Exhibit 10.1
CAPITAL STOCK CONTRIBUTION AGREEMENT
by and among
XXXXXXXX RANCH, LLC,
a California limited liability company,
XXXXXXXX KNIGHTSBRIDGE, LLC,
a California limited liability company,
KNIGHTSBRIDGE FINE WINES, INC.,
a Nevada corporation
and
XX. XXXXX XXXXXXXX,
Equityholder
TABLE OF CONTENTS
1. Certain Definitions......................................................................................1
2. Contribution of Xxxxxxxx Assets; Assumption of Certain Liabilities; Contribution of
Knightsbridge Common Stock. .............................................................................2
2.1 Contribution of Xxxxxxxx Assets.................................................................2
2.2 Excluded Assets.................................................................................4
2.3 Assumption of Certain Liabilities...............................................................4
2.4 Excluded Liabilities............................................................................4
2.5 Contribution of Knightsbridge Common Stock......................................................4
2.6 Transfer of Assets; Attorney-in-fact............................................................5
3. The Closing..............................................................................................6
4. Closing Deliveries.......................................................................................6
4.1 Deliveries of Xxxxxxxx and the Equityholder.....................................................6
4.2 Deliveries of Newco.............................................................................7
4.3 Deliveries of Knightsbridge.....................................................................8
5. Further Assurances.......................................................................................8
6. Representations and Warranties of Xxxxxxxx...............................................................8
6.1 Organization; Good Standing.....................................................................8
6.2 Authority; Enforceability.......................................................................9
6.3 Investments.....................................................................................9
6.4 No Conflict.....................................................................................9
6.5 Litigation; Compliance with Law.................................................................9
6.6 Financial Statements...........................................................................10
6.7 Absence of Undisclosed Liabilities.............................................................10
6.8 Taxes..........................................................................................10
6.9 Title to Assets................................................................................11
6.10 Fixed Assets...................................................................................11
6.11 Intellectual Property Matters..................................................................11
6.12 Material Agreements............................................................................12
6.13 Customers and Suppliers........................................................................13
6.14 Inventory......................................................................................13
6.15 Accounts Receivable............................................................................13
6.16 Authorizations.................................................................................13
6.17 Environmental Matters..........................................................................14
6.18 Related Parties................................................................................14
6.19 Improper or Unlawful Payments..................................................................15
6.20 No Brokers.....................................................................................15
6.21 Product Warranties; Returns....................................................................15
6.22 Conditions Affecting the Business..............................................................15
-i-
6.23 Conduct of Business............................................................................15
6.24 Insurance......................................................................................15
6.25 Products.......................................................................................16
6.26 Real Property..................................................................................16
6.27 Employee Benefits..............................................................................17
6.28 Consents/Bulk Sales............................................................................17
6.29 Intentionally Deleted..........................................................................18
6.30 Disclosure.....................................................................................18
6.31 Investment Undertaking.........................................................................18
6.32 No Representation..............................................................................18
7. Representations and Warranties of Knightsbridge.........................................................18
7.1 Organization; Good Standing....................................................................18
7.2 Authority; Enforceability......................................................................19
7.3 No Conflict....................................................................................19
7.4 Capitalization.................................................................................20
7.5 Knightsbridge Common Stock.....................................................................20
7.6 SEC Filings....................................................................................20
7.7 Litigation.....................................................................................20
7.8 Brokers........................................................................................21
7.9 No Prior Activities............................................................................21
7.10 Disclosure.....................................................................................21
7.11 Compliance With Laws...........................................................................21
7.12 Consents.......................................................................................22
7.13 Non-contravention..............................................................................22
7.14 Taxes..........................................................................................22
7.15 Knightsbridge's Due Diligence .................................................................22
8. Covenants...............................................................................................22
8.1 Transfer and Retention of Records..............................................................22
8.2 Employee Matters; Use of Premises by Knightsbridge.............................................22
8.3 Tax Matters....................................................................................23
8.4 Use of Xxxxxxxx Name in Competing Business.....................................................23
8.5 Bulk Sales.....................................................................................23
8.6 Repayment of Institutional Indebtedness........................................................23
8.7 Public Statements..............................................................................23
9. Conditions to the Obligations to Close..................................................................24
9.1 Representations and Warranties.................................................................24
9.2 Performance of Obligations.....................................................................24
9.3 No Material Adverse Change.....................................................................24
9.4 Closing Deliveries.............................................................................24
9.5 Financing......................................................................................24
10. Indemnification.........................................................................................24
10.1 Indemnification by Xxxxxxxx....................................................................24
10.2 Indemnification by Knightsbridge...............................................................25
10.3 Right to Indemnification Not Affected by Knowledge or Waiver...................................26
-ii-
10.4 Indemnification Amount.........................................................................26
10.5 Time Limitations...............................................................................26
11. Miscellaneous...........................................................................................26
11.1 Attorneys Fees and Costs and Transaction Taxes.................................................26
11.2 Expenses.......................................................................................27
11.3 Amendment......................................................................................27
11.4 Entire Agreement...............................................................................27
11.5 Waiver.........................................................................................27
11.6 Notices........................................................................................27
11.7 Governing Law; Jurisdiction....................................................................28
11.8 Severability...................................................................................29
11.9 Binding Effect; Assignment.....................................................................29
11.10 Headings.......................................................................................29
11.11 Third Parties..................................................................................29
11.12 Counterparts...................................................................................29
11.13 Confidentiality................................................................................30
-iii-
Index of Schedules
[To be supplied]
CAPITAL STOCK CONTRIBUTION AGREEMENT
CAPITAL STOCK CONTRIBUTION AGREEMENT (this "Agreement"), dated
as of April 21, 2004, by and among XXXXXXXX RANCH, LLC, a California limited
liability company ("Xxxxxxxx"), XXXXXXXX KNIGHTSBRIDGE, LLC, a California
limited liability company ("Newco"), KNIGHTSBRIDGE FINE WINES, INC., a Nevada
corporation ("Knightsbridge"), and Xx. Xxxxx Xxxxxxxx ("Equityholder").
RECITALS
WHEREAS, Xxxxxxxx has previously contributed (the "Xxxxxxxx
Contribution") to Newco all of the tangible and intangible assets, properties
and rights of Xxxxxxxx used or held for use in connection with the ownership and
operation of a vineyard and winery by which the cultivation of grape varieties,
manufacture and production of wine, and the distribution of wine products for
retail consumption occurs (the "Business"), and Newco has assumed certain
liabilities of Xxxxxxxx.
WHEREAS, in consideration of the Xxxxxxxx Contribution, Newco
issued a 100% membership interest to Xxxxxxxx pursuant to the terms, conditions
and provisions contained in that certain original Limited Liability Company
Agreement of Newco (the "Original LLC Agreement");
WHEREAS, at the Closing (as defined below), Knightsbridge
desires to contribute (the "Knightsbridge Contribution") to Newco shares of its
Common Stock, par value $.001 per share (the "Common Stock");
WHEREAS, at the Closing (as defined below), in consideration
of the Knightsbridge Contribution, Newco will transfer to Knightsbridge a 50%
membership interest pursuant to the terms, conditions and provisions contained
in this Agreement and that certain Amended and Restated Limited Liability
Company Agreement dated as of the Closing Date (the "LLC Agreement");
WHEREAS, at the Closing, Knightsbridge shall also fund the
balance of the loan in the original amount of $2,400,000
to Newco;
WHEREAS, following the Knightsbridge Contribution and transfer
by Newco, Knightsbridge and Xxxxxxxx shall each own a 50% membership interest in
Newco pursuant to the terms, conditions and provisions contained in the LLC
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Certain Definitions. The terms defined in Appendix I attached hereto,
whenever used in this Agreement (including, without limitation, the exhibits and
schedules attached hereto), shall have the meanings given to them in Appendix I.
2. Contribution of Xxxxxxxx Assets; Assumption of Certain Liabilities;
Contribution of Knightsbridge Common Stock.
2.1 Contribution of Xxxxxxxx Assets. Subject to the terms and
provisions contained herein, and in consideration of the issuance of the 100%
membership interest in Newco to Xxxxxxxx, Xxxxxxxx has sold, assigned, conveyed,
transferred and delivered, as a capital contribution to Newco, all of its right,
title and interest in and to, free and clear of all Liens (except for Permitted
Liens), all of the assets, rights, properties and contracts related to, or
utilized in connection with, the Business (collectively, the "Assets") other
than those specific Excluded Assets described in Section 2.2 hereof, wherever
located and however situated. The Assets include, without limitation, the
following:
(i) full title and ownership to the sixty-nine (69) acre parcel
of land on which the Business is conducted (the "Parcel"), a
description of which is set forth on Schedule 2.1(i);
(ii) the winery located on the Parcel, including, without
limitation, full title and ownership to the building located on the
Parcel consisting of approximately fifty-seven thousand (57,000)
square feet where wine is manufactured, produced and stored (the
"Building");
(iii) all of the Inventory, including, without limitation, cased
wines and in bulk wines, and goods in-transit; all of which Inventory
is set forth on Schedule 6.14 attached hereto;
(iv) all of the Accounts Receivable, notes and other amounts
receivable and the proceeds of any of the foregoing (including,
without limitation, all rebates or vendor reimbursements due from any
supplier or vendor or buying association with respect to the period
prior to the Closing); all of which Accounts Receivable is set forth
on Schedule 6.15 attached hereto;
(v) all of the Intellectual Property Rights (and all goodwill
associated therewith, if any) related to or used in the Business
including, without limitation, the Internet domain name
xxx.xxxxxxxxxxxxxxxxxxx.xxx, the label names "Xxxxxxxx Ranch",
"Xxxxxxxx Canyon", and "Soscol Ridge" and any and all other labels,
approvals, trademarks, trademark applications, service marks, service
xxxx applications and all goodwill associated therewith set forth on
Schedule 6.11 attached hereto, and any derivatives or combinations
thereof;
(vi) all right, title and interest of Xxxxxxxx in and to the
Intangibles;
(vii) all of the books and records relating to the Business, the
Assets and the Assumed Liabilities (excluding the equity ownership
records, tax returns, general ledger and minute books of Xxxxxxxx)
including, without limitation: quality control records; records
relating to the Authorizations; records relating to the adoption and
use of any of the Intellectual Property Rights; specifications; sales;
purchasing; rebates; customers; vendors; suppliers; product
registrations;
-2-
mailing lists; advertising materials; catalogs (digital and print);
market research data; promotional and marketing materials (digital and
print); print, radio and television commercials; label and shipping
carton dies; designs; films; artwork; photography; mechanical art;
color separations; prints, plates and graphic material; and all files
and correspondence related to any of the foregoing;
(viii) all transferable governmental approvals, authorizations,
consents, licenses, orders, franchises, alcoholic beverage permits and
licenses and other permits of any Governmental Entity owned, held, or
utilized by Xxxxxxxx in connection with the Business, including the
Authorizations;
(ix) all raw materials, work in process, wine casks and barrels,
supplies, spare parts, tooling and shipping and packaging materials;
(x) the exclusive right of Xxxxxxxx to represent itself as
carrying on the Business in continuation thereof, including, without
limitation, all telephone, facsimile, and customer service or 800
phone numbers of Xxxxxxxx;
(xi) all manufacturer warranties provided to Xxxxxxxx with
respect to any items which are part of the Assets;
(xii) the Fixed Assets owned or leased by Xxxxxxxx for use in the
Business as set forth on Schedule 6.10 attached hereto;
(xiii) all Material Agreements to which Xxxxxxxx is a party or by
which Xxxxxxxx is bound as set forth on Schedule 6.12 attached hereto;
(xiv) all cash, cash equivalents, and marketable securities
including, without limitation, bank deposits, investments in "money
market" funds, commercial paper funds, certificates of deposit, and
Treasury bills, together with any accrued interest thereon;
(xv) all prepaid items (or portions thereof) relating exclusively
to the Business;
(xvi) all deposits paid to Xxxxxxxx by any customers in respect
of any future product orders;
(xvii) all computer software used in connection with the
Business;
(xviii) any contracts of insurance with respect to the Business,
and any reimbursement for, or other benefit associated with, prepaid
insurance, including without limitation, any insurance proceeds with
respect to events occurring prior to the date hereof;
(xix) all goodwill and all other rights, properties, and assets
of any kind or character whatsoever directly or indirectly relating to
the conduct of the Business, whether tangible or intangible, owned,
licensed, or held by Xxxxxxxx,
-3-
including, without limitation, the full benefit of all third party
representations, warranties, guarantees, indemnities, undertakings,
certificates, covenants, agreements and the like and all security
received by Xxxxxxxx for the purchase or other acquisition of any part
of the Assets, except to the extent such rights, properties, or assets
comprise a part of an Excluded Asset or are expressly excluded by the
terms of this Agreement.
