ATER XXXXX XXXXXX XXXXXX & XXXXXXXX, LLP
222 S.W. Columbia, Suite 1800
Portland, Oregon 97201
(000)000-0000 (phone)
(000)000-0000 (fax)
January 6, 1997
Xx. Xxxxxxx Xxxxx
Acquisitions Northwest, Inc.
000 XX Xxxxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
RE: Letter of Intent to Purchase Tualatin Vineyards
Dear Xx. Xxxxx:
This Letter of Intent sets forth the terms and conditions by
which Willamette Valley Vineyards, Inc. ("Buyer") proposes to
purchase all of the outstanding shares of capital stock of
Tualatin Vineyards, Inc. ("Company") located near Forest Grove,
Oregon. The shareholders of Company are referred to hereinafter
as the "Sellers".
The parties recognize that this Letter of Intent has been
unanimously approved by the Boards of Directors of both Buyer and
Company. The terms and conditions include, but are not limited
to, the following:
1. Purchase Terms and Conditions. The Buyer will acquire
100 percent of the stock of Tualatin Vineyards, Inc., through a
tax-free reorganization in the form of a merger, as follows:
A. The purchase price will be $1,824,000 plus the
current assets (with inventory valued at cost under generally
accepted accounting principles), minus the current and long-term
liabilities of Company as reflected in its audited balance sheet
as of November 30, 1996, and any subsequent unaudited balance
sheet as of the Closing Date as defined in paragraph 2 below.
B. The purchase price will be paid in a combination of
cash and stock of Willamette Valley Vineyards, Inc., as follows:
i. Buyer will issue new shares of unregistered,
Willamette Valley Vineyards, Inc. common stock in an amount equal
to 65 percent of the purchase price. The method for establishing
the share price shall be agreed to between Buyer and Company, but
will be based on the mean of the closing prices for a period of
60 days immediately prior to the date of execution of the Stock
Purchase Agreement. To provide Sellers with liquidity for their
newly issued shares of Willamette Valley Vineyards, Inc. stock,
Buyer will either xxxxx Xxxxxxx demand and piggyback registration
rights typical for this type of transaction or, if the parties
mutually agree, the shares shall be exempt from registration
pursuant to a state fairness hearing and Section 3(a)(10) of the
Securities Act of 1933.
ii. The remaining 35 percent of the purchase
price will be paid in cash at Closing.
iii. The purchase price will be paid to Sellers
in such amounts as equals their prorata ownership in Company in
such combinations of shares of Willamette Valley Vineyards, Inc.
stock and cash as determined by Company. Company will provide to
Buyer the prorata amounts and combinations of stock and cash
payments prior to the closing. Any upward or downward adjustment
to the purchase price based on the results of Company's audited
balance sheet at November 30, 1996 and any subsequent unaudited
balance sheet as of the Closing Date, shall be made
proportionately to the amount of shares of Willamette Valley
Vineyards, Inc. stock and cash paid to each Seller as their
portion of the purchase price.
C. As an xxxxxxx money deposit for the purchase
described in this Letter of Intent, Xxxxx agrees to place $12,000
in escrow. The xxxxxxx money deposit shall be given by Xxxxx,
together with mutually agreeable escrow instructions to the
escrow agent, as soon as practicable following execution of this
Letter of Intent. At Closing, assuming all closing conditions
have been satisfied or waived, the xxxxxxx money deposit will be
returned by escrow agent to Buyer or paid to Sellers.
D. The parties shall escrow $100,000 of the purchase
price (such amount to consist of $65,000 in value of Willamette
Valley Vineyards, Inc. stock and $35,000 in cash) until Buyer and
Seller in their reasonable determination are satisfied with the
amounts set forth in the unaudited balance sheet of the Company
dated as of the Closing Date.
2. Closing Date. The Closing Date shall be as soon as
possible in January 1997, or any other date which is mutually
agreeable between the parties.
3. Xxxxx's Conditions to Closing. Xxxxx's obligation to
proceed with the transaction under this Letter of Intent is
subject to the following conditions and Xxxxx's satisfactory due
diligence investigation with respect to the following issues:
A. Analysis and verification of the continued
viability of Company's existing customer contacts and business
relationships.
B. Company to pay off entire amount of its loan from
Farm Credit Services (FCS). Should the Company be required to
borrow funds on a short term basis to pay off the FCS loan, Xxxxx
agrees to pay off Company's short term obligation at the time of
closing.
C. Evaluation of all other assets, liabilities,
business and financial condition of Company, and verification of
the balance sheet items such as accounts payable, accounts
receivable, inventory and accrued expenses.
D. Receipt of any and all consents and approvals, if
any, from all third parties, including without limitation the
ability of Buyer to obtain all required licenses from
governmental authorities (including the transfer of Company's
liquor licenses) and all required assignments of contracts,
leases, agreements and the like to enable Buyer to carry out
Company's business on a timely basis following the Closing.
