STOCK PURCHASE AGREEMENT
Between
FRANCISCAN VINEYARDS, INC.
(a Delaware corporation)
Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxxxx Xxxxxxx
Jean-Xxxxxx Xxxxxxx
Xxxxxxx Xxxxx-Xxxxxxx Und Kinder Beteiligungsverwaltung II, GbR
Xxxxx Xxxxx Xxxxx Und Kinder Beteiligungsverwaltung II, GbR
Xxxxxx Xxxxx-Xxxxxxx,
Xxxxxxxxx Xxxxx-Xxxxxxx and
Xxxxx Xxxxx-Xxxxxxx
and
CANANDAIGUA BRANDS, INC.
(a Delaware corporation)
Dated: April 21, 1999
TABLE OF CONTENTS
Page
1. PLAN OF ACQUISITION.........................................................3
1.1 Sale and Purchase of Shares.........................................3
1.2 Purchase Price and Payment..........................................3
1.3 Adjustments to Purchase Price.......................................3
1.4 Closing.............................................................4
1.5 Execution and Delivery of Purchase Price
and Closing Documents......................................... .....4
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS...................5
2.1 Due Incorporation/Qualification.....................................5
2.2 Outstanding Capital Stock; Title....................................6
2.3 Subsidiaries and Other Affiliates...................................7
2.4 Consents............................................................7
2.5 No Breach...........................................................8
2.6 Financial Statements of the Company and ACSA and EVSA...............8
2.7 Absence of Certain Changes..........................................9
2.8 Tax Matters........................................................10
2.9 Litigation.........................................................11
2.10 Compliance With Laws..............................................11
2.11 Title to and Condition of Assets..................................12
2.12 Inventory.........................................................12
2.13 Product Recall....................................................12
2.14 Labor Matters.....................................................12
2.15 Intellectual Property.............................................12
2.16 Employee Benefits Plan............................................13
2.17 Employment Contracts..............................................15
2.18 Contracts.........................................................15
2.19 Insurance.........................................................15
2.20 Environmental Compliance..........................................15
2.21 Related Transactions..............................................16
2.22 Survival..........................................................16
2.23 Disclosure........................................................16
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER................................16
3.1 Due Incorporation..................................................16
3.2 Power and Authority................................................16
3.3 Consents...........................................................17
3.4 No Breach..........................................................17
3.5 BATF/ABC Licensing.................................................17
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3.6 Financing..........................................................18
3.7 Investment Intent..................................................18
3.8 Survival...........................................................18
4. COVENANTS OF THE COMPANY AND SELLERS.......................................18
4.1 Operation of Business of the Company...............................18
4.2 Access to Records..................................................19
4.3 Consents...........................................................19
4.4 Notification.......................................................19
4.5 No Shop Provision..................................................20
4.6 Hart-Scott-Rodino Act..............................................20
4.7 Environmental Assessment...........................................20
4.8 Certain Financial Information......................................22
4.9 Identification of Inventory........................................22
4.10 Title Matters.....................................................23
4.11 Cooperation in Huneeus-Chantre Properties Plan Severance.........24
5. BUYER'S COVENANTS..........................................................24
5.1 (Intentionally left blank).........................................24
5.2 HSR Act............................................................24
5.3 Notification of Certain Matters....................................24
5.4 Company Records....................................................24
5.5 Brokers and Finders................................................25
5.6 Environmental Assessment Commissioned..............................25
5.7 Repayment of Loans.................................................25
5.8 Payment of Legal Fees..............................................25
6. CONDITIONS TO BUYER'S OBLIGATIONS..........................................25
6.1 Covenants..........................................................25
6.2 HSR Act............................................................26
6.3 Resignation of Directors and Termination of Valette
Employment Agreement...............................................26
6.4 Sale of Vineyards..................................................26
6.5 EVSA Stock Agreement...............................................26
6.6 ACSA Stock Agreement...............................................27
6.7 ACSA and EVSA Shareholders Agreements and Buy-Sell Agreement.......27
6.8 ACSA Distribution Agreement........................................27
6.9 Grape Supply Agreements............................................27
6.10 (Intentionally left blank)........................................28
6.11 Quintessa Wine Processing Agreement...............................28
6.12 Lewis Ranch Purchase Agreement....................................28
6.13 Intercompany Loans................................................28
6.14 (Intentionally left blank)........................................28
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6.15 Employment and Consulting Agreement...............................28
6.16 Environmental Assessment..........................................28
6.17 No Knowledge of Breach by Other Parties...........................29
6.18 Opinions of Counsel...............................................29
6.19 Chilean Counsel Opinionl..........................................29
6.20 (Intentionally left blank)........................................29
6.21 Payment to MJ Lewis Corp..........................................29
6.22 Additional Undertakings...........................................29
7. CONDITIONS TO SELLERS' OBLIGATIONS.........................................30
7.1 Representations and Covenants......................................30
7.2 HSR Act............................................................30
7.3 Sale of Vineyards..................................................30
7.4 EVSA Stock Agreement...............................................30
7.5 ACSA Stock Agreement...............................................30
7.6 ACSA and EVSA Shareholders Agreements and Buy-Sell Agreement.......31
7.7 ACSA Distribution Agreement........................................31
7.8 Grape Supply Agreements............................................31
7.9 (Intentionally left blank).........................................32
7.10 Quintessa Wine Processing Agreement...............................32
7.11 Lewis Ranch Purchase Agreement....................................32
7.12 Intercompany Loans................................................32
7.13 (Intentionally left blank)........................................32
7.14 Non-Competition and Confidentiality Agreement.....................32
7.15 No Knowledge of Breach by Other Party.............................33
7.16 Opinion of Counsel................................................33
8. INDEMNIFICATION AND CERTAIN REMEDIES.......................................33
8.1 Obligation of Sellers to Indemnify for Certain Liabilities.........33
8.2 Obligation of Buyer to Indemnify...................................33
8.3 Claims.............................................................34
8.4 Obligations of Sellers to Reduce Purchase Price....................34
9. TERMINATION AND ABANDONMENT................................................35
9.1 Methods of Termination.............................................35
9.2 Procedure Upon Termination.........................................35
10. MISCELLANEOUS.............................................................35
10.1 Counterparts......................................................35
10.2 Notices...........................................................35
10.3 Public Announcement...............................................37
10.4 Successors and Assigns............................................37
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10.5 Governing Law.....................................................37
10.6 Waiver and Other Action...........................................38
10.7 Entire Agreement..................................................38
10.8 Severability......................................................38
10.9 Interpretation....................................................38
10.10 Third Party Beneficiaries........................................38
10.11 Arbitration of Environmental Dispute.............................38
10.12 Venue............................................................41
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of April 21,
1999, among Xxxxxxx Xxxxxxx, Xxxxxxx Xxxxxxxxx Xxxxxxx, Jean-Xxxxxx Xxxxxxx,
Xxxxxxx Xxxxx-Xxxxxxx Und Kinder Beteiligungsverwaltung II, GbR (formerly known
as Xxxxxxx Xxxxx-Xxxxxxx-Tabet Und Kinder Beteiligungsverwaltung II, GbR), and
Xxxxx Xxxxx Xxxxx Und Kinder Beteiligungsverwaltung II, GbR (the "Selling
Shareholders") and Xxxxxx Xxxxx-Xxxxxxx, Xxxxxxxxx Xxxxx-Xxxxxxx and Xxxxx
Xxxxx-Xxxxxxx (the "Selling Partners") (collectively with the Selling
Shareholders, the "Sellers"), Franciscan Vineyards, Inc., a Delaware corporation
(the "Company"), and Canandaigua Brands, Inc., a Delaware corporation ("Buyer").
BACKGROUND
The Company is engaged in producing wines which have a distinguished
place in the wine market. The wines are produced primarily from grapes grown by
the Company and affiliates of the Sellers at facilities located in the most
important wine producing regions in the State of California and in Chile (the
"Business"). The Company's wines sell in the premium, super premium and ultra
premium price categories. The principal brands sold by the Company are
Franciscan, Mt. Veeder, Estancia, Veramonte and Quintessa. The Company's Chilean
affiliates were among the first significant producers of premium grapes and
wines in Chile's famed Casablanca Valley.
Buyer is engaged in the international production and marketing of wine,
spirits and beer.
The Sellers and affiliates of the Company now desire to sell and
transfer all of their ownership in the Company to the Buyer and to enter into
ancillary agreements involving the sale and purchase of certain vineyards, the
purchase of grapes, wine processing, distribution and joint ownership of certain
corporations in Chile, along with other arrangements with Buyer pertaining to
the Business. The Buyer desires to acquire the Business and to enter into these
other agreements and arrangements. The Buyer further desires that the Business
continue operating with the same vision, drive and direction currently guiding
the Business.
Empresas Vitivincolas SA is a Chilean corporation owning and operating
vineyards in Chile ("EVSA"). Alto de Casablanca SA is a Chilean corporation
owning and operating the Veramonte winery ("ACSA"). Stonewall Canyon Vineyards,
LLC, a California limited liability company ("SCV") and Eckes Properties, Inc.,
a California corporation ("EPI") own vineyards in Monterey County, Napa County
and the Alexander Valley of Sonoma County, California and are affiliates of the
Sellers.
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Sellers are directly or indirectly the owners of all of the issued and
outstanding shares of capital stock consisting of 10,198 shares of Class A and
Class B common stock and 628,500 shares of Class C stock and 901,087 shares of
preferred stock of the Company (collectively, the "Shares") and the Selling
Partners are the owners of all partnership interests in PCH IV Eckes-Chantre
Beteiligungsverwaltung GbR ("PCH IV") which holds certain of the Shares. In
connection with the closing of the transactions contemplated by this Agreement,
the holders of all options to acquire shares of common stock in the Company
pursuant to stock option and stock purchase agreements ("Option Holders") will
be bought out of their option rights by the Company in the form of a cashless
exercise of their stock options. The Shares will be sold on the terms and
conditions of this Agreement for a purchase price of $180,830,000.
At the same time as the acquisition of the Company is consummated,
other arrangements involving the Buyer will be consummated as follows: (i) SCV
and EPI will sell and Buyer will purchase certain vineyards and related vineyard
assets of these two companies for a purchase price of $28,400,000, and at the
same time SCV will distribute to the Company an amount equal to the Company's
basis in SCV as held by its MJ Lewis subsidiary, (ii) Huneeus-Chantre Properties
LLC ("HCP") and the Company will modify the existing grape purchase contract by
which the Company buys substantially all of the grapes grown on the Quintessa
vineyards to provide for HCP or its affiliates to retain certain of these grapes
but without changing the price terms of the agreement, (iii) H/Q Wines LLC ("H/Q
Wines") and the Company will enter into a medium-term agreement whereby the
Company will handle the vinification, aging, bottling and storage of Quintessa
wines while H/Q Wines seeks to build or acquire its own facilities for these
purposes, (iv) the Company will pay in cash all obligations which it owes to
SCV, EPI, HCP, EVSA and ACSA, other intercompany obligations will be reconciled,
and key executive loans from the Company will be repaid, (v) all of the
outstanding Series A preferred stock of each of EVSA and ACSA, which stock is
currently owned by the Company, will be converted to common stock of EVSA and
ACSA at or prior to Closing, and the Company will acquire sufficient additional
common stock of EVSA to achieve 70% ownership of both EVSA and ACSA and will
enter into a shareholders agreement concerning each of these companies, (vi) the
Company will enter into agreements with Xxxxxxx Xxxxxxx, Jean-Xxxxxx Xxxxxxx and
Xxxxxxx Xxxxxxxxx Xxxxxxx to assure their continued involvement in the Company
after the Closing, (vii) ACSA and the Company will enter into an exclusive,
worldwide distribution agreement in perpetuity with respect to the Veramonte
brand providing an appropriate pricing mechanism and other terms, (viii) the
shareholders of ACSA, EVSA and the parties to the ACSA Distribution Agreement
will enter into a buy/sell agreement providing for certain parties to trigger a
buy/sell arrangement with respect to ACSA and EVSA and the termination of the
Distribution Agreement after a certain period, and (ix) the parties will
negotiate in good
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faith to enter into an agreement whereby H\Q Wines may acquire the Xxxxxxxxx
xxxxx and inventory from the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants contained herein, the
parties hereto agree as follows:
1. PLAN OF ACQUISITION.
1.1 SALE AND PURCHASE OF SHARES. Subject to and upon the terms
and conditions contained herein, at the closing provided for in Section 1.4
(Closing),
(a) the Selling Shareholders will sell and transfer to
Buyer, and Buyer will purchase and accept delivery from Selling Shareholders,
all of the Shares (other than the Shares held by PCH IV, which are addressed in
paragraph 1.1(b) below); and
(b) the Selling Partners will sell and transfer to Buyer,
and Buyer will purchase and accept delivery from the Selling Partners, of
assignment of all of the partnership interests in PCH IV (the "Partnership
Interests").