2.2 Excluded Assets. Notwithstanding any other provision contained in
this Agreement, it is expressly agreed that Newco did not acquire and does not
and will not own any of those personal family items or memorabilia and
decorations of the Equityholder and his family members used in the Business
(collectively, the "Excluded Assets").
2.3 Assumption of Certain Liabilities. Subject to the terms and
conditions of this Agreement, as of the Closing Date, Newco hereby agrees to
assume and pay, perform and discharge, when due, the following liabilities and
obligations of Xxxxxxxx, which shall not include any Excluded Liabilities
(collectively, the "Assumed Liabilities"):
(i) all liabilities under the Material Agreements and the
Authorizations arising from and after the date hereof;
(ii) all liabilities of Xxxxxxxx relating to the Business due to
unaffiliated third parties for the purchase and sale of goods made in
the ordinary course of business consistent with the past practices of
Xxxxxxxx;
(iii) all accrued expenses as set forth on Schedule 2.3 (iii)
attached hereto;
(iv) the liabilities of Xxxxxxxx payable to the Equityholder and
to Xxxxxxxx Cattle Company, a California general partnership, as set
forth on Schedule 2.3(iv) attached hereto; and
(v) the liabilities of Xxxxxxxx payable to Knightsbridge as set
forth on Schedule 2.3(v) attached hereto.
2.4 Excluded Liabilities. It is expressly agreed that Xxxxxxxx shall
retain and Newco shall not assume or have any liability, responsibility or
obligation, directly or indirectly, for any liabilities of Xxxxxxxx or the
Equityholder or which in any way relate to or arise from the Business, or Assets
or otherwise (whether known or unknown, fixed or contingent, material or
immaterial, mature or unmatured) other than the Assumed Liabilities, including,
without limitation (i) subject to 11.1 below, any professional, attorney or
accounting fees; and (ii) federal and state income taxes of Xxxxxxxx.
2.5 Contribution of Knightsbridge Common Stock. At the Closing,
subject to the capital adjustments set forth in Section 2.6, and in
consideration of the transfer by Xxxxxxxx of 50% of its membership interest in
Newco to Knightsbridge, Knightsbridge shall issue and deliver to Newco, as a
capital contribution, shares of Common Stock. The number of shares of Common
Stock initially issued to Newco (the "Initial Shares") shall be equal to the
quotient of
-4-
the amount of ten million dollars ($10,000,000) divided by $2.35 per share. The
Common Stock shall be held by Newco for a period of not less than two (2) years
prior to any distribution under the terms and conditions of the LLC Agreement.
The Initial Shares issued to Newco pursuant to this Agreement shall, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable.
2.6 Transfer of Assets; Attorney-in-fact.
(a) Xxxxxxxx has put Newco into full physical possession and
enjoyment of the Assets by delivery of the Assets to Newco at Kirkland's place
of business in Napa, California. With respect to the Assets that could not be
physically delivered to Newco because they were in the possession of third
parties or otherwise, Xxxxxxxx has provided irrevocable instructions to the
party in possession thereof, with copies to Newco, that all right, title, and
interest therein have been vested in Newco and that the same are to be held for
Newco's exclusive use and benefit.
(b) To the extent that the assignment by Xxxxxxxx to Newco of any
Material Agreement or other contract, agreement, instrument, license,
understanding, or arrangement to be assigned to Newco hereunder shall require
the consent of a party other than Xxxxxxxx, which has not been obtained prior to
the Closing and if Xxxxxxxx and Knightsbridge shall nevertheless elect to
consummate the transactions contemplated by this Agreement, this Agreement shall
not constitute an agreement to assign the same if an attempted assignment
without such consent would constitute a breach thereof unless Knightsbridge
before, at, or after the Closing elects in a writing delivered to Xxxxxxxx,
specifically identifying such absent consent, to waive such consent.
(c) For a period of twelve months after the Closing Date,
Xxxxxxxx hereby constitutes and appoints Newco, and its successors and permitted
assigns, as the true and lawful attorneys-in-fact of Xxxxxxxx with full power of
substitution, in the name of Newco or the name of Xxxxxxxx, on behalf of and for
the benefit of Newco, to collect all accounts receivable included within the
Assets and other items being transferred, conveyed and assigned to Newco as
provided herein, to endorse, without recourse, checks, notes and other
instruments included with the Assets in the name of Xxxxxxxx for the purpose of
collection, to institute and prosecute, in the name of Xxxxxxxx or otherwise,
all proceedings which Newco may deem proper in order to collect, assert or
enforce any claim, right or title of any kind in or to the Assets being
transferred, conveyed and assigned as provided herein and to defend and
compromise or settle any and all actions, suits or proceedings in respect of any
of such Assets and Assumed Liabilities and to do all such acts and things in
relation thereto as Newco may deem advisable in its sole discretion. Xxxxxxxx
acknowledges and agrees that the foregoing powers are coupled with an interest
and shall be irrevocable. Xxxxxxxx further agrees that Newco shall retain for
its own account any amounts collected pursuant to the foregoing powers, and
Xxxxxxxx, the Equityholder, and their Affiliates shall pay to Newco, if and when
received, any amounts which shall be received by Xxxxxxxx, the Equityholder, or
their Affiliates after the Closing in respect of the Assets to be transferred,
conveyed and assigned to Newco as provided herein.
-5-
3. The Closing. The closing of this Agreement and the other transactions
contemplated hereby (the "Closing") shall take place at 10:00 a.m., local time,
within two (2) business days following the satisfaction of all closing
conditions contained herein, but in no event later than April 30, 2004, unless
otherwise agreed to by the parties in writing (the "Closing Date"). The Closing
shall take place at the offices of Newco, or at such other location as the
parties shall agree.
4. Closing Deliveries.
4.1 Deliveries of Xxxxxxxx and the Equityholder. At the Closing and
subject to the terms, provisions and conditions contained herein, Xxxxxxxx and
the Equityholder shall take all actions and do all things necessary to sell,
transfer, assign, convey and deliver the Assets to Newco, free and clear of any
and all Liens (except for Permitted Liens) and to consummate the transactions
contemplated hereby, including, without limitation, delivery or causing to be
delivered to Newco and/or Knightsbridge, as applicable, the following:
(a) Xxxx of Sale, Assignment and Assumption Agreement (the "Xxxx
of Sale"), with full covenants of warranty as to the good and indefeasible title
of Xxxxxxxx in the Assets, necessary to sell, transfer and assign all of
Kirkland's right, title and interest in and to the Assets, free and clear of any
and all Liens (except for Permitted Liens);
(b) such instruments of sale, assignment, transfer and conveyance
as Newco may request in order to record the sale, assignment, transfer and
conveyance of any of the Intellectual Property Rights with the United States
Patent and Trademark Office, the United States Copyright Office and any other
Governmental Entity, domestic or foreign;
(c) a copy of the Grant Deed (the "Grant Deed"), with full
covenants and warranties as to the good and indefeasible title of Newco in the
Parcel and the Building located thereon;
(d) a certificate of good standing of Xxxxxxxx, dated as of a
recent date, from the Secretary of State of the State of California;
(e) a certificate dated as of the Closing Date, executed by the
Manager of Xxxxxxxx, certifying that attached thereto are (i) true, correct and
complete copies of the Certificate of Formation and the Limited Liability
Company Agreement of Xxxxxxxx; (ii) true, correct and complete copy of the
resolutions adopted by the Board of Managers and the members of Xxxxxxxx
authorizing the execution, delivery and performance of this Agreement and the
Xxxxxxxx Documents and the consummation of the transactions contemplated hereby
and thereby; and (iii) the incumbency of the officers of Xxxxxxxx executing this
Agreement and the Xxxxxxxx Documents;
(f) all Authorizations necessary or required to be obtained in
order to consummate the transactions contemplated hereby;
-6-
(g) evidence of filing of such financing statements and
termination and release agreements, including without limitation, termination of
the loan and mortgage to Prudential, as are required in order to sell, transfer,
assign, convey and deliver to Newco all rights, title and interest of Xxxxxxxx
in and to the Assets, free and clear of all Liens (except for Permitted Liens);
(h) the LLC Agreement and exhibits attached, all duly executed by
Xxxxxxxx;
(i) a policy of title insurance, dated as of the date of the
Closing and issued by Newco's title insurance company, insuring Newco with
respect to all Owned Real Property (in amounts acceptable to Newco), subject
only to the Permitted Liens, together with (i) surveys acceptable to Newco of
all Owned Real Property, which surveys shall be certified to Newco, Newco's
lender and Newco's title insurance company, showing the locations of all
buildings, all other improvements and the Permitted Liens, (ii) insurance that
the Permitted Liens have not been violated and that a violation shall not cause
a forfeiture or right of reentry and (iii) such other title insurance as Newco
shall reasonably require;
(j) satisfactory evidence of payment of all applicable real
property transfer, documentary stamp and similar taxes (and all forms and
returns required in connection therewith) in connection with transactions
contemplated hereby;
(k) an affidavit pursuant to the Foreign Investment in Real
Property Tax Act;
(l) such other certificates, documents, receipts and instruments
as Newco or its legal counsel may reasonably request.
4.2 Deliveries of Newco. At the Closing and subject to the terms,
provisions and conditions contained herein, Newco shall deliver to Xxxxxxxx
and/or Knightsbridge, as applicable, the following:
(a) a certificate of good standing of Newco, dated as of a recent
date, from the Secretary of State of the State of California;
(b) a certificate dated as of the Closing Date, executed by the
Secretary of Newco certifying that attached thereto is: (i) a true, correct and
complete copy of the Certificate of Formation of Newco; (ii) a true, correct and
complete copy of the resolutions adopted by the Board of Managers of Newco
authorizing the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby; and (iii) the incumbency
of the officers of Newco executing this Agreement;
(c) the LLC Agreement and exhibits attached, all duly executed by
Newco;
-7-
(d) such other certificates, documents and instruments as
Xxxxxxxx or its legal counsel may reasonably request.