X. Xxxxx's ability to utilize Company's assets
effectively and efficiently depends on Xxxxx's successful
employment of certain key employees of Company. Xxxxx's
obligation to close the transaction is conditioned upon securing
the employment commitment of those employees which Xxxxx deems
are key to successful operation of Company's business.
X. Xxxxx will be obtaining third party financing for
the cash portion of the purchase price and certain working
capital requirements. Xxxxx's obligation to proceed with the
transaction is subject to Buyer obtaining timely financing on
satisfactory terms.
G. The receipt of such formal and informal opinions of
legal, tax and accounting counsel as Buyer may require concerning
such matters as may be of reasonable concern to Buyer.
H. The execution by Xxxxx, Company and Sellers of a
definitive Stock Purchase Agreement together with all related
assignments and other instruments necessary to fully transfer all
outstanding shares of Tualatin Vineyards, Inc. stock to Buyer.
I. Company's and Sellers' performance of their
obligations described in paragraphs 5, 6 and 7 below.
J. Approval of the terms of the purchase by Xxxxx's
investment bankers.
K. Approval of the terms of the purchase by a third
party investor with whom Xxxxx has had preliminary discussions
about a proposed significant strategic investment in Buyer.
L. The agreement of all shareholders of Company to
sell their shares to Buyer and the execution of the Stock
Purchase Agreement by all shareholders.
X. Xxxxx shall have granted registration rights to
Buyer's founders, Xxx Xxxxxx and Xxx Xxxxxxxx, on terms
consistent with the registration rights granted to Sellers.
4. Stock Purchase Agreement. The Stock Purchase Agreement
shall, among other things include:
A. Provisions reflecting the sale and purchase of all
outstanding shares of Tualatin Vineyards, Inc. stock, purchase
price, payment, and closing requirements pursuant to paragraphs 1
through 3 of this Letter of Intent.
B. Representations, warranties and indemnity
agreements by Company and Sellers, each to survive the closing
for a period of one year following the Closing Date, including
but not limited to those listed below. For purposes of the
representations and warranties, the term "Company's knowledge" or
"Seller's knowledge" shall refer to matters actually known by
Company or Sellers as the case may be. By way of illustration
and not limitation, the Stock Purchase Agreement shall include
the following representations and warranties by Company and
Sellers:
i. the legal status and authority of Company;
ii. the authorization and validity of the Stock
Purchase Agreement and all related agreements as to Company and
Sellers;
iii. the ownership structure of Company and
existence and structure of any subsidiaries or affiliates of
Company;
iv. the status of all consents and approvals
required to be obtained by Company to consummate the purchase;
v. Company's compliance with all laws, and the
status of all licenses and permits applied for or obtained for
the operation of Company's business;
vi. the accuracy of the financial statements and
other information, whether of a financial or operational nature,
of Company, provided to Buyer;
vii. the status of any claims, litigation or
liabilities, including tax liabilities prior to the Closing Date;
viii. that all contracts, leases, licenses,
permits and other agreements of Company have been disclosed and
are valid and enforceable according to their terms, except as
disclosed to Buyer;
ix. that Seller has good and unencumbered and
marketable title to all of the assets of the Company, without the
existence of any liens, charges or other interests except those
disclosed to and accepted by Xxxxx;
x. that Seller has adequate title to the
inventory as reflected on the financial statements as necessary
for processing of the inventory into furnished products for sale
by Company;
xi. that, to the best of Company's knowledge, its
receivables are unconditional and enforceable obligations of the
account debtors and are not subject to any offsets or recoupment,
except as disclosed to Buyer;
xii. that Xxxxxx's will be responsible for all
taxes due as a result of operations prior to the Closing Date;
xiii. that, to the best of Company's knowledge,
the operation of all of the assets and the conduct of Company's
business shall have been and shall be, as the Closing Date, in
full compliance with all applicable federal, state and local
statutes, ordinances and regulations, except as disclosed in
writing to Buyer;
xiv. that there are no outstanding claims or
proceedings pending or threatened against Company as a result of
labor contracts, except as disclosed to Buyer;
xv. that Sellers have good, unencumbered and
marketable title to their respective shares of stock of Company,
and that Sellers have obtained all necessary consents and
approvals for transfer of the shares to Buyer;
xvi. that, to the best of Company's knowledge,
Company has not failed to disclose any facts, conditions or
circumstances which could have a material adverse effect on the
Company;
xvii.that, to the best of Company's knowledge,
there are no conditions applicable to any of the assets or the
facilities operated by the Company which could lead to a claim,
liability or investigation relating to environmental
contamination, except as disclosed in writing to Buyer; Sellers
shall indemnify Buyer against any and all such environmental
claims or liabilities applicable to periods prior to Closing
Date; and
xviii. that no material changes have occurred in
the Company's financial statements between 30 November 1995 and
the Closing Date; in particular, the fixed assets including,
land, buildings, improvements and equipment.
C. Representations and warranties of Buyer as to:
i. Buyer's legal status and authority;
ii. the authorization and validity of the Stock
Purchase Agreement and related documents as to Buyer; and
iii. the status of any pending or threatened
litigation or other proceeding involving Buyer.