1.2 PURCHASE PRICE AND PAYMENT.
(a) PURCHASE PRICE. Upon the terms and subject to the
conditions contained in this Agreement, Buyer will purchase the Shares and the
Partnership Interests from Sellers in cash in the aggregate amount of One
Hundred Eighty Million and Eight Hundred Thirty Thousand Dollars ($180,830,000)
(the "Purchase Price"), of which all will be paid at the Closing. The Purchase
Price is to be allocated amongst the Sellers as shown in Exhibit 1.2(a)
(Allocation of Purchase Price).
1.3 ADJUSTMENTS TO PURCHASE PRICE. At Closing, the Purchase
Price shall be adjusted with respect to the following matters:
(a) reduced by 60% of an amount equal to aggregate cash
bonuses not to exceed $4 million paid by the Company to non-option participants
of Company in anticipation of the Closing; and
(b) if required, reduced by an amount not to exceed $9
million in accordance with ss.8.4 (Obligations of Sellers to Reduce Purchase
Price), clause (b) of ss.4.7 (Environmental Matters) and subject to the rights
of the parties to terminate this Agreement pursuant to clause (b) of
ss.9.1(Methods of Termination); and
(c) reduced by an amount equal to the dollar amount
expended by the Company in connection with the cashless exercise and
cancellation of all rights of the Option Holders to acquire stock in the
Company; and
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(d) increased by the amount transferred to MJ Lewis Corp.
by SCV pursuant to Section 6.4.
1.4 CLOSING. Upon the terms and subject to the conditions
ontained in this Agreement, the Closing (the "Closing") shall take place at the
offices of Farella Braun & Martel LLP, San Francisco, CA or such other place as
the parties may mutually agree in writing no later than 10:00 a.m. on June 4,
1999 (the "Initial Closing Date"). If the conditions to Closing have not been
met before the Initial Closing Date, either Buyer or the Company may elect by
written notice to the other parties to extend the time for the Closing to an
outside Closing date not more than thirty (30) days after the Initial Closing
Date.
1.5 EXECUTION AND DELIVERY OF PURCHASE PRICE AND CLOSING
DOCUMENTS. At the Closing, amongst other things called for by this Agreement:
(a) Buyer shall deliver the Purchase Price (less the
Deferred Share Purchase Price) to each Seller in accordance with the allocation
shown in Exhibit 1.2(a) (Allocation of Purchase Price) by wire transfer to each
Seller's account or by other immediately available funds, pursuant to
instructions given to Buyer by each Seller prior to Closing.
(b) The Selling Shareholders shall deliver certificates
representing their Shares, duly endorsed or accompanied by stock powers executed
and in form sufficient to fully vest title in Buyer to all of such Shares.
(c) The Selling Partners shall deliver assignments of the
Partnership Interests in form sufficient to vest title in Buyer to all of the
Partnership Interests, together with any other documents of transfer or
assignment reasonably requested by Buyer to consummate the transactions
contemplated hereby.
(d) The Company and/or Sellers shall deliver the stock
books, stock ledgers, minute books, corporate seals, and all other documents,
instruments, opinions, writings and other materials required to be delivered by
the Company and/or Sellers pursuant to this Agreement.
(e) The Company, Sellers, and Buyer shall deliver
opinions of counsel as provided in Sections 6.18 and 7.16.
(f) (Intentionally left blank)
(g) Except to the extent otherwise provided in Exhibit
1(g) (Steps in Closing), all actions taken at the Closing shall be deemed to
have been taken simultaneously at the time the last of any such actions is taken
or completed.
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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS.
Except (i) as set forth in the disclosure schedule attached hereto as
Exhibit 2 (Disclosure Schedule) to this Agreement (the "Disclosure Schedule"),
(ii) as set forth in the Company's 1998 Financial Statements (as defined below),
or (iii) as to properties or assets being purchased as part of the transactions
contemplated by this Agreement, each Seller, for himself, herself or itself, and
not jointly, and the Company represent and warrant to Buyer, as of the date of
this Agreement and as of the Closing Date, as follows:
2.1 DUE INCORPORATION, QUALIFICATION AND CORPORATE POWER.
(a) INCORPORATION/QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company is duly qualified and in good standing to
do business as a foreign corporation in California and does not maintain offices
or own assets in any other state, nor is the Company qualified to do business in
any other state. The subsidiaries of the Company shown in the Disclosure
Schedule (the "Subsidiaries") are corporations duly organized, validly existing
and in good standing under the laws of the State of California.
(b) AUTHORITY OF COMPANY. The Company has the full
corporate power and authority, and all authorizations and permits required by
governmental or other authorities, to carry on its business as now being
conducted, and the authority to execute, deliver and perform this Agreement. The
Subsidiaries have the full corporate power and authority, and all authorizations
and permits required by governmental or other authorities, to carry on their
respective businesses as now being conducted. This Agreement has been duly
authorized, executed and delivered by the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate and perform the transactions contemplated by this Agreement.
This Agreement is a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, reorganization, insolvency or similar laws and subject to
general principles of equity.
(c) AUTHORITY OF SELLERS. Each Seller represents as to
itself that (i) he, she or it has the legal capacity and authority to execute,
deliver and perform this Agreement; (ii) this Agreement has been duly
authorized, executed and delivered by the Seller and no other action by the
Seller is necessary to authorize this Agreement or to consummate and perform the
transactions contemplated by this Agreement; and (iii) this Agreement is a
legal, valid and binding obligation of the Seller enforceable against the Seller
in accordance with its terms, except as enforceability may be limited by
bankruptcy, reorganization, insolvency or similar laws and subject to general
principles of equity.
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(d) ARTICLES OF INCORPORATION AND BYLAWS. The Company has
(or will cause to be) delivered to Buyer true and complete copies of the
Articles of Incorporation and Bylaws of the Company and of the Subsidiaries as
in effect on the date hereof. Neither the Company nor the Subsidiaries are in
default under or in violation of any provision of its Articles of Incorporation
or Bylaws.
2.2 OUTSTANDING CAPITAL STOCK; TITLE.
(a) CAPITALIZATION. The authorized capital stock of the
Company consists of 12,198 Shares of common stock, 1,000,000 Shares of preferred
stock and 1,000,000 shares of Class C stock, of which 10,198 Shares of Class A
and B common stock, 628,500 shares of Class C stock and 901,087 Shares of
preferred stock are issued and outstanding, with options or rights to acquire
1,636 additional shares of Class A and Class B common stock (the "Stock
Options") remaining outstanding and unexercised. The Shares have been duly
authorized and validly issued and are fully paid, nonassessable, and at the time
of delivery at the Closing will be free and clear of all liens, claims, pledges
and encumbrances and shall (including the Shares held by PCH IV) constitute 100%
of the outstanding capital stock of the Company. Since December 31, 1998,
$1,490,940 of new cash capital has been contributed to the Company in the form
of cash or notes which will be repaid in full at or before the Closing.
(b) OWNERSHIP.
(i) Each Selling Shareholder represents as to
that Selling Shareholder that (i) the Selling Shareholder is the lawful record
and beneficial owner of the number of Shares set forth next to its name in the
Disclosure Schedule; (ii) there are no voting trusts, voting agreements, proxies
or other agreements or instruments or understandings with respect to the voting
of the Shares of the Selling Shareholder; and (iii) the Selling Shareholder has
and, on the Closing Date, will transfer to Buyer, good, valid and marketable
title to the Selling Shareholder Shares, free and clear of any and all liens,
pledges, encumbrances and restrictions.
(ii) Each Selling Partner jointly and severally
represents that: (i) PCH IV is the lawful record and beneficial owner of the
number of Shares set forth next to PCH IV's name in the Disclosure Schedule;
(ii) there are no voting trusts, voting agreements, proxies or other agreements,
instruments or understandings with respect to the voting of the Shares held by
PCH IV; (iii) the Selling Partners are the lawful owner of all the Partnership
Interests and no other person, corporation, company or other entity has any
interest in PCH IV; (iv) on the Closing Date, PCH IV will have no liabilities,
accrued
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or contingent, and as a result of the purchase of the Partnership Interests as
contemplated hereby, Buyer will neither assume nor become obligated for any
liabilities of any kind; (v) on the Closing, the only assets or property of PCH
IV will be 360,435 Shares of preferred stock and 2,000 Shares of Class A common
stock of the Company; (vi) the Selling Partners have, and on the Closing Date,
will transfer to Buyer, valid title to the Partnership Interests, free and clear
of any and all liens, pledges, encumbrances and restrictions, and following the
purchase by Buyer of the Partnership Interests hereunder, Buyer will acquire all
ownership interests in and to PCH IV and will be the sole beneficial owner of
the assets held by PCH IV, and (vii) upon the acquisition by Buyer of the
Partnership Interests, PCH IV shall immediately dissolve by operation of law.
(c) OPTIONS OR OTHER RIGHTS OBLIGATING COMPANY. There are
no outstanding or authorized Shares, options, warrants, or purchase,
subscription, call, conversion, exchange or other contracts or instruments
convertible into Shares ("Securities") obligating the Company to sell, exchange
or otherwise deliver, or to purchase, redeem or otherwise receive or acquire
Securities of the Company. No dividends have been declared and remain unpaid by
the Company.
(d) OPTIONS OR OTHER RIGHTS OBLIGATING SELLERS.
(i) Each Seller represents as to that Seller
that there are no outstanding or authorized Securities obligating the Seller to
sell, exchange or otherwise deliver, or to purchase or otherwise receive or
acquire Securities of the Company.
(ii) Each Selling Partner jointly and severally
represents as to PCH IV that there
are no outstanding or authorized Securities obligating PCH IV to sell, exchange
or otherwise deliver, or to purchase or otherwise receive or acquire Securities
of the Company.
2.3 SUBSIDIARIES AND OTHER AFFILIATES.
The Company does not own, directly or indirectly, any
capital stock of, or other investment or interest in, any corporation,
partnership, limited liability company, joint venture or other entity.
2.4 CONSENTS.
(a) CONSENTS RELATING TO COMPANY. Except as required by
the Bureau of Alcohol, Tobacco & Firearms, the California Department of
Alcoholic Beverage Control or pursuant to HSR, there are no authorizations,
consents, permits, licenses or approvals of, or declarations, registrations or
filings with, any governmental or regulatory authority required by the Company
in connection with the execution, delivery or performance by the Company of this
Agreement or the consummation by the Company of the transactions contemplated
hereby.
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(b) CONSENTS RELATING TO THE SELLERS. Each Seller
represents as to that Seller (and the Selling Partners jointly and severally
represent as to PCH IV) that except as required by the Bureau of Alcohol,
Tobacco & Firearms, the California Department of Alcoholic Beverage Control or
pursuant to HSR, there are no authorizations, consents, permits, licenses or
approvals of, or declarations, registrations or filings with, any governmental
or regulatory authority required by the Seller (and, in the case of the Selling
Partners, by PCH IV) in connection with the execution, delivery or performance
by the Seller of this Agreement or the consummation by the Seller of the
transactions contemplated hereby.
2.5 NO BREACH.
(a) NO BREACH BY COMPANY. The execution, delivery and
performance of this Agreement by the Company of the transactions contemplated
hereby or thereby will not violate, breach, conflict with, constitute a default
under or result in the imposition of any lien, claim or encumbrance upon the
Shares or any property or asset of the Company pursuant to: (i) any provision of
the Articles of Incorporation or Bylaws of the Company; (ii) any law, statute,
rule or regulation or order, writ, judgment, injunction, award or decree of any
court, arbitrator or governmental or regulatory body to which the Company or any
of its respective properties is subject, or (iii) any lease or other agreement
(other than obligations which involve $250,000 or less per year) to which the
Company is a party, by which the Company is bound, or to which any of the assets
or properties are subject.
(b) NO BREACH BY SELLERS. Each Seller represents as to
that Seller (and the Selling Partners jointly and severally represent and
warrant as to PCH IV) that the execution, delivery and performance of this
Agreement by Sellers of the transactions contemplated hereby or thereby will not
violate, breach, conflict with, constitute a default under or result in the
imposition of any lien, claim or encumbrance upon the Shares, the Partnership
Interests (and, in the case of the Selling Partners, upon PCH IV) or any
property or asset of the Company pursuant to: (i) any provision of the Articles
of Incorporation or Bylaws of the Company or, in the case of the Selling
Partners, the Partnership Agreement of PCH IV; (ii) any law, statute, rule or
regulation or order, writ, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body to which Sellers or any of their
properties are subject, or (iii) any lease or other agreement (other than
obligations which involve $250,000 or less of annual revenue or expense) to
which the Seller is a party, by which the Seller is bound, or to which any of
the Seller's assets or properties are subject.
