell Lane, Boulder,
Colorado 80301, telephone: (303) 440-5220.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses payable by the
registrant in connection with the offering of the common stock being registered,
other than placement agent fees, the amount of which will depend upon the
aggregate gross proceeds received. All the amounts shown are estimates, except
for the registration fee. These expenses will be borne by the registrant.
SEC registration fee $ $4,258.37
Accounting fees and expenses 15,500.00
Legal fees and expenses 100,000.00
Miscellaneous expenses 5,000.00
-----------
Total $ 124,758.37
Item 15. Indemnification of Officers and Directors.
Section 102(b)(7) of the Delaware General Corporation Law permits a
Delaware corporation to limit the personal liability of its directors in
accordance with the provisions set forth therein. The Certificate of
Incorporation of the registrant provides that the personal liability of its
directors shall be limited to the fullest extent permitted by applicable law.
Section 145 of the Delaware General Corporation Law permits Delaware
corporations to indemnify directors, officers, employees or agents against
expenses, judgments and fines reasonably incurred and against certain other
liabilities in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person was or is a director, officer, employee or
agent of the corporation. The Certificate of Incorporation and the Bylaws of the
registrant provide for indemnification to the fullest extent permitted by
applicable law. The Certificate of Incorporation limits the liability of the
registrant's directors for monetary damages for breaches of the directors'
fiduciary duty of care. In addition, the Certificate of Incorporation requires
the registrant to indemnify its directors, officers, employees and agents
serving at the registrant's request against expenses, judgment (including
derivative actions), fines and amounts paid in settlement. This indemnification
is limited to actions taken in good faith in the reasonable belief that the
conduct was lawful and in or not opposed to the registrant's interests. The
Bylaws provide for the indemnification of directors and officers in connection
with civil, criminal, administrative or investigative proceedings when acting in
their capacities as agents of the registrant. In addition, the registrant has
entered into agreements with its directors and certain executive officers that
require it to indemnify such persons against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred (including
expenses of a derivative action) in connection with any proceeding, whether
actual or threatened, to which any such person may be made a party by reason of
the fact that such person is or was our director or officer, provided that such
person's conduct was not knowingly fraudulent or deliberately dishonest and did
not constitute willful misconduct. The registrant also maintains an officers and
directors liability insurance policy.
The foregoing may reduce the likelihood of a derivative litigation against
the registrant's directors and executive officers and may discourage or deter
stockholders or management from suing directors or executive officers for
breaches of their duty of care, even though such actions, if successful, might
otherwise benefit the registrant and its stockholders.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit Number Description of Document
---------------- ----------------------------------------------------------
1.1 Form of Placement Agency Agreement*
4. (i).1.(a) Amended and Restated Certificate of Incorporation of
Wild Oats (1)
4 (i).1.(b) Certificate of Correction to Amended and Restated
Certificate of Incorporation of Wild Oats (1)
4 (i).1.(c) Certificate of Amendment to Amended and Restated
Certificate of Incorporation of Wild Oats (3)
4 (ii).1 Amended and Restated By-Laws of Wild Oats (1)
4.2 Specimen stock certificate (2)
4.3 Rights Agreement dated May 22, 1998 between Wild Oats and
Norwest Bank Minnesota (4)
4.4 Amendment No. 1 to Rights Agreement dated February 26, 2002
between Wild Oats and Wells Fargo Bank, N.A. (5)
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP*
23.1 Consent of PricewaterhouseCoopers LLP*
23.2 Consent of Ernst & Young LLP*
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP.
Reference is made to Exhibit 5.1
24.1 Power of Attorney**
______________
* Filed herewith.
** Previously filed.
(1) Incorporated by reference to Wild Oats' Annual Report on Form 10-K for the
year ended December 28, 1996 (File Number 0-21577).
(2) Incorporated by reference to Wild Oats' Registration Statement on Form S-1
(File Number 333-11261).
(3) Incorporated by reference to Wild Oats' Registration Statement on Form S-3
(File Number 333-88011).
(4) Incorporated by reference to Wild Oats' Registration Statement on Form S-8
(File No. 333-66347).
(5) Incorporated by reference to Wild Oats' Annual Report on Form 10-K for the
year ended December 29, 2001 (File Number 0-21577).
Item 17. Undertakings
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officers or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boulder, State of Colorado, on August 15, 2002.
Wild Oats Markets, Inc.
Date: August 15, 2002 By: /s/ Perry D. Odak
-------------------------------------
Perry D. Odak
Chief Executive Officer and President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act, this registration statement
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
By: *
-----------------------------
Perry D. Odak Chief Executive Officer, President August 15, 2002
and Director (Principal Executive
Officer)
By: *
-----------------------------
Edward F. Dunlap Chief Financial Officer (Principal August 15, 2002
Financial and Accounting Officer)
By: *
-----------------------------
John A. Shields Chairman August 15, 2002
By: *
-----------------------------
David M. Chamberlain Vice Chairman August 15, 2002
By: *
-----------------------------
Brian K. Devine Director August 15, 2002
By: *
-----------------------------
David L. Ferguson Director August 15, 2002
By: *
-----------------------------
James B. McElwee Director August 15, 2002
By: *
-----------------------------
Mo J. Siegel Director August 15, 2002
*By: /s/ Freya R. Brier
----------------------------- Attorney-in-Fact
Freya R. Brier, as Attorney-in-Fact August 15, 2002
INDEX TO EXHIBITS
Exhibit Number Description of Document
---------------- ----------------------------------------------------------
1.1 Form of Placement Agency Agreement*
4. (i).1.(a) Amended and Restated Certificate of Incorporation of
Wild Oats (1)
4 (i).1.(b) Certificate of Correction to Amended and Restated
Certificate of Incorporation of Wild Oats (1)
4 (i).1.(c) Certificate of Amendment to Amended and Restated
Certificate of Incorporation of Wild Oats (3)
4 (ii).1 Amended and Restated By-Laws of Wild Oats (1)
4.2 Specimen stock certificate (2)
4.3 Rights Agreement dated May 22, 1998 between Wild Oats and
Norwest Bank Minnesota (4)
4.4 Amendment No. 1 to Rights Agreement dated February 26, 2002
between Wild Oats and Wells Fargo Bank, N.A. (5)
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP*
23.1 Consent of PricewaterhouseCoopers LLP*
23.2 Consent of Ernst & Young LLP*
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP.