D. Provisions to the effect that the Sellers shall
each be personally liable to the extent of their ownership
interest in the Company for the performance of Company's
obligations and the accuracy of Company's representations and
warranties.
E. The agreement of Sellers (except for Xxxxxxx
Xxxxxx) not to compete with Buyer for a period of two years after
the Closing Date and to forever hold in confidence all knowledge
and information with respect to Company's business.
5. Conduct of Business. Until the Closing Date, Company
will use best efforts to conduct its business in a reasonable and
prudent manner in accordance with past practices; will engage in
no transactions out of the ordinary course of business; will use
best efforts to preserve the existing business organization and
relations with its employees, customers, suppliers and others
with whom it has a business relationship; will use their best
efforts to preserve and protect the assets; will not dispose of
any of its assets, except such as are retired and replaced in the
ordinary course of business; will not make any distribution to
shareholders; will not, without Xxxxx's approval which will not
be unreasonably withheld, pay any bonuses nor make any salary or
wage increases other than those regularly scheduled in the normal
course of business, and will conduct its business in compliance
with all applicable laws and regulations.
6. Access and Confidentiality. During reasonable business
hours, Buyer and its agents will have access to the premises in
which Company conducts its business and to all of the books,
records, personnel, consultants, accountants and attorneys of
Company. Company will furnish to Buyer such financial records,
operational data and other information as Buyer shall reasonably
request and shall immediately provide to Buyer or its agents, for
review, Company's Articles of Incorporation, bylaws, stock book,
minutes book, retirement plans, insurance records, employee
agreements, leases, contracts, invoices and documents to which
Company is a party.
Buyer understands that all information provided by the Company
is confidential, proprietary and, potentially, sensitive
material. Xxxxx agrees to use such information solely for the
purpose of evaluating and structuring the transaction
contemplated in this Letter of Intent. Xxxxx will not disclose
to anyone other than those advisors, accountants, attorneys and
staff assisting Buyer in this transaction. No announcement,
discussion, press release or other publication of this Letter of
Intent, the possibility of the purchase or the negotiations and
discussions between Buyer and Company may be made or issued by
one party without the written authorization of the other party,
except that each party may seek the advice of its counsel,
accountants and other advisers with respect thereto.
7. Negotiations with Others. Company and Xxxxxxx
acknowledge that, upon execution of this Letter of Intent, Xxxxx
will proceed with the investigation described above, will retain
counsel, accountants and other advisers, and will commence
preparation of documents to implement the terms hereof.
Accordingly, Company and Sellers agree that prior to the 90th day
following the date on which Xxxxx executes this Letter of Intent,
neither the Company, nor Sellers nor Company's employees or
agents will directly or indirectly contact, solicit from, or
negotiate or communicate with anyone other than Buyer regarding
the sale or potential sale of Company's stock, its assets, or any
ownership interest in Company, and any such contacts,
solicitations, negotiations or communications which were
initiated prior to the execution of this Letter of Intent shall
be suspended and shall not resume. Company will promptly reveal
to Buyer the nature and terms of any unsolicited offer, proposal
or communication Seller receives from any third party after the
execution of this Letter of Intent.
Effect of this Letter of Intent; Miscellaneous. When signed by
all parties, paragraphs 1, 3, 5, 6, 7 and 8 of this Letter of
Intent will be a binding and enforceable agreement between the
parties. Buyer and Company agree to proceed promptly in the
preparation and negotiation of the definitive Stock Purchase
Agreement. The Stock Purchase Agreement will be prepared by
Company's counsel consistent with the terms and conditions
outlined in this Letter of Intent. Regardless of whether a
definitive Asset Purchase Agreement is entered into, Buyer and
Seller will bear their own expenses for this transaction. The
parties understand and acknowledge that Company will pay to
Acquisitions Northwest, Inc. ("ANI") a broker's fee of $115,000
in connection with XXX's representation of Company in the
transaction which is the subject of this Letter of Intent. The
parties further understand and acknowledge that XXX's fee shall
be paid out of the shares of Willamette Valley Vineyards, Inc.
common stock to be received by Sellers in this transaction.
This Letter of Intent shall be effective upon signature by all
parties in the spaces below.
Very truly yours,
/s/ Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
Vice President/General Manager
Willamette Valley Vineyards, Inc.
[SIGNATURES ON FOLLOWING PAGE]
SIGNATURE PAGE
ACCEPTED AND AGREED TO:
Tualatin Vineyards, Inc.
By: /s/ Xxxxxxx Xxxxxxx 1/16/97
Xxxxxxx Xxxxxxx Date
President and Director
/s/ Xxxxxxx Xxxxxx 1/17/97
Xxxxxxx Xxxxxx, Director Date
/s/ Xxxxx Xxxxxxx 1/16/97
Xxxxx Xxxxxxx, Director Date
Willamette Valley Vineyards, Inc.
By: /s/ Xxxxx X. Xxxxxx 1/15/97
Xxxxx X. Xxxxxx Date
President and Chairman of
the Board of Directors
Xx. Xxxxxxx Xxxxx
January 6, 1997
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