EXCHANGE AND CONTRIBUTION AGREEMENT
THIS EXCHANGE AND CONTRIBUTION AGREEMENT (this "AGREEMENT"), dated
as of July 29, 1997, is made and entered into by and among XXXXXX VINEYARDS
CALIFORNIA INC., a California corporation ("SVI-CAL"), XXXXXX VINEYARDS INC.,
a Delaware corporation ("SVI-DEL," and together with SVI-Cal the
"CORPORATIONS"), VINEYARD INVESTORS 1972, a California limited partnership
("VI-1972"), VINEYARD 405, a California limited partnership ("V-405," and
together with VI-1972, the "PARTNERSHIPS"), QUADRA PARTNERS LLC, a California
limited liability company ("QUADRA"), XXXXXX X. XXXXXX, AS TRUSTEE OF THE
XXXXXX X. XXXXXX REVOCABLE TRUST, DATED OCTOBER 8, 1992 ("AGS"), XXXXX X.
XXXXXX ("SDS"), XXXXX X. XXXXXX ("HMS"), EMANTY LIMITED LIABILITY COMPANY, a
California limited liability company ("EMANTY"), BIG VINES LIMITED LIABILITY
COMPANY, a California limited liability company ("BIG VINES," and together
with Quadra, the "LIMITED LIABILITY COMPANIES"), and XXXX X. XXXXXXXX ("KJG").
RECITALS
A. SVI-Cal is a California Subchapter S corporation, all of the issued
and outstanding shares of stock of which (the "SVI-CAL SHARES") are held by
AGS.
B. SVI-Del is a Delaware corporation having no outstanding shares,
organized for the purpose of receiving and holding all of the assets to be
transferred to it hereunder, including without limitation, all of the issued
and outstanding common stock of SVI-Cal.
C. VI-1972 is a California limited partnership having SVI-Cal as its
general partner and SVI-Cal, AGS, Big Vines, Emanty and KJG as its limited
partners.
D. V-405 is a California limited partnership having SVI-Cal as its
general partner and SVI-Cal and VI-1972 as its limited partners.
E. Quadra is a California limited liability company having SVI-Cal,
AGS, SDS, HMS and KJG as its members.
F. Emanty is a California limited liability company having AGS, Xxxxx
X. Xxxxxx and Xxxxx X. Liberty as its members.
G. Big Vines is a California limited liability company having SDS and
HMS as its members.
H. The parties desire to capitalize SVI-Del through the exchange (the
"EXCHANGE") of the SVI-Cal Shares, the partnership interests of AGS, Emanty
and KJG in VI-1972 (the "VI-1972 PARTNERSHIP INTERESTS"), the membership
interests of AGS, SDS, HMS and KJG in Quadra (the "QUADRA MEMBERSHIP
INTERESTS") and the membership interests of SDS and HMS in Big
Vines (the "BIG VINES MEMBERSHIP INTERESTS") for shares of Class B Common
Stock of SVI-Del, with the result, among others, that SVI-Cal will become the
wholly-owned subsidiary of SVI-Del.
I. Simultaneously with the Exchange, the parties desire that SVI-Del
contribute (the "CONTRIBUTION," and together with the Exchange, the
"TRANSACTION") the VI-1972 Partnership Interests, the Quadra Membership
Interests and the Big Vines Membership Interests to SVI-Cal and that VI-1972,
V-405, Quadra and Big Vines thereby be dissolved, with the result that the
assets and liabilities of VI-1972, V-405, Quadra and Big Vines become the
assets and liabilities of SVI-Cal.
J. The parties desire that the Transaction be accomplished immediately
prior to and contingent upon the completion of the contemplated initial
public offering by SVI-Del of 2,000,000 shares of its Class A Common Stock
(the "PUBLIC OFFERING").
K. The parties intend that the Exchange will qualify for tax-free
treatment under Section 351(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"), and the Regulations promulgated thereunder.
