PURCHASE AGREEMENT
Among
SEBASTIANI VINEYARDS, INC.,
TUOLOMNE RIVER VINTNERS GROUP
and
CANANDAIGUA WINE COMPANY, INC.
Dated as of January 30, 2001
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SALE OF TURNER ROAD VINTNERS
TABLE OF CONTENTS
ARTICLE 1 PURCHASE AND SALE OF ASSETS........................................1
1.1 Purchase of Assets; Assumption of Liabilities..................1
1.2 Non-Assignable Agreements and Rights...........................4
1.3 Closing; Closing Purchase Price Allocation.....................4
1.4 Closing Purchase Price Adjustment..............................6
1.5 Inventory Adjustment...........................................8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS..........................8
2.1 Corporate Organization; Qualification..........................8
2.2 Authorizations; Etc............................................8
2.3 No Violation...................................................9
2.4 Financial Statements...........................................9
2.5 Absence of Certain Changes.....................................10
2.6 Assets of Business.............................................10
2.7 Title to Assets................................................10
2.8 Trademarks and Intellectual Property...........................11
2.9 Litigation.....................................................11
2.10 Compliance with Law............................................11
2.11 Tax Matters....................................................12
2.12 Employees......................................................12
2.13 Benefit Plans; ERISA...........................................14
2.14 Insurance......................................................16
2.15 Contracts; No Default..........................................16
2.16 Customers and Suppliers........................................16
2.17 Licenses and Registrations.....................................16
2.18 Books and Records..............................................17
2.19 As Is, Where Is Sale...........................................17
2.20 No Other Representations or Warranties.........................17
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER............................20
3.1 Corporate Organization; Etc....................................20
3.2 Authorization; Etc.............................................20
3.3 No Violation...................................................20
3.4 Consents and Approvals of Governmental Authorities.............21
3.5 Funds..........................................................21
3.6 Omitted........................................................21
3.7 Disclosure of Information......................................21
3.8 Investment Experience..........................................21
3.9 Omitted........................................................21
3.10 No Other Representations or Warranties.........................21
ARTICLE 4 CONDUCT OF BUSINESS PENDING THE CLOSING DATE.......................22
4.1 Regular Course of Business.....................................22
4.2 Organization...................................................23
4.3 Insurance; Property............................................23
4.4 No Default; Amendment..........................................23
4.5 Compliance with Laws...........................................23
4.6 No Acquisitions; Exclusivity...................................23
ARTICLE 5 COVENANTS OF SELLERS AND BUYER.....................................24
5.1 Full Access....................................................24
5.2 Consents, Removal of Objections................................24
5.3 Employees......................................................25
5.4 Further Assurances.............................................25
5.5 Public Announcements...........................................26
5.6 Actions of Buyer Affecting Representations and Warranties......26
5.7 Actions of Sellers Affecting Representations and Warranties....26
5.8 Notification; Updates to Disclosure Schedule...................26
5.9 Conduct Pending the Closing....................................27
5.10 Access by Sellers; Books and Records...........................27
5.11 Plant Closings.................................................28
5.12 Certain Financial Information..................................28
5.13 Bulk Sales.....................................................29
5.14 Distributors...................................................29
5.15 Mutual Assistance on Accounts Receivable.......................29
5.16 Transition Services............................................29
5.17 Title Matters..................................................29
5.18 Liens..........................................................29
5.19 Sellers' Financial Statements..................................29
5.20 Business Information...........................................30
ARTICLE 6 CONDITIONS TO BUYER'S OBLIGATIONS..................................31
