AMENDMENT NO. 2 TO
VINEYARD DEVELOPMENT AND
MANAGEMENT AGREEMENT
THIS AMENDMENT NO. 2 TO VINEYARD DEVELOPMENT AND MANAGEMENT AGREEMENT
(this "Amendment") is made and entered into as of the 7th day of May 1998, by
and between XXXXXX VINEYARDS CALIFORNIA INC., a California corporation and
formerly named Xxxxxx Vineyards and Management Co. ("Xxxxxx"), and IDV NORTH
AMERICA, INC., a Connecticut corporation and formerly named Heublein, Inc.
("Heublein"). This Amendment is being entered into for the purpose of
amending that certain Vineyard Development and Management Agreement between
the parties, dated as of December 1, 1995, as previously amended by that
certain Amendment No. 1 to Vineyard Development and Management Agreement
between the parties, dated as of March 28, 1997 (collectively, the
"Management Agreement"). All capitalized terms used herein without separate
definition shall have the same meaning as used in the Management Agreement.
WITNESSETH:
WHEREAS, clause (vii) of Section 10.3 of the Management Agreement
provides that Heublein may terminate the Management Agreement if Xxxxxx X.
Xxxxxx and members of his family fail to beneficially own, directly or
indirectly, at least 51% of the capital stock of Xxxxxx;
WHEREAS, at the time the Management Agreement was entered into, Xxxxxx
was a privately held company with a single class of capital stock all
outstanding shares of which were owned by Xxxxxx X. Xxxxxx;
WHEREAS, in July 1997, in connection with the initial public offering of
Xxxxxx Vineyards Inc., a Delaware corporation ("SVI"), (i) Xxxxxx became a
wholly owned direct subsidiary of SVI, (ii) SVI created a dual class capital
structure comprised of Class A Common Stock and Class B Common Stock, with
the Class B Common Stock possessing greater voting rights than the Class A
Common Stock, (iii) all of the outstanding shares of Class B Common Stock of
SVI were issued to and are owned beneficially and of record by Xxxxxx X.
Xxxxxx, members of his family, Xxxx Xxxxxxxx (an officer of each of SVI and
Scheid) and members of his family, and (iv) shares of Class A Common Stock
were issued to purchasers in the offering;
WHEREAS, each share of Class A Common Stock of SVI is entitled to one
vote and each share of Class B Common Stock of SVI is entitled to five votes
on all matters submitted to a vote of the stockholders of SVI; and except for
matters where applicable law requires the approval of one or both classes of
the Common Stock of SVI voting as a separate class and except as described
below in connection with the election of directors, the Class A Common Stock
and the Class B Common Stock vote together as a single class on all matters
presented for a vote of the stockholders of SVI;
WHEREAS, the holders of the Class A Common Stock, voting as a separate
class, are entitled to elect 25% of the authorized number of directors of SVI
rounded up to the nearest whole number, and the holders of the Class B Common
Stock, voting as a separate class, are entitled to elect the remaining
directors of SVI; and
WHEREAS, due to the proposed changes in the ownership of SVI, and
indirectly in Xxxxxx, described in excerpts from SVI's preliminary prospectus
dated April 27, 1998 that were delivered to Heublein on or about May 6, 1998
(the "Preliminary Prospectus Excerpts"), the parties desire to amend clause
(vii) of Section 10.3 of the Management Agreement.
NOW, THEREFORE, in consideration of the payment of $10.00 and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. AMENDMENT OF CLAUSE (vii) OF SECTION 10.3. Clause (vii) of Section
10.3 of the Management Agreement is hereby amended to read in its entirety as
follows; provided, that such amendment shall be effective only in the event
that the public offering of shares of Class A Common Stock of SVI by Xxxxxx
X. Xxxxxx (and certain other selling stockholders in the event of an exercise
of the underwriters' overallotment option) is consummated substantially in
the manner described in the Preliminary Prospectus Excerpts:
"(vii) if Heublein is the Terminating Party, (A) Xxxxxx X. Xxxxxx
and the members of his family and Xxxx X. Xxxxxxxx and the members of his
family, collectively, shall fail to beneficially own, directly or
indirectly, shares of the capital stock of SVI that both (1) represent a
majority of the combined voting power of the outstanding shares of all
classes of Common Stock of SVI, when voting together as a single class,
and (2) have the power to elect a majority of the total authorized number
of directors of SVI, or (B) SVI shall fail to beneficially own, directly
or indirectly, shares of the capital stock of Xxxxxx representing at least
80% of the voting power of Xxxxxx in the election of directors; Xxxxxx
shall give prompt written notice to Heublein of any such failure; or".
2. DIAGEO AND UDV AS AFFILIATES OF HEUBLEIN. Xxxxxx acknowledges and
agrees that Diageo plc and United Distillers and Vintners plc are
"Affiliates" of Grand Metropolitan plc for purposes of clause (viii) of
Section 10.3 of the Management Agreement.