2.6 FINANCIAL STATEMENTS OF THE COMPANY AND ACSA AND EVSA
8
(a) The Company has delivered to Buyer true, correct and
complete copies of the following financial statements, including the notes
thereto, of the Company (collectively the "Financial Statements"): the audited
balance sheets of the Company as of December 31, 1998 (the "Balance Sheet
Date"), audited balance sheets as of December 31, 1997 and December 31, 1996,
with the related statements of income, and statements of cash flows for the
years then ended, all certified by the Company's independent public accountants
(with the Financial Statements for the year ended December 31, 1998 referred to
as the "1998 Financial Statements"). The Company has no debts, obligations,
guaranties of the obligations of others or liabilities of the type required to
be disclosed in the Financial Statements under generally accepted accounting
principles, except for (1) debts, obligations, guaranties and liabilities
reflected or reserved against in the Financial Statements and (2) debts,
obligations, guaranties and liabilities incurred or entered into in the ordinary
course of business after the Balance Sheet Date. The Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently applied by the Company throughout the periods indicated and fairly
present the financial position of the Company as of the respective dates thereof
and the results of its operations for the periods indicated.
(b) ACSA and EVSA have delivered to the Buyer true,
correct and complete copies of the following financial statements, including the
notes thereto, of ACSA and EVSA (collectively the "ACSA and EVSA Financial
Statements"); the audited balance sheets of ACSA and EVSA as of December 31,
1998 and 1997, of ACSA as of December 31, 1997 and 1996, and of ACSA as of
December 31, 1996 and 1995, with the related statement of income, and statements
of cash flows for the years then ended, all certified by ACSA and EVSA's
independent public accountants. ACSA and EVSA have no debts, obligations,
guaranties of the obligations of others or liabilities of the type required to
be disclosed in the ACSA and EVSA Financial Statements under generally accepted
accounting principles, except for (1) debts, obligations, guaranties and
liabilities reflected in the ACSA and EVSA Financial Statements and (2) debts,
obligations, guaranties and liabilities incurred or entered into in the ordinary
course of business after December 31, 1998. The ACSA and EVSA Financial
Statements have been prepared in accordance with generally accepted principles
consistently applied by ACSA throughout the periods indicated and fairly present
the financial position of ACSA and EVSA as of the respective dates thereof and
the results of its operations for the periods indicated.
2.7 ABSENCE OF CERTAIN CHANGES. Except with regard to the
Announcement Matters referred to below, since December 31, 1998 (the date of the
most recent unaudited financial statements of the Company, the "Balance Sheet
Date"), the affairs of the Company have been conducted in the ordinary course of
business and the Company has not suffered any adverse change in its business,
results of operations, working capital, assets, or liabilities, or the manner of
conducting its business. Without limiting the
9
generality of the foregoing, since the Balance Sheet Date none of the following
has occurred:
(a) any transaction contracted for or concluded by the
Company except transactions in the ordinary course of business or transactions
not having an adverse effect on the Company;
(b) any change in accounting methods or practices by the
Company;
(c) any increase in salary, bonus or other compensation
payable or to become payable by the Company to any of its officers, directors or
employees in an amount in excess of the Company' periodic bonuses and increases;
(d) any sale or transfer of any of the Company's assets
except in the ordinary course of business or as may be contemplated in
connection with the Closing of the transactions contemplated by this Agreement;
(e) any amendment or termination of any agreement of the
Company involving more than $250,000 per year of revenue or expense which is not
terminable on notice of ninety (90) days or less without a penalty (a "Material
Contract"), except as may be contemplated in connection with the Closing of the
transactions contemplated by this Agreement;
(f) any loan by the Company to any person or entity or
guaranty by the Company of any such loan, except in the ordinary course of
business or as may be contemplated in connection with the Closing of the
transactions contemplated by this Agreement;
(g) any mortgage, pledge or other encumbrance of any
asset of the Company, except in the ordinary course of business or as may be
contemplated in connection with the Closing of the transactions contemplated by
this Agreement;
(h) commencement or notice or threat of commencement of
any civil litigation or any governmental proceeding against or investigation of
the Company.
The "Announcement Matters" means the resignation or termination of employees,
suppliers or customers or changes in sales volumes beyond the Company's
reasonable control which occur as a result of the announcement or consummation
of the transactions contemplated by this Agreement.
2.8 TAX MATTERS. For purposes of this Agreement, the term "Taxes"
means all taxes of any kind or nature, including but not limited to U.S., state,
local and foreign income taxes, withholding taxes, branch profit taxes, gross
receipts taxes, franchise taxes,
10
sales and use taxes, business and occupation taxes, property taxes, VAT, custom
duties or imposts, stamp taxes, excise taxes, payroll taxes, intangible taxes
and capital taxes and any penalties or interest thereon.
(a) The Company has filed within the time and in the
manner prescribed by law all tax returns and reports required to be filed by it
under the laws of the United States and each state or other jurisdiction in
which it conducts business activities requiring the filing of tax returns or
reports and has paid all taxes shown due on such returns or subsequent
assessments.
(b) There are no tax liens (whether imposed by the United
States, any state, local, foreign or other taxing authority) outstanding against
the Company or any of its assets (other than liens for taxes not yet due and
owing).
(c) All Taxes that the Company is required to withhold or
to collect have been duly withheld or collected and all withholdings and
collections either have been duly and timely paid over to the appropriate
governmental authorities or are, together with the payments due or to become due
in connection therewith, duly reflected on the Financial Statements.
(d) On or before the date of Closing, the Company and its
shareholders, directors and option holders shall have taken all steps necessary
under United States Internal Revenue Code ss.280G (including executing all
shareholder and other approvals), to cause any and all payments made by the
Company in connection with this Agreement and the transactions contemplated
hereby to any "disqualified individuals" (as such term is defined in IRC
ss.280G) which might otherwise constitute "excess parachute payments" (as such
term is defined in IRC ss.280G) to be fully deductible to the Company.
(e) In connection with the recapitalization of the
Company's Class C stock into the Company's preferred stock as provided in
Section 6.20, and the transfer of funds by SCV to MJ Lewis Corp., as described
in Sections 6.4 and 6.21, the Company will not incur any tax liability.
2.9 LITIGATION. There is no (i) suit, action, litigation or other
similar proceeding pending or threatened against the Company, affecting the
Company or its business, assets, properties or operations or (ii) order,
judgment or decree to which the Company or its business, assets, properties or
operations is subject.
2.10 COMPLIANCE WITH LAWS. The Company is in compliance with all
laws, ordinances, regulations and orders applicable to its business or
operations ("Laws") and has not since January 1, 1996, received any notification
of any asserted past or present failure to comply with any law, ordinance,
regulation or order. The Disclosure Schedule contains a complete list of all of
the governmental licenses and permits, consents, orders,
11
decrees, notifications and other compliance requirements under which the Company
is operating or bound.
2.11 TITLE TO AND CONDITION OF ASSETS. The tangible personal
property included in the Company's assets is in usable condition. Except as set
forth in the Financial Statements or the Disclosure Schedule and subject to the
provisions of Section 4.10 (Title Matters), the Company has good and marketable
and unencumbered legal title to each of its assets, free and clear of any claim,
charge, easement, encumbrance, security interest, lien, option, pledge, right of
others, or restriction (whether on voting, sale, transfer, disposition or
otherwise), whether imposed by agreement, law, equity or otherwise except for
any restrictions on transfer generally arising under any applicable federal or
state securities law ("Encumbrances"). There is no pending or threatened action
that would interfere with the quiet enjoyment of such leaseholds by the Company.
2.12 INVENTORY. All inventory of the Company reflected in the
Financial Statements has been produced and packaged in accordance with all
applicable laws, regulations and orders and is usable and salable in the
ordinary course of business and is of equivalent quality to the inventory of the
Company over the past three (3) years, except for inventory items, if any, which
have been written down in the Financial Statements to realizable fair market
value or for which adequate reserves have been provided therein.
2.13 PRODUCT RECALL. The Company has not since January 1, 1996
recalled any products made, bottled, distributed or sold by the Company and it
is not now nor has it ever been under any obligation to do so, and there is no
reasonable basis known to the Company for any such recall.
2.14 LABOR MATTERS. The Company is not a party to any labor
agreement with respect to its employees with any labor organization, group or
association. Since January 1, 1996, the Company has not experienced any attempt
by organized labor or its representatives to make the Company conform to demands
of organized labor relating to its employees or to enter into a binding
agreement with organized labor that would cover the employees of the Company.
There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any other governmental
agency, and since January 1, 1996, the Company has not experienced a work
stoppage or other labor difficulty.
2.15 INTELLECTUAL PROPERTY
(a) Set forth in the Disclosure Schedule is a list and a
brief description or identification of all trademarks and trademark applications
(including registration and application numbers therefor), owned by Company
and/or used in connection with the Business. The Company owns all right, title
and interest in and to or possesses licenses or other rights to use all
trademarks and trademark applications, trade names, fictitious or assumed names,
service marks, service mark
12
applications, registered copyrights, copyright applications, trade secrets,
license agreements and all similar proprietary rights used in connection with
the Business (collectively the "Intellectual Property") necessary to conduct its
business as now operated. The Intellectual Property does not infringe any rights
of others nor is any other person infringing the Intellectual Property.
(b) The Company has not received any written notice from
any third party within twelve months prior to the date of this Agreement that
challenges the ownership of or the Company's right to use any of the
Intellectual Property. None of the Intellectual Property has expired or been
canceled or abandoned. Any applications for Intellectual Property (including all
applications required for renewal of Intellectual Property) which are pending
with the applicable governmental entities have not been finally rejected on any
grounds and neither Sellers nor the Company has any knowledge of any reason why
any such applications should not be granted. None of the past or present
employees, officers, directors or shareholders of the Company has any rights in
any of the Intellectual Property. The Company has not granted any outstanding,
written licenses that are in effect relating to the Intellectual Property other
than to distributors and brokers solely in connection with the promotion and
sale of the Company's products. The Company does not have any obligation under
any contract or agreement to make any material royalty or other payments for use
of any of the Intellectual Property.
2.16 EMPLOYEE BENEFITS PLAN.
(a) The Disclosure Schedule lists all employee benefit
plans and agreements to which the Company is a party or by which the Company is
bound with respect to (i) pension or retirement income plans and agreements,
(ii) plans, agreements, arrangements or practices, whether or not written,
relating to other "fringe benefits" to employees, officers, directors, agents,
or others, including, but not limited to vacation, sick leave, medical,
hospitalization, dental, child care, parenting, sabbatical, life and other
insurance, and similar or related benefits, and perquisites including, but not
limited to, company automobiles, club memberships or privileges, and other
similar or related benefits, (iii) any other "employee benefit plan" as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended and the related regulations and published interpretations ("ERISA")
(such plans, agreements, arrangements or practices described in this sentence
herein referred to individually as a "Plan" and collectively as the "Plans").
The Company has delivered to Buyer true and complete copies of all documents
constituting such Plans together with summary plan descriptions of those plans
or arrangements not otherwise in writing.
(b) The Company is in compliance with the applicable
provisions of ERISA and the Internal Revenue Code of 1986, as amended (the
"Code") with respect to all Plans, and the Company is in compliance with Laws
applicable to such Plans.
13
Without limiting the generality of the foregoing all Plans are fully funded in
accordance with their terms and applicable Law. The Company has performed all of
its obligations under all Plans. Each of the Plans, which is intended to be
qualified and tax exempt under code Sections 401(a) and 501(a), is so qualified
and is subject to a current favorable determination letter from the Internal
Revenue Service.
The representations and warranties set forth in Sections
2.16(c) through (h) below shall not be deemed to have been breached by the
Sellers or the Company if any such breach is as a result of operations in the
ordinary course of business or is not adverse to the Company.
(c) Except as contemplated in this Agreement, the Company
has no express or implied commitment (i) to create or incur liability with
respect to or cause to exist any other employee benefit plan, program or
arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
(d) Neither the Company nor any "ERISA Affiliate" of the
Company has ever sponsored, contributed to or participated in a pension plan
subject to Title IV of ERISA, including but not limited to any defined benefit
plan, any multiemployer plan (as defined in Section 4001(a)(3) of ERISA), or any
multiple employer plan subject to Sections 4063 and 4064 of ERISA, and no fact
or event exists which could give rise to any liability under Title IV of ERISA.
An "ERISA Affiliate" is any trade or business (whether or not incorporated)
which is treated with the Company as a single employer under Section 414(b),
(c), (m) or (o) of the Code.