4.3 Deliveries of Knightsbridge. At the Closing, and subject to the
terms, provisions and conditions contained herein, Knightsbridge shall deliver
to Newco or the Equityholder, as applicable, the following:
(a) a certificate of good standing of Knightsbridge, dated as of
a recent date, from the Secretary of State of the State of Nevada;
(b) a certificate dated as of the Closing Date, executed by the
Secretary of Knightsbridge certifying that attached thereto is: (i) a true,
correct and complete copy of the Certificate of Incorporation of Knightsbridge;
(ii) a true, correct and complete copy of the resolutions adopted by the Board
of Directors of Knightsbridge authorizing the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby; and (iii) the incumbency of the officers of Knightsbridge
executing this Agreement;
(c) a stock certificate issued to Newco representing the Initial
Shares;
(d) the LLC Agreement and exhibits attached, all duly executed by
Knightsbridge;
(e) such other certificates, documents and instruments as
Xxxxxxxx or its legal counsel may reasonably request.
(f) the balance of the loan proceeds in the amount of $2,400,000,
less the amount of documented loan advances previously made to Xxxxxxxx.
5. Further Assurances. Each of Xxxxxxxx, Knightsbridge, Newco and the
Equityholder covenants and agrees to execute, deliver, file and record, or cause
to be executed, delivered, filed and recorded, such further agreements,
instruments and other documents and take, or cause to be taken, such further
actions, as any party hereto may reasonably request as being necessary or
advisable to effect or evidence the transactions contemplated by this Agreement.
6. Representations and Warranties of Xxxxxxxx. Unless otherwise specified,
to its best knowledge and subject to the disclosures provided herein, Xxxxxxxx
hereby represents and warrants to each of Newco and Knightsbridge as follows:
6.1 Organization; Good Standing. Xxxxxxxx is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of California and has the power and authority to own and lease its
assets and properties and to conduct the Business as it is now being conducted.
Xxxxxxxx is qualified to do business as a foreign company in all jurisdictions
where it is required to be qualified, except those jurisdictions whereby the
failure to qualify would not have a Material Adverse Effect.
-8-
6.2 Authority; Enforceability.
(a) Xxxxxxxx has the corporate power and authority to execute,
deliver and perform this Agreement and all other agreements, certificates and
documents executed or delivered, or to be executed or delivered, by Xxxxxxxx in
connection herewith (collectively, the "Xxxxxxxx Documents"), and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Xxxxxxxx Documents by Xxxxxxxx has been
duly authorized by all necessary company action on the part of Xxxxxxxx. This
Agreement and each of the Xxxxxxxx Documents have been duly executed and
delivered by Xxxxxxxx and this Agreement and each of the Xxxxxxxx Documents
constitute (or, in the case of certain of the Xxxxxxxx Documents, when executed
and delivered will constitute) the legal, valid and binding obligations of
Xxxxxxxx, enforceable against Xxxxxxxx in accordance with their respective
terms.
(b) The Equityholder has the legal capacity to execute, deliver
and perform this Agreement. This Agreement and the Xxxxxxxx Employment Agreement
have been duly executed and delivered by the Equityholder and constitutes the
legal, valid and binding obligations of the Equityholder enforceable against the
Equityholder in accordance with its respective terms.
6.3 Investments. Xxxxxxxx has no subsidiaries, joint ventures or other
equity interests or investments.
6.4 No Conflict. Except as set forth on Schedule 6.4, the execution,
delivery and performance of this Agreement and the Xxxxxxxx Documents by
Xxxxxxxx and the consummation of the transactions contemplated hereby and
thereby do not and will not (i) violate or conflict with any provision of the
Articles of Organization or the Limited Liability Company Agreement of Xxxxxxxx;
(ii) violate, conflict with, result in a material breach of or constitute (with
or without notice or lapse of time or both) a default under, give rise to a
right of termination, amendment or cancellation of, accelerate the performance
required by, or result in any payment under, any Material Agreement, instrument
or other writing of any nature whatsoever to or by which Xxxxxxxx is a party or
is bound, or by which any of the Assets or the Business is subject; (iii)
violate, conflict with or result in a material breach of any Legal Requirement
applicable to Xxxxxxxx; (iv) result in the creation of any Lien on any of the
Assets; or (v) render void or create a right of amendment, termination or
rescission under any Material Agreement or other arrangement with a customer of
or vendor to the Business, except to the extent such right would not have a
Material Adverse Effect.
6.5 Litigation; Compliance with Law.
(a) Litigation. There are no suits or actions, or, pending or
threatened, against or relating to Xxxxxxxx. There are no judgments, orders,
stipulations, injunctions, decrees or awards in effect which relate to Xxxxxxxx
or the operation of Xxxxxxxx, which if decided against Xxxxxxxx would materially
affect the ability of Xxxxxxxx to consummate the transactions contemplated
hereby, except for any suits or actions that would not, have a Material Adverse
Effect.
-9-
(b) The operation, ownership and use of the Assets by Xxxxxxxx
are in material compliance with, and conform to, all law, statute, ordinance,
code, rule, regulation, policy, guidance document, provision of law, or other
requirement, order, judgment, award and decree (each, a "Legal Requirement")
applicable to Xxxxxxxx, the Business or the Assets, including, without
limitation, the rules and regulations concerning operation of a vineyard,
cultivation and manufacture of wine, utilization of migrant workers, use of
pesticides and other agricultural chemicals, or as promulgated by the U.S. Food
and Drug Administration, U.S. Department of Labor, U.S. Immigration and
Naturalization Service, U.S. Environmental Protection Agency, Federal
Occupational Safety and Health Act of 1970, and any state laws analogous
thereto. No notice has been served upon either Xxxxxxxx or the Equityholder
(other than a notice subsequently withdrawn or with regard to a violation
subsequently cured) from any Governmental Authority or other person claiming,
nor does there currently exist, any violation of any applicable Legal
Requirement in connection with any of such activities.
6.6 Financial Statements. Schedule 6.6 attached hereto sets forth a
true and correct copy of Kirkland's Unaudited Balance Sheet, Statement of Profit
and Loss and Cash Flows as of and for each of the fiscal years ending December
31, 2003, December 31, 2002 and December 31, 2001, including the notes thereto
(collectively, the "Financial Statements"). The Financial Statements were
prepared from and are in agreement with the books and records of Xxxxxxxx, and
fairly present the financial position of Xxxxxxxx for the periods set forth in
such Financial Statements.
6.7 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 6.7 attached hereto or as set forth or adequately reserved against on
the balance sheet dated as of December 31, 2003 (or disclosed in the notes
thereto) (the "December 2003 Balance Sheet"), Xxxxxxxx has no liabilities or
obligations. Except as set forth on Schedule 6.7 attached hereto, all
liabilities and obligations of Xxxxxxxx incurred since January 1, 2004 have been
incurred in the ordinary course of business in a manner consistent with past
practice, except for liabilities and obligations of Xxxxxxxx which do not and
will not have a Material Adverse Effect. For purposes of this Section 6.7, all
references to Kirkland's liabilities shall include, without limitation, all
liabilities, whether direct or indirect, absolute, contingent or matured, known
or unknown, asserted or unasserted, and liquidated or unliquidated.
6.8 Taxes. (a) Except as set forth on Schedule 6.8(a) attached hereto:
Xxxxxxxx has duly and timely filed (in accordance with any
extensions duly granted by the appropriate Governmental Entity) with
the appropriate Governmental Entity all Tax Returns required to be
filed by Xxxxxxxx for Taxes, and paid the amount of Tax showing as
payable on such Tax Returns, for all periods ending on or prior to the
date of the Closing.
There is no pending, proposed or, to the actual knowledge of
Xxxxxxxx, threatened any audit, examination, investigation, dispute,
deficiency assessment, refund litigation, claim, or other
administrative or judicial proceeding relating to any Tax for which
Xxxxxxxx is or may be liable and which could result in a Lien on any
of the Assets.
-10-
6.9 Title to Assets. Except as set forth on Schedule 6.9 attached
hereto, Xxxxxxxx has good, valid and indefeasible title to or, in the case of
licenses, valid and subsisting licenses in the Assets, in each case free and
clear of any and all Liens (except for Permitted Liens). The Assets that are
owned, together with those used under license, are free from material defects,
are in good operating condition and a good state of maintenance and repair,
subject only to normal wear and tear in the ordinary course of business, and are
suitable for the continued conduct of the Business in a manner consistent with
past practices. The Assets include all rights and property necessary for the
conduct of the Business by Newco in the manner it is presently conducted by
Xxxxxxxx. At the Closing, Newco will obtain from Xxxxxxxx good and indefeasible
title to all of the Assets, free and clear of all Liens (except for Permitted
Liens).
6.10 Fixed Assets. Schedule 6.10 attached hereto contains a true,
complete and correct list, together with brief description of, the machinery,
equipment, furniture and fixtures (the "Fixed Assets") and other items of
personal property owned by Xxxxxxxx and all interests therein which are part of
the Assets, including, without limitation, all wine casks and barrels. Except as
set forth in Schedule 6.10, Xxxxxxxx has good, valid and indefeasible title to
the Fixed Assets and the personal property owned by Xxxxxxxx, in each case free
and clear of any and all Liens (except for Permitted Liens). All of the Fixed
Assets and, if applicable, the personal property are in good operating
condition, state of maintenance and repair and working order, subject to normal
wear and tear.
6.11 Intellectual Property Matters. Set forth on Schedule 6.11
attached hereto is a list of the Intellectual Property Rights, specifying as to
each, as applicable: (i) the nature of the Intellectual Property Right; (ii) all
licenses, sublicenses and other agreements (true, correct and complete copies of
any such licenses, sublicenses or other agreements are attached to Schedule
6.11) relating in any manner to any Intellectual Property Right; and (iii) the
filing and registration information with respect to each Intellectual Property
Right that is registered with the United States Patent and Trademark Office, the
United States Copyright Office, any state or foreign jurisdiction or other
Governmental Authority. There are no Intangibles that are owned by Xxxxxxxx or
the Equityholder or any of their respective Affiliates or family members which
are used in or in connection with the Business that are not set forth on
Schedule 6.11 attached hereto. Except as set forth on Schedule 6.11 attached
hereto, there are no royalties, fees or other amounts payable by or to Xxxxxxxx
with respect to any of the Intellectual Property Rights. Xxxxxxxx nor the
Equityholder has received a notice of a claim of infringement or knows of any
reasonable basis for a claim that such an infringement or violation exists.
Xxxxxxxx has ownership of (free and clear of any and all Liens) or rights by
license, lease or other agreement to use (free and clear of any and all Liens
and without the payment of any fees or the incurrence of any royalties or other
amounts) the Intellectual Property Rights that are necessary to permit the use
of the Assets and to conduct the Business. None of the Equityholder or any of
his Affiliates or family members or any present or former employee of Xxxxxxxx
owns or has a propriety or financial interest, directly or indirectly, in any of
the Intellectual Property Rights. Neither Xxxxxxxx nor the Equityholder is a
party in any pending action, suit or proceeding that involves a claim of
infringement or any other claim related to any Intellectual Property Right or,
to the actual knowledge of Xxxxxxxx, there is no threatened action, suit or
proceeding that involves a claim of infringement or any other claim relating to
any Intellectual Property Right. None of the Intellectual Property Rights is
subject to any outstanding Legal Requirement in order to maintain any federal
registration of such Intellectual Property Rights. No Intellectual Property
Right is
-11-
subject to any outstanding order, judgment, decree, stipulation or agreement
restricting its use by Xxxxxxxx or restricting the licensing thereof to any
Person by Xxxxxxxx or which could affect the transfer of the Intellectual
Property Rights to Newco free and clear of any and all Liens. Upon the execution
and recording, where applicable, of such instruments of assignment or conveyance
as may be requested by Newco, all Intellectual Property Rights will be fully
vested in Newco, free and clear of any and all Liens.