Reference is made to Exhibit 5.1
24.1 Power of Attorney**
______________
* Filed herewith.
** Previously filed.
(1) Incorporated by reference to Wild Oats' Annual Report on Form 10-K for the
year ended December 28, 1996 (File Number 0-21577).
(2) Incorporated by reference to Wild Oats' Registration Statement on Form S-1
(File Number 333-11261).
(3) Incorporated by reference to Wild Oats' Registration Statement on Form S-3
(File Number 333-88011).
(4) Incorporated by reference to Wild Oats' Registration Statement on Form S-8
(File No. 333-66347).
(5) Incorporated by reference to Wild Oats' Annual Report on Form 10-K for the
year ended December 29, 2001 (File Number 0-21577) Exhibit 5.1
Exhibit 1.1
[Form of Placement Agency Agreement]
WILD OATS MARKETS, INC.
4,450,000 Shares of Common Stock, $0.001 par value per share
PLACEMENT AGENCY AGREEMENT
--------------------------
August __, 2002
J.P. Morgan Securities Inc.
As Placement Agent
One Bush Street
San Francisco, CA 94104
Dear Sir or Madam:
Wild Oats Markets, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell 4,450,000 shares (the "Shares") of common stock,
par value $0.001 per share (the "Common Stock"), to certain investors
(collectively, the "Investors"). The Company desires to engage you as its
placement agent (the "Placement Agent") in connection with such issuance and
sale. The Shares are more fully described in the Registration Statement (as
hereinafter defined)
The Company hereby confirms as follows its agreements with the
Placement Agent.
1. Agreement to Act as Placement Agent. On the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions of this Agreement and the engagement
letter, dated April 26, 2002, between the Company and the Placement Agent, as
amended August __, 2002 (the "Engagement Letter"), the Placement Agent agrees
to act as the Company's exclusive placement agent in connection with the
issuance and sale, on a best efforts basis, by the Company of the Shares to
the Investors. The Company acknowledges and agrees that the Placement Agent's
engagement hereunder is not an agreement by the Placement Agent or any of its
affiliates to underwrite or purchase any securities or otherwise provide any
financing. As compensation for its services hereunder, the Company agrees to
pay the Placement Agent a placement fee or fees in accordance with the first
paragraph of Section 4 of the Engagement Letter.
2. Delivery and Payment. Subject to the terms and conditions hereof,
payment of the purchase price for, and delivery of certificates for, the
Shares shall be made at the office of Coudert Brothers LLP, 1114 Avenue of the
Americas, New York, New York 10036, or at such other place as shall be agreed
upon by J.P. Morgan Securities Inc. and the Company, at 10:00 A.M., New York
City time, on the third or fourth business day (as permitted under Rule 15c6-1
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
after the determination of the public offering price of the Shares (such time
and date of payment and delivery being herein called the "Closing Date").
Subject to the terms and conditions hereof, payment of the purchase
price for the Shares shall be made to or upon the order of the Company by wire
transfer in Federal (same day) funds to the Company, upon delivery of
certificates for the Shares, through the facilities of The Depository Trust
Company, to such persons, and shall be registered in such name or names and
shall be in such denominations, as the Placement Agent may request at least
one business day before the Closing Date. Payment of the purchase price for
the Shares shall be made on the Closing Date by the purchasers thereof
directly to the Company or by such purchaser to the Placement Agent who will
remit such funds to the Company.
Certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the Placement
Agent shall request by written notice to the Company.
3. Representations and Warranties of the Company. The Company
represents and warrants and covenants to the Placement Agent that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3
(Registration No. 333-90096) relating to the Common Stock and certain other
securities of the Company, under the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (collectively referred to as the "Rules
and Regulations") of the Commission thereunder. The term "Registration
Statement" as used herein means such registration statement, as amended, at
the time it becomes or became effective (the "Effective Date"), including all
material incorporated by reference therein and any information deemed to be
included by Rule 430A. The Commission has not issued any order suspending the
effectiveness of the Registration Statement or preventing or suspending the
use of the Prospectus or the Preliminary Prospectus (as defined below). The
term "Preliminary Prospectus" as used herein means a preliminary prospectus
relating to the Shares as contemplated by Rule 430 or Rule 430A ("Rule 430A")
of the Rules and Regulations included at any time as part of the registration
statement or filed with the Commission pursuant to Rule 424 of the Rules and
Regulations. A final prospectus relating to the Shares containing information
permitted to be omitted at the time of effectiveness by Rule 430A will be
filed by the Company with the Commission in accordance with Rule 424(b) of the
Rules and Regulations. The term "Prospectus" as used herein means the
prospectus relating to the Shares as first filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations or, if no such filing is required,
the form of final prospectus relating to the Shares included in the
Registration Statement on the date it became effective, including all
material, if any, incorporated by reference therein, except that if any
revised prospectus or prospectus supplement shall be provided to the Placement
Agent by the Company for use in connection with the offering and sale of the
Shares which differs from the Prospectus (whether such revised prospectus or
prospectus supplement is or not required to be filed by the Company pursuant
to Rule 424(b) of the Rules and Regulations), the term "Prospectus" shall
refer to such prospectus as revised or supplemented from and after the time
such revised prospectus or prospectus supplement is first provided to the
Placement Agent for such use.
(b) At the time the Registration Statement or any post-effective
amendment to the Registration Statement became effective, at the time the
Prospectus is first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations and when any supplement or amendment to the Prospectus
is filed with the Commission and at the Closing Date (as defined in Section
2), the Registration Statement (and any post-effective amendment thereto) and
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment or supplement to the Registration Statement
or the Prospectus) contained and will contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, complied and will comply in all material respects with the Act
and the Rules and Regulations, and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein (in the light of
the circumstances under which they were made, in the case of the Prospectus)
not misleading, and no event will have occurred which should have been set
forth in an amendment or supplement to the Registration Statement or the
Prospectus which has not then been set forth in such an amendment or
supplement; each Preliminary Prospectus, as of the date filed with the
Commission, did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; except that no representation or warranty is made in
this Section 3(b) with respect to statements or omissions made in reliance
upon and in conformity with written information furnished to the Company
expressly for inclusion in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto by or on
behalf of the Placement Agent specifically for the Company's use therein.