6.1 Representations and Warranties True............................31
6.2 Performance....................................................31
6.3 Consents.......................................................31
6.4 HSR; No Proceeding or Litigation...............................31
6.5 Opinions of Counsel............................................32
6.6 Certificates...................................................32
6.7 Adverse Changes................................................32
6.8 Funds..........................................................32
6.9 Title to Real Property.........................................32
6.10 FIRPTA Certificate.............................................32
6.11 Transitional Services..........................................33
6.12 List of Payable and Accounts Receivable........................33
ARTICLE 7 CONDITIONS TO SELLER'S OBLIGATIONS.................................33
7.1 Representations and Warranties True............................33
7.2 Performance....................................................33
7.3 HSR; No Proceeding or Litigation...............................33
7.4 Consents.......................................................34
7.5 Opinions of Counsel............................................34
7.6 Certificate....................................................34
7.7 Transitional Services..........................................34
ARTICLE 8 TERMINATION AND ABANDONMENT........................................34
8.1 Methods of Termination.........................................34
8.2 Procedure upon Termination.....................................34
ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY..............35
9.1 Survival of Representations and Warranties and Covenants.......35
9.2 Indemnification by Sellers.....................................35
9.3 Indemnification by Buyer.......................................36
9.4 Termination of Indemnification.................................37
9.5 Procedures Relating to Indemnification.........................37
9.6 Sellers' Representative........................................38
ARTICLE 10 MISCELLANEOUS PROVISIONS..........................................39
10.1 Arbitration....................................................39
10.2 Amendment and Modification.....................................39
10.3 Waiver of Compliance...........................................39
10.4 Expenses; Attorneys' Fees......................................39
10.5 Notices........................................................40
10.6 Assignment.....................................................41
10.7 Governing Law..................................................41
10.8 Counterparts...................................................42
10.9 Entire Agreement...............................................42
10.10 Third Party Beneficiaries......................................42
10.11 Certain Definitions............................................42
Schedules
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1.1(a)(i) Real Property
1.1(a)(iv) Equipment
1.1(a)(v) Contracts
1.1(a)(vii) Inventory
1.1(a)(ix) Intellectual Property
1.1(b)(iv) Promotional Spending
1.1(c) Excluded Assets
1.4(a) Accounting Methodology
1.4(c) Inventory Procedures
2.5(a) Changes in Credit or Promotional Practices
2.7 Security Interests
2.8 Trademark Registration Numbers
2.12(g) Terminated Employees
2.12(h) Transferred Employees
2.16 Changes in Customers or Suppliers
2.22 Distributors
2.23 Zoning Restrictions and Special Taxes, Affecting, and
Obligations to Encumber Real Property
5.3 Unavailable Employees
6.3 Required Consents to Assignment of Contracts
6.9 Title to Real Property
Disclosure Schedule
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2.1 Organization
2.3 No Violation
2.6 Assets of the Business
2.9 Litigation
2.10 Compliance with Law
2.12 Employees
2.13 Benefit Plans
2.14 Insurance
2.15 Contract Consents
2.16 Adverse Change
2.17 Licenses and Permits
2.23 Real Property
Exhibits
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A Escrow Agreement
B Financial Statements
C Funding Commitment
D Transitional Services Agreement
E Opinion of Sellers' Counsel
F Opinion of Buyer's Counsel
PURCHASE AGREEMENT
This PURCHASE AGREEMENT dated as of January 30, 2001 (this "Agreement"), is
among SEBASTIANI VINEYARDS, INC., a Delaware corporation ("SVI"), and Tuolomne
River Vintners Group, a California partnership, (the "TRVG" and together with
SVI, "Sellers") and Canandaigua Wine Company, Inc., a New York corporation
("Buyer") and solely for purposes of Section 9.6, Richard Cuneo. Capitalized
terms used herein are defined in Section 10.11.
Sellers desire to sell to Buyer, and Buyer desires to purchase from
Sellers, certain property and assets of Sellers relating to SVI's wine
production, sales, marketing and distribution business currently conducted under
the TRV Trademarks (the "Business") on the terms and subject to the conditions
hereinafter set forth.
Accordingly, the parties hereto agree as follows:
ARTICLE 1
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PURCHASE AND SALE OF ASSETS
1.1 PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES.
(a) PURCHASE AND SALE OF ASSETS. On the terms and subject to the
conditions of this Agreement, Sellers will sell, transfer, convey and
assign to Buyer, and Buyer will purchase from Sellers all right, title and
interest of Sellers as of the Closing in the following (collectively, the
"Assets") with the understanding that SVI will remain in the wine
production, sales, marketing and distribution business not associated with
the TRV Trademarks:
(i) the real property located in Lodi, California, described in
Schedule 1.1(a)(i) hereto (the "Real Property");
(ii) all rights, privileges and easements appurtenant to the Real
Property (collectively, "Appurtenances");
(iii) all structures, buildings, building systems (including
without limitation roof, HVAC, electrical, plumbing, sprinklers and
fire safety systems), irrigation systems, fixtures and other
improvements, together with the systems and facilities servicing such
structures, located on the Real Property (collectively,
"Improvements");
(iv) all (A) machinery, tools, appliances, vehicles, furniture,
equipment, cooperage, barrels and other personal property and fixtures
used in the Business, wherever located, including, but not limited to,
that described in Schedule 1.1(a)(iv) hereto, and (B) machinery,
tools, appliances, vehicles, furniture, equipment, cooperage, barrels
and other personal property and fixtures, whether or not used in the
Business, if located on the Real Property ((A) and (B) collectively,
"Equipment");
(v) the contracts set forth in Schedule 1.1(a)(v) hereto and any
grape purchase contracts entered into by SVI prior to the Closing Date
in accordance with Section 4.1 (collectively, the "Contracts");
(vi) all intellectual property rights to the brand names
"Farallon," "Talus," "Heritage," "Vendange," "Nathanson Creek" and "La
Terre" (the "TRV Brandnames") and to the names "Turner Road Vintners"
and "Humphrey & Brown International Wine Marketers," and the domain
names "www.humphreybrown.com," "www.humphreyandbrown.com,"
"www.turnerroadvintners.com," "www.faralloncellars.com,"
"www.taluscellars.com," "www.heritage-vineyards.com,"
"www.heritagevineyards.com," "www.heritagecellars.com,"
"www.heritagewinery.com," "www.nathansoncreek.com,"
"www.vendange.com," and "www.laterrecellars.com" and the goodwill
associated with such TRV Brandnames, names and domain names, whether
registered or not (collectively, the "TRV Trademarks");
(vii) all (A) finished goods of the Business, including bottled
wines labeled with TRV Brandnames, unlabeled case goods, and bulk
wines, and (B) raw materials (whether expensed or not), including work
in process, of the Business, and retail sales merchandise and
supplies, consumable manufacturing supplies, spare parts and repair
materials acquired in the course of Sellers' Business, as the same may
exist at the close of business on the day before the Closing Date
(including, without limitation, those listed in Schedule 1.1(a)(vii)
hereto, other than such items sold or otherwise disposed of in the
ordinary course of business prior to the Closing Date) (the
"Inventory");
(viii) all accounts receivable and notes receivable owed to
Sellers that relate exclusively to the Business ("Receivables");
(ix) all formulae, recipes, and blending instructions currently
used in the Business or necessary to enable the Buyer to operate the
Business, and all right, title, and interest in and to any patents and
any pending patent applications, and in and to any copyrights,
trademarks or services marks, or other intellectual property right,
whether registered or not, in any trade dress, label designs, bottle
designs, and other designs, advertising campaigns and layouts, trade
secrets, inventions, models, manufacturing know-how, and any other
similar intellectual property rights related to the operation of the
Business, together with the goodwill of the Business symbolized
thereby, including, without limitation, that listed in Schedule
1.1(a)(ix);
(x) copies of all Sellers' books and records necessary for the
conduct of the Business;
(xi) any other intangible personal property now or hereafter
owned by Sellers and relating to the operation of the Business, the
ownership or use of the Real Property or any of the foregoing Assets,
and all transferable permits, licenses and approvals and other rights
necessary to utilize the Assets and enjoy the benefits of the
Business; and
(xii) any assets reflected in the Closing Balance Sheet and not
set forth above.
(b) ASSUMPTION OF LIABILITIES. On the terms and subject to the
conditions of this Agreement, Buyer shall assume on the Closing Date and
shall pay, perform and discharge when due the following obligations and
liabilities of Sellers (the "Assumed Liabilities"):
(i) all obligations and liabilities of SVI under the Contracts,
exclusive of (A) payments of money to be made by the Sellers on or
after the Closing Date, the obligation for which arose prior to the
Closing Date (except to the extent Buyer has assumed such obligation
pursuant to subparagraph (ii) below), (B) obligations of the Sellers
to indemnify other parties to the Contracts for acts or omissions of
the Sellers or their Affiliates prior to the Closing Date, (C)
liabilities under the Contracts arising out of or otherwise in respect
of any breach by Seller of the terms of such Contracts prior to the
Closing Date, and (D) liabilities to any third parties under any of
the Contracts deemed to be not assigned to Buyer pursuant to Section
1.2(a) arising prior to the date all consents necessary to the
assignment of such Contract have been obtained;
(ii) all accounts payable and accrued expenses and wine and grape
purchases payable by Sellers that relate exclusively to the Business
and have been taken into account in computing the Closing Purchase
Price (or, if adjusted, the Adjusted Closing Purchase Price);
(iii) all obligations and liabilities for refunds, adjustments,
promotional and other allowances, exchanges, returns, and warranty,
guarantee and merchantability claims in respect of any and all
products sold or manufactured by SVI in connection with the Business
at any time before, on or after the Closing Date, but only if such
liability has, and only to the extent of, a corresponding accrual, and
has been taken into account in computing the Closing Purchase Price
(or, if adjusted, the Adjusted Closing Purchase Price), except that
such assumption of responsibility shall not include any liability or
obligations of the Seller in the nature of product liability,
negligence or strict liability arising from actions or omissions by
Sellers or their Affiliates occurring on or prior to the Closing Date;
and
(iv) all obligations and liabilities relating to or arising from
the Buyer's conduct of the Business or use of the Assets from and
after the Closing Date, including Sellers' promotional commitments and
obligations, consistent with Sellers' past practices, which are
payable, performable and incurred after the Closing Date and will not
exceed in aggregate during the six months following the Closing Date
an amount equal to the total dollars per case allowable for the number
of cases sold under all of the brands as set forth on Schedule
1.1(b)(iv).