3. LEGAL FEES. Xxxxxx agrees to reimburse Heublein for its reasonable
attorneys' fees and costs incurred in connection with the negotiation and
execution of this Amendment and the confirmation by Heublein described in
Section 5 below, up to an amount not to exceed $1,500.
4. REPRESENTATION BY XXXXXX. Xxxxxx represents and warrants to
Heublein that since the time that the Management Agreement was entered into,
there has been no material adverse change in the financial condition,
operations or assets of Xxxxxx.
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5. HEUBLEIN CONSENT TO BANK WAIVER. Xxxxxx has requested Bank of
America National Trust and Savings Association ("Bank") to grant a waiver of
default substantially in the form of EXHIBIT A attached to this Amendment in
connection with a loan related to the vineyard that is the subject of the
Management Agreement. Bank has advised Xxxxxx that it desires to obtain
confirmation from Heublein that the grant of such a waiver by Bank will not
adversely affect any current obligation of Heublein to Xxxxxx and/or Bank
related to such loan. Heublein hereby agrees to provide such confirmation to
Bank in such form as shall be reasonably acceptable to Heublein; provided,
however, that such confirmation shall not subject Heublein to any increased
obligation to Xxxxxx or Bank.
6. FULL FORCE AND EFFECT. Except as amended hereby, the Management
Agreement remains in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
XXXXXX VINEYARDS CALIFORNIA INC.
By: /s/ XXXXX X. XXXXXX
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Signature
Vice President Finance
---------------------------------
Name and Title
IDV NORTH AMERICA, INC.
By: /s/ XXXX X. XXXXXXXXXXX
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Signature
Vice President, Assistant Secretary
and Assistant General Counsel
---------------------------------
Name and Title
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EXHIBIT A
WAIVER
XXXXXX VINEYARDS CALIFORNIA INC., a California corporation and formerly
named Xxxxxx Vineyards and Management Co. (the "Borrower"), has requested
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank") to waive
any default that may occur under Section 9.7 of that certain Business Loan
Agreement, dated as of March 28, 1997, between the Borrower and the Bank (the
"Loan Agreement") as a result of the public offering described herein, and
the Bank is willing to grant such waiver as specified herein. All
capitalized terms used herein without separate definition have the same
meaning as used in the Loan Agreement.
DISCLOSURES BY THE BORROWER
The Borrower has notified the Bank of the following:
Section 9.7 of the Loan Agreement provides that it shall be an event of
default if a direct or indirect change in the Borrower's capital ownership in
excess of 10% shall occur.
The Borrower is a wholly owned subsidiary of Xxxxxx Vineyards Inc., a
Delaware corporation ("SVI").
Certain principal stockholders of SVI propose to sell between 1,000,000
and 1,150,000 shares of Class A Common Stock of SVI in an underwritten public
offering, as described in SVI's Registration Statement on Form SB-2 filed
with the Securities and Exchange Commission on April 27, 1998 (the
"Offering"). The maximum number of shares proposed to be sold represents
17.2% of the aggregate number of outstanding shares of Class A Common Stock
and Class B Common Stock of SVI. It is anticipated that the shares sold in
the Offering will be widely distributed and not concentrated in the hands of
any buyer or buyers.
As a result of the Offering, the stockholdings of the management
personnel of SVI and their family members (the "Control Group") will decrease
from 65.3% to between 48.1% to 50.4% of the aggregate number of outstanding
shares of Class A Common Stock and Class B Common Stock of SVI.
SVI has a dual class capital structure consisting of Class A Common
Stock and Class B Common Stock. Generally, except for the election of
directors, the Class A Common Stock and the Class B Common Stock vote
together as a single Class on all matters presented for a vote of the
stockholders, with each share of Class A Common Stock entitled to one vote
and each share of Class B Common Stock entitled to five votes. The holders
of the Class B Common Stock, voting as a separate class, are entitled to
elect a majority of the Board of Directors of SVI, and the holders of the
Class A Common Stock, voting as a separate class, are entitled to elect a
minority of the Board of Directors of SVI.
Immediately following the Offering, the Control Group will retain
effective control of SVI and the Borrower, and will continue to direct the
business, management and policies of
SVI and the Borrower, through (i) holding from 74.6% up to 83.5% of the
combined voting power of the outstanding Class A and Class B Common Stock of
SVI and (ii) the ability to elect a majority of the Board of Directors of SVI
as a result of their holdings of shares of Class B Common Stock of SVI.
WAIVER
Based on the disclosures made by the Borrower as described above, the
Bank hereby waives any default that may occur under Section 9.7 of the Loan
Agreement as a result of any change in ownership of the capital stock of SVI
that may result from the proposed sales of shares of Class A Common Stock of
SVI in the Offering.
This Waiver shall be effective as of the 7th day of May 1998.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
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Signature
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Name and Title
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