(c) Each of the Company and its subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation. Each of the Company and its subsidiaries has full corporate
power and authority to conduct all the activities conducted by it, to own or
lease all the assets owned or leased by it and to conduct its business as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, in the most recent Preliminary Prospectus).
Each of the Company and its subsidiaries is duly licensed or qualified to do
business and in good standing as a foreign organization in all jurisdictions
in which the nature of the activities conducted by it or the character of the
assets owned or leased by it makes such licensing or qualification necessary,
except where any failures to be so licensed or qualified will not individually
or in the aggregate have a material adverse effect on the business,
properties, operations, financial condition or results of operations of the
Company and its subsidiaries taken as a whole. Except as listed on Schedule
3(c) to this Agreement (the entities therein listed as subsidiaries of the
Company hereinafter the "subsidiaries"), the Company does not own, directly or
indirectly, any shares of capital stock or any other equity securities of any
corporation or have any equity interest in any firm, partnership, joint
venture, association or other entity. Complete and correct copies of the
articles or certificate of incorporation and of the bylaws of each of the
Company and its subsidiaries and all amendments thereto have been made
available to the Placement Agent, and no changes therein will be made
subsequent to the date hereof and prior to the Closing Date without notice to
the Placement Agent.
(d) The issued and outstanding shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
nonassessable and are not now in violation of or subject to any preemptive or,
except as set forth in the Registration Statement with respect to Perry Odak's
right to additional options, similar rights. The Company has an authorized,
issued and outstanding capitalization as set forth in the Registration
Statement and the Prospectus as of the dates referred to therein. The
description of the securities of the Company in the Registration Statement and
the Prospectus is complete and accurate in all material respects. Except as
set forth in the Registration Statement and the Prospectus, the Company does
not have outstanding any options to purchase, or any rights or warrants to
subscribe for, or any securities or obligations convertible into, or
exchangeable for, or any contracts or commitments to issue or sell, any shares
of capital stock or other securities. All of the issued capital stock of each
of the subsidiaries of the Company has been duly and validly authorized and
issued and is fully paid and non-assessable and is owned directly or
indirectly by the Company, free and clear of all liens, charges or
encumbrances other than the encumbrances created by Amendment No. 1 to the
Company's Amended and Restated Credit Agreement, dated October 17, 2001.
(e) The Company has full corporate power and authority to execute
and deliver this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly and validly authorized, executed and delivered by
the Company and is a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to the
effect of applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and equitable principles of general applicability.
(f) The issuance and sale of the Shares have been duly and validly
authorized by the Company, and the Shares, when delivered by the Company in
accordance with this Agreement, assuming receipt of consideration therefor as
provided in this Agreement, will be duly and validly issued, fully paid and
nonassessable and will not have been issued in violation of or subject to any
preemptive or, except as set forth in the Registration Statement with respect
to Perry Odak's right to additional options, similar rights. The holders of
the Shares will not be subject to personal liability by reason of being such
holders. The Shares, when issued, will conform in all material respects to the
description thereof set forth in the Registration Statement and the
Prospectus.
(g) The financial statements and the related notes and schedules
included in the Registration Statement and the Prospectus present fairly, in
all material respects, the financial condition of the Company as of the dates
thereof and the results of its operations and cash flows for the periods
covered thereby, and have been prepared in conformity with generally accepted
accounting principles ("GAAP") consistently applied during the periods covered
(subject, in the case of unaudited financial statements, to the absence of
footnotes and normal year-end adjustments). No other financial statements or
schedules of the Company or any other entity are required by the Act or the
Rules and Regulations to be included in the Registration Statement or the
Prospectus. PricewaterhouseCoopers LLP and Ernst & Young LLP (together, the
"Accountants"), who have reported on such financial statements and schedules,
are independent accountants with respect to the Company as required by the Act
and the Rules and Regulations. The financial statements of the Company and the
related notes and schedules included in the Registration Statement and the
Prospectus have been prepared in conformity with the requirements of the Act
and the Rules and Regulations.
(h) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that in all material respects (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) the
recorded accountability for cash and inventory for resale is compared with
existing cash and inventory for resale at reasonable intervals and appropriate
action is taken with respect to any differences.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the
Closing Date, except as set forth in the Registration Statement and the
Prospectus, (i) there has not been and will not have been any change in the
capitalization of the Company other than non-material changes in the ordinary
course of business, or any material adverse change, arising for any reason
whatsoever, in the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, (ii) neither
the Company or any of its subsidiaries has incurred nor will it incur any
material liabilities or obligations, direct or indirect, actual or contingent,
nor has the Company or any of its subsidiaries entered into nor will it enter
into any material transactions other than pursuant to this Agreement and the
transactions referred to herein and (iii) the Company has not and will not
have paid or declared any dividends or other distributions of any kind in
respect of its capital stock.
(j) All leases or subleases by the Company or any of its
subsidiaries for retail stores are, to the Company's knowledge, under valid,
binding and enforceable leases or subleases conforming to the description
thereof set forth in or incorporated by reference into the Registration
Statement and the Prospectus, with such exceptions as are not material and do
not interfere in any material respect with the use made or proposed to be made
of such property and buildings by the Company or such subsidiary.
(k) The Company is not and, upon consummation of the transactions
contemplated herein will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940, as amended.
(l) Except as set forth in the Registration Statement and the
Prospectus, there are no actions, suits or proceedings pending or, to the
Company's knowledge, threatened against or affecting the Company or any of its
subsidiaries or any of their respective directors or officers in their
capacity as such, before or by any court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign that are
required to be disclosed in the Registration Statement or the Prospectus,
including pursuant to Regulation S-X or Regulation S-K of the Rules and
Regulations.
(m) The Company and each of its subsidiaries has (i) all
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to carry on its business as presently conducted
except where the failure to have any such governmental licenses, permits,
consents, orders, approvals and other authorizations would not individually or
in the aggregate have a material adverse effect on the business, properties,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (ii) complied with all laws, regulations and
orders applicable to either it or its business, except where any failures to
so comply would not individually or in the aggregate have a material adverse
effect on the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, and (iii)
performed all its obligations required to be performed, and is not, to the
Company's knowledge, in default, under any material indenture, mortgage, deed
of trust, voting trust agreement, loan agreement, bond, debenture, note
agreement, lease, contract or other agreement or instrument (collectively, a
"contract or other agreement") to which it is a party or by which its property
is bound or affected, except as otherwise set forth in the Registration
Statement and the Prospectus and except where any such defaults would not
individually or in the aggregate have a material adverse effect on the
business, properties, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, and, to the Company's
knowledge, no other party under any material contract or other agreement to
which it is a party is in default in any respect thereunder. The Company is
not in violation of any provision of its certificate of incorporation or
by-laws.