NOW, THEREFORE, in consideration of the premises, and the mutual
agreements and covenants contained herein, the parties hereby agree as
follows:
1. TRANSACTION.
(a) THE EXCHANGE. One (1) day prior to and contingent upon
the closing of the Public Offering, the parties will execute such documents
and will take such other actions as may be necessary or desirable to cause
the Exchange to occur, including without limitation, the assignment by AGS to
SVI-Del of all of his right, title and interest in and to the SVI-Cal Shares,
the assignment by AGS, Emanty and KJG to SVI-Del of all of their respective
right, title and interest in and to the VI-1972 Partnership Interests, the
assignment by AGS, SDS and HMS of all of their respective right, title and
interest in and to the Quadra Membership Interests and the assignment by SDS
and HMS of all of their respective right, title and interest in and to the
Big Vines Membership Interests. Each of the interests assigned hereunder
shall be free and clear of all liens, liabilities, claims and encumbrances.
SVI-Del will accept such assignments, and concurrently will cause shares of
its Class B Common Stock to be issued in exchange therefor to the parties and
in the denominations set forth in SECTION 1(c) below.
(b) THE CONTRIBUTION. Simultaneously with the Exchange, the
parties will execute such documents and will take such other actions as may
be necessary or desirable to cause the Contribution to occur, including
without limitation the assignment as a capital contribution by SVI-Del to
SVI-Cal of the VI-1972 Partnership Interests and the Quadra Membership
Interests assigned to SVI-Del under SECTION 1(a) above, free and clear of all
liens, liabilities, claims and encumbrances. Following the Contribution, the
parties will execute such documents and will take such other actions as may
be necessary or desirable to cause VI-1972, V-405, Quadra and Big Vines to be
wound up and dissolved.
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(c) RESULTS OF THE TRANSACTION. As a result of the Transaction:
(i) THE CORPORATIONS. SVI-Cal, conducting business under
the name "Xxxxxx Vineyards California Inc.," will become the wholly-owned
subsidiary of SVI-Del, conducting business under the name "Xxxxxx Vineyards
Inc." and qualified to do business in California, the Subchapter S status
of SVI-Cal will terminate and the issued and outstanding capital stock of
SVI-Del will consist of 4,400,000 shares of Class B Common Stock held as
follows:
NO. OF SHARES OF
NAME OF STOCKHOLDER CLASS B COMMON STOCK
------------------- --------------------
Xxxxxx X. Xxxxxx, as Trustee of the
Xxxxxx X. Xxxxxx Revocable Trust,
dated October 8, 1992 2,955,851
Xxxxx X. Xxxxxx 290,093
Xxxxx X. Xxxxxx 290,093
Emanty Limited Liability 573,870
Company
Xxxx X. Xxxxxxxx 290,093
---------
Total 4,400,000
(ii) THE PARTNERSHIPS. Each of the Partnerships will be
wound up and dissolved, and the assets and liabilities thereof will become
the assets and liabilities of SVI-Cal.
(iii) THE LIMITED LIABILITY COMPANIES. Each of the
Limited Liability Companies will be wound up and dissolved, and the assets
and liabilities thereof will become the assets and liabilities of SVI-Cal.
2. THE PUBLIC OFFERING. One (1) day following the Transaction,
the parties will use their reasonable best efforts to cause the Public
Offering to be effected, in accordance with the provisions of the
Registration Statement on Form SB-2 (the "REGISTRATION STATEMENT") filed by
SVI-Del with the Securities and Exchange Commission with respect thereto, the
Prospectus which is part of such Registration Statement (the "PROSPECTUS")
and the underwriting agreement among SVI-Del and Cruttenden Xxxx
Incorporated, Xxxxxxx Equities, Inc. and Xxxxxx & Xxxxxxx, Inc.