6.12 Material Agreements.
(a) Schedule 6.12 sets forth a list and a brief description of
all material written and oral contracts or agreements relating to Xxxxxxxx,
including without limitation any: (i) contract or series of contracts resulting
in a commitment or potential commitment for expenditure or other obligation or
potential obligation, or which provides for the receipt or potential receipt,
involving in excess of Five Thousand Dollars ($5,000.00) in any instance, or
series of related contracts that in the aggregate give rise to rights or
obligations exceeding such amount; (ii) agreement which restricts Xxxxxxxx from
engaging in any line of business or from competing with any other Person; (iii)
warranties made with respect to products manufactured, packaged, distributed or
sold by Xxxxxxxx; (iv) partnership, shareholder, joint venture, or similar
agreement or arrangements to which Xxxxxxxx is a party; (v) contracts with
suppliers and distributors; (vi) any agreements, contracts, license or
sublicense agreements, assignments, or understandings with respect to
Intellectual Property owned or used by Xxxxxxxx; or (vii) any other contract,
agreement, instrument, arrangement or commitment that is material to the
condition (financial or otherwise), results of operation, assets, properties,
liabilities, Business or prospects of Xxxxxxxx or the Assets (collectively, the
"Material Agreements"). Xxxxxxxx has previously furnished to Newco true,
complete and correct copies of all Material Agreements required to be listed on
Schedule 6.12.
(b) Except as set forth on Schedule 6.12, none of the Material
Agreements was entered into outside the ordinary course of business of Xxxxxxxx.
(c) The Material Agreements are each in full force and effect and
are the valid and legally binding obligations of Xxxxxxxx and the other parties
thereto, enforceable in accordance with their respective terms, subject only to
bankruptcy, insolvency or similar laws affecting the rights of creditors
generally and to general equitable principles and foreign laws. Neither Xxxxxxxx
nor the Equityholder has received notice of default by Xxxxxxxx under any of the
Material Agreements or any other contract or agreement relating to borrowed
money to which Xxxxxxxx is a party or by or to which it or its assets are bound
or subject, and, to the actual knowledge of Xxxxxxxx, no event has occurred
which, with the passage of time or the giving of notice or both, would
constitute a default by Xxxxxxxx thereunder. Neither Xxxxxxxx nor the
Equityholder has received notice of the pending or threatened cancellation,
revocation or termination of any of the Material Agreements or any other
agreements relating to borrowed money to which Xxxxxxxx is a party or by or to
which it or its assets are bound or subject, nor are any of them aware of any
facts or circumstances which could lead to any such cancellation, revocation or
termination. Neither Xxxxxxxx nor the Equityholder has received notice, or has
any knowledge, that the consummation of the transactions contemplated under this
Agreement would result in any party to a Material Agreement canceling, revoking,
or terminating such Material
-12-
Agreement or ceasing to transact business, or materially altering the manner in
which it transacts business, pursuant to such Material Agreement.
6.13 Customers and Suppliers. (a) Schedule 6.13(a) attached hereto
contains a list of each of the ten (10) largest customers and suppliers
(measured by dollar volume of purchases and sales, as applicable) of Xxxxxxxx
for each of the fiscal years ended 2001, 2002 and 2003. Except as set forth on
Schedule 6.13(a) attached hereto, neither Xxxxxxxx nor the Equityholder is
engaged in any dispute with any customer, supplier or manufacturer with respect
to the Assets or the Business, nor does Xxxxxxxx or the Equityholder have
knowledge of any matter or fact as of the Closing Date which could reasonably be
expected to result in a dispute with any customer, supplier or manufacturer with
respect to the Assets or the Business.
(b) Except as set forth on Schedule 6.13(b), to the actual
knowledge of Xxxxxxxx and Equityholder, no customer, supplier or manufacturer is
terminating or not renewing its contractual arrangements with Xxxxxxxx prior to
the Closing Date or because of the purchase of a fifty percent (50%) interest in
Newco by Knightsbridge.
6.14 Inventory. Schedule 6.14 contains a true, complete and correct
list of all of Kirkland's inventories of commodities and wine products, whether
raw materials, work-in-process or finished goods, relating to the operation of
the Business, including, without limitation, all wine stocks, as well as all of
Kirkland's merchandising, promotional and packaging supplies and materials which
are held at, or are in transit from or to, any of the locations at which any
aspect of the operations of Xxxxxxxx is conducted, or which are used by or held
for the benefit of Xxxxxxxx, (the "Inventory") as of the Closing Date. All such
Inventory arose from bona fide transactions in the ordinary course of business
consistent with past practice. Xxxxxxxx is not under any obligation to return
any of the Inventory in its possession to any other Person.
6.15 Accounts Receivable. The Accounts Receivable set forth on
Schedule 6.15 are: (i) good and collectible in the ordinary course of business;
(ii) the result of bona fide, arm's-length completed transactions in the
ordinary course of business consistent with past practices; and (iii) not
subject to any deductions, credits, counterclaims, disputes or offsets.
6.16 Authorizations. To the actual knowledge of Xxxxxxxx, Xxxxxxxx
owns, holds, possesses or lawfully uses all Authorizations which are in any
manner necessary for the ownership and use of the Assets. Xxxxxxxx is not in
default, nor has Xxxxxxxx received any notice of any claim of default with
respect to any Authorization and, to the knowledge of Xxxxxxxx, no event has
occurred, which with the giving of notice or passage of time or both, would
cause or give rise to any default with respect to any Authorization. To the
actual knowledge of Xxxxxxxx, all such Authorizations are renewable by their
terms or in the ordinary course of business without the need to comply with any
special qualification procedures or to pay any amounts other than routine filing
fees, and will not be adversely affected or terminated by consummation of the
transactions contemplated hereby. None of the Authorizations have been amended,
assigned, pledged or otherwise transferred. The Authorizations include, but are
not limited to, as applicable, licenses for the production and distribution of
wine products from the FDA, permits for the use of pesticides and other
agricultural chemicals from the EPA, and visas applicable to the use of migrant
workers and immigrants.
-13-
6.17 Environmental Matters. Except as set forth on Schedule 6.17
attached hereto:
(a) Xxxxxxxx is in material compliance with all Environmental
Laws and Environmental Permits, including, without limitation, the use of
pesticides and other chemicals in the cultivation of the vineyard and production
of wine, except where the failure to comply with such Environmental Laws and
Environmental Permits would not have a Material Adverse Effect.
(b) Neither Xxxxxxxx nor the Equityholder has received any
written notice with respect to Xxxxxxxx or any Site related to the Business from
any Governmental Entity or other Person alleging that Xxxxxxxx is not in
compliance with any Environmental Law or Environmental Permit, and none of them
has received any written notice or request for information with respect to, and
has not been designated a responsible or potentially responsible party for,
remedial action, response costs or investigation.
(c) There has been no Release of a Hazardous Substance at, from,
in, to, on or under any Site and no Hazardous Substance is present in, on, about
or migrating to or from any Site that could reasonably be expected to give rise
to any Environmental Claim against Xxxxxxxx.
(d) There are no pending or outstanding corrective actions
requested, required or being conducted by any Governmental Entity or Regulatory
Authority with respect to Xxxxxxxx for the investigation, remediation or cleanup
of any Site, and there have been no such corrective actions.
(e) Xxxxxxxx has obtained and holds all Environmental Permits
necessary for the conduct of its operations and Business as presently conducted.
(f) There are no past, pending or, to the actual knowledge of
Xxxxxxxx, threatened Environmental Claims against Xxxxxxxx, and Xxxxxxxx has no
knowledge of any facts or circumstances which could reasonably be expected to
form the basis of any Environmental Claim against Xxxxxxxx.
6.18 Related Parties. Except as set forth on Schedule 6.18, neither
Xxxxxxxx, the Equityholder, nor any current or former (within the past three (3)
years) manager, officer, or member of Xxxxxxxx, or any of their family members
(individually a "Related Party" and collectively the "Related Parties"), or any
Affiliate of Xxxxxxxx or any Related Party: (a) owns, directly or indirectly,
any interest in any person which is a competitor of Xxxxxxxx, or of a supplier
or customer of Xxxxxxxx; (b) owns, directly or indirectly, in whole or in part,
any property, asset or right, real, personal or mixed, tangible or intangible
(including, but not limited to, any of the intangible property) which is
utilized in the operation of the Business; (c) has an interest in or is,
directly or indirectly, a party to any contract, agreement, lease or arrangement
pertaining or relating to Xxxxxxxx; or (d) to the best knowledge of Xxxxxxxx,
has any cause of action or other claim whatsoever against, or owes any amount
to, Xxxxxxxx.
-14-
6.19 Improper or Unlawful Payments. Neither Xxxxxxxx nor any of its
officers and agents, Affiliates or, to the actual knowledge of Xxxxxxxx, any
other Person associated with or acting on behalf of Xxxxxxxx, the Equityholder
or any of their respective Affiliates or family members, has made any illegal or
improper payment to, or provided any illegal or improper benefit or inducement
for, any governmental official, union official, supplier, customer, union or
other Person, in an attempt to influence any such Person to take or to refrain
from taking any action relating to the Business or any of the Assets or to
engage in any action by or on behalf of Xxxxxxxx or the Equityholder or any of
their respective Affiliates or family members in any way or paid any bribe,
payoff, influence payment, kickback or other unlawful payment.
6.20 No Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Xxxxxxxx and the
Equityholder directly with Newco and Knightsbridge and without the intervention
of any other Person acting on behalf of Xxxxxxxx or the Equityholder and in such
manner as not to give rise to any claim against Newco or Knightsbridge or any of
their respective Affiliates for any finder's fee, brokerage commission or like
payment.
6.21 Product Warranties; Returns. With respect to the Inventory: (a)
except as set forth on Schedule 6.21, Xxxxxxxx is not liable for any unexpired
product warranty with respect to any of the Inventory that it distributes or
that it has heretofore distributed, sold or manufactured; (b) neither Xxxxxxxx
nor the Equityholder has received any notice of any claim based upon any product
warranty with respect to the Inventory; and (c) neither Xxxxxxxx nor the
Equityholder knows or has any reasonable ground to know of any such claim
(actual or threatened) based upon any product warranty with respect to any such
product. Schedule 6.21 attached hereto sets forth all warranties, express or
implied, that Xxxxxxxx has made or is responsible for in connection with any
Inventory. Schedule 6.21 sets forth the percentage of product returns and
exchanges for the past three fiscal (3) years.
6.22 Conditions Affecting the Business. There is no fact, development
or threatened development with respect to the markets, products, services,
clients, customers, facilities, personnel, vendors, suppliers or operations of
Xxxxxxxx with respect to the Business or the Assets or the Assumed Liabilities
which, to the actual knowledge of Xxxxxxxx or the Equityholder, could have a
Material Adverse Effect.
6.23 Conduct of Business. Except as disclosed on Schedule 6.23 hereto,
since December 31, 2001, Xxxxxxxx has conducted its business in the ordinary and
usual course consistent with past practices and no Material Adverse Effect has
occurred.
6.24 Insurance. Schedule 6.24 sets forth a true and complete list of
all insurance policies providing insurance coverage of any nature to Xxxxxxxx or
pertaining to the Real Property. Xxxxxxxx has previously provided Newco with
true and complete copies of all of such insurance policies, as amended to the
date hereof. Such policies provide adequate and customary coverage for the
Business and are sufficient for compliance by Xxxxxxxx with all Legal
Requirements and all Material Agreements to which Xxxxxxxx is a party or by
which any of the Assets of Xxxxxxxx are bound. All of such policies are in full
force and effect and are valid and enforceable in accordance with their terms,
and Xxxxxxxx has complied with all terms and
-15-
conditions of such policies, including premium payments. Xxxxxxxx has not
received any written notice from its insurance carriers of an intention to
cancel or alter the coverage under any of its policies during the past twelve
months.