(n) Neither the execution, delivery and performance of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
the compliance by the Company with the terms and provisions hereof require the
consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any public, governmental or regulatory agency or
body having jurisdiction over the Company or any of its subsidiaries or any of
their respective properties, except such as have been made or obtained under
the Act, such as may be required under state securities or Blue Sky laws or
such as are required by the bylaws and rules of the NASD.
(o) Neither the execution, delivery and performance of this
Agreement, nor the consummation of any of the transactions contemplated
herein, nor the compliance by the Company with the terms and provisions hereof
conflicts or will conflict with, or results or will result in a breach of, any
of the terms and provisions of, or constitutes or will constitute a default
(or an event with which notice or lapse of time, or both, would constitute
such a default) under, or results in or will result in the creation or
imposition of any lien, charge or encumbrance (except for such liens as would
not individually or in the aggregate have a material adverse effect on the
business, properties, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole) pursuant to the terms of any
material contract or other agreement to which the Company or any of its
subsidiaries is a party or by which any material property or assets of the
Company or any of its subsidiaries may be bound; nor will such action result
in any violation of any provision of the Company's organizational or governing
documents, or any judgment, decree, order, statute, rule or regulation of any
court or of any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
respective properties or assets.
(p) There is no document or contract known to the Company of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that is
not described or filed as required. All such contracts filed as exhibits to or
disclosed in the Registration Statement or Prospectus to which the Company or
any of its subsidiaries is a party have been duly authorized, executed and
delivered by the Company or such subsidiary, constitute valid and binding
agreements of the Company or such subsidiary, and are enforceable against the
Company in accordance with the terms thereof, subject to the effect of
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and equitable principles of general applicability.
(q) No statement, representation or warranty made by the Company
in this Agreement or made in any certificate or document required by this
Agreement to be delivered to the Placement Agent will be, when made,
inaccurate, untrue or incorrect in any material respect.
(r) The Company and its directors and officers have not taken,
directly or indirectly, any action intended to cause or result, or which might
reasonably be expected to cause or result, under the Act or otherwise, in, or
which has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
(s) Except for the registration rights granted under the
Registration Rights Agreement dated July 12, 1996, among the Company and
certain holders of Shares specified therein, no holder of securities of the
Company has rights to the registration of any securities of the Company as a
result of the filing of the Registration Statement, other than rights which
are not exercisable due to the Placement Agent's determination (pursuant to
its discretionary authority under the relevant registration rights agreement)
to include only securities sold directly from the Company or which have been
waived in writing.
(t) The Common Stock currently outstanding is quoted on The Nasdaq
National Market (the "NNM"), and the Shares to be sold under this Agreement
have been included in a notification to be duly authorized for quotation on
the NNM.
(u) Neither the Company nor any of its subsidiaries is involved in
any dispute with the National Labor Relations Board or a recognized labor
union, which would have a material impact on the business properties,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, nor is any such dispute known by the Company
to be threatened.
(v) Except as set forth in the Registration Statement and the
Prospectus, the business and operations of the Company and its subsidiaries
have been and are being conducted in material compliance with all applicable
laws, ordinances, rules, regulations, licenses, permits, approvals, plans,
authorizations or requirements relating to occupational safety and health, or
pollution, or protection of health or the environment (including, without
limitation, those relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants or hazardous or toxic substances,
materials or wastes into ambient air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of chemical substances, pollutants,
contaminants or hazardous or toxic substances, materials or wastes, whether
solid, gaseous or liquid in nature) of any governmental department,
commission, board, bureau, agency or instrumentality of the United States, any
state or political subdivision thereof, or any foreign jurisdiction, and all
applicable judicial or administrative agency or regulatory decrees, awards,
judgments and orders relating thereto, except where the failure to be in such
compliance will not, individually or in the aggregate, have a material adverse
effect on the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole; and neither
the Company's legal counsel nor any of its subsidiaries' legal counsel has
knowledge of or has received any notice from any governmental instrumentality
or any third party alleging any material violation thereof or liability
thereunder (including, without limitation, liability for costs of
investigating or remediating sites containing hazardous substances and/or
damages to natural resources).
(w) Except as disclosed in or specifically contemplated by the
Registration Statement of the Prospectus, (i) the Company and its subsidiaries
own or have obtained valid and enforceable licenses or options for the
material inventions, patent applications, patents, trademarks (both registered
and unregistered), tradenames, copyrights and trade secrets necessary for the
conduct any material portion of the business of the Company and its
subsidiaries as currently conducted; and (ii) (a) to the Company's knowledge,
there are no third parties who have any ownership rights to any material
intellectual property that is owned by, or has been licensed to, the Company
or any of its subsidiaries for the products and services described in the
Registration Statement and the Prospectus that would preclude the Company or
such subsidiary from conducting its businesses as currently conducted, except
for the ownership rights of the owners of the Intellectual Property licensed
or optioned by the Company and its subsidiaries or where the failure to own or
license such intellectual property would not have a material adverse effect on
the business, properties, financial condition or results of operations of the
Company and its subsidiaries taken as a whole; (b) there is no pending or, to
the Company's knowledge or any of its subsidiaries, threatened action, suit,
proceeding or claim by others challenging the rights of the Company or any of
its subsidiaries in or to any intellectual property owned, licensed or
optioned by the Company or any of its subsidiaries, other than any such
actions, suits, proceedings, or claims which, individually or in the aggregate
if determined adversely to the Company or its subsidiaries, would not have a
material adverse affect on the business's properties, financial condition or
results of operations of the Company and its subsidiaries taken as a whole;
(c) there is no pending or, to the Company's knowledge, threatened action,
suit, proceeding or claim by others challenging the validity or scope of any
intellectual property owned, licensed or optioned by the Company or any of its
subsidiaries, other than any such actions, suits, proceedings, or claims
which, individually or in the aggregate if determined adversely to the Company
or its subsidiaries, would not have a material adverse affect on the
business's properties, financial condition or results of operations of the
Company and its subsidiaries taken as a whole; and (d) there is no pending or,
to the Company's knowledge, threatened action, suit, proceeding or claim by
others that the Company or any of its subsidiaries infringe or otherwise
violate any patent, trademark, copyright, trade secret or other proprietary
right of others, other than any such actions, suits, proceedings, or claims
which, individually or in the aggregate if determined adversely to the Company
or its subsidiaries, would not have a material adverse affect on the
business's properties, financial condition or results of operations of the
Company and its subsidiaries taken as a whole.