(e) There has been no prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any
Plan. Except as set forth on the Disclosure Schedule, neither the Company nor
any ERISA Affiliate is currently liable or has previously incurred any liability
for any tax or penalty arising under the Code or ERISA, and no fact or event
exists which could give rise to any such liability.
(f) There has been no violation of ERISA with respect to
the filing of applicable returns, reports, documents and notices regarding any
of the Plans with the Secretary of Labor or the Secretary of the Treasury or the
furnishing of such notices or documents to the participants or beneficiaries of
the Plans.
(g) There are no pending legal proceedings which have
been asserted or instituted against any of the Plans, the assets of any such
Plans or the Company or any
14
ERISA Affiliate or the plan administrator or any fiduciary of the Plans with
respect to the operation of such plans (other than routine, uncontested benefits
claims).
(h) The Company does not maintain any welfare benefit
plan providing continuing benefits after the termination of employment (other
than as required by Section 4980B of the Code and at the former employee's own
expense), and the Company and each of its ERISA Affiliates have complied in all
material respects with the notice and continuation requirements of Section 4980B
of the Code and the regulations thereunder.
2.17 EMPLOYMENT CONTRACTS. The Disclosure Schedule contains a list
of all employment contracts, deferred compensation, profit-sharing, stock
purchase, stock option, stock appreciation right, bonus and severance plans and
agreements or similar agreements by which the Company is bound. Except as set
forth in the Disclosure Schedule or the Financial Statements and except as
contemplated pursuant to this Agreement, (i) all the contracts and arrangements
described in this Section 2.17 are in full force and effect and there is no
default by the Company under any of them, and (ii) the Company has not entered
into any written severance agreement or similar arrangement in respect of any
present or former employee that will result in any obligation (absolute or
contingent) of Buyer or the Company to make any payment in excess of $100,000 to
any present or former employee following termination of employment.
2.18 CONTRACTS. The Company is not in material default under any
contracts to which it is a party which call for or involve the payment,
potential payment or accrued obligation by the Company from the date hereof
through the earliest date such contract can be terminated unilaterally either by
the Company or the other party thereto without penalty, of an amount in excess
of $35,000; provided, however, all contracts not so listed in the Disclosure
Schedule or the Financial Statements shall not in the aggregate exceed $225,000.
The accounts receivable of the Company are legally valid and enforceable
obligations, it being understood that no guaranty of collection is hereby given.
2.19 INSURANCE. The Disclosure Schedule contains a list of all
insurance policies held by the Company concerning its business. There is no
current default with respect to the payment of premiums under any such contract
or otherwise.
2.20 ENVIRONMENTAL COMPLIANCE. The Company has not generated, used,
transported, treated, stored, released or disposed of, and has not expressly
permitted anyone else to generate, use, transport, treat, store, release or
dispose of any Hazardous Substance including substances that are defined or
listed in, or otherwise classified pursuant to any applicable Laws as "hazardous
substances" "hazardous materials," "hazardous wastes" or "toxic substances"
including petroleum and asbestos (collectively, "Hazardous Substance") in
violation of any Law. Any Hazardous Substance handled or
15
dealt with or disposed of in any way in connection with operation of the
Company, whether by the Company or the Company's agents, during Sellers'
ownership, has been handled, dealt with, or disposed of in all respects in
compliance with applicable Laws. There has not been any generation, use,
transportation, treatment, storage, release or disposal of any Hazardous
Substance by the Company or the use of any property or facility of the Company
which has created or might reasonably be expected to create any liability under
any laws or which would require reporting to or notification of any governmental
entity.
2.21 RELATED TRANSACTIONS. Except as contemplated by this
Agreement, the Company is not, directly or indirectly, a party to any
transactions with any officer, director or shareholder of the Company or their
affiliates which will survive the Closing, and none of such persons has any
direct or indirect interest in any, supplier or customer of the Company which
will survive the Closing.
2.22 SURVIVAL. The representations and warranties contained in
Sections 2.1(c), 2.2(b), 2.2(d), 2.4(b) and 2.5(b) (the "Surviving
Representations and Warranties") shall survive the Closing Date. All other
representations and warranties of the Company and Sellers contained in this
Article 2 shall terminate at the Closing. None of the representations and
warranties is a condition to the obligation of Buyer to consummate the
transactions contemplated pursuant to this Agreement.
2.23 DISCLOSURE. No representation or warranty made by the Company
or Sellers contained in this Agreement or in the Disclosure Schedule and the
certificates or other instruments delivered pursuant to this Agreement, as of
the date hereof, contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements or facts contained herein
or therein, in light of the circumstances under which they were made, not
misleading, except as the accuracy or completeness thereof may be affected by
this Agreement and the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to the Company and each of the Sellers,
as of the date of this Agreement and as of the Closing Date, as follows:
3.1 DUE INCORPORATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2 POWER AND AUTHORITY. Buyer has the corporate power and
authority and all authorizations and permits required by governmental or other
authorities, to carry on its business as currently being conducted and to
execute, deliver and perform this
16
Agreement and the other documents required to be executed by it in connection
with this Agreement, and the execution, delivery and performance by it of this
Agreement and the other agreements and documents executed or to be executed by
it in connection with this Agreement have been duly authorized, executed and
delivered by Buyer and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement and the agreements and instruments entered
into by Buyer in connection herewith or to consummate and perform the
transactions contemplated hereby and the agreements and instruments entered into
by Buyer in connection herewith. This Agreement and the agreements and
instruments entered into by Buyer in connection herewith constitute valid and
binding agreements enforceable against Buyer in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws and subject to general principles of equity. Buyer acknowledges
that it is a sophisticated investor, familiar with the wine industry generally,
has made a reasonable investigation of the Company and its business, and is
aware of the risks inherent in an investment in a business such as that of the
Company. Because of its experience and business acumen it has the expertise to
ask the questions necessary to make an informed decision as to whether to
purchase the Shares as contemplated by this Agreement. Buyer has made reasonable
investigation and inquiry of all matters related to this agreement and the
Disclosure Schedule to the extent permitted prior to the execution of this
Agreement and will continue its investigation through the day of Closing.
3.3 CONSENTS. There are no authorizations, consents, permits,
licenses or approvals of, or declarations, registrations or filings with, any
governmental or regulatory authority or agency required by Buyer that have not
been received in connection with the execution, delivery or performance by Buyer
of this Agreement or the other agreements executed or to be executed by it in
connection with this Agreement or the consummation by Buyer of the transactions
contemplated by this Agreement.
3.4 NO BREACH. The execution, delivery and performance of this
Agreement and the consummation by Buyer of the transactions contemplated hereby,
will not constitute a default under, or permit the termination or the
acceleration of maturity or performance of, (i) any provision of the Articles of
Incorporation or Bylaws of Buyer; (ii) any law, statute, rule or regulation or
order, writ, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body to which Buyer or its properties are subject, or
(iii) any material contract or obligation to which Buyer is a party, by which
Buyer is bound, or to which any of its assets or properties are subject.
3.5 BATF/ABC LICENSING. Buyer has or will have obtained prior to
the Closing Date all licenses or approvals required to be obtained prior to the
Closing for the consummation of the transactions contemplated hereunder by the
Bureau of Alcohol, Tobacco & Firearms and the California Department of Alcoholic
Beverage Control.
17
3.6 FINANCING. Buyer has available (and will have available, and
to the extent necessary to complete its obligations under this Agreement will
draw on, at the Closing) a commitment from The Chase Manhattan Bank, Chase
Securities Inc. and Credit Suisse First Boston (collectively "Chase") to provide
sufficient funds to enable Buyer to consummate the transactions contemplated
hereby. Such commitment to be substantially in the form previously furnished to
Sellers and subject only to the terms and conditions stated therein. Buyer is in
full compliance with its existing credit facilities, will execute and agree to
loan terms and conditions in connection with documents required pursuant to
Chase's commitment which are the same as or generally similar to Buyer's
existing loan terms, conditions, representations and other covenants or which
are otherwise market terms in similar loans and are consistent with the
commitment, will take all steps on its part necessary under Chase's commitment
to cause Chase to fund its commitment, has no knowledge Chase will not fund its
commitment in connection with the Closing, and without the prior written
approval of the Company will not amend the Chase commitment in any manner that
could reasonably be expected to adversely affect the certainty of Buyer's
ability to obtain the financing contemplated by the commitment or the
consummation of the transactions contemplated hereby.
3.7 INVESTMENT INTENT. Buyer is acquiring the Shares and
Partnership Interests for investment for its own account, not as nominee or
agent, and not with a view to the sale, distribution, subdivision, transfer or
fractionalization thereof. Buyer acknowledges that the Shares and Partnership
Interests (a) have not been registered under the Securities Act of 1933 or any
state securities law and there is no commitment to register the Shares or
Partnership Interests, and (b) cannot be resold, unless they are subsequently
registered or an exemption from registration is available.
3.8 SURVIVAL. All representations and warranties of Buyer
contained in Sections 3.1 to 3.4 shall survive the Closing Date ("Surviving
Buyer Representations and Warranties"). All other representations and warranties
of Buyer contained in this Article 3 shall terminate at the Closing.
4. COVENANTS OF THE COMPANY AND SELLERS.
From the date of this Agreement until the earlier of the Closing or
termination of this Agreement , (i) the Company covenants and agrees that, and
(ii) each Seller agrees that he, she or it shall take all commercially
reasonable steps to ensure that:
4.1 OPERATION OF BUSINESS OF THE COMPANY. The Company will carry
on its business and activities in substantially the same manner as previously
carried out and will use its reasonable efforts, consistent with past practices,
to (i) preserve existing relationships with vendors, customers, and others
having business relationships with the Company, (ii) maintain its tangible
assets in good order, condition and repair, reasonable
18
wear and tear excepted, (iii) not enter into any lease, amendment of lease,
agreement to sell grapes, or other agreement with respect to the use or
occupancy of any real property now owned or leased by the Company except as
contemplated by this Agreement, without the Buyer's prior consent which may not
be unreasonably withheld, conditioned or delayed, (iv) continue to comply with
all applicable Laws, (v) perform its obligations with respect to its lenders,
and (vi) with respect to the real property owned or leased by the Company,
refrain from (w) transferring any interest in the property, (x) creating any
easement, lien, mortgage or encumbrance, (y) enter into any development or other
agreement with respect to the property without the permission of Buyer or as
contemplated by this Agreement, or (z) permit any changes to the zoning
classification of the property. The Company will continue to carry its existing
insurance, if present coverage continues to be generally available at
substantially the same premium cost.
4.2 ACCESS TO RECORDS. Until Closing and subject to the terms of
the existing agreements with Buyer regarding confidentiality, the Company shall
afford to Buyer, its officers, employees, counsel, accountants, and other
representatives reasonable access upon reasonable prior notice, to inspect and
copy the books, records, contracts and other documents of the Company at the
Company's offices in order that Buyer may have full opportunity to make such
investigations as it shall desire to make of the affairs of the Company; and the
Company will cause its officers and accountants to furnish such additional
financial and operating data and other information relating to the business and
assets of the Company as Buyer shall, from time to time, reasonably request.
4.3 CONSENTS. The Company shall use its reasonable efforts to
assist Buyer in obtaining any consents required to effect the transactions
contemplated in this Agreement; it being understood that while the Closing of
the transactions contemplated by this Agreement does not require the Company to
obtain the consent of its lenders (as loans of lenders who do not consent will
be paid off by the Company immediately following the Closing), the Company will
nonetheless in advance of the Closing use its reasonable efforts to assist Buyer
in obtaining the consent to the transactions contemplated by this Agreement of
those lenders, if any, designated by Buyer.
4.4 NOTIFICATION. From time to time prior to the Closing, the
Company shall promptly advise Buyer in writing of (i) any event known to the
Company (which for purposes of this Agreement shall mean to the actual knowledge
of Jean-Xxxxxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxx Xxxxxxxxx Xxxxxxx and Xxxxxxx
Xxxxxxxxxx) or (ii) any event occurring subsequent to the date of this Agreement
which becomes known to the Company which would render any representation or
warranty of the Company contained in this Agreement, if made on or as of the
date of such event or the Closing, inaccurate in any material respect.
19
4.5 NO SHOP PROVISION. From and after the date of this Agreement
until the earlier of the Closing or the termination of this Agreement pursuant
to its terms, Sellers shall not, and shall instruct the Company and the
Company's and Sellers' respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, (a) solicit
or initiate the submission of any Acquisition Proposal (as defined below) by any
person, entity or group (other than Buyer and its affiliates, agents and
representatives) or (b) participate in any discussions or negotiations or enter
into any agreement or understanding with any person, entity or group (other than
Buyer and its affiliates, agents and representatives) in connection with any
Acquisition Proposal. Upon execution of this Agreement, Sellers shall cease, and
shall cause the Company to cease, all current discussions relating to any
Acquisition Proposal (other than discussions with Buyer and its affiliates,
agents and representatives). For the purposes of this Agreement, an "Acquisition
Proposal" means any proposal or offer for any merger, exchange offer, sale of
shares, consolidation, sale of all or substantially all of the assets of or
similar corporate transaction with respect to the Company (other than sales of
assets in the ordinary course of business in immaterial amounts or as otherwise
permitted or contemplated under the terms of this Agreement).