6.25 Products. To the actual knowledge of Xxxxxxxx, there exists no
set of facts (i) which could furnish a basis for the recall, withdrawal or
suspension of any Authorization, approval or consent of any Governmental Entity
with respect to any product manufactured, distributed or sold by Xxxxxxxx (a
"Product"), (ii) which could furnish a basis for the recall, withdrawal or
suspension by order of any Governmental Entity of any Product, or (iii) which
could have a Material Adverse Effect or which could otherwise cause Xxxxxxxx to
recall, withdraw or suspend any such Product from the market or to change the
marketing classification of any such Product.
6.26 Real Property.
(a) Schedule 6.26 sets forth a list (including, without
limitation, legal descriptions) of all real property owned by Xxxxxxxx (the
"Owned Real Property"). Xxxxxxxx owns the Owned Real Property in fee subject to
no Liens (including, without limitation, leases, occupancy agreements,
possessory rights, options and rights of first refusal) except for Permitted
Liens. Xxxxxxxx has not leased all or any part of any Owned Real Property.
(b) Xxxxxxxx is not a party to any lease or sublease under which
Xxxxxxxx is tenant or subtenant.
(c) Schedule 6.26(c) is a list of all service contracts,
equipment leases, maintenance contracts, management agreements and other
agreements, oral or written (the "Service Contracts") which are in force and
pertain to or affect any Owned Real Property. Copies of the Service Contracts
have been delivered by Xxxxxxxx to Newco. Xxxxxxxx is party to all the Service
Contracts and the same are in full force and effect and are enforceable in
accordance with their respective terms, except as such enforceability may be
subject to or limited by bankruptcy, insolvency, reorganization or other similar
laws, now or hereafter in effect, affecting the enforcement of creditors' rights
generally. Except as set forth on Schedule 6.26(c), the Service Contracts have
not been amended or extended. Xxxxxxxx has not assigned, pledged or otherwise
transferred any Service Contract and there is no default (and to Kirkland's best
knowledge, no event which with the passage of time or the giving of notice, or
both, would constitute a default) under any Service Contract by any party
thereto.
(d) All licenses, permits and permanent certificates of occupancy
(the "Approvals"), if any, needed in connection with the construction, use,
occupancy and maintenance of any Owned Real Property are set forth in Schedule
6.26(e). The Approvals have been duly issued and paid for and are in full force
and effect in accordance with the respective terms thereof. The Approvals have
not been amended. Xxxxxxxx has not assigned, pledged or otherwise transferred
any Approval. Xxxxxxxx has delivered to Newco copies of the Approvals.
(e) Copies of the current real estate tax bills for the Owned
Real Property have been delivered to Newco by Xxxxxxxx.
-16-
(f) Schedule 6.26(g) is a list of the written guarantees and
warranties in force which Xxxxxxxx has received from its contractors, suppliers
and materialmen with respect to any Owned Real Property. Xxxxxxxx has delivered
to Newco copies of such guarantees and warranties.
(g) There are no pending or, to Kirkland's actual knowledge,
contemplated zoning changes, "floor area ratio" changes, variances, special
zoning exceptions, conditions or agreements affecting or which might affect any
Owned Real Property.
(h) No assessments or special assessments have been levied or, to
Kirkland's best knowledge, are contemplated or pending against any Owned Real
Property, except that the Property is in the process of being reassessed due to
a transfer from the Xxxxxxxx Cattle Company to Xxxxxxxx and there may be a
reassessment in the transfer of the Property from Xxxxxxxx to Newco and when
Knightsbridge acquires a 50% interest in Newco.
(i) Neither Equityholder nor Xxxxxxxx owe any monies to any
contractor, subcontractor or materialmen for labor or materials performed,
rendered or supplied in connection with any Owned Real Property for which such
person could claim a lien.
(j) Xxxxxxxx is currently in default under its loan with
Prudential.
(k) The Owned Real Property, including, without limitation, all
building systems, structural components, and building equipment, are in good
condition and repair, and to Kirkland's actual knowledge there exist no defects
in the same.
(l) Public utilities currently serve all utility requirements of
all Owned Real Property. All such public utilities enter directly through
adjoining public streets and do not pass through adjoining private land. All
such public utilities are installed and operating and all installation and
connection charges have been paid for in full.
(m) To Kirkland's actual knowledge, the streets, roads, highways
and avenues in front of or adjoining any Owned Real Property have been dedicated
to the proper municipal authority and such municipal authority has accepted such
dedication.
6.27 Employee Benefits.
Schedule 6.27 contains a complete and accurate list of all Employee
Benefit Plans and a complete copy of the current Xxxxxxxx Employee handbook
which has been previously delivered to Knightsbridge.
6.28 Consents/Bulk Sales.
(a) Except as set forth on Schedule 6.28, no filing or
registration with, notice to or authorization, consent or approval or other
action (including, without limitation, the grant of any waiver) of any
Governmental Entity or any other Person is required to be obtained by Xxxxxxxx
or the Equityholder in connection with: (i) the transfer to Newco of the Assets
or the
-17-
assumption of the Assumed Liabilities; (ii) the execution, delivery and
performance of this Agreement and the Xxxxxxxx Documents and the consummation of
the transactions contemplated hereby and thereby; and (iii) following the
Closing, the enjoyment and possession by Newco of all of the rights and
privileges with respect to the Assets and the Business.
6.29 [Intentionally Deleted].
6.30 Disclosure. No representation or warranty of Xxxxxxxx contained
in this Agreement or the Xxxxxxxx Documents, and no statement, report, or
certificate furnished by or on behalf of Xxxxxxxx or the Equityholder to Newco
or its agents pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
6.31 Investment Undertaking. Xxxxxxxx acknowledges that the Initial
Shares to be issued to Newco pursuant to this Agreement will be "restricted
securities" within the meaning of Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"). Xxxxxxxx further acknowledges that Newco is
acquiring such shares for Newco's own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act. Xxxxxxxx
represents that it is an "accredited investor", as that term is defined in Rule
501 under the Securities Act, and such Initial Shares may not be sold,
transferred, pledged, loaned, assigned, hypothecated or otherwise disposed of
unless such Initial Shares are subsequently registered under the Securities Act
and applicable state securities laws or unless an exemption from such
registration requirements is available.
6.32 No Representation. Xxxxxxxx and Equityholder make no
representations, warranties or covenants, express or implied with regard to (i)
the economics, profitability or success of the operations of Xxxxxxxx and/or
Newco; (ii) the projected sales, projected revenues, projected expenses or
projected profits or lack thereof of Xxxxxxxx and/or Newco, and Xxxxxxxx is
looking to Newco's relationship with Knightsbridge to provide increased and
improved marketing and sales for Newco.
7. Representations and Warranties of Knightsbridge. To its best knowledge
and subject to the written disclosure provided respectively, Newco and
Knightsbridge, as applicable hereby represent and warrant to Xxxxxxxx as
follows:
7.1 Organization; Good Standing.
(a) Newco is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of California and has
the power and authority to own and lease its assets and properties and to
conduct its business as it is now being conducted. Newco is qualified to do
business as a foreign company in all jurisdictions where it is required to be
qualified, except those jurisdictions whereby the failure to qualify would not
have a Material Adverse Effect.
-18-
(b) Knightsbridge is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has the
power and authority to own and lease its assets and properties and to conduct
its business as it is now being conducted. Knightsbridge is qualified to do
business as a foreign company in all jurisdictions where it is required to be
qualified, except those jurisdictions whereby the failure to qualify would not
have a Material Adverse Effect.
7.2 Authority; Enforceability.
(a) Newco has the corporate power and authority to execute,
deliver and perform this Agreement and all other agreements, certificates and
documents executed or delivered, or to be executed or delivered, by Newco in
connection herewith (collectively, the "Newco Documents"), and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Newco Documents by Newco has been duly
authorized by all necessary corporate action on the part of Newco. This
Agreement and each of the Newco Documents have been duly executed and delivered
by Newco and this Agreement and each of the Newco Documents constitute (or, in
the case of certain of the Newco Documents, when executed and delivered will
constitute) the legal, valid and binding obligations of Newco, enforceable
against Newco in accordance with their respective terms.
(b) Knightsbridge has the corporate power and authority to
execute, deliver and perform this Agreement and all other agreements,
certificates and documents executed or delivered, or to be executed or
delivered, by Knightsbridge in connection herewith (collectively, the
"Knightsbridge Documents"), and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agreement
and the Knightsbridge Documents by Knightsbridge has been duly authorized by all
necessary corporate action on the part of Knightsbridge. This Agreement and each
of the Knightsbridge Documents have been duly executed and delivered by
Knightsbridge and this Agreement and each of the Knightsbridge Documents
constitute (or, in the case of certain of the Knightsbridge Documents, when
executed and delivered will constitute) the legal, valid and binding obligations
of Knightsbridge, enforceable against Knightsbridge in accordance with their
respective terms.
7.3 No Conflict. The execution, delivery and performance of this
Agreement and the Newco Documents by Knighstbridge and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) violate or
conflict with any provision of the Articles of Organization or the LLC Agreement
of Newco; (ii) violate, conflict with, result in a breach of or constitute (with
or without notice or lapse of time or both) a default under, give rise to a
right of termination, amendment or cancellation of, accelerate the performance
required by, or result in any payment under, any contract, instrument or other
writing of any nature whatsoever to or by which Knighstbridge is a party or is
bound, or by which any of the assets or the business is subject; (iii) violate,
conflict with or result in a breach of any Legal Requirement applicable to
Knighstbridge; (iv) result in the creation of any Lien on any of the Assets
(except for Permitted Liens); or (v) render void or create a right of amendment,
termination or rescission under any Material Agreement or other arrangement with
a customer of or vendor to the business.
-19-
7.4 Capitalization. Knightsbridge has authorized capital stock
consisting of 100,000 shares of common stock, 31,562,000 shares of which are
issued and outstanding, and no shares of preferred stock.
7.5 Knightsbridge Common Stock. The Initial Shares, when issued and
delivered to Newco in accordance with the terms and provisions of this
Agreement, will be (i) duly authorized and validly issued, fully paid and
non-assessable, (ii) free and clear of any security interests, pledges,
mortgages, claims, liens and encumbrances of any kind whatsoever, and (iii)
issued in compliance with all applicable federal and state securities laws.
7.6 SEC Filings.
(a) Knightsbridge has previously delivered to Xxxxxxxx a copy of
each report required to be filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") filed with the Securities and Exchange Commission
(the "SEC") on or after September 30, 2003 (the "Knightsbridge SEC Reports"),
which are all the forms, reports and documents required to be filed by
Knightsbridge with the SEC since September 30, 2003. Except for changes required
by the Securities and Exchange Commission, the Knightsbridge SEC Reports (A)
were prepared in accordance with the requirements of the Exchange Act and (B)
did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) 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.
(b) Except for changes required by the Securities and Exchange
Commission, each of (i) Knightsbridge's audited consolidated balance sheet and
related consolidated statements of income, cash flows and changes in
stockholders' equity (together with related notes) as of and for the year ended
December 31, 2003, as contained in the Knightsbridge SEC Reports, and (ii)
Knightsbridge's unaudited consolidated balance sheet and related consolidated
statements of income, cash flows and changes in stockholders' equity as of and
for the nine month period ended December 31 2003, as contained in the
Knightsbridge SEC Reports (collectively, the "Knightsbridge Financial
Statements"), (x) fairly present in all material respects the financial position
of Knightsbridge as of the dates thereof and the results of its operation, cash
flows and stockholders' equity for each of the periods then ended, except that
the unaudited financial statements are subject to normal year-end adjustments,
and (y) were prepared in accordance with GAAP applied in a consistent basis
throughout the periods involved, in each case, except as otherwise indicated in
the notes thereto.