(x) Except as disclosed in Schedule 3(x), the Company and its
subsidiaries has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of any tax deficiency which has been or might
be asserted or threatened against it which could have a material adverse
effect on the business, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(y) On the Closing Date, all stock transfer or other taxes (other
than income taxes) which are required to be paid in connection with the sale
and transfer of the Shares to be sold hereunder will be, or will have been,
fully paid or provided for by the Company and all laws imposing such taxes
will be or will have been fully complied with.
(z) The Company and its subsidiaries maintain insurance of the
types and in the amounts that the Company reasonably believes is adequate for
their business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company or any of its subsidiaries,
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against by similarly situated companies, all of which
insurance is in full force and effect.
(aa) To the knowledge of the Company, neither the Company nor any
of its subsidiaries has not at any time since its incorporation, directly or
indirectly, (i) made any unlawful contribution to any candidate for public
office, or failed to disclose fully any contribution in violation of law, or
(ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any jurisdiction thereof.
4. Agreements of the Company. The Company covenants and agrees
with the Placement Agent as follows:
(a) The Company will not, during such period as the Prospectus
would be required by law to be delivered in connection with sales of the
Shares by an underwriter or dealer in connection with the offering
contemplated by this Agreement, file any amendment or supplement to the
Registration Statement or the Prospectus, unless a copy thereof shall first
have been submitted to the Placement Agent within a reasonable period of time
prior to the filing thereof and the Placement Agent shall not have objected
thereto in good faith.
(b) The Company will notify the Placement Agent promptly, and will
confirm such advice in writing, (i) when any post-effective amendment to the
Registration Statement becomes effective, (ii) of any request by any
securities or other governmental authority (including, without limitation, the
Commission) of any jurisdiction for amendments or supplements to the
Registration Statement or the Prospectus or for additional information, (iii)
of the issuance by any securities or other governmental authority (including,
without limitation, the Commission) of any jurisdiction of any stop order
suspending the effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose or the threat thereof, (iv) of the
happening of any event that in the judgment of the Company makes any statement
made in the Registration Statement or the Prospectus untrue or that requires
the making of any changes in the Registration Statement or the Prospectus in
order to make the statements therein, in light of the circumstances in which
they made, not misleading and (v) of receipt by the Company or any
representative or attorney of the Company of any other communication from the
securities or other governmental authority (including, without limitation, the
Commission) of any jurisdiction relating to any of the Registration Statement,
any Preliminary Prospectus or the Prospectus in connection with the offering
contemplated hereby. If at any time any securities or other governmental
authority (including, without limitation, the Commission) of any jurisdiction
shall issue any order suspending the effectiveness of the Registration
Statement in connection with the offering contemplated hereby, the Company
will make every reasonable effort to obtain the withdrawal of such order at
the earliest possible moment. If the Company has omitted any information from
the Registration Statement, pursuant to Rule 430A, it will comply with the
provisions of and make all requisite filings with the Commission pursuant to
said Rule 430A and notify the Placement Agent promptly of all such filings.
(c) If, at any time when a Prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or the Registration Statement, as then
amended, would include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading,
or if for any other reason it is necessary at any time to amend or supplement
the Prospectus or the Registration Statement to comply with the Act or the
Rules and Regulations, the Company will promptly notify the Placement Agent
and, subject to Section 4(a) hereof, will promptly prepare and file with the
Commission, at the Company's expense, an amendment to the Registration
Statement or an amendment or supplement to the Prospectus that corrects such
statement or omission or effects such compliance and will deliver to the
Placement Agent without charge, such number of copies thereof as the Placement
Agent may reasonably request. The Company consents to the use of the
Prospectus or any amendment or supplement thereto by the Placement Agent.
(d) The Company will furnish to the Placement Agent and its
counsel, without charge, (i) one signed copy of the registration statement
described in Section 3(a) hereof, including financial statements and
schedules, and all exhibits thereto and (ii) so long as a Prospectus relating
to the Shares is required to be delivered under the Act, as many copies of
each Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto as the Placement Agent may reasonably request.
(e) The Company will comply with all the undertakings contained in
the Registration Statement.
(f) Prior to the sale of the Shares to the Investors, the Company
will cooperate with the Placement Agent and its counsel in connection with the
registration or qualification of the Shares for offer and sale under the state
securities or Blue Sky laws of such jurisdictions as the Placement Agent may
request; provided, that in no event shall the Company be obligated to qualify
to do business in any jurisdiction where it is not now so qualified or to take
any action which would subject it to general service of process in any
jurisdiction where it is not now so subject.
(g) The Company will make generally available to holders of its
securities, as soon as may be practicable, but in no event later than the last
day of the fifteenth full calendar month following the calendar quarter in
which the Effective Date falls, a consolidated earnings statement (which need
not be audited but shall be in reasonable detail) for a period of 12 months
ended commencing after the Effective Date, and satisfying the provisions of
Section 11(a) of the Act (including Rule 158 of the Rules and Regulations).
(h) The Company will not at any time, directly or indirectly, take
any action intended, or which might reasonably be expected, to cause or result
in, or which will constitute, stabilization of the price of the Shares to
facilitate the sale or resale of any of the Shares.
(i) The Company will apply the net proceeds from the offering and
sale of the Shares in the manner set forth in the Prospectus under the caption
"Use of Proceeds."
5. Expenses. Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will
pay all costs and expenses incident to the performance of the obligations of
the Company under this Agreement, including but not limited to costs and
expenses of or relating to (i) the preparation and filing of the Registration
Statement (including each pre- and post-effective amendment thereto) and
exhibits thereto, each Preliminary Prospectus, the Prospectus and any
amendment or supplement to the Prospectus, including all fees, disbursements
and other charges of counsel to the Company, (ii) the preparation and delivery
of certificates representing the Shares, (iii) furnishing (including costs of
shipping and mailing) such copies of the Prospectus and any Preliminary
Prospectus, and all amendments and supplements to the Prospectus, as may be
requested for use in connection with the placement of the Shares, (iv) the
listing of the Shares on the NMS, and (v) fees, disbursements and other
charges of counsel and auditors to the Company. The Company shall reimburse
the Placement Agent, promptly upon request, for expenses as set forth in the
second paragraph of Section 4 of the Engagement Letter.