4.6 HART-SCOTT-RODINO ACT. The Company and Sellers shall make any
and all filings required to be made on their part under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act"). The Company and Sellers shall
furnish to Buyer such necessary information and reasonable assistance as Buyer
may request in connection with its preparation of necessary filings or
submissions under the provisions of the HSR Act. The Company and Sellers shall
supply Buyer with copies of all correspondence, filings or communications,
including file memoranda evidencing telephonic conferences with representatives
of either the Federal Trade Commission, the Antitrust Division of the United
States Department of Justice, or any other governmental entity or members of
their respective staffs, with respect to the transactions contemplated by this
Agreement and any related or contemplated transactions, except for documents
filed pursuant to Item 4(c) of the Notification and Report Form or
communications regarding the same. All required filing fees shall be paid
equally by Buyer and Sellers.
4.7 ENVIRONMENTAL ASSESSMENT.
(a) Between the date of this Agreement and Closing,
Sellers shall cause Buyer to be granted access to the facilities and vineyards
of the Company and the other vineyards being sold to the Buyer as contemplated
by this Agreement for the purposes of conducting an environmental assessment at
Buyer's sole cost and expense, which may include subsurface soil and groundwater
sampling by environmental consultants reasonably acceptable to the Company and
Sellers and pursuant to a scope of work determined by Buyer and approved by the
Company, which approval shall not be unreasonably withheld (the "Environmental
Assessment"). Buyer shall provide
20
reasonable advance written notice if its access involves any drilling, trenching
or similar physical disturbance of the surface of the property or is with
respect to any Hazardous Substance inspection involving any on-site testing of
soil or subsurface conditions, and Sellers will have the right to have a
representative present. In conducting the Environmental Assessment, Buyer and
its agents and representatives shall comply with all applicable Laws, maintain
customary and appropriate insurance coverage, and not unreasonably interfere in
the operations of the owner of the property. Buyer's access hereunder shall be
at its sole cost, expense, and risk and Buyer expressly assumes all
responsibility for, and indemnifies Company and Sellers against, any
liabilities, damages, claims and expenses arising out of the conduct of any
environmental site inspections by Buyer and its agents, consultants or
representatives other than those that constitute Environmental Remediation Costs
pursuant to Section 6.13 (Environmental Assessment), and shall repair any damage
to and restore to its prior condition the property which has been inspected.
In connection with any Environmental Assessment, Buyer shall cause the
following to occur:
(i) The Environmental Assessment shall be
conducted pursuant to standard quality control/quality assurance procedures and
in accordance with the terms of the preceding paragraph.
(ii) Before any final report is prepared as the
result of the Environmental Assessment, such preliminary report shall be
conspicuously labeled as a draft, and Buyer shall promptly give Sellers a copy
of the draft report. Until the Closing, Buyer shall keep the draft report and
the information contained therein confidential and shall not disclose it to any
person or entity without Sellers' prior written consent; provided, however, that
Buyer may furnish a copy of this draft report to any proposed lender or to any
consultant engaged in, or commenting upon the results of, the draft report, or
to any other person working with or on behalf of Buyer who agrees to maintain
the draft report in confidence.
(iii) If for any reason the Closing fails to occur,
then thereafter and as a promise which will survive the termination of this
Agreement, Buyer shall not disclose to any party the contents of the draft
report except pursuant to valid legal process or with the written consent of
Sellers.
(iv) Any ground water, soil or other samples taken
from the property will be properly disposed of by Buyer at Buyer's sole cost and
in accordance with all applicable Laws.
21
(v) If requested by Buyer, the licensed
professional company performing the Environmental Assessment shall prepare its
good faith estimate of the Environmental Remediation Costs as defined in ss.6.13
(Environmental Assessment).
(b) The Sellers shall pay or the Company and Sellers
shall reduce the Purchase Price with respect to all Environmental Remediation
Costs as identified in the Environmental Assessment, subject to the provisions
of ss.8.4 (Obligations of Sellers to Reduce Purchase Price); provided that if
Sellers dispute the determination of the Environmental Remediation Costs, the
amount of the Purchase Price reduction attributable to the Environmental
Remediation Costs shall be deposited in an escrow with the title insurance
company issuing the Buyer's title insurance (or a national bank acceptable to
Buyer and Sellers) to be held in interest bearing securities selected by Buyer,
and disbursed at the request of Buyer to pay the costs of remediation work and
any fines or penalties which may be assessed in connection with any remedial
work, and 180 days following the completion of this work, or ten (10) years
after the date of this Agreement, whichever is earlier, the remaining balance,
including accrued interest, in the escrow account shall be paid to Sellers in
the proportions in which the original Purchase Price was to have been paid to
them before the reduction.
4.8 CERTAIN FINANCIAL INFORMATION.
The Company and Sellers shall provide, or shall use their best efforts
to cause to be provided to, Buyer and shall assist in the preparation by Buyer
of, the audited and unaudited financial and other information required for the
preparation of summary financial data and pro forma financial information
regarding the Business, for all periods required by applicable provisions of
Regulations S-X and S-K promulgated under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder. The Sellers and the Company shall provide such
management representation letters and shall use their best efforts to cause the
Company's outside public accountants to deliver such consents and comfort as are
customary under applicable accounting standards, as promptly as reasonably
practicable, but in no event later than forty-five days following the Closing.
Buyer shall be responsible for the costs and expenses incurred in connection
with such preparation, review and audit. Sellers agree that Buyer may use, and
Sellers shall deliver such consents and shall authorize their outside public
accountants to deliver such consents, (as may reasonably be requested by Buyer)
to the use of the financial and other information provided pursuant to this
Section 4.8, regarding the Business or any other financial information provided
by Sellers to Buyer specifically for the following purposes, in any registration
statement, prospectus, Rule 144A offering memorandum, Form 8-K or other public
filing or document at any time on and after the date of this Agreement.
4.9 IDENTIFICATION OF INVENTORY. On a mutually agreeable date
prior to Closing, Company and Buyer shall conduct a reasonable inspection of the
quantity and
22
quality of the inventory of the Company. The Company will conduct or will permit
Buyer to conduct such tests of inventory as Buyer reasonably requests.
4.10 TITLE MATTERS
(a) The Company has provided or shall promptly provide
Buyer with a copy of current preliminary title reports for all real property
(the "Property") owned by the Company (the "Preliminary Title Report"), issued
by First American Title Company or its affiliates or another major title
insurance company selected by the Company and doing business in California (the
"Title Company"), together with a copy of each document referred to in the
Preliminary Title Report. At the Closing, Buyer may purchase at its expense for
the Company and/or its benefit title insurance showing good and marketable title
to the Property vested in Buyer. To the extent that such title insurance policy
shows the Company's title is subject only to those exceptions shown in the
Preliminary Title Report, or disclosed in any visual inspection of the Property
by the Title Company or by any survey delivered to Buyer, which taken as a whole
do not materially and adversely impair the ability of a reasonable owner of the
Property to continue to farm the Property in the manner in which it is currently
being farmed by the Company or to cultivate the acreage of vineyards currently
under cultivation, or to operate its facilities in the manner in which the
Company is currently operating in the ordinary course of business, or which may
be approved in writing by Buyer (together, the "Permitted Exceptions") the
representations in ss.2.11 (Title to and Condition of Assets) with respect to
real property title matters shall be deemed satisfied.
(b) The Company may cure any defects in title with
respect to the Property that are necessary to permit the issuance of the Title
Policy containing only Permitted Exceptions. To the extent that by the time of
the Closing, the Company has not removed any such defect in title, the Closing
shall still occur, but there shall be a deemed Loss for the purpose of ss.8.4
(Sellers Obligations to Reduce Purchase Price) equal to the amount by which the
fair market value of the Property is reduced by reason of the unremoved defect,
with the amount of this Loss to be as agreed by the parties at the time of the
Closing; if the parties do not agree, then as reasonably estimated by Buyer. If
the parties have not agreed on the amount of this Loss, then Buyer shall deposit
in escrow with the Title Company the amount of any Purchase Price reduction it
reasonably claims in connection with this Loss, and this sum shall be held in
escrow in an interest-bearing account until such time as the parties have
reached agreement on the actual amount of the price reduction associated with
this Loss or the matter is determined by a court of competent jurisdiction,
whose order has become final and no longer subject to appeal. At that time, the
difference between the amount of the Purchase Price paid to Sellers at the
Closing and the finally-determined amount of the Purchase Price, plus interest
thereon at the weighted average yield earned on the funds that remained in the
escrow shall be paid
23
to Sellers and the balance of the funds remaining in the escrow shall be paid to
Buyer, with the costs of the escrow to be split equally between Sellers and
Buyer.
(c) The Company will make available to Buyer as soon as
practicable after the execution of this Agreement copies of all boundary surveys
in its possession, together with affidavits of no change duly executed by the
Company or its agent, with respect to the real property owned or leased by the
Company and which is not being sold by the Company in connection with the
transactions contemplated by this Agreement.
4.11 COOPERATION IN HUNEEUS-CHANTRE PROPERTIES PLAN SEVERANCE.
The Company shall terminate the application of all Huneeus-Chantre
Properties Plans which are operated jointly with the Company, as soon as
reasonably practicable following the Closing, and Buyer agrees to cooperate in
such termination.
5. BUYER'S COVENANTS. Buyer covenants as follows:
5.1 (Intentionally left blank)
5.2 HSR ACT. Buyer shall make any and all filings required to be
made on its part under the HSR Act. Buyer shall furnish the Company and Sellers
such necessary information and reasonable assistance as the Company and Sellers
may request in connection with its preparation of necessary filings or
submissions under the provisions of the HSR Act. Buyer shall supply the Company
and Sellers with copies of all correspondence, filings or communications,
including file memoranda evidencing telephonic conferences with representatives
of either the Federal Trade Commission, the Antitrust Division of the United
States Department of Justice, or any other governmental entity or members of
their respective staffs, with respect to the transactions contemplated by this
Agreement and any related or contemplated transactions, except for documents
filed pursuant to Item 4(c) of the Notification and Report Form or
communications regarding the same. All required filing fees shall be paid
equally by Buyer and Sellers.
5.3 NOTIFICATION OF CERTAIN MATTERS. Buyer shall give prompt
notice to the Company and Sellers, of (i) the occurrence, or failure to occur,
of any event known to Buyer that would be likely to cause any representation or
warranty by Buyer contained in this Agreement, if made on or as of the date of
such event or the Closing, to be inaccurate in any material respect, and (ii)
any failure of Buyer to comply with or satisfy, any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement.
5.4 COMPANY RECORDS. Buyer agrees for a period of five (5) years
subsequent to the Closing Date, upon reasonable request of any Seller, to make
available to such
24
Seller all information and statements in the Company's possession with regard to
periods prior to the Closing Date which may be reasonably required by the
Sellers.
5.5 BROKERS AND FINDERS. Buyer shall pay all broker, finder or
similar fees or commissions to any agent, broker, finder or other persons or
entity acting on behalf of Buyer in connection with the transactions
contemplated by this Agreement.
5.6 ENVIRONMENTAL ASSESSMENT COMMISSIONED. Prior to or
simultaneously with the execution of this Agreement, Buyer shall have
commissioned the Environmental Assessment, with the draft report to be delivered
to Buyer within a period not to exceed twenty (20) business days from the date
of such commissioning. The Environmental Assessment shall cover all property and
facilities owned or leased by the Company or to be acquired by Buyer pursuant to
this Agreement and shall be conducted and prepared by a firm reasonably
acceptable to Buyer and the Company.
5.7 REPAYMENT OF LOANS. Not later than sixty (60) days following
the Closing, Buyer will repay in full all loans from lenders to the Company
which required the consent of the lender to the transactions contemplated by
this Agreement and whose consent was not obtained.
5.8 PAYMENT OF LEGAL FEES. Buyer acknowledges that the Company and
certain Sellers have incurred legal fees payable to the law firm of Farella,
Braun & Martel LLP in connection with the process of negotiating and
implementing the sale of the stock and assets of the Company (the "Legal Fees").
Buyer has agreed that the Company, and not the Sellers, shall pay the Legal
Fees, subject to Xxxxxxx Xxxxxxx' payment of a dollar amount of the Legal Fees
equal to the legal fees of the law firm of Heller, Ehrman, White & McAuliffe for
its representation of Harald and Xxxxx Xxxxx in these transactions, and subject
to the Legal Fees being reasonable in light of the legal work performed.