7.7 Litigation. Excepting a threatened claim made by California Wine
Company ("Stonegate") against Knightsbridge for monetary damages with respect to
Knightsbridge's alleged obligation to purchase grapes under contract with
Stonegate, there are no suits or actions, or, pending or, to the knowledge of
Knightsbridge, threatened, against or relating to Knightsbridge. There are no
judgments, orders, stipulations, injunctions, decrees or awards in effect which
relate to Knightsbridge or the operation of Knightsbridge, which if decided
against Knightsbridge would materially affect the ability of Knightsbridge to
consummate the
-20-
transactions contemplated hereby, except for any suits or actions that would
not, have a Material Adverse Effect.
7.8 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Knightsbridge.
7.9 No Prior Activities. Except for obligations incurred in connection
with its incorporation or organization or the negotiation and consummation of
this Agreement and the transactions contemplated hereby, Newco has neither
incurred any obligation or liability nor engaged in any business or activity of
any type or kind or entered into any agreement or arrangement with any person.
7.10 Disclosure. No representation or warranty of Knightsbridge or
Newco contained in this Agreement or the Newco Documents or the Knightsbridge
Documents, as applicable, contains or will contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
7.11 Compliance With Laws. To the best of Knightsbridge's knowledge,
Knightsbridge is in material compliance with all laws, rules, regulations,
ordinances, agreements, codes, orders, licenses, and permits applicable to its
business. Knightsbridge has not received notice of any violation of any
applicable federal, state, or local statute, law, or regulation (including any
applicable employment, or other law, ordinance, or regulation) affecting its
properties or the business; and to the best knowledge of Knightsbridge, there
are no such violations.
7.12 Consents. To the best of Knightsbridge's knowledge, no consent,
approval, permit, license or authorization of any local, state, federal or
international governmental authority or agency which has jurisdiction over the
parties ("Governmental Authority") or any other person is required to be
obtained by them in connection with the execution and delivery of this Agreement
and the transaction documents or the performance by them of the transactions
contemplated hereby and thereby.
7.13 Non-Contravention. The execution and delivery of this Agreement
by Knightsbridge does not, and the performance by the parties of this
transaction contemplated hereby and thereby to be performed the by will not
conflict with, or result in any violation of, or constitute a default under any
provision of any contract, instrument or agreement to which Knightsbridge is a
party or by which Knightsbridge is found; be a violation of any domestic or
foreign statute, law, ordinance, rule or regulation of any Governmental
Authority ("Law"); or create or impose any lien, charge or encumbrance of any of
the Property.
7.14 Taxes. Knightsbridge has timely filed all federal, state, local,
foreign and other returns, estimates and reports ("Returns") which it was
required to file relating or pertaining to any and all taxes attributable to, or
incurred in connection with the Property or the Business ("Taxes"). All such
Returns are true and correct and were completed in accordance with applicable
law. Knightsbridge has paid all Taxes and have withheld with respect all of
-21-
Knightsbridge's employees all Federal, state and local income taxes, FICA, FATA
and any other taxes required to be withheld. There are no present disputes as to
Taxes payable by Knightsbridge.
7.15 Knightsbridge's Due Diligence. Knightsbridge shall use its
independent judgment and make its own determination as to the scope and breadth
of the due diligence investigation that Knightsbridge shall make relative to the
Assets.
8. Covenants.
8.1 Transfer and Retention of Records. After the Closing, Newco, on
the one hand, and Xxxxxxxx, on the other hand, upon reasonable prior written
notice from the other party or parties, as applicable, shall give such other
party or parties, as applicable, and their respective representatives,
employees, counsel and accountants, access, during normal business hours and at
their principal place of business, to the books and records relating to the
Business, but solely with respect to periods prior to the Closing Date, and
shall permit such persons to examine and copy such records to the extent
reasonably requested in connection with the preparation of Tax and financial
reporting matters, audits, legal proceedings, governmental investigations and
other business purposes; provided, however, that nothing herein shall obligate
Newco or Xxxxxxxx, as the case may be, to (i) take actions that would
unreasonably disrupt the normal course of business of Newco or Xxxxxxxx, as
applicable; (ii) violate the terms of any contract to which Newco or Xxxxxxxx,
as applicable, is a party or to which Newco or Xxxxxxxx, as applicable, is bound
or by which any of the assets of Newco or Xxxxxxxx, as applicable, is subject;
(iii) grant access to any of its proprietary, confidential or classified
information (including, without limitation, any Confidential and Proprietary
Information); or (iv) waive any right to assert the attorney-client privilege or
any other privilege with respect to any document.
8.2 Employee Matters; Use of Premises by Knightsbridge.
(a) Newco shall offer employment to the employees of Xxxxxxxx at
the same positions held while such employees were employed by Xxxxxxxx. Any
changes to these positions will be made in accordance with the Newco Operating
Agreement.
(b) Newco shall not be deemed to be a successor employer with
respect to the employment of any of Kirkland's employees or with respect to any
benefit plans maintained for the benefit of Kirkland's employees. In the event
any of Kirkland's employees shall be deemed to have been terminated by reason of
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, all liability for any severance and
other similar benefits to any such Xxxxxxxx employee shall be the sole
responsibility of Xxxxxxxx.
(c) Newco shall provide Knightsbridge employees, approved by
Newco's Manager, with full and complete access to, the Building and Parcel, and
Knightsbridge may designate the Building as its principal executive offices for
all of its business purposes, without limitation, in connection with its
business operations and in public filings to be made by Knightsbridge with the
Securities and Exchange Commission. Knightsbridge shall be entitled to
-22-
utilize the administrative services and employees of Newco and three offices at
costs to be agreed upon between Newco and Knightsbridge and on an annual basis.
8.3 Tax Matters. Xxxxxxxx (i) shall cause to be prepared and duly and
timely filed all Tax Returns with respect to the Assets for all periods on or
prior to the Closing Date for sales, bulk sales, use, real or personal property
or other transfer, excise, recording fees and charges and similar Taxes
(including, without limitation, any such Tax Returns required to be filed as a
result of, or in connection with, the sale, assignment, conveyance and transfer
of the Assets to Newco or the transactions contemplated hereby) and (ii) shall
be solely responsible for the payment of such Taxes accruing prior to the
Closing Date. Each of Xxxxxxxx, the Equityholder, Newco and Knightsbridge shall
cooperate (and shall cause their tax professionals to cooperate) with each other
in connection with any Tax matter relating to the Assets or Assumed Liabilities
or the transactions contemplated by this Agreement arising from periods on or
before the Closing Date.
8.4 Use of Xxxxxxxx Name in Competing Business. Each of Xxxxxxxx, the
Equityholder and their Affiliates covenant and agree not to use the name
"Xxxxxxxx" in any business that is competitive with the Business, it being
understood by the parties that Xxxxxxxx Vineyards, LLC and/or Cattle is not
engaged in a competitive business for purposes of this Section and may utilize
the "Xxxxxxxx" name in connection with these businesses.
8.5 Bulk Sales. Xxxxxxxx and Newco hereby agree to (i) comply with any
and all "bulk transfer" law or similar statute, rule or regulation including,
without limitation, laws under the uniform commercial code and any similar
applicable laws and such laws relating to Taxes ("Bulk Transfer Laws") and (ii)
jointly and severally indemnify and hold harmless Newco and each of its members,
directors, officers, employees, and agents from and against any and all
liabilities (including without limitation, attorneys' fees thereof) arising out
of any failure by any party to comply with any Bulk Transfer Laws.
8.6 Repayment of Institutional Indebtedness. Prior to or
simultaneously with the Closing, Xxxxxxxx and the Equityholder hereby agree to
pay all of its institutional indebtedness, including bank debt owed to
Prudential, and Xxxxxxxx shall cause UCC-3 termination statements to be filed
with respect to any security interest filings by any holders of institutional
indebtedness, and provide other customary and reasonable documents and
instruments to evidence repayment of such institutional indebtedness, as Newco
shall reasonably require, and shall jointly and severally indemnify and hold
harmless Newco and each of its members, directors, officers, employees, and
agents from and against any and all liabilities (including without limitation,
attorneys' fees thereof) arising out of any failure by any party to pay off its
institutional indebtedness with Prudential.
8.6.1 Indemnification by Xxxxxxxx. For a period of three years from
the Closing Date, Xxxxxxxx shall indemnify Newco and hold Newco harmless from
any liability owed by Newco on the last Four Million Dollars ($4,000,000) of
principal indebtedness of the Financing ($20,000,000) owed to Citigroup.
8.7 Public Statements. Following the Closing Date, Knightsbridge shall
issue a press release with respect to the terms and conditions of this Agreement
as required by Law or
-23-
a Governmental Authority and shall make any and all filings required to be made
with the Securities and Exchange Commission under the Securities Act and the
Exchange Act.
9. Conditions to the Obligations to Close. The obligations of Xxxxxxxx and
Knightsbridge to close the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver of the following conditions.
9.1 Representations and Warranties. The representations and warranties
for all parties made on the date hereof shall be true and correct as if such
representations and warranties have been made on the Closing Date.
9.2 Performance of Obligations. Each party shall have performed in all
material respects its obligations under this Agreement required to be performed
on or prior to the Closing Date.
9.3 No Material Adverse Change. Since the date of this Agreement,
there shall not have been any material adverse change in the financial
condition, results of operations, assets, properties, liabilities, business or
prospects of Xxxxxxxx, Newco or Knightsbridge.
9.4 Closing Deliveries. All documents required to be delivered by each
party under Section 4 of this Agreement shall have been delivered on or before
the Closing Date.
9.5 Financing. On or prior to the Closing Date, Xxxxxxxx and
Knightsbridge shall mutually arrange to obtain bank financing for Newco from
Citigroup on terms and conditions reasonably acceptable to each of Xxxxxxxx and
Knightsbridge and on substantially similar terms and conditions as set forth in
that certain commitment letter from Citigroup, with gross proceeds of not less
than $20,000,000 (the "Financing"). The Financing shall be used to pay off any
and all obligations owed to Prudential, to consummate the transactions
contemplated hereunder and to provide working capital to operate the business of
Newco following the Closing.