6. Conditions of the Obligations of the Placement Agent. The
obligations of the Placement Agent hereunder are subject to the following
conditions:
(a) Notification that the Registration Statement has become
effective shall be received by the Placement Agent not later than 5:00 p.m.,
New York City time, on the date of this Agreement or at such later date and
time as shall be consented to in writing by the Placement Agent and all
filings required by Rule 424 of the Rules and Regulations and Rule 430A shall
have been made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the
qualification or registration of the Shares under the securities or Blue Sky
laws of any jurisdiction shall be in effect and no proceeding for such purpose
shall be pending before or threatened or contemplated by any securities or
other governmental authority, (iii) any request for additional information on
the part of the staff of any securities or other governmental authority
(including, without limitation, the Commission) shall have been complied with
to the satisfaction of the staff of the Commission or such authorities and
(iv) after the date hereof no amendment or supplement to the Registration
Statement or the Prospectus shall have been filed unless a copy thereof was
first submitted to the Placement Agent and the Placement Agent did not object
thereto in good faith.
(c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the business, properties, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of business,
in each case other than as set forth in the Registration Statement and the
Prospectus, and (ii) the Company shall not have sustained any material loss or
interference with its business or properties from fire, explosion, flood or
other casualty, whether or not covered by insurance, or from any labor dispute
or any court or legislative or other governmental action, order or decree,
which is not set forth in the Registration Statement and the Prospectus, if in
the judgment of the Placement Agent any such development makes it
impracticable or inadvisable to consummate the sale and delivery of the Shares
to Investors at the public offering price.
(d) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
subsidiaries or any of their respective officers or directors in their
capacities as such, before or by any court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, which
if determined adversely to the Company or any of its subsidiaries could
materially and adversely affect the business, properties, properties,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(e) Each of the representations and warranties of the Company
contained herein shall be true and correct at the Closing Date, as if made on
such date, and all covenants and agreements herein contained to be performed
on the part of the Company and all conditions herein contained to be fulfilled
or complied with by the Company at or prior to the Closing Date shall have
been duly performed, fulfilled or complied with.
(f) The Placement Agent shall have received an opinion, dated the
Closing Date (or such other date as may be set forth in a representation or
warranty), of Skadden, Arps, Slate, Meagher & Flom LLP, as special counsel to
the Company, in substantially the form set forth in Annex I herein.
(g) Concurrently with the execution and delivery of this
Agreement, and at the Closing Date, the Accountants shall have furnished to
the Placement Agent a letter, dated the date of its delivery, addressed to the
Placement Agent and in form and substance reasonably satisfactory to the
Placement Agent.
(h) At the Closing Date, there shall be furnished to the Placement
Agent a certificate, dated the date of its delivery, signed by each of the
Chief Executive Officer and the Chief Financial Officer of the Company, in
form and substance satisfactory to the Placement Agent to the effect that to
each of such person's knowledge:
(i) Each signer of such certificate has carefully examined
the Registration Statement and the Prospectus and (A) as of the date of
such certificate, (x) the Registration Statement does not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading and (y) the Prospectus does not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading and (B) since the Effective Date no event
has occurred as a result of which it is necessary to amend or supplement
the Prospectus in order to make the statements therein not untrue or
misleading in any material respect.
(ii) Each of the representations and warranties of the
Company contained in this Agreement were, when originally made, and are,
at the time such certificate is delivered, true and correct.
(iii) Each of the covenants (not waived by the Placement
Agent) required herein to be performed by the Company on or prior to the
date of such certificate has been duly, timely and fully performed and
each condition herein required to be complied with by the Company on or
prior to the delivery of such certificate has been duly, timely and
fully complied with.
(iv) No stop order suspending the effectiveness of the
Registration Statement or of any part thereof has been issued and no
proceedings for that purpose have been instituted or are contemplated by
the Commission.
(v) Subsequent to the date of the most recent financial
statements in the Prospectus, there has been no material adverse change
in the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, except
as set forth in the Prospectus.
(i) The Shares shall be qualified for sale in such states as the
Placement Agent may reasonably request, each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing
Date; provided that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take
any action which would subject it to taxation or general service of process in
any jurisdiction where it is not now so subject.
(j) The Shares shall have been approved for quotation on the NNM.
(k) The NASD shall have confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the placement
agency terms and arrangements.
(l) The Company shall have furnished to the Placement Agent such
certificates, in addition to those specifically mentioned herein, as the
Placement Agent may have reasonably requested as to the accuracy and
completeness at the Closing Date of any statement in the Registration
Statement or the Prospectus, as to the accuracy at the Closing Date of the
representations and warranties of the Company as to the performance by the
Company of its obligations hereunder, or as to the fulfillment of the
conditions concurrent and precedent to the obligations hereunder of the
Placement Agent.
7. Indemnification.
(a) The Company shall indemnify and hold harmless the Placement
Agent, its affiliates and their respective employees, agents and controlling
persons as set forth in Annex A to the Engagement Letter, which is
incorporated herein by reference.
(b) The Placement Agent shall indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company who signs the Registration Statement
(each, for purposes of this Section 7, an "indemnified party") to the same
extent as the indemnity from the Company to the Placement Agent contained in
the first paragraph of Annex A to the Engagement Letter, but only insofar as
losses, claims, liabilities, expenses or damages arise out of or are based on
any untrue statement or omission or alleged untrue statement or omission made
in reliance on and in conformity with information relating to the Placement
Agent furnished in writing to the Company by the Placement Agent expressly for
use in the Registration Statement, any Preliminary Prospectus or the
Prospectus. This indemnity agreement will be in addition to any liability that
the Placement Agent might otherwise have to an indemnified party. The Company
acknowledges that, for all purposes under this Agreement, the statements set
forth in the second, third and last sentences of the second paragraph, the
last sentence of the third paragraph, and the next to last sentence of the
fourth paragraph under the heading "Plan of Distribution" constitute the only
information relating to the Placement Agent furnished in writing to the
Company by the Placement Agent expressly for inclusion in the Registration
Statement, any Preliminary Prospectus or the Prospectus.