6. CONDITIONS TO BUYER'S OBLIGATIONS.
The obligation of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, at or before the Closing,
of each of the following conditions, unless waived in writing by Buyer:
6.1 COVENANTS. The Company and Sellers shall have performed and
complied in all material respects with all agreements, covenants and conditions
on their part required to be performed or complied with on or prior to the
Closing Date. For purposes of this Agreement, any non-performance or breach of
any representation or warranty by Sellers or the Company shall not be a basis
for Buyer to refuse or fail to consummate the transactions contemplated by this
Agreement, but may be a basis for a reduction of the Purchase Price pursuant to
Section 8.4, indemnification to Buyer pursuant to Section 8 or termination of
this Agreement by Buyer pursuant to Section 9.1.
25
6.2 HSR ACT. All waiting periods under the HSR Act shall have
expired or the requisite governmental approval shall have been obtained.
6.3 RESIGNATION OF DIRECTORS AND TERMINATION OF VALETTE EMPLOYMENT
AGREEMENT. Sellers shall have provided resignations of Xxxxxx Xxxxxx, Xxxxxxx
Xxxxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxx-Xxxxxxx and Jean-Xxxxxx Xxxxxxx as directors
of the Company effective immediately following the Closing, and the existing
employment agreement of Jean-Xxxxxx Xxxxxxx shall have been superseded,
terminated and released, without liability to the Company.
6.4 SALE OF VINEYARDS. Prior to the Closing, Buyer and each of SCV
and EPI as applicable ("Vineyard Owners") shall have entered into an agreement
substantially in the form attached hereto as Exhibits 6.4(a) and (b) (Sale of
Vineyards) (each a "Vineyard Sale Agreement") for the sale and transfer of
certain vineyard properties owned by these entities (the "Vineyard Properties").
Each Vineyard Sale Agreement shall provide for a purchase price equal to (i)
Seventeen Million Four Hundred Thousand Dollars ($17,400,000) for the SCV
Vineyard Properties and Eleven Million Dollars ($11,000,000) for the EPI
Vineyard Properties; plus (ii) all cultural costs paid or incurred by the
Vineyard Owner with respect to the Vineyard Property during the period starting
November 1, 1998 through the Closing Date; plus (iii) all property taxes paid or
incurred in connection with the ownership of the Vineyard Property for the
period starting November 1, 1998 through the Closing Date plus (iv) the net book
value of the equipment related to the Stonewall Vineyard less the book value of
the equipment related to the Los Encinos Vineyard. Immediately following the
closing of the transactions contemplated in the Vineyard Sale Agreements, SCV
shall have, as set forth in Exhibit 1(g) (Steps in Closing), transferred to MJ
Lewis Corp., a wholly-owned subsidiary of the Company, $10,000,000, an amount
equal to the tax basis of the interest of MJ Lewis Corp. in SCV. Unless Sellers
and Buyer agree in writing otherwise prior to the Closing Date, each of the
transactions contemplated in the Vineyard Sale Agreements shall have closed on
the day of the Closing, but immediately before the Closing pursuant to this
Agreement.
6.5 EVSA STOCK AGREEMENT. Prior to or on the day of the Closing,
all outstanding and issued shares of the Series A preferred stock of EVSA held
by the Company shall have been duly exchanged for or converted into shares of
common stock of EVSA pursuant to an agreement substantially in the form attached
hereto as Exhibit 6.5 (EVSA Stock Agreement) (the "EVSA Agreement"). The EVSA
Agreement will also provide for the Company to acquire from the other
shareholders of EVSA at a price of $6,293,000 sufficient additional common
shares of EVSA so that the Company would hold 70% of the common shares of EVSA,
with the other shareholders of EVSA holding 30% of the common stock of EVSA. All
intercompany accounts between EVSA and the Company, if any, and all cash capital
contributed by the Company to EVSA since December 31, 1998, if any, shall be
repaid prior to Closing.
26
6.6 ACSA STOCK AGREEMENT. Prior to or on the day of the Closing,
all outstanding and issued shares of the Series A preferred stock of ACSA held
by the Company shall have been duly exchanged for or converted into shares of
common stock of ACSA representing 70% of the common shares of ACSA (with the
other shareholders of ACSA thereupon holding shares of common stock of ACSA
representing 30% of the common shares of ACSA) pursuant to an agreement
substantially in the form attached hereto as Exhibit 6.6 (ACSA Stock Agreement)
(the "ACSA Agreement"). All intercompany accounts between ACSA and the Company,
excluding the advance by the Company of approximately $3 million which shall be
repaid with future wine deliveries, and all cash capital contributed to ACSA
since December 31, 1998, if any, shall be repaid prior to Closing.
6.7 ACSA AND EVSA SHAREHOLDERS AGREEMENTS AND BUY-SELL AGREEMENT.
Prior to or on the day of the Closing, the Company, ACSA and the other
shareholders of ACSA, and the Company, EVSA and the other shareholders of EVSA,
shall enter into shareholders agreements substantially in the forms attached
hereto as Exhibit 6.7(a) (ACSA Shareholders Agreement and EVSA Shareholders
Agreement) providing for the management of the ACSA and EVSA and certain
restrictions on transfer of ACSA and EVSA stock to the Company and EVSA. Prior
to or on the day of the Closing, the Company, the other shareholders of ACSA and
EVSA, Buyer and other parties shall enter into a buy-sell agreement
substantially in the form attached hereto as Exhibit 6.7(b) (Buy-Sell
Agreement).
6.8 ACSA DISTRIBUTION AGREEMENT. Prior to or on the day of the
Closing, Buyer, the Company and ACSA shall have entered into a new long-term
distribution agreement substantially in the form attached hereto as Exhibit 6.8
(ACSA Distribution Agreement) (the "Distribution Agreement") pursuant to which
the Company shall be granted the exclusive, worldwide distribution rights in
perpetuity for the Veramonte brand of wine, subject to termination in connection
with the buy/sell rights in the Buy/Sell Agreement amongst the Company, the
shareholders of ACSA and EVSA and others. Performance by the Company of its
obligations pursuant to the Distribution Agreement shall be guaranteed by Buyer.
6.9 GRAPE SUPPLY AGREEMENTS. Prior to or on the day of the
Closing, the Company, Buyer and HCP shall have entered into a grape supply
agreement substantially in the form attached hereto as Exhibit 6.9(a) (Quintessa
Grapes) (the "Quintessa Grape Agreement"). The Quintessa Agreement shall provide
for the supply of grapes by HCP to the Company under the same terms and
conditions and at the same prices as set forth in the Grape Purchase Agreement
dated as of August 4, 1994 as amended in July, 1996 and November 26, 1996
between the Company and HCP and shall provide that performance by the Company of
its obligations pursuant to the Quintessa Grape Agreement shall be guaranteed by
Buyer. Pursuant to the Quintessa Grape Agreement,
27
HCP and its affiliate H/Q Wines will have the right to retain a specified
tonnage of grapes from its annual production. Prior to the Closing, the Company,
Buyer and H/Q Vineyards shall have entered into grape supply agreements
substantially in the form attached hereto as Exhibits 6.9(b) and (c),
(respectively the Encinos and Lewis Grape Agreements) providing for similar
terms and covering grapes to be grown on the Los Encinos and Lewis Ranches. The
Lewis Grape Agreement shall also include a plan relating to the varieties of
grapes to be planted and a schedule for plantings.
6.10 (Intentionally left blank)
6.11 QUINTESSA WINE PROCESSING AGREEMENT. Prior to or on the
Closing Date, the Company, Buyer and H\Q Wines shall have entered into a Wine
Processing Agreement substantially in the form attached hereto as Exhibit 6.11
(Wine Processing) (the "Quintessa Wine Processing Agreement") which shall
provide for the manufacture and storage of bulk and finished wine by the Company
for H/Q Wines.
6.12 LEWIS RANCH PURCHASE AGREEMENT. Prior to the day of the
Closing, the Company and H/Q Vineyards shall have entered into a land purchase
agreement for the sale by the Company of the land located at 0000 Xxxxxxxxxxx
Xxxx xx Xxxx, Xxxxxxxxxx (the "Lewis Ranch"), substantially in the form attached
hereto as Exhibit 6.12 (Lewis Ranch).
6.13 INTERCOMPANY LOANS. On or before the Closing Date, any amounts
outstanding on all intercompany loans payable by the Company to SCV, EPI, EVSA
or ACSA or by SCV, EPI, HCP, EVSA or ACSA to the Company, including those under
the loan agreements between the Company and SCV (but not including the Company's
advances to ACSA which are to be repaid over time by the delivery of wine),
shall have been repaid, and the loan by the Company to its President and CEO
described in the Disclosure Schedule shall have been repaid.
6.14 (Intentionally left blank)
6.15 EMPLOYMENT AND CONSULTING AGREEMENT. Prior to or on the day of
the Closing, Buyer and Xxxxxxx Xxxxxxx shall have entered into an employment and
consulting agreement substantially in the form attached hereto as Exhibit 6.15
(Employment and Consulting Agreement).
6.16 ENVIRONMENTAL ASSESSMENT. The Environmental Assessment report
shall have been received by Buyer. If the Environmental Assessment report
identifies any violation of applicable law which requires remedial work, the
firm conducting the Environmental Assessment at Buyer's request shall prepare an
estimate of the costs of remediation work and the amount of any fines or
penalties which may be assessed in connection with any remedial work (the
"Environmental Remediation Costs").
28
6.17 NO KNOWLEDGE OF BREACH BY OTHER PARTIES. Buyer shall have
received from each Seller and the Company a certificate dated as of the Closing
Date certifying that each such Seller and the Company, to his, her or its best
knowledge, is not aware of any breach of representation and warranty or covenant
by Buyer under this Agreement or specifying those of which the party executing
the certificate is aware.
6.18 OPINIONS OF COUNSEL. Buyer shall have received from the
Sellers' counsels legal opinions addressing the matters set forth in Exhibit
6.18(a) (Sellers' Opinions) with respect to the due authorization of the
documents executed and delivered on behalf of the Sellers under this Agreement
and the capital structure of the Company, and from the Selling Partner's and PCH
IV's counsel, a legal opinion addressing the matters set forth in Exhibit
6.18(b) (Selling Partners' Opinion) with respect to the dissolution of PCH IV
and certain tax consequences resulting therefrom. In addition, the Selling
Partners shall deliver to Buyer a balance sheet of PCH IV as of the Closing
prepared by KPMG Peat Marwick showing that PCH IV has no liabilities and has no
assets other than the Shares referred to in Section 2.2(b)(ii).
6.19 CHILEAN COUNSEL OPINION. Buyer shall have received from the
firm of Urenda, Rencoret, Orrego y Dorr of Santiago, Chile a legal opinion to
the effect that as soon as reasonably practicable following the Closing and the
payment by the Company of the $6,293,000 for additional EVSA common stock, the
Company will be the owner of 70% of the common stock of EVSA and ACSA, that the
governing documents of ACSA and EVSA which are the equivalent of the articles
and bylaws of a United States corporation are in the forms attached to the
opinion and are in full force and effect subject only to the completion of
registration and publication formalities required by Chilean law in connection
with the capital restructuring of ACSA and EVSA described in Sections 6.5 and
6.6, that the shares owned by the Company in ACSA and EVSA are duly and validly
issued and outstanding and are non-assessable and that there are no Chilean
taxes payable by the Company, ACSA or EVSA in connection with the conversion of
the Series A preferred shares in these companies previously held by the Company
and now converted into common shares.
6.20 (Intentionally left blank)
6.21 PAYMENT TO MJ LEWIS CORP. SCV shall have transferred to MJ
Lewis Corp. the amount provided for in Section 6.4.
6.22 ADDITIONAL UNDERTAKINGS. Such additional undertakings from the
owners of H/Q Wines shall have been entered into as Buyer may have reasonably
requested and whose form is reasonably approved by the law firm of Farella Braun
& Martel, LLP.
29
7. CONDITIONS TO SELLERS' OBLIGATIONS.
The obligation of the Company and Sellers to consummate the transaction
contemplated by this Agreement shall be subject to the satisfaction, at or
before the Closing, of each of the following conditions, unless waived in
writing by the Company and Sellers:
7.1 REPRESENTATIONS AND COVENANTS. Buyer shall have performed and
complied in all material respects with all representations and warranties
agreements, covenants and conditions on its part required to be performed or
complied with on or prior to the Closing Date.
7.2 HSR ACT. All waiting periods under the HSR Act shall have
expired or the requisite governmental approval shall have been obtained.