3. DISTRIBUTIONS. Prior to the date of the Transaction, SVI-Cal
will make a reasonable estimate of the minimum amount of the accumulated
adjustment account of SVI-Cal (the "ACCUMULATED ADJUSTMENT ACCOUNT") pursuant
to applicable Regulations promulgated under the Code through the date of the
Transaction and will distribute such amount, to be first offset by the
cancellation of existing advances, to AGS as the sole shareholder of SVI-Cal.
If such advances are not sufficient to offset the amount of the Accumulated
Adjustment Account as of the date of the Transaction in its entirety, the
balance will be evidenced by a promissory note payable by SVI-Cal to AGS
thirty (30) days following demand in the amount thereof, bearing interest at
the prime rate (the "PRIME RATE") published in THE WALL STREET JOURNAL on
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the date thereof. In addition, prior to the date of the Transaction, VI-1972
will distribute to each of AGS, Big Vines, Emanty and KJG a promissory note
payable to such party thirty (30) days following demand in an amount
sufficient to pay federal and state income taxes due on the income from
VI-1972 through the date of the Transaction, bearing interest at the Prime
Rate on the date thereof.
VI-1972 will distribute promissory notes to its partners providing
for the payment of amounts necessary to pay income taxes on the income from
the partnership through the date of the Transaction.
4. BUY-SELL AGREEMENT. Immediately following the Transaction,
the applicable parties shall execute the Buy-Sell Agreement in substantially
the form attached hereto as EXHIBIT A and by this reference incorporated
herein.
5. REPRESENTATIONS AND WARRANTIES.
(a) INVESTMENT. Each of AGS, SDS, HMS, Emanty, Big Vines and
KJG (as applicable, a "PURCHASER") severally represents and warrants to the
other parties that:
(i) Such Purchaser has had, prior to the Transaction, the
opportunity to ask questions of, and receive answers from, the Corporations
and their respective management concerning the Corporations and the terms
and conditions of this Agreement. Such Purchaser will rely in part upon
the information about the Corporations included in the Registration
Statement and the Prospectus and the representations and warranties of the
Corporations herein in making such Purchaser's investment decision.
(ii) Such Purchaser and (if applicable) each of such
Purchaser's members is an "accredited investor" as such term is defined in
Rule 501(a) of Regulation D under the Securities Act of 1933, as amended
(the "SECURITIES ACT").
(iii) Such Purchaser has been advised that the shares of
Class B Common Stock acquired by such Purchaser hereunder and the shares of
Class A Common Stock into which such Class B Common Stock may be converted
(collectively, the "ACQUIRED STOCK") have not been registered under the
Securities Act nor qualified under any state securities laws on the ground,
among others, that no distribution or public offering thereof is to be
effected, and that, in this connection, SVI-Del is relying in part on the
representations of such Purchaser set forth herein.
(iv) It is such Purchaser's intention to acquire the
Acquired Stock for such Purchaser's own account, and the Acquired Stock is
being and will be acquired for the purpose of investment and not with a
view to distribution or resale thereof.
(v) Such Purchaser (with respect to each of Emanty and Big
Vines, through its managing member or managing members) is able to bear the
economic
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risk of an investment in the Acquired Stock acquired by such Purchaser
pursuant to this Agreement and can afford to sustain a total loss on such
investment.
(vi) Such Purchaser (with respect to each of Emanty and
Big Vines, through its managing member or managing members) is an
experienced and sophisticated investor, is able to fend for himself,
herself or itself in the transactions contemplated by this Agreement,
and has such knowledge and experience in financial and business matters
that such Purchaser is capable of evaluating the risks and merits of
acquiring the Acquired Stock.
(vii) Notwithstanding any other provision contained in
this Agreement, such Purchaser understands that such Purchaser may never be
able to sell or dispose of the Acquired Stock and may thus have to bear the
risk of such investment for a substantial period of time, or forever. Such
Purchaser is aware that none of the Acquired Stock may be sold pursuant to
Rule 144 adopted under the Securities Act unless certain conditions have
been met and until such Purchaser has held the Acquired Stock for at least
one (1) year.