(c) If an indemnified party proposes to assert the right to be
indemnified under Section 7(b), such indemnified party will, promptly after
receipt of notice of commencement of any action against it in respect of which
a claim is to be made against the Placement Agent under Section 7(b), notify
the Placement Agent of the commencement of such action, enclosing a copy of
all papers served, but the omission so to notify the Placement Agent will not
relieve it from any liability that it may have to any indemnified party under
Section 7(b) unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the Placement Agent. If any
such action is brought against any indemnified party and it notifies the
Placement Agent of its commencement, the Placement Agent will be entitled to
participate in and, to the extent that it elects by delivering written notice
to the indemnified party promptly after receiving notice of the commencement
of the action from the indemnified party, to assume the defense of the action,
with counsel reasonably satisfactory to the indemnified party, and after
notice from the Placement Agent to the indemnified party of its election to
assume the defense, the Placement Agent will not be liable to the indemnified
party for any legal or other expenses except as provided below and except for
the reasonable costs of investigation subsequently incurred by the indemnified
party in connection with the defense. The indemnified party will have the
right to employ its own counsel in any such action, but the fees, expenses and
other charges of such counsel will be at the expense of such indemnified party
unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the Placement Agent, (2) the indemnified party has
reasonably concluded (based on advice of counsel) that a conflict exists
between the indemnified party and the Placement Agent that would prevent the
counsel selected by the Placement Agent from representing the indemnified
party (in which case the Placement Agent will not have the right to direct the
defense of such action on behalf of the indemnified party) or (3) the
Placement Agent has not in fact employed counsel to assume the defense of such
action within a reasonable time after receiving notice of the commencement of
the action, in each of which cases the reasonable fees, disbursements and
other charges of counsel will be at the expense of the Placement Agent. It is
understood that the Placement Agent shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties. The Placement Agent will reimburse all such
fees, disbursements and other charges promptly as they are incurred. The
Placement Agent will not, without the prior written consent of the indemnified
party, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification has been sought under Section 7(b) (whether or not the
indemnified party is a party to such claim, action, suit or proceeding),
unless such settlement, compromise or consent includes an unconditional
release of the indemnified party and each such controlling person from all
liability arising out of such claim, action, suit or proceeding.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 7(b) is
applicable in accordance with its terms but for any reason is held to be
unavailable from the Placement Agent, the Placement Agent will contribute to
the total losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted, but after deducting any contribution received by the
Company or any other indemnified party from persons other than the Placement
Agent such as persons who control the Company within the meaning of the Act or
the Exchange Act, officers of the Company who signed the Registration
Statement and directors of the Company, who also may be liable for
contribution) to which all indemnified parties and the Placement Agent may be
subject in such proportion as shall be appropriate to reflect the relative
benefits received by the Company and the other indemnified parties on the one
hand and the Placement Agent on the other. The relative benefits received by
the Company and the other indemnified parties on the one hand and the
Placement Agent on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting Company expenses)
received by the Company as set forth in the table on the cover page of the
Prospectus bear to the fee received by the Placement Agent hereunder. If, but
only if, the allocation provided by the foregoing sentence is not permitted by
applicable law, the allocation of contribution shall be made in such
proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the
Company, on the one hand, and the Placement Agent on the other, with respect
to the statements or omissions which resulted in such loss, claim, liability,
expense or damage, or action in respect thereof, as well as any other relevant
equitable considerations with respect to the offering contemplated by this
Agreement. Such relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Placement Agent, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Placement Agent agree that it would
not be just and equitable if contributions pursuant to this Section 7(d) were
to be determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, liability, expense or damage, or action in respect thereof,
referred to above in this Section 7(d) shall be deemed to include, for purpose
of this Section 7(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7(d), the
Placement Agent shall not be required to contribute, in respect of all
indemnified parties, any amount in excess of the fee received by it, and no
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) will be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
8. Termination. (a) The obligations of the Placement Agent under
this Agreement may be terminated at any time prior to the Closing Date, by
notice to the Company from the Placement Agent, without liability on the part
of the Placement Agent to the Company if, prior to delivery and payment for
the Shares, (i) trading in the Common Stock of the Company shall have been
suspended by the Commission or by the NNM, (ii) trading in securities
generally on the NNM shall have been suspended or limited or minimum or
maximum prices shall have been generally established on any of such exchanges,
or additional material governmental restrictions, not in force on the date of
this Agreement, shall have been imposed upon trading in securities generally
by the NNM or by order of the Commission or any court or other governmental
authority, (iii) a general banking moratorium shall have been declared by any
Federal or state authority, or (iv) any material adverse change in the
financial or securities markets in the United States or any outbreak or
escalation of hostilities or acts of terrorism involving the United States or
declaration by the United States of a national emergency or war or other
calamity or crisis shall have occurred, the effect of any of which is such as
to make it, in the sole judgment of the Placement Agent, impracticable or
inadvisable to market the Shares on the terms and in the manner contemplated
by the Prospectus.
(b) The obligations of the parties under this Agreement shall be
automatically terminated in the event that notice is given to the Company from
the Placement Agent, on or prior to the Closing Date, that payment for the
Shares is not being transmitted by the investors on the Closing Date.
(c) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to Section 8 (b)), or if the sale
of the Shares provided for herein is not consummated because any condition to
the obligations of the Placement Agent set forth herein is not satisfied or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof, the Company
will, subject to demand by you and to the terms of the Engagement Letter,
reimburse you for all reasonable out-of-pocket expenses incurred in connection
herewith.
9. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, 3375
Mitchell Lane, Boulder, Colorado 80301, Attention: General Counsel, with a
copy to Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York,
New York 10036-6522, Attention: Randall H. Doud or (b) if to the Placement
Agent, at the office of J.P. Morgan Securities Inc., One Bush Street, San
Francisco, CA 94104, Attention: Norman Colbert, with a copy to Coudert
Brothers LLP, 1114 Avenue of the Americas, New York, New York 10036,
Attention: Jeffrey E. Cohen. Any such notice shall be effective only upon
receipt. Any notice under Section 7 may be made by facsimile or telephone, but
if so made shall be subsequently confirmed in writing.