7.3 SALE OF VINEYARDS. Prior to the Closing, Buyer and each of SCV
and EPI as applicable ("Vineyard Owners") shall have entered into an agreement
substantially in the form attached hereto as Exhibits 6.4(a) and (b) (Sale of
Vineyards) (each a "Vineyard Sale Agreement") for the sale and transfer of
certain vineyard properties owned by these entities (the "Vineyard Properties").
Each Vineyard Sale Agreement shall provide for a purchase price equal to (i)
Seventeen Million Four Hundred Thousand Dollars ($17,400,000 for the SCV
Vineyard Properties and Eleven Million Dollars ($11,000,000) for the EPI
Vineyard Properties; plus (ii) all cultural costs paid or incurred by the
Vineyard Owner with respect to the Vineyard Property during the period starting
November 1, 1998 through the Closing Date; plus (iii) all property taxes paid or
incurred in connection with the ownership of the Vineyard Property for the
period starting November 1, 1998 through the Closing Date plus (iv) the net book
value of the equipment related to the Stonewall Vineyard less the book value of
the equipment related to the Los Encinos Vineyard. Immediately following the
closing of the transactions contemplated in the Vineyard Sale Agreements, SCV
shall have, as set forth in Exhibit 1(g) (Steps in Closing), transferred to MJ
Lewis Corp., a wholly-owned subsidiary of the Company, the amount specified in
Section 6.4. Unless Sellers and Buyer agree in writing otherwise prior to the
Closing Date, each of the transactions contemplated in the Vineyard Sale
Agreements shall have closed on the day of Closing, but immediately before the
Closing pursuant to this Agreement.
7.4 EVSA STOCK AGREEMENT. Prior to or on the day of the Closing,
all outstanding and issued shares of the Series A preferred stock of EVSA held
by the Company shall have been duly exchanged for or converted into shares of
common stock of EVSA pursuant to an agreement substantially in the form attached
hereto as Exhibit 6.5 (EVSA Stock Agreement) (the "EVSA Agreement"). The EVSA
Agreement will also provide for the Company to acquire from the other
shareholders of EVSA at a
30
price of $6,293,000 sufficient additional common shares of EVSA so that the
Company would hold 70% of the common shares of EVSA, with the other shareholders
of EVSA holding 30% of the common stock of EVSA. All intercompany accounts
between EVSA and the Company, if any, and all cash capital contributed by the
Company to EVSA since December 31, 1998, if any, shall be repaid prior to
Closing.
7.5 ACSA STOCK AGREEMENT. Prior to or on the day of the Closing,
all outstanding and issued shares of the Series A preferred stock of ACSA held
by the Company shall have been duly exchanged for or converted into shares of
common stock of ACSA representing 70% of the common shares of ACSA (with the
other shareholders of ACSA thereupon holding shares of common stock of ACSA
representing 30% of the common shares of ACSA) pursuant to an agreement
substantially in the form attached hereto as Exhibit 6.6 (ACSA Stock Agreement)
(the "ACSA Agreement"). All intercompany accounts between ACSA and the Company,
excluding the advance by the Company of approximately $3 million which shall be
repaid with future wine deliveries, and all cash capital contributed to ACSA
since December 31, 1998, if any, shall be repaid prior to Closing.
7.6 ACSA AND EVSA SHAREHOLDERS AGREEMENTS AND BUY-SELL AGREEMENT.
Prior to or on the day of the Closing, the Company, ACSA and the other
shareholders of ACSA, and the Company, EVSA and the other shareholders of EVSA,
shall enter into shareholders agreements substantially in the forms attached
hereto as Exhibit 6.7(a) (ACSA Shareholders Agreement and EVSA Shareholders
Agreement) providing for the management of the ACSA and EVSA and certain
restrictions on transfer of ACSA and EVSA stock to the Company and EVSA. Prior
to or on the day of the Closing, the Company, the other shareholders of ACSA and
EVSA, Buyer and other parties shall enter into a buy-sell agreement
substantially in the form attached hereto as Exhibit 6.7(b) (Buy-Sell
Agreement).
7.7 ACSA DISTRIBUTION AGREEMENT. Prior to or on the day of the
Closing, Buyer, the Company and ACSA shall have entered into a new long-term
distribution agreement substantially in the form attached hereto as Exhibit 6.8
(ACSA Distribution Agreement) (the "Distribution Agreement") pursuant to which
the Company shall be granted the exclusive, worldwide distribution rights in
perpetuity for the Veramonte brand of wine, subject to termination in connection
with the buy/sell rights in the ACSA and EVSA Shareholder Agreements.
Performance by the Company of its obligations pursuant to the Distribution
Agreement shall be guaranteed by Buyer.
7.8 GRAPE SUPPLY AGREEMENTS. Prior to or on the day of the
Closing, the Company, Buyer and HCP shall have entered into a grape supply
agreement substantially in the form attached hereto as Exhibit 6.9(a) (Quintessa
Grapes) (the "Quintessa Grape Agreement"). The Quintessa Grape Agreement shall
provide for the
31
supply of grapes by HCP to the Company under the same terms and conditions and
at the same prices as set forth in the Grape Purchase Agreement dated as of
August 4, 1994 as amended in July 1996 and November 26, 1996 between the Company
and HCP and shall provide that performance by the Company of its obligations
pursuant to the Quintessa Grape Agreement shall be guaranteed by Buyer. Pursuant
to the Quintessa Grape Agreement, HCP and its affiliate H/Q Wines will have the
right to retain a specified tonnage of grapes from its annual production. Prior
to the Closing, the Company, Buyer and H/Q Vineyards shall have entered into
grape supply agreements substantially in the form attached hereto as Exhibits
6.9(b) and (c), (respectively the Encinos and Lewis Grape Agreements) providing
for similar terms and covering grapes to be grown on the Los Encinos and Lewis
Ranches. The Lewis Grape Agreement shall also include a plan relating to the
varieties of grapes to be planted and a schedule for plantings.
7.9 (Intentionally left blank)
7.10 QUINTESSA WINE PROCESSING AGREEMENT. Prior to or on the
Closing Date, the Company, Buyer and Q shall have entered into a Wine Processing
Agreement substantially in the form attached hereto as Exhibit 6.11 (Wine
Processing) (the "Quintessa Wine Processing Agreement") which shall provide for
the manufacture and storage of bulk and finished wine by the Company for H/Q
Wines.
7.11 LEWIS RANCH PURCHASE AGREEMENT. Prior to the day of the
Closing, the Company and H\Q Vineyards shall have entered into a land purchase
agreement for the sale by the Company of the land located at 0000 Xxxxxxxxxxx
Xxxx xx Xxxx, Xxxxxxxxxx known as the Lewis Ranch (the "Lewis Ranch"),
substantially in the form attached hereto as Exhibit 6.12 (Lewis Ranch).
7.12 INTERCOMPANY LOANS. On or before the Closing Date, any amounts
outstanding on all intercompany loans payable by the Company to SCV, EPI, HCP,
EVSA or ACSA or by SCV, EPI, HCP, EVSA or ACSA to the Company, including those
under the loan agreements between the Company and SCV (but not including the
Company's advances to ACSA which are to be repaid over time by the delivery of
wine), shall have been repaid, and the loan by the Company to its President and
CEO described in the Disclosure Schedule shall have been repaid.
7.13 (Intentionally left blank)
7.14 NON-COMPETITION AND CONFIDENTIALITY AGREEMENT.
Prior to or on the day of the Closing, Buyer and Xxxxxxx Xxxxxxx shall
have entered into an employment and consulting agreement substantially in the
form attached hereto as (Exhibit 6.15 (Employment and Consulting Agreement).
32
7.15 NO KNOWLEDGE OF BREACH BY OTHER PARTY. Each Seller shall have
received a certificate dated as of the Closing Date certifying that Buyer, to
its best knowledge, is not aware of any breach of representation and warranty or
covenant under this Agreement or specifying those of which Buyer is aware of.
7.16 OPINION OF COUNSEL. Sellers shall receive at Closing from
Nixon, Xxxxxxxx, Xxxxxx & Doyle LLP, Buyer's counsel, an opinion dated the
Closing Date, addressing the matters set forth in Exhibit 7.16 (Buyer's Opinion)
with respect to the due authorization of the documents executed and delivered on
behalf of the Buyer under this Agreement.
8. INDEMNIFICATION AND CERTAIN REMEDIES.
8.1 OBLIGATION OF SELLERS TO INDEMNIFY FOR CERTAIN LIABILITIES.
Any Seller having breached any Surviving Representations and Warranties,
covenants or agreement of such Seller shall separately, and not jointly,
indemnify Buyer and hold harmless and, upon Buyer's request, defend Buyer,
and/or its affiliates, subsidiaries, directors, officers, employees, agents and
assigns from and against any claims, demands, causes of action, proceedings,
losses, liabilities, damages, deficiencies, interest, penalties, expenses,
judgments and costs (including reasonable attorneys', consultants' and
accountants' fees and disbursements, court costs, amounts paid in settlement and
expenses of investigation) incurred by Buyer (collectively, "Losses") based
upon, arising out of or otherwise in respect of the breach of such Surviving
Representation and Warranty, covenant or agreement by such Seller, subject in
each instance to Section 8.3 below, and provided however that the obligation of
any Seller pursuant to this Section 8.1 with respect to a Loss shall be limited
to (a) such Seller's ownership percentage as set forth in Exhibit 1.2(a)
(Allocation of Purchase Price), multiplied by (b) the amount of such Loss. Any
claim by Buyer hereunder shall be made no later than the first anniversary of
the Closing Date. Buyer's indemnification rights under this Agreement shall be
limited to Losses arising out of a breach of a Surviving Representation and
Warranty, covenant or agreement and this shall be the sole remedy of Buyer with
respect thereto.
8.2 OBLIGATION OF BUYER TO INDEMNIFY. Buyer shall indemnify,
defend and hold harmless each Seller and his, her or its respective heirs and
assigns from and against any Losses (as the term "Losses" is defined in Section
8.1 above) arising out of or otherwise in respect of the breach of any
representation, warranty, covenant or agreement of Buyer contained in this
Agreement or in any document or other writing delivered pursuant to this
Agreement and for any liabilities arising with respect to the operation of the
Company after the Closing Date. Any claim by Sellers hereunder shall be made no
later than the first anniversary of the Closing Date.
33
8.3 CLAIMS. If any party (the "Indemnitee") receives notice of
circumstances that would give rise to a claim by such party or notice of any
claim or the commencement of any action or proceeding with respect to which any
other party (or parties) is obligated to provide indemnification (the
"Indemnifying Party") pursuant to Section 8.1 or 8.2 (a "Claim"), the Indemnitee
shall promptly give the Indemnifying Party notice thereof. Within 30 days after
such notice, the Indemnifying Party shall notify the Indemnitee whether it
irrevocably elects to make payment of the amount claimed or, with respect to
third party claims, to contest such claim by appropriate legal proceedings. The
failure of the Indemnifying Party to notify the Indemnitee of its intention
within such 30 days shall constitute and irrevocable election by them that it
shall pay the amount claimed, as appropriate. Any defense of a claim shall be
conducted by counsel of good standing chosen by Indemnitee and satisfactory to
Indemnifying Party. Such defense shall be conducted at the expense of
Indemnifying Party, except that if any proceeding involves both claims against
which indemnity is granted hereunder and other claims for which indemnification
is not granted hereunder, the expenses of defending against such claims shall be
borne by the Indemnifying Party and the Indemnitee in respective proportions to
the dollar amount of the claims for which they may be liable based on the
aggregate dollar amount of the claims.
8.4 OBLIGATIONS OF SELLERS TO REDUCE PURCHASE PRICE. The Purchase
Price or the purchase price under the applicable Vineyard Sale Agreement(s), as
the case may be, shall be reduced at the time of Closing with respect to any
Losses (other than Environmental Remediation Costs and those relating to matters
covered by insurance carried by or for the benefit of the Company) arising out
of or otherwise in respect of the breach of any representation or warranty made
by Sellers or Company to Buyer pursuant to this Agreement to the extent such
Losses in the aggregate exceed $3 million but do not thereafter exceed $9
million (or $12 million in total). For the purposes of this Section 8.4, Losses
shall also include Environmental Remediation Costs, if such Environmental
Remediation Costs exceed $1 million. Subject to the procedure provided in ss.4.7
(Environmental Assessment), all Environmental Remediation Costs in excess of $1
million shall be a reduction of the Purchase Price or the purchase price under
the applicable Vineyard Sale Agreement(s), as the case may be, irrespective of
whether the aggregate of Losses and Environmental Remediation Costs exceed $3
million. In the event Losses (not including the Environmental Remediation Costs)
exceed $3 million and the Environmental Remediation Costs do not exceed $1
million, then the Purchase Price or the purchase price under the applicable
Vineyard Sale Agreements, as the case may be, shall be reduced by the total of
Losses exceeding $3 million plus all such Environmental Remediation Costs. To
the extent Losses exceed $3 million and include matters relating to the filing
of Form 5500 by the Company, Sellers shall have the obligation, notwithstanding
the above, to pay all Losses directly relating to such Form 5500 filings in cash
to Buyer.