(viii) Such Purchaser either has a preexisting personal or
business relationship with the Corporations or one or more of their
respective officers, directors or controlling persons, or by reason of such
Purchaser's business or financial experience or the business or financial
experience of such Purchaser's professional advisors (who are unaffiliated
with and who are not compensated by the Company or any affiliate or selling
agent of the Company, directly or indirectly), has the capacity to protect
such Purchaser's own interests in connection with the acquisition of the
Acquired Stock.
(ix) Such Purchaser acknowledges that the certificates
representing the Acquired Stock shall contain the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR BY ANY
APPLICABLE STATE SECURITIES LAWS AND MUST BE HELD INDEFINITELY UNLESS
SUBSEQUENTLY REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR DISPOSED OF PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
(b) SVI-DEL. SVI-Del represents and warrants to each of AGS,
SDS, HMS, Emanty and KJG (as applicable, a "STOCKHOLDER") that all Acquired
Stock issued or issuable to such Stockholder has been or when issued will be
duly authorized, validly issued and fully paid and nonassessable, has been
issued or when issued will be issued in compliance with all applicable
federal and state securities laws, and was not or when issued will not be
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities.
(c) GENERAL. Each party severally represents and warrants to
each other party that:
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(i) If such party is not an individual, such party is duly
organized, validly existing and in good standing under the laws of the
jurisdiction under which it is organized.
(ii) Such party has full legal right, power and authority
to enter into this Agreement and to perform the transactions contemplated
hereby.
(iii) This Agreement has been duly authorized, executed
and delivered by such party and is a valid and binding agreement on the
part of such party, enforceable in accordance with its terms, except as
enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(iv) The making and performance of this Agreement by such
party and the consummation of the transactions contemplated herein will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under (A) any bond, debenture, note or other evidence
of indebtedness, or under any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to
which such party is a party or by which such party's properties may be
bound, (B) if such party is other than an individual, the charter, bylaws,
operating agreement or other governing documents of such party, or (C) any
law, order, rule, regulation, writ, injunction, judgment or decree of any
court, administrative agency, regulatory body, government or governmental
agency or body, domestic or foreign, having jurisdiction over such party or
such party's properties.
(v) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over such party or such party's
properties is required for the execution and delivery of this Agreement and
the consummation by such party of the transactions herein contemplated.
6. MISCELLANEOUS.
(a) NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on
the part of any Party in exercising any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
(b) AMENDMENTS, WAIVERS AND CONSENTS. Changes in or
additions to this Agreement may be made, and compliance with any covenant or
provision herein set forth may be omitted or waived, if the party to be bound
shall consent thereto in writing. Any waiver or consent may be given subject
to satisfaction of conditions stated therein and any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
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(c) ADDRESSES FOR NOTICES, ETC. All notices, requests,
demands and other communications hereunder shall be in writing (including
telegraphic communication) and mailed, by certified or registered mail, or
telegraphed or delivered to the applicable party at the address for notice as
set forth in the register maintained by SVI-Del for such purpose or at such
other address as shall be designated by such party in a written notice to the
other parties complying as to delivery with the terms of this SECTION 6.3.
All such notices, requests, demands and other communications shall, when
mailed or telegraphed, respectively, be effective when deposited in the mails
or delivered to the telegraph company, respectively, addressed as aforesaid.
(d) BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
heirs, legal representatives, successors and assigns.
(e) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Agreement or any other instrument
or document delivered in connection herewith shall survive the execution and
delivery hereof or thereof until the third (3rd) anniversary of the date of
this Agreement.
(f) PRIOR AGREEMENTS. This Agreement constitutes the entire
agreement among the parties and supersedes any prior understandings or
agreements concerning the subject matter hereof.
(g) SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
(h) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California (without
giving effect to its principles of conflicts of law).
(i) HEADINGS. Article, Section and Subsection headings in
this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
(j) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement
by signing any such counterpart.