Notwithstanding the foregoing, the Sellers shall be responsible for all
liabilities and obligations not expressly assumed by the Buyer under this
Agreement (collectively the "Retained Liabilities"), including and not by way of
limitation (a) liabilities relating to employee benefits, severance pay,
vacation pay, or the Company Plans to employees, (b) tax liabilities, including
and not by way of limitation, income, excise, sales, use, gross receipts, gross
revenues, franchise, employment, payroll or property relating to the Business or
the Purchased Assets for any period ending on or prior to the Closing Date or
arising out of the transactions contemplated by this Agreement, except as
expressly assumed by Buyer under Section 1.3(c), (c) violations by Sellers or
their Affiliates of those laws described in Section 2.10, (d) liabilities
arising out of contracts other than those assumed with respect to the Contracts,
(e) claims by Distributors arising out of
the operation of the Business prior to Closing or out of the transactions
contemplated by this Agreement, (f) liabilities under Environmental Laws or
other Legal Requirements arising out of the treatment, storage, disposal,
recycling, reuse or arrangements for disposal (whether at the Real Property or
other locations) of wastes and Hazardous Substances generated, used, handled or
transported by or on behalf of Sellers in connection with the operation of the
Business or the use and occupancy of the Real Property on or prior to the
Closing Date, (g) any breach by Sellers of the terms of a Contract or obligation
to indemnify a party for the acts of the Sellers, (h) any products liability
claims arising out of any product or services sold or manufactured by Sellers in
connection with the operation of the Business on or prior to the Closing Date,
whether based on contract, tort (including negligence), warranty or strict
liability, or (i) except as assumed under Section 1.1(b), any claims which may
also be imposed on the Buyer by virtue of "successorship", "de facto merger",
"mere continuation" or other, similar principles of law.
(c) EXCLUDED ASSETS. Notwithstanding any other provision of this
Agreement, Sellers will not sell to Buyer, and Buyer will not acquire any
interest in, the assets listed or described in Schedule 1.1(c) (the
"Excluded Assets").
1.2 NON-ASSIGNABLE AGREEMENTS AND RIGHTS.
(a) NON-ASSIGNABILITY. To the extent any lease, contract or other
agreement or any license, permit or approval is not capable of being
assigned, transferred, subleased or sublicensed without the consent or
waiver of the issuer thereof or a party thereto (other than the Sellers) or
any third party (including a government or governmental unit), or if such
assignment, transfer, sublease or sublicense or attempt to assign,
transfer, sublease or sublicense would constitute a breach thereof or a
violation of any law, decree, order, regulation or other governmental
edict, this Agreement shall not constitute an assignment, transfer,
sublease or sublicense thereof, or an attempted assignment, transfer,
sublease or sublicense thereof.
(b) BUYER AND SELLERS TO USE REASONABLE EFFORTS. The Buyer and the
Sellers agree to use reasonable efforts to obtain the consents and waivers
referred to in Subsection (a) above, and to obtain any other consents and
waivers necessary to assign, convey, settle, deliver and transfer the
Assets.
(c) IF WAIVERS OR CONSENTS CANNOT BE OBTAINED. If any consent or
waiver referred to in Subsection (a) above is not obtained, then to the
extent that such consent or waiver is not a condition precedent to the
Closing the Sellers shall (i) provide Buyer the benefits of the relevant
permit, license, approval, lease, contract or other agreement, (ii)
cooperate in any arrangement, reasonable and lawful as to both the Buyer
and the Sellers, designed to afford to the Buyer the benefits of the
Business and the Assets, and (iii) continue with the Buyer to attempt to
obtain such consent or waiver.
1.3 CLOSING; CLOSING PURCHASE PRICE ALLOCATION.
(a) THE CLOSING. The closing of the purchase and sale of the Assets
and the assumption of the Assumed Liabilities (the "Closing") shall be held
at the offices of Morrison & Foerster LLP, 425 Market St., San Francisco,
California, at 10:00 a.m. on a date to be mutually agreed upon between the
parties, which shall be the later of March 15, 2001, or the second
business day after satisfaction of the condition to closing set forth in
Section 7.3(a), or, if the other conditions to the Closing shall not have
been satisfied or waived by such date, as soon thereafter as is practicable
once such conditions are satisfied or waived (the date on which the Closing
shall occur being referred to herein as the "Closing Date"). Without
limiting the foregoing, the parties acknowledge that their mutual desire is
to close on March 1, 2001, or as soon thereafter as is reasonably possible
and will endeavor to do so.
(i) At the Closing, Buyer shall deliver to the Sellers:
(A) by wire transfer to a single bank account (designated in
writing by the Sellers at least two business days prior to the
Closing Date), immediately available funds in an amount equal to
the "Total Shareholders Equity" as shown on the Pro Forma Closing
Balance Sheet less the Inventory Adjustment plus $170,000,000
(the "Closing Purchase Price"), less $15,000,000 to be held by a
third party as an escrow or retainage (the "Escrow");
(B) instruments of assumption in form and substance
reasonably satisfactory to Sellers and their counsel evidencing
and effecting the assumption by Buyer of the Assumed Liabilities
and such other documents as are specifically required by this
Agreement.
(ii) At the Closing, Buyer shall deliver the Escrow to a third
party escrow agent (the "Escrow Agent"), mutually agreeable to the
parties, pursuant to an Escrow Agreement attached as EXHIBIT A (the
"Escrow Agreement"). The Escrow will be placed in an interest bearing
account. The interest will be paid to the parties based on the
distribution of the Escrow. Any amount remaining in the Escrow after
the first anniversary of the Closing Date will be paid to the Sellers.
Buyer will be permitted to offset amounts due to Buyer from the
Sellers against the amounts in escrow.
(iii) At the Closing, Sellers shall deliver or cause to be
delivered to Buyer executed instruments of sale, assignment, transfer
and conveyance in form and substance reasonably satisfactory to Buyer
and its counsel evidencing and effecting the sale and transfer to
Buyer of the Assets (it being understood that such instruments shall
not require Sellers to make any additional representations, warranties
or covenants, expressed or implied, not contained in this Agreement).
Sellers agree to convey, and Buyer agrees to accept, title to the Real
Property, Appurtenances and Improvements by grant deed and Seller
shall remove prior to Closing any mortgage or deed of trust liens
regarding the Real Property and/or Leased Property.
(b) CLOSING PURCHASE PRICE ALLOCATION. The Closing Purchase Price
shall be allocated (the "Allocation") in the following manner:
(i) $170 million shall be allocated to the Assets of TRVG; and
(ii) the balance of the Closing Purchase Price (or, if adjusted,
the Adjusted Closing Purchase Price) shall be allocated to the Assets
of SVI; provided, however, in the event the appraisal of the Assets of
SVI is higher than the Closing Purchase Price less the sum of $170
million, then the above allocation of Closing Purchase Price to TRVG
shall be reduced by the amount such appraisal exceeds the Closing
Purchase Price less the sum of
$170 million. The Assets of SVI will be appraised by an appraisal firm
selected by Buyer which is reasonably satisfactory to Sellers, and
such appraisal shall be completed and approved by Buyer and Sellers as
soon after the Closing Date as is reasonably practicable. The parties
agree that the Allocation will be used by the parties in reporting the
transaction contemplated by this Agreement for federal and state
income tax purposes. Neither the appraisal provided for in this
subsection, nor the Allocation shall affect the amount of the
aggregate Closing Purchase Price or the amount of the aggregate
Adjusted Closing Purchase Price.
(c) PAYMENT OF TRANSFER TAXES. Buyer shall pay all sales, transfer or
use taxes and assessments arising from the sale or transfer of the Assets
hereunder. Buyer shall pay any premium for title insurance and endorsements
on the Real Property issued to Buyer at Closing. Property taxes on the Real
Property, Appurtenances and Improvements shall be prorated between Buyer
and SVI on a pro rata basis as of the Closing Date. If Closing occurs
before the actual taxes and assessments payable during such year are known,
the proration of taxes shall be upon the basis of taxes and assessments for
the Real Property and Improvements payable during the immediately preceding
year; provided, however, that if the taxes and assessments payable during
the year in which Closing occurs are thereafter determined to be more or
less than the taxes and assessments payable during the preceding year,
Sellers and Buyer promptly shall adjust the proration made at Closing and
Sellers or Buyer, as the case may be, shall pay to the other any amount
required as a result of such adjustment. This covenant shall not merge with
the deed delivered hereunder but shall survive the Closing.
1.4 CLOSING PURCHASE PRICE ADJUSTMENT.
(a) PREPARATION OF CLOSING BALANCE SHEET. Within 45 days after the
Closing Date, SVI shall cause to have prepared and delivered to Buyer (i)
an audited closing balance sheet for the Business (the "Closing Balance
Sheet") as of the close of business on the Closing Date and related audited
income statement for the period then ended and (ii) an audited balance
sheet for SVI as of the close of business on the Closing Date and related
audited income statement for the period then ended (determined on a pro
forma basis as though the parties had not consummated the transactions
contemplated by this Agreement). Buyer shall assist SVI in the preparation
of the Closing Balance Sheet and shall provide SVI and its representatives
access at all reasonable times to the personnel, properties, books and
records of the Business for such purpose. Such Closing Balance Sheet and
related income statement shall be prepared consistent with the Accounting
Methodology and using generally accepted accounting principles,
consistently applied, except as set forth in the Accounting Methodology and
shall take account of the results of the physical inventory and inspection
of the Assets and Business set forth below. During the 45 days immediately
following Buyer's receipt of the Closing Balance Sheet, Buyer will be
permitted to review SVI's working papers relating to the Closing Balance
Sheet. The Closing Balance Sheet shall become final and binding upon the
parties on the 45th day following receipt thereof by Buyer unless Buyer
gives written notice of its disagreement ("Notice of Disagreement") to SVI
prior to such date. Any Notice of Disagreement shall specify in reasonable
detail the nature of any disagreement so asserted. If a timely Notice of
Disagreement is received by SVI, then the Closing Balance Sheet (as revised
in accordance with clause (x) or (y) below) shall become final and binding
upon the parties on the earlier of (x) the date the parties hereto resolve
in writing any differences they have with respect to any matter specified
in the Notice of Disagreement or (y) the date the Accounting Firm completes
a Final Closing
Balance Sheet. During the ten business days immediately following the
delivery of a Notice of Disagreement, SVI and Buyer shall seek in good
faith to resolve in writing any differences which they may have with
respect to any matter specified in the Notice of Disagreement. During such
period, SVI shall have access to the working papers of Buyer prepared in
connection with Buyer's preparation of the Notice of Disagreement. At the
end of such ten business day period, SVI and Buyer shall immediately submit
to an independent accounting firm (the "Accounting Firm") for review and
resolution any and all matters which remain in dispute and which were
included in the Notice of Disagreement. Within ten (10) business days of
such submission to the Accounting Firm, each of the parties and their
accountants shall be afforded the opportunity to present their positions as
to such Closing Balance Sheet to the Accounting Firm. Within 45 days of
such submission to the Accounting Firm, the Accounting Firm shall resolve
all matters remaining in dispute and, based on such resolution, adjust the
Closing Balance Sheet accordingly (as adjusted, the "Final Closing Balance
Sheet"). The Final Closing Balance Sheet shall be binding on the parties.
In resolving all matters in dispute, the Accounting Firm shall apply the
standards set forth above for preparation of the Closing Balance Sheet to
determine whether the Closing Balance Sheet was prepared in accordance with
such standards. Such determination shall be made without reference to the
Pro Forma Closing Balance Sheet. The Final Closing Balance Sheet shall
become final and binding on Buyer and Sellers on the date the Accounting
Firm delivers its final resolution to the parties. The Accounting Firm
shall be mutually agreeable to the Buyer and Sellers and shall be a
nationally recognized independent accounting firm. The fees of the
Accounting Firm pursuant to this Section 1.4 shall be borne 50% by Buyer
and 50% by SVI.
(b) ADJUSTMENT. The Closing Purchase Price shall be increased or
decreased, dollar for dollar, for any differences between "Total
Shareholders Equity" as set forth on the Pro-Forma Balance Sheet and as set
forth on the Closing Balance Sheet or, if disputed, the Final Closing
Balance Sheet (the Closing Purchase Price as so increased or decreased
shall hereinafter be referred to as the "Adjusted Closing Purchase Price").
If the Closing Purchase Price is less than the Adjusted Closing Purchase
Price, Buyer shall, and if the Closing Purchase Price is more than the
Adjusted Closing Purchase Price, Sellers shall, within 10 business days
after the Closing Balance Sheet or Final Closing Balance Sheet, as the case
may be, becomes final and binding on the parties, make payment by wire
transfer in immediately available funds of the amount of such difference,
together with interest thereon at a rate equal to the rate of interest from
time to time announced publicly by Citibank, N.A. as its base rate,
calculated on the basis of the actual number of days elapsed over 365, from
the Closing Date to the date of payment.
(c) PRE-CLOSING INVENTORY. From the date hereof until the Closing
Date, Sellers, Buyer and their representatives (including accountants,
engineers and consultants) shall cooperate to perform a physical inventory
and inspection of the Assets and Business for purposes of creating the
Closing Balance Sheet (the "Pre-Closing Inventory"). The parties shall
complete the Pre-Closing Inventory prior to Closing on the nearest date to
Closing as is reasonably practicable. The Pre-Closing Inventory shall be
conducted at such times as are reasonably necessary to complete the
Pre-Closing Inventory on that date. As part of the Pre-Closing Inventory,
Buyer shall be permitted to inspect the condition of, and sample the Assets
in light of Sellers' representations and warranties hereunder; provided
that, such inspection shall be conducted in a reasonable fashion so as to
not interfere unreasonably with the operations of Sellers and so as to
prevent any material adverse effect on any Assets. For purposes of creating
the Closing Balance Sheet, Sellers and Buyer shall follow the procedures
set forth in Schedule 1.4(c) hereto and shall be bound by the provisions
thereof for determining the quantity of Inventory and whether such
Inventories are merchantable.
1.5 INVENTORY ADJUSTMENT. For the purposes of calculating the Closing
Purchase Price and the Adjusted Closing Purchase Price, the "Net Inventory" set
forth on the Pro Forma Closing Balance Sheet, the Closing Balance Sheet, and the
Final Closing Balance Sheet shall be reduced by $31,200,000 (the "Inventory
Adjustment").
ARTICLE 2
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REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as and to the extent set forth in the DISCLOSURE SCHEDULE delivered
by Sellers to Buyer concurrently with the execution and delivery of this
Agreement (the "Disclosure Schedule"), SVI and TRVG, severally and jointly,
hereby represent and warrant to Buyer on the date hereof and on and as of the
Closing Date as follows:
2.1 CORPORATE ORGANIZATION; QUALIFICATION.
(a) SVI ORGANIZATION. SVI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware; SVI
has full power and authority to carry on the Business as it is now being
conducted and to own, lease and operate its properties and assets; and SVI
has made available to Buyer complete and correct copies of its Articles of
Incorporation and Bylaws, as currently in effect. The DISCLOSURE SCHEDULE
lists all jurisdictions in which SVI is qualified or licensed to do
business, and such jurisdictions are all jurisdictions necessary for
conduct of the Business.
(b) TRVG ORGANIZATION. TRVG is a general partnership duly organized,
validly existing and in good standing under the laws of the State of
California; TRVG has full power and authority to carry on its business as
it is now being conducted and to own, lease and operate its properties and
assets; and TRVG has made available to Buyer complete and correct copies of
TRVG's Partnership Agreement, as currently in effect. The DISCLOSURE
SCHEDULE lists all jurisdictions in which TRVG is qualified or licensed to
do business, and such jurisdictions are all jurisdictions necessary for
conduct of the Business.
2.2 AUTHORIZATIONS; ETC.
(a) SVI AUTHORITY. SVI has full corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby.
The Board of Directors and stockholders of SVI have taken all action
required to authorize the execution and delivery of this Agreement and
consummation of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by SVI, and no other corporate
or other action is necessary to effect such execution and delivery; and
this Agreement is the valid and binding obligation of SVI, enforceable in
accordance with its terms, except that (i) enforceability may be limited by
bankruptcy, reorganization, insolvency or other laws affecting the
enforcement of creditors' rights generally, and (ii) courts may award money
damages rather than specific
enforcement of contractual provisions involving matters other than or in
addition to the payment of money.