34
9. TERMINATION AND ABANDONMENT.
9.1 METHODS OF TERMINATION. The transactions contemplated by this
Agreement may be terminated at any time prior to the Closing as follows:
(a) By mutual consent of the parties to this Agreement
evidenced in a writing signed by the parties;
(b) By either Buyer or Sellers in the event that the
aggregate Losses for which adjustments to the Purchase Price would otherwise be
made pursuant to this Agreement and the Vineyard Purchase Agreements exceeds $9
million;
(c) By the Company or Buyer at any time after the Initial
Closing Date or any extension thereof pursuant to ss.1.4 (Closing), if the
Closing has not occurred;
(d) By Buyer, if a condition set forth in Article 6 has
not been satisfied; and
(e) By Sellers or the Company, if a condition set forth
in Article 7 has not been satisfied.
9.2 PROCEDURE UPON TERMINATION. In the event of termination
pursuant to this Section 9, a written notice thereof shall forthwith be given by
the terminating party to the other party and the transactions contemplated by
this Agreement shall be terminated and abandoned without further actions. If the
transactions contemplated by this Agreement are terminated and/or abandoned as
provided herein, then:
(a) Each party will redeliver all documents, work papers,
and other material of any other party relating to the transactions contemplated
by this Agreement, whether obtained before or after the execution hereof, to the
party furnishing the same; and
(b) The confidentiality of all confidential information
received by any party hereto with respect to the business of any other party or
its subsidiaries shall survive the termination of this Agreement.
10. MISCELLANEOUS.
10.1 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
10.2 NOTICES. All notices, demands, requests, or other
communications that may be or are required to be given, served, or sent by any
party to any other party pursuant to
35
this Agreement shall be in writing and shall be delivered in person, mailed by
registered or certified mail, return receipt requested, or delivered by a
commercial courier guaranteeing overnight delivery, addressed as follows:
If to the Company or Sellers: (Via XX Xxxx)
Xxxxxxxxxx Xxxxxxxxx, Xxx.
X.X. Xxx 000
Xxxxxxxxxx, XX 00000
(Via Federal Express)
Franciscan Vineyards, Inc.
0000 Xxxxxxxx Xxxx
Xx. Xxxxxx, XX 00000
Attention: Jean-Xxxxxx Xxxxxxx, President
Facsimile: (000) 000-0000
e-mail: xxx@xxxxxxxxxx.xxx
With a copy to: Farella Braun & Martel LLP
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
e-mail: xxxxxxx@xxx.xxx
With a copy to: Xxxxxx Radovsky Maloney & Share LLP
Four Embarcadero Center, Suite 4000
San Francisco, CA 94111-4106
Attention: Xxxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
e-mail: xxxxxxx@xxxxxxx.xxx
With a copy to: Heller, Ehrman, White & McAuliffe
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Richard A. Peers, Esq.
Facsimile: (000) 000-0000
e-mail: xxxxxx@xxxx.xxx
If to Buyer: Canandaigua Brands, Inc.
000 Xxxxxxxxxxx Xxxxxx Xxxx
Xxxxxxxx, XX 00000
36
Attention: Xxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
e-mail: xxx.xxxxx@xxxxxxx.xxx
With a copy to: Nixon, Xxxxxxxx, Xxxxxx & Doyle, LLP
Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx III, Esq.
Facsimile: (000) 000-0000
e-mail: xxxxxx@xxxx.xxx
If a Party has furnished a facsimile and/or e-mail address, a nonbinding
confirming copy of the Notice shall also be sent by facsimile transmission or
e-mail. Delivery shall be effective upon delivery or refusal of delivery, with
the receipt or affidavit of the United States Postal Service or overnight
delivery service deemed conclusive evidence of such delivery or refusal. Each
party may designate by notice in writing a new address to which any notice,
demand, request, or communication may thereafter be so given, served, or sent.
10.3 PUBLIC ANNOUNCEMENT. Neither the Company, Sellers or Buyer
shall, without the approval of the other parties hereto, (which approval shall
not be unreasonably withheld), make any press release or other public
announcement concerning the transactions contemplated by this Agreement, except
as and to the extent that any such party shall so be obligated by applicable
law, in which case the other party shall be advised and the parties shall use
their best efforts to cause a mutually agreeable release or announcement to be
issued, provided that the parties shall cooperate in making a public
announcement concerning this Agreement immediately following its execution. The
foregoing shall not be deemed to preclude communications or disclosures
necessary to implement the provisions of this Agreement.
10.4 SUCCESSORS AND ASSIGNS. This Agreement and the rights,
interests, and obligations hereunder shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Buyer shall have the right, on or prior to Closing, to assign its rights and
delegate its duties pursuant to this Agreement to a wholly-owned subsidiary,
provided, however, that Buyer shall remain liable for all obligations of such
subsidiary.
10.5 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of California without giving effect to
principles of conflicts of laws.
37
10.6 WAIVER AND OTHER ACTION. This Agreement may be amended,
modified, or supplemented only by a written instrument executed by the party
against which enforcement of the amendment, modification, or supplement is
sought.
10.7 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, and the
other documents executed or delivered pursuant hereto contain the complete
agreement among the parties with respect to the transactions contemplated hereby
and supersede all prior agreements and understandings among the parties with
respect to such transactions contemplated by this Agreement with the exception
of the Non-Disclosure Agreement executed by the Company and Buyer as of March
23, 1999. Section and other headings are for reference purposes only and shall
not affect the interpretation or construction of this Agreement.
10.8 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision were never a part hereof-, the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance (except to the
extent such remaining provisions constitute obligations of another party to this
Agreement corresponding to the unenforceable provision); and in lieu of such
illegal, invalid, or unenforceable provision, there shall be added automatically
as part of this Agreement, a provision as similar in its terms to such illegal,
invalid, or unenforceable provision as may be possible and be legal, valid, and
enforceable.
10.9 INTERPRETATION. This Agreement shall be construed according to
the fair meaning of its language. The rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be employed
in interpreting this Agreement. Whenever the term "including" is used in this
Agreement, it shall be interpreted as meaning "including, but not limited to"
the matter or matters thereafter enumerated.
10.10 THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended to confer upon any person other than the parties hereto and their
successors and permitted assigns any rights or remedies under or by reason of
this Agreement.
10.11 ARBITRATION OF ENVIRONMENTAL DISPUTE. Any dispute arising
from, or relating to, Environmental Remediation Costs shall be resolved at the
request of any party through binding arbitration. Within 14 business days after
demand for arbitration has been made by a party, the parties, and/or their
counsel, shall meet to discuss the issues involved, to discuss a suitable
arbitrator and arbitration procedure, and to agree on arbitration rules
particularly tailored to the matter in dispute, with a view to the dispute's
prompt, efficient, and just resolution. Upon the failure of the parties to agree
upon
38
arbitration rules and procedures within a reasonable time (not longer than
thirty (30) days from the demand), the Commercial Arbitration Rules of the
American Arbitration Association shall be applicable. Likewise, upon the failure
of the parties to agree upon an arbitrator within a reasonable time (not longer
than thirty (30) days from the demand), there shall be a panel comprised of one
(1) arbitrator, to be appointed by the American Arbitration Association. At
least thirty (30) days before the arbitration hearing, the parties shall allow
each other reasonable written discovery including the inspection and copying of
documents and other tangible items relevant to the issues which are to be
presented at the arbitration hearing. The arbitrator shall be empowered to
decide any disputes regarding the scope of discovery. Fees for the arbitrator
shall be divided equally between the parties, and the parties will be
individually responsible for the payment of the fees. The prevailing party in
any arbitration, proceeding or legal action arising out of, or in connection
with, this Agreement shall be entitled to recover its reasonable attorneys' fees
and costs incurred in connection with such arbitration, proceeding or legal
action. The arbitrator shall determine who the prevailing party is for this
purpose.
The award rendered by the arbitrator shall be final and binding upon
the parties. The arbitration shall be conducted in San Francisco, California.
The California State Superior Court located in San Francisco, California shall
have exclusive jurisdiction over disputes between the parties in connection with
such arbitration and the enforcement thereof. The parties consent to the
jurisdiction and venue of the California State Superior Court located in San
Francisco, California. Notwithstanding the fact that the parties have agreed to
have any disputes arising from, or related to, this Agreement resolved by
binding arbitration, such arbitration provision shall not prevent the parties
from seeking ancillary or equitable relief in connection therewith from the
California State Superior Court, including specific performance.
39
"NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE `ARBITRATION OF
DISPUTES' PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO
HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN
THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND
APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE
`ARBITRATION OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO
ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY."
BUYER _________________________ SELLERS _________________________
COMPANY________________________
40
10.12 VENUE. If any legal proceeding or any action (excluding
arbitration described in Section 10.11) relating to this Agreement or any of the
other agreements being executed and delivered in connection herewith, or any of
the transactions contemplated hereby or thereby, is brought or otherwise
initiated such action shall be brought in a court of appropriate jurisdiction
sitting in Xxx Xxxxxxxxx xx Xxxx Xxxxxx, Xxxxxxxxxx if the claim is brought
against the Company or any Seller(s); in Monroe County, New York if the claim is
brought against Buyer. The Company, each Shareholder and Buyer (i) hereby
irrevocably submits itself to the jurisdiction of a court of appropriate
jurisdiction in these respective counties, and (ii) to the extent permitted by
applicable law, hereby waives, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such suit, action or proceeding, the defense that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper, or that this Agreement or
other agreements executed in connection herewith, or the subject matter thereof,
may not be enforced in or by such courts. Without limiting the foregoing, Buyer,
the Company and each of the Sellers consent to process being served on it in any
such suit, action or proceeding at the address of such party set forth in
Section 10.2, and agree that they would generally prefer any suit action or
claim under this Section 10.12 to be heard in federal, not state, court and
shall use their best efforts to do so if there is applicable jurisdiction.
41
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
with the intention of being bound by this Agreement as of the day and year first
above written.
COMPANY: BUYER:
FRANCISCAN VINEYARDS, INC., CANANDAIGUA BRANDS, INC.,
a Delaware corporation a Delaware corporation
By:/s/Jean-Xxxxxx Xxxxxxx By:/s/Xxxxxxx Xxxxx
Jean-Xxxxxx Xxxxxxx, President Xxxxxxx Xxxxx, President
SELLERS:
XXXXXXX XXXXX-XXXXXXX UND KINDER
BETEILIGUNGSVERWALTUNG II, GbR
/s/Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx, an individual
/s/Xxxxxxx Xxxxxxxxx Xxxxxxx By: /s/Xxxxxxx Xxxxx-Xxxxxxx
Xxxxxxx Xxxxxxxxx Xxxxxxx, an individual Xxxxxxx Xxxxx-Xxxxxxx
/s/Jean-Xxxxxx Xxxxxxx XXXXX XXXXX XXXXX UND XXXXXX
Xxxx-Xxxxxx Xxxxxxx, an individual BETEILIGUNGSVERWALTUNG II, GbR
/s/Xxxxxx Xxxxx-Xxxxxxx By: /s/Xxxxx Xxxxx Xxxxx
Xxxxxx Xxxxx-Xxxxxxx, an individual Xxxxx Xxxxx Xxxxx
Its: Managing Partner
/s/Xxxxxxxxx Xxxxx-Xxxxxxx
Xxxxxxxxx Xxxxx-Xxxxxxx, an individual
/s/Xxxxx Xxxxx-Xxxxxxx
Xxxxx Xxxxx-Xxxxxxx, an individual
The Registrant has omitted from this filing the Schedules listed below. The
Registrant will furnish supplementally to the Commission, upon request, a copy
of any omitted Schedule.
Exhibit Description
------- -----------
1.2(a) Allocation of Purchase Price
1(g) Steps in Closing
2 Disclosure Schedule
6.4(a) Vineyard Sale Agreement
6.4(b) Vineyard Sale Agreement
6.5 EVSA Stock Agreement
6.6 ACSA Stock Agreement
6.7(a) ACSA and EVSA Shareholders Agreement
6.7(b) Buy-Sell Agreement
6.8 ACSA Distribution Agreement
6.9(a) Quintessa Grape Agreement
6.9(b) Encinos Grape Agreement
6.9(c) Lewis Grape Agreement
6.11 Wine Processing Agreement
6.12 Lewis Ranch Agreement
6.15 Employment and Consulting Agreement
6.18 Sellers' Opinions
6.18(b) Selling Partners' Opinion
7.16 Buyer's Opinion