(k) FURTHER ASSURANCES. From and after the date of this
Agreement, upon the reasonable request of any party, the other parties shall
execute and deliver such instruments, documents and other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
(l) GENERAL RELEASE. Each of the parties hereby expressly
waives any and all claims, demands and causes of action which he, she or it
has, claims to have or may have, whether known or unknown, against either one
or both of the Corporations and any of their past, present and future
corporate sponsors, parents, divisions, subsidiaries, affiliates,
7
related entities, successors, assigns, officers, attorneys, employees, agents
or representatives. As used in this Agreement, "claims," "demands" and
"causes of action" include, but are not limited to, contract claims, whether
express or implied, tort claims, equitable claims, fraud claims, claims
arising out of federal, state or local laws, regulations or ordinances. Each
of the parties warrants that he, she or it has no pending claims of any kind
before any court, administrative agency or other tribunal, or in arbitration
against either one or both of the Corporations or any of their sponsors,
corporate parents, divisions, sponsors, subsidiaries, affiliates, related
entities, successors, assigns, officers, attorneys, employees, agents or
representatives.
(m) CALIFORNIA CIVIL CODE SECTION 1542. It is understood and
agreed that all rights under California Civil Code Section 1542 are hereby
expressly waived by each party. Said Section provides as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the release which if known by
him must have materially affected his settlement with
the debtor.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as applicable as of the date first above written.
XXXXXX VINEYARDS CALIFORNIA INC., a
California corporation
By: /s/ XXXXXX X. XXXXXX
---------------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: Chief Executive Officer
"SVI-CAL"
XXXXXX VINEYARDS INC.,
a Delaware corporation
By: /s/ XXXXXX X. XXXXXX
---------------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: Chief Executive Officer
"SVI-DEL"
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VINEYARD INVESTORS 1972, a
California limited partnership
By: Xxxxxx Vineyards California Inc., a California
corporation formerly known as "Xxxxxx Vineyards
Inc."
By: /s/ XXXXXX X. XXXXXX
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: Chief Executive Officer
Its: General Partner
"VI-1972"
VINEYARD 405, a California limited partnership
By: Xxxxxx Vineyards California Inc., a California
corporation formerly known as "Xxxxxx Vineyards
Inc."
By: /s/ XXXXXX X. XXXXXX
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: Chief Executive Officer
Its: General Partner
"V-405"
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QUADRA PARTNERS LLC, a California
limited liability company
By: /s/ XXXXXX X. XXXXXX
---------------------------------------------------
Name: Xxxxxx X. Xxxxxx, as Trustee of the
Xxxxxx X. Xxxxxx Revocable Trust, dated
October 8, 1992
Its: Managing Member
"QUADRA"
EMANTY LIMITED LIABILITY COMPANY,
a California limited liability company
By: /s/ XXXXXX X. XXXXXX
---------------------------------------------------
Name: Xxxxxx X. Xxxxxx, as Trustee of the
Xxxxxx X. Xxxxxx Revocable Trust, dated
October 8, 1992
Its: Managing Member
"EMANTY"
BIG VINES LIMITED LIABILITY COMPANY,
a California limited liability company
By: /s/ XXXXX X. XXXXXX
---------------------------------------------------
Name: Xxxxx X. Xxxxxx
Its: Managing Member
By: /s/ XXXXX X. XXXXXX
---------------------------------------------------
Name: Xxxxx X. Xxxxxx
Its: Managing Member
"BIG VINES"
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/s/ XXXXXX X. XXXXXX
------------------------------------------------------
Xxxxxx X. Xxxxxx, as Trustee of the Xxxxxx X. Xxxxxx
Revocable Trust, dated October 8, 1992
"AGS"
/s/ XXXXX X. XXXXXX
------------------------------------------------------
Xxxxx X. Xxxxxx
"SDS"
/s/ XXXXX X. XXXXXX
------------------------------------------------------
Xxxxx X. Xxxxxx
"HMS"
/s/ XXXX X. XXXXXXXX
------------------------------------------------------
Xxxx X. Xxxxxxxx
"KJG"
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