(b) TRVG AUTHORITY. TRVG has full power and authority to enter into
this Agreement and to carry out the transactions contemplated hereby. The
partners of TRVG have taken all action required to authorize the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by TRVG, this Agreement is the valid and binding obligation of
TRVG, enforceable in accordance with its terms, except that enforceability
may be limited by bankruptcy, reorganization, insolvency or other laws
affecting the enforcement of creditors' rights generally, and courts may
award money damages rather than specific enforcement of contractual
provisions involving matters other than or in addition to the payment of
money.
2.3 NO VIOLATION. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provision of the Articles of Incorporation or Bylaws of SVI or the Partnership
Agreement of TRVG. Neither the execution and delivery of this Agreement by
Sellers nor the consummation of the transactions contemplated hereby will:
(a) require Sellers to obtain any consent, approval, authorization or
permit of, or make any filing with or provide any notification to, any
governmental or regulatory authority, except (A) in connection with the HSR
Act, (B) pursuant to state securities laws, or (C) pursuant to laws, rules
and regulations regulating the production and sale of alcoholic beverages,
if any are applicable;
(b) with respect to Contracts between SVI and SVI's distributors,
except as set forth in the DISCLOSURE SCHEDULE, require any payment or the
incurring of any obligation on the part of SVI or result in a loss of
rights or default, with or without notice or lapse of time, under the
terms, conditions or provisions of any such contracts or agreements, except
for such defaults as to which requisite waivers or consents have been
obtained;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Sellers or the Assets; or
(d) result in the creation or imposition of any Security Interest on
any of the Assets.
2.4 FINANCIAL STATEMENTS. Attached hereto as EXHIBIT B are true and correct
copies of (i) the unaudited balance sheet of the Business, properly adjusted for
the Excluded Assets, as of December 31, 2000 (the "Balance Sheet"), related
unaudited income statement for the six month period then ended, and footnotes
and details thereto, and (ii) the unaudited balance sheet of the Business as of
June 30, 2000, related unaudited income statement for the fiscal year then
ended, and footnotes and details thereto. Buyer shall have access to the work
papers of Sellers' accountants used in the preparation of the Balance Sheet and
all financial statements of the Sellers which relate in whole or in part to the
Business. The Balance Sheet and related unaudited income statement, and the
unaudited balance sheet of the Business as of June 30, 2000, and related
unaudited income statement (A) have been prepared consistent with the Accounting
Methodology and using generally accepted accounting principles, consistently
applied, except as set forth in the Accounting Methodology, (B) fairly present
the financial condition, and results of operations of the Business as of dates
and for the periods referred to therein, and (C) are consistent with the books
and records of the Business.
2.5 ABSENCE OF CERTAIN CHANGES.
(a) OPERATIONS. Since the date of the Balance Sheet there has not been
(i) any adverse change in (A) the business, financial condition or
operations of the Business, (B) the Assets or (C) Sellers' relationships
with suppliers, customers, distributors, lessors or others relating to the
Business except, in each case, changes in the ordinary course of business;
(ii) any damage, destruction or loss, whether or not covered by insurance,
adversely affecting the Business or the Assets; (iii) the creation of any
Security Interest with respect to any Assets, except in the ordinary course
of business; (iv) except as set forth on Schedule 2.5(a), any change in the
credit practices, promotional practices or pricing practices of Sellers
with respect to the Business or in Sellers' method of maintaining the
Business's books, accounts or business records; (v) any acquisition of any
assets, or lease of any assets from any other Person, relating exclusively
to the Business except in the ordinary course of business consistent with
past practice; (vi) any sale or other transfer of any assets relating
exclusively to the Business to any other Person, except in the ordinary
course of business consistent with past practice; (vii) any action that
would result in a violation or breach of, or a default under, any Contract
or any contract by which any of the Assets is bound; (viii) any transaction
involving the Business outside the ordinary course of business; or (ix) the
execution or creation of, or any amendment or termination of, any Contract
or any contract by which any of the Assets is bound, except in the ordinary
course of business.
(b) COMPENSATION. Since the date of the Balance Sheet, there has not
been any increase in the compensation or benefits payable or to become
payable by Sellers to any Employees working solely for the Business, except