10. Survival. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company set
forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement shall remain in full force and effect, regardless
of (i) any investigation made by or on behalf of the Placement Agent or any
controlling person referred to in Section 7 hereof and (ii) delivery of and
payment for the Shares. The respective agreements, covenants, indemnities and
other statements set forth in Sections 3, 5, 7 and 8(c) hereof shall remain in
full force and effect, regardless of any termination or cancellation of this
Agreement.
11. Successors. This Agreement shall inure to the benefit of and
shall any and their respective successors be binding upon the Placement Agent,
the Company and their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons
and for the benefit of no other person except that (i) the indemnification and
contribution contained in Section 7(a) of this Agreement shall also be for the
benefit of the Placement Agent and any person or persons who control the
Placement Agent within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act and (ii) the indemnification and contribution contained in
Sections 7(b) and (d) of this Agreement shall also be for the benefit of the
directors of the Company, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.
No Investor shall be deemed a successor because of such purchase.
12. Knowledge. When used herein, the term "to the Company's
knowledge" or similar phrases shall refer to the knowledge of the following
officers of the Company as of the date hereof: Chief Executive Officer; Chief
Financial Officer; Vice President Legal; Vice President Human Resources;
Senior Vice President Merchandising; and Senior Vice President Operations.
13. APPLICABLE LAW. THE VALIDITY AND INTERPRETATIONS OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Entire Agreement. This Agreement and the Engagement Letter
constitute the entire understanding between the parties hereto as to the
matters covered hereby and supersedes all prior understandings, written or
oral, relating to such subject matter.
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the Placement Agent.
Very truly yours,
WILD OATS MARKETS, INC.
By:
----------------------------------
Name: Freya R. Brier
Title: Vice President Legal;
General Counsel
Confirmed as of the date first
above mentioned:
J.P. MORGAN SECURITIES INC.
By:
----------------------------------
Name: Norman Colbert
Title: Managing Director
Exhibit 5.1
[Letterhead of Skadden, Arps, Slate, Meagher & Flom LLP]
August 15, 2002
Wild Oats Markets, Inc.
3375 Mitchell Lane
Boulder, Colorado 80301
RE: Wild Oats Markets, Inc. Registration Statement on Form S-3
(Registration Number 333-90096)
Ladies and Gentlemen:
We have acted as special counsel to Wild Oats Markets, Inc., a Delaware
corporation (the "Company"), in connection with the registration by the Company
of 3,250,000 shares (the "Shares") of the Company's common stock, par value
$0.001 per share (the "Common Stock"), together with the associated rights to
purchase units of Series A Junior Participating Preferred Stock of the Company
associated therewith (the "Rights"), to be offered and sold to certain investors
(the "Investors").
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Act").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement on Form S-3 (File No. 333-90096) as filed with the Securities and
Exchange Commission (the "Commission") on June 7, 2002 under the Act; (ii)
Amendment No. 1 to the Registration Statement on Form S-3 as filed with the
Commission on July 24, 2002; (iii) Amendment No. 2 to the Registration Statement
on Form S-3 as filed with the Commission on August 15, 2002 (such Registration
Statement, as so amended, being hereinafter referred to as the "Registration
Statement"); (iv) a specimen certificate representing the Common Stock; (v) the
Amended and Restated Certificate of Incorporation of the Company, as amended to
date and currently in effect; (vi) the Amended and Restated By-Laws of the
Company, as amended to date and currently in effect; (vii) certain resolutions
of the Board of Directors of the Company, relating to the issuance and sale of
the Shares and related matters; (viii) the Rights Agreement, dated May 22, 1998,
between the Company and Norwest Bank Minnesota, as Rights Agent (the "Rights
Agreement"); (ix) Amendment No. 1 to the Rights Agreement, dated February 26,
2002, between the Company and Wells Fargo Bank, N.A. (the "Rights Agreement
Amendment"); and (x) resolutions of the Board of Directors of the Company
relating to the adoption of the Rights Agreement and the Rights Agreement
Amendment. We also have examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company and such
agreements, certificates of public officials, certificates of officers or other
representatives of the Company and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of executed documents, we have assumed that the parties thereto,
other than the Company, its directors and officers, had the power, corporate or
other, to enter into and perform all obligations thereunder and also have
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof on such parties. In rendering the opinion set forth
below, we have assumed that the amount of the consideration contemplated to be
received by the Company by the resolutions of the Pricing Committee of the Board
of Directors of the Company authorizing the issuance of the Shares shall be at a
price per Share not less than the per share par value of the Common Stock. As to
any facts material to the opinions expressed herein that we have not
independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Company and others.
Members of our firm are admitted to the bar in the State of New York
and we do not express any opinion as to the laws of any jurisdiction other than
the corporate laws of the State of Delaware, and we do not express any opinion
as to the effect of any other laws on the opinion stated herein.
Based upon and subject to the foregoing, we are of the opinion that
when (i) the Registration Statement becomes effective under the Act, (ii) the
Pricing Committee of the Board of Directors of the Company properly has taken
the required actions in connection with the issuance and sale of the Shares,
(iii) the Shares have been delivered to and paid for by the Investors at a price
per share not less than the price per Share as contemplated by the resolutions
of the Pricing Committee of the Board of Directors of the Company authorizing
the issuance of the Shares, and (iv) certificates representing the Shares in the
form of the specimen certificate examined by us have been manually signed by an
authorized officer of the transfer agent and registrar for the Common Stock and
registered by such transfer agent and registrar, then the issuance and sale of
the Shares (together with the associated Rights) will have been duly authorized,
and the Shares will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3 of our report dated March 25, 2002 relating
to the financial statements and financial statement schedule, which appears in
Wild Oats Markets, Inc.'s Annual Report on Form 10-K for the year ended December
29, 2001. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
PricewaterhouseCoopers LLP
Denver, Colorado
August 15, 2002
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated November 17, 1999, with respect to the financial
statements of Sun Harvest Farms, Inc. as of September 28, 1999, December 29,
1998 and December 30, 1997, and for the nine-month period ended September 28,
1999 and the fiscal years ended December 29, 1998, December 30, 1997 and
December 31, 1996, included in the Annual Report on Form 10-K of Wild Oats
Markets, Inc. for the year ended December 29, 2001, which is incorporated by
reference in Amendment No. 2 to Form S-3 Registration Statement (filed on
August 15, 2002) of Wild Oats Markets, Inc. for the registration of 3,250,000
shares of its common stock.
Ernst & Young LLP
San Antonio, Texas
August 15, 2002