10. Indemnification.
10.1 Indemnification by Xxxxxxxx.
Xxxxxxxx, hereby agrees to defend, indemnify and hold Newco,
Knightsbridge, and their respective Affiliates (collectively, a "Knightsbridge
Indemnified Party"), harmless from, against and in respect of any and all costs,
damages, charges or expenses of any nature (whether or not arising out of third
party claims), including reasonable attorneys' fees (collectively, "Losses"),
incurred directly by a Knightsbridge Indemnified Party, arising out of any of
the following: (i) any inaccuracy or breach of any representation or warranty of
Xxxxxxxx or the Equityholder contained in this Agreement, or any Xxxxxxxx
Document; (ii) any liability, obligation or responsibility of Xxxxxxxx or the
Equityholder or which in any way relates to the Business or the Assets that is
not an Assumed Liability; and (iii) any breach of any agreement, covenant or
obligation of Xxxxxxxx or Equityholder contained in this Agreement. A
Knightsbridge Indemnified Party shall give Xxxxxxxx and the Equityholder prompt
written notice
-24-
of any third party claim which may give rise to any indemnity obligation under
this Section 10.1, together with the estimated amount of such claim, and
Xxxxxxxx and the Equityholder shall have the right to assume the defense of any
such claim through counsel of its own choosing, by so notifying the
Knightsbridge Indemnified Party within thirty (30) days of receipt of such
written notice; provided, however, that Xxxxxxxx counsel shall be reasonably
satisfactory to the Knightsbridge Indemnified Party. Failure to give prompt
notice shall not affect the indemnification obligations hereunder in the absence
of actual prejudice. If a Knightsbridge Indemnified Party desires to participate
in any such defense assumed by Xxxxxxxx and the Equityholder, it may do so at
its sole cost and expense. If Xxxxxxxx and the Equityholder decline to assume
any such defense, the Knightsbridge Indemnified Party shall have the right to
undertake the defense, compromise or settlement of such claim and Xxxxxxxx and
the Equityholder shall be liable for all reasonable costs and expenses of
defending such claim incurred by the Knightsbridge Indemnified Party, including
reasonable fees and disbursements of counsel. Neither party shall, without the
prior written consent of the other party, which shall not be unreasonably
withheld, settle, compromise or offer to settle or compromise any such claim or
demand on a basis which would result in the imposition of a consent order,
injunction or decree which would restrict the future activity or conduct of the
other party or any subsidiary or affiliate thereof or if such settlement or
compromise does not include an unconditional release of the other party for any
liability arising out of such claim or demand or any related claim or demand.
10.2 Indemnification by Knightsbridge. Knightsbridge shall defend,
indemnify and hold Xxxxxxxx, the Equityholder and their respective Affiliates
(collectively, a "Xxxxxxxx Indemnified Party") harmless from and against and in
respect of any and all Losses, incurred directly by Xxxxxxxx and the
Equityholder arising out of any of the following: (i) any inaccuracy or breach
of any representation or warranty of Knightsbridge contained in this Agreement;
or (ii) any breach of any agreement, covenant or obligation of Knightsbridge in
this Agreement. The Xxxxxxxx Indemnified Party shall give Newco prompt written
notice of any third party claim which may give rise to any indemnity obligation
under this Section 10.2, together with the estimated amount of such claim, and
Newco shall have the right to assume the defense of any such claim through
counsel of its own choosing, by so notifying the Xxxxxxxx Indemnified Party
within thirty (30) days of receipt of such written notice; provided, however,
that Newco's counsel shall be reasonably satisfactory to the Xxxxxxxx
Indemnified Party. Failure to give prompt notice shall not affect the
indemnification obligations hereunder in the absence of actual prejudice. If the
Xxxxxxxx Indemnified Party desires to participate in any such defense assumed by
Newco, it may do so at its sole cost and expense. If Newco declines to assume
any such defense, the Xxxxxxxx Indemnified Party shall have the right to
undertake the defense, compromise or settlement of such claim and Newco shall be
liable for all costs and expenses of defending such claim incurred by the
Xxxxxxxx Indemnified Party, including reasonable fees and disbursements of
counsel. Neither party shall, without the prior written consent of the other
party, which shall not be unreasonably withheld, settle, compromise or offer to
settle or compromise any such claim or demand on a basis which would result in
the imposition of a consent order, injunction or decree which would restrict the
future activity or conduct of the other party or any subsidiary or affiliate
thereof or if such settlement or compromise does not include an unconditional
release of the other party for any liability arising out of such claim or
demand.
-25-
10.3 Right to Indemnification Not Affected by Knowledge or Waiver.
(a) The right to indemnification hereunder, payment of Losses or
other remedy based upon breach of any representation, warranty, covenant,
agreement or obligation of a party hereunder shall not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date (including, without limitation,
the due diligence investigation engaged in by Xxxxxxxx, Newco, Knightsbridge and
their respective representatives), with respect to the accuracy or inaccuracy of
or compliance or noncompliance with, any such representation, warranty,
covenant, agreement or obligation.
(b) The waiver of any condition to a party's obligation to
effectuate the Closing and consummate the transactions contemplated hereby,
where such condition is based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant, agreement or
obligation, will not affect the right to indemnification, payment of Losses or
other remedy based on such representation, warranty, covenant, agreement or
obligation.
10.4 Indemnification Amount. Xxxxxxxx and Knightsbridge shall have
liability for indemnification with respect to any Loss based upon Section 10
hereof from the first dollar of Loss. Anything to the contrary notwithstanding,
except with respect to any claims for indemnification based upon fraud, Xxxxxxxx
and Knightsbridge shall have no liability for indemnification to the extent that
the aggregate amount of all Losses with respect to such matters exceeds an
amount equal to one million dollars ($1,000,000) (the "Indemnification Limit").
10.5 Time Limitations.
(a) Except for any liability with respect to a claim with respect
to a breach of any representation or warranty or any covenant, agreement or
obligation of Xxxxxxxx or the Equityholder based upon fraud, Xxxxxxxx shall have
no liability with respect to the matters described in Section 10 unless, on or
before the date that is the three (3) year anniversary of the Closing Date,
Knightsbridge or Newco, as applicable, files a claim against Xxxxxxxx in
writing.
(b) Except for any liability with respect to any claim with
respect to a breach of any representation, warranty, covenant, agreement or
obligation of Knightsbridge of Newco based upon fraud, Knightsbridge shall have
no liability with respect to the matters described in Section 10 unless, on or
before the date that is the three (3) year anniversary of the Closing Date,
Xxxxxxxx or Newco, as applicable, files a claim against Knightsbridge in
writing.
11. Miscellaneous.
11.1 Attorneys Fees and Costs and Transaction Taxes. Newco shall pay
all sales, use, transfer, vehicle transfer, real property transfer (including
any deed recording fee), recording, gains and other similar Taxes, if any, which
may be payable with respect to the consummation of the transactions contemplated
by this Agreement and attorneys fees of Xxxxxxxx and Knightsbridge not to exceed
$40,000 each.
-26-
11.2 Expenses. Except as otherwise expressly provided in this
Agreement, each party hereto shall pay its own costs and expenses incurred in
connection with or incidental to the preparation and negotiations of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby (including, without
limitation, attorneys' fees and expenses).
11.3 Amendment. This Agreement may not be modified, amended, altered
or supplemented, except by a written agreement executed by each of the parties
hereto.
11.4 Entire Agreement. This Agreement, including the schedules and
exhibits hereto, and the instruments and other documents delivered pursuant to
this Agreement, the Xxxxxxxx Documents, and the Newco Documents, contain the
entire understanding and agreement of the parties relating to the subject matter
hereof and supersedes all prior and/or contemporaneous understandings and
agreements of any kind and nature (whether written or oral) among the parties
with respect to such subject matter.
11.5 Waiver. Any waiver of any breach of or failure to comply with any
provision or condition of this Agreement by the other party shall not be
construed as, or constitute, a continuing waiver of such provision or condition,
or a waiver of any other breach of, or failure to comply with, any other
provision or condition of this Agreement, any such waiver to be limited to the
specific matter and instance for which it is given. No waiver of any such breach
or failure or of any provision or condition of this Agreement shall be effective
unless in a written instrument signed by the party granting the waiver and
delivered to the other party hereto in the manner provided for hereunder in
Section 11.6. No failure or delay by either party to enforce or exercise its
rights hereunder shall be deemed a waiver hereof, nor shall any single or
partial exercise of any such right or any abandonment or discontinuance of steps
to enforce such rights, preclude any other or further exercise thereof or the
exercise of any other right.
11.6 Notices. All notices, demands, consents, requests, instructions
and other communications to be given or delivered or permitted under or by
reason of the provisions of this Agreement or in connection with the
transactions contemplated hereby shall be in writing and shall be deemed to be
delivered and received by the intended recipient as follows: (a) if personally
delivered, on the Business Day of such delivery (as evidenced by the receipt of
the personal delivery service), (b) if mailed certified or registered mail
return receipt requested, four (4) Business Days after being mailed, or (c) if
delivered by overnight courier (with all charges having been prepaid), on the
Business Day after such delivery (as evidenced by the receipt of the overnight
courier service of recognized standing) or (d) if delivered by facsimile
transmission, on the Business Day of such delivery if sent before 6:00 p.m. in
the time zone of the recipients or if sent after that time, on the next
succeeding Business Day (as evidenced by the printed confirmation of delivery
generated by the sending party's telecopier machine). If any notice, demand,
consent, request, instruction or other communication cannot be delivered because
of a changed address of which no notice was given (in accordance with this
Section 11.6), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second Business Day the notice is sent (as evidenced by a sworn affidavit of the
sender). All such notices, demands, consents, requests, instructions and other
communications will be sent to the following addresses:
-27-
If to Xxxxxxxx or the Equityholder:
Xxxxxxxx Ranch, LLC
X.X. Xxx 0000
Xxx Xxxxxxxx Xxxxx Xxxx
Xxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxxxx
Telecopier:
with a copy to:
Xxxxxxx, Nomura & Molineux LLP
0000 Xxxxxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopier: 000-000-0000
If to Knightsbridge:
Knightsbridge Fine Wines, Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Mr. Xxxx Xxxxxxx
Telecopier:
with a copy to:
Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxx Xxxxxxxx, Esq.
Telecopier: 000-000-0000
or to such other address as any party may specify by notice given to the other
party in accordance with this Section 11.6.
11.7 Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED IN THAT STATE, WITHOUT REGARD TO ANY OF
ITS PRINCIPLES OF CONFLICTS OF LAWS OR OTHER LAWS WHICH WOULD RESULT IN THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. THIS AGREEMENT SHALL BE
CONSTRUED AND INTERPRETED WITHOUT REGARD TO ANY ARBITRATION PRESUMPTION AGAINST
THE PARTY CAUSING THIS AGREEMENT TO BE DRAFTED. EACH OF THE PARTIES
UNCONDITIONALLY AND IRREVOCABLY
-28-
CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA,
COUNTY OF SAN FRANCISCO, AND THE FEDERAL DISTRICT COURT FOR THE NORTHERN
DISTRICT OF CALIFORNIA WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
AND EACH OF THE PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY
OBJECTION TO VENUE IN ANY SUCH COURT.
11.8 Severability. Without limiting anything set forth in Section 11.8
hereof, the parties agree that should any provision of this Agreement be held to
be invalid, illegal or unenforceable in any jurisdiction, that holding shall be
effective only to the extent of such invalidity, illegally or unenforceability
without invalidating or rendering illegal or unenforceable the remaining
provisions hereof, and any such invalidity, illegally or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. It is the intent of the parties that this Agreement be fully
enforced to the fullest extent permitted by applicable law.
11.9 Binding Effect; Assignment. This Agreement and the rights and
obligations hereunder may not be assigned by any party hereto without the prior
written consent of the other parties hereto. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns and the heirs, estate and legal representatives
of the Equityholder.
11.10 Headings. The section headings contained in this Agreement
(including, without limitation, section headings and headings in the exhibits
and schedules) are inserted for reference purposes only and shall not affect in
any way the meaning, construction or interpretation of this Agreement. Any
reference to the masculine, feminine, or neuter gender shall be a reference to
such other gender as is appropriate. References to the singular shall include
the plural and vice versa.
11.11 Third Parties. Except as expressly permitted herein, nothing
herein is intended or shall be construed to confer upon or give to any Person,
other than the parties hereto and the Persons claiming a right to
indemnification under Section 10 hereof, any rights, privileges or remedies
under or by reason of this Agreement.
11.12 Counterparts. This Agreement may be executed in two (2) or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, and all of which, when
taken together, shall constitute one and the same document. This Agreement shall
become effective when one or more counterparts, taken together, shall have been
executed and delivered by all of the parties.
-29-
11.13 Confidentiality. After the Closing Date, and except as may be
required by applicable law or pursuant to Section 8.7, none of the parties
shall, directly or indirectly, disclose the terms and provisions of this
Agreement, and the transactions contemplated thereby, including, without
limitation, the existence of this Agreement and the other agreements executed
and delivered in connection with the transactions contemplated thereby, to any
person or entity, other than to its attorneys, accountants, bankers,
shareholders, employees, directors, officers or professional advisors.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by a
duly authorized officer of each party hereto as of the date first above written.
XXXXXXXX RANCH, LLC
By:
---------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Manager
KNIGHTSBRIDGE FINE WINES, INC.
By:
----------------------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
XXXXXXXX KNIGHTSBRIDGE, LLC
By: Xxxxxxxx Winery, LLC, Its Member
By:
----------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: General Manager
--------------------------------------------------
Xxxxx Xxxxxxxx
-30-
APPENDIX I
"Accounts Receivable" means all trade accounts receivable and
all notes, bonds and other evidences of indebtedness of and rights to receive
payment, including, without limitation, rebates, refunds and similar payments
and any rights of Xxxxxxxx and/or the Equityholder with respect to any third
party collection procedures or any other actions or proceedings relating to the
Business which have been commenced in connection therewith and any other item
that would be characterized as an account receivable in accordance with GAAP.
"Actual Knowledge" shall mean those matters of which the
applicable person has actual knowledge, and in the case of Xxxxxxxx, shall be
Xxxxx Xxxxxxxx and Xxxx Xxxxxxxx, without inquiry.
"Affiliate" of any Person means any stockholder, member,
Person or entity controlling, controlled by or under common control with such
Person, or any director, officer, manager or key employee of such Person or any
of the respective immediate family members of such Person. For purposes of this
definition, the term "control", when used with respect to any Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" shall have meanings that
correspond to the foregoing.
"Authorizations" means all licenses, permits, franchises,
approvals, authorizations, qualifications, concessions or the like, issued or
granted by any federal, state, local or foreign Governmental Entity or by any
nongovernmental entity to any Person or which in any way relate to the Business
or the Assets.
"Business Day" means a day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Employee Benefit Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), any "employee welfare benefit plan" (as defined
in Section 3(1) of ERISA), and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including without
limitation insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation which Xxxxxxxx or any ERISA Affiliate (as defined herein) on or
before Closing has sponsored, maintained or contributed to or has had any
obligation, liability (whether contingent or other), or responsibility.
"Environment" means all air, surface water, groundwater or
land, including, without limitation, land surface or subsurface, including,
without limitation, all fish, wildlife, biota and all other natural resources.
(i)
"Environmental Claim" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings or other
communications (whether written or oral), whether criminal or civil, pursuant to
or relating to any applicable Environmental Law by any Person (including, but
not limited to, any Governmental Entity or citizens' group) based upon,
alleging, asserting, or claiming any actual or potential (a) violation of or
liability under any Environmental Law, (b) violation of any Environmental
Permit, or (c) liability for investigatory costs, cleanup costs, removal costs,
remedial costs, response costs, natural resource damages, property damage,
personal injury, fines or penalties arising out of, based on, resulting from or
related to the presence, Release or threatened Release into the Environment of
any Hazardous Substance at any location, including, but not limited to, any
off-Site location to which any Hazardous Substance or materials containing any
Hazardous Substance were sent for handling, storage, treatment or disposal.
"Environmental Law" means any and all current federal,
state, local, provincial and foreign, civil and criminal laws, statutes,
ordinances, orders, codes, rules, regulations, Environmental Permits, policies,
guidance documents, judgments, decrees, injunctions, or agreements with any
Governmental Entity, relating to the protection of health and the Environment,
worker health and safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution,
formulation, packaging, labeling, or Release of Hazardous Substance, including,
but not limited to: the Clean Air Act, 42 U.S.C.ss.7401 et seq.; the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C.ss.9601 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.ss.1251
et seq.; the Hazardous Material Transportation Act, 49 U.S.C.ss.1801 et seq.;
the Federal Insecticide Fungicide and Rodenticide Act, 7 U.S.C.ss.136 et seq.;
the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.ss.6901 et
seq.; the Toxic Substances Control Act, 15 U.S.C.ss.2601 et seq.; the
Occupational Safety and Health Act of 1970, 29 U.S.C.ss.651 et seq.; the Oil
Pollution Act of 1990, 33 U.S.C.ss.2701 et seq.; and the state analogies
thereto; and any common law doctrine, including, but not limited to, negligence,
nuisance, trespass, personal injury, or property damage related to or arising
out of the presence, Release, or exposure to a Hazardous Substance.
"Environmental Permit" means any federal, state, local,
provincial, or foreign permits, licenses, consents or Authorizations required by
any Governmental Entity under or in connection with any Environmental Law and
includes any and all orders, consent orders or binding agreements issued or
entered into by a Governmental Entity under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"ERISA Affiliate" means any entity which is, or within the
last six years was, a member of (i) a controlled group of corporations (as
defined in Section 414(b) of the Code), (ii) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (iii) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
Xxxxxxxx.
(ii)
"GAAP" means generally accepted accounting principles in
effect in the United States of America at the time of any determination, and
which are applied on a consistent basis. All accounting terms used in this
Agreement which are not expressly defined in this Agreement shall have the
meanings given to those terms by GAAP, unless the context of this Agreement
otherwise requires.
"Governmental Entity" means any court, tribunal, arbitrator,
executive or regulatory authority, tax authority, agency, commission, official
or other instrumentality of the United States of America, any foreign country or
any domestic or foreign state, county, city, municipality or other political
subdivision.
"Hazardous Substance" means petroleum, petroleum hydrocarbons
or petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls, and
any other chemicals, materials, substances or wastes, in any amount or
concentration, which are now or hereafter become defined or regulated as
"hazardous substances", "hazardous materials", "hazardous wastes", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic
pollutants", "pollutants", "regulated substances", "solid wastes" or
"contaminants" or words of similar import under any Environmental Law.
"Intangibles" means the Intellectual Property Rights,
including, without limitation, all trade secrets, designs and methodologies,
formulae, recipes, research and development, inventions (whether or not
patentable) and other proprietary processes and information of any kind not
directly used in connection with the Business but being developed or considered
for development any time during the last five (5) years by Xxxxxxxx or by others
for the benefit of Xxxxxxxx or the Equityholder for use in connection with the
Business.
"Intellectual Property Rights" means all United States of
America and foreign: patents; copyrights, trademarks; trade names; service
marks; brand names; business and product names; uniform resource locators
("URL's"); Internet domain names; Internet websites and the electronic files,
content and layout related thereto; email addresses; listings in telephone books
and directories and internet directories; browser, search engines and
hyper-links; logos; symbols; trade dress; design and representation or
expressions of any of the foregoing; all registrations or applications for
registration of any of the foregoing; and all databases; source codes; object
codes; computer programs and computer software in any form or medium, in each
case that are owned by Xxxxxxxx and/or were, are or may be used in connection
with the Business or held for use or being developed by Xxxxxxxx or by others
for the benefit of Xxxxxxxx or the Equityholder for use in connection with the
Business; and all trade secrets; industrial or manufacturing models; tools,
methods and processes; formulae; recipes; research and development; inventions
(whether or not patentable); know-how; manufacturing, engineering and other
drawings and blueprints; technology; technical information; engineering data;
design and engineering specifications; and other proprietary processes and
information of any kind owned by Xxxxxxxx or the Equityholder and which were,
are or may be used in connection with the Business or any of the Assets.
"Inventory" means all of Kirkland's inventories of products,
whether raw materials, work-in-process or finished goods, all goods used in the
Business, all of Kirkland's
(iii)
merchandising, promotional and packaging supplies and materials which are held
at, or are in transit from or to, any of the locations at which any aspect of
the operations of Xxxxxxxx and/or the Business is conducted, or which are used
by or held for the benefit of Xxxxxxxx, and any other item of Xxxxxxxx which
would be characterized as inventory.
"Best of knowledge" shall mean those matters of which the
applicable Person has actual knowledge, and which, in the case of Xxxxxxxx,
shall include Xx. Xxxxx Xxxxxxxx and Xxxx Xxxxxxxx after reasonable inquiry of
the Xxxxxxxx members. In the case of Knightsbridge, the applicable Person shall
be Xxxx Xxxxxxx after reasonable inquiry.
"Legal Requirement" of a Person means any statute, rule,
regulation or other provision of law, or any order, judgment or other direction
of a court, arbitration panel or other tribunal resolution or any Governmental
Entity, or any other requirement, permit, registration, license or Authorization
applicable to such Person, or to any of its properties, assets or business.
"Liens" means any liens, charges, encumbrances, options,
rights of first refusal, security interests, claims, mortgages, pledges,
charges, easements, obligations or any other encumbrances (including, without
limitation, any conditional sale or other title retention agreement or any lease
in the nature thereof and any agreement to grant or to permit or suffer to exist
any of the foregoing) or third party rights or equitable interests of any nature
whatsoever.
"Material Adverse Effect" shall mean an adverse effect on the
assets, properties, operations, prospects or condition (financial or otherwise)
of the Business or the Assets resulting in any Losses of Xxxxxxxx which Losses
equal or exceed the amount of $25,000 individually or $50,000 in the aggregate.
"Permitted Liens" means those liens exceptions to title
referenced in the title insurance policy issued to Newco and Xxxxxxxx Cattle
Company for the land securing the $20,000,000 loan by Citigroup and such other
liens as disclosed in the schedules to this Agreement.
"Person" means any natural individual, corporation,
partnership, joint venture, trust, limited liability company, association,
organization, firm or other entity.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Substance into the Environment.
"Site" means any real property (including but not limited to
the Parcel) currently or previously owned or leased, used or operated by
Xxxxxxxx, any predecessors of Xxxxxxxx or any entities previously owned by
Xxxxxxxx, including, without limitation, all soil, subsoil, surface waters and
groundwater thereat.
"Tax" or "Taxes" means any and all taxes, charges, fees,
levies, deficiencies or other assessments of any nature whatsoever, including,
without limitation, any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (pursuant to Section 59A of the Code or
otherwise), custom duties, capital stock, net worth, franchise, recording,
employee's income
(iv)
withholding, foreign withholding, social security (or its equivalent),
unemployment, disability, real property, personal property, intangible property,
sales, use, alcohol, transfer, value added, occupancy, registration, customs,
recording, gains, alternative or add-on minimum, estimated or other taxes,
charge, fee, levy, deficiency or other assessment of whatever kind or nature,
including any interest, penalties or additions to tax in respect of any of the
foregoing, whether disputed or not, and any obligation to indemnify, assume or
succeed to the liability of any other Person in respect of any of the foregoing
(including, without limitation, as a transferee (pursuant to Section 6901 of the
Code or otherwise), as a result of Treasury Regulation ss.1.1502-6 or similar
provision of applicable law, or as a result of a tax sharing or similar
agreement, arrangement or understanding).
"Tax Return" means any federal, state, local or foreign
return, declaration, report, claim for refund or credit, document, or other
information or filing (including any schedule or exhibit thereto) that is filed
or required to be supplied to any Governmental Entity or Regulatory Authority in
respect of or relating to any Tax, and any amendment thereof, whether on a
consolidated, combined, unitary or separate basis.
"Third Party Claim" means a claim or demand made by any Person
who is not a party to this Agreement including, without limitation, any
corporation, Governmental Entity or other third party against an Indemnitee.
(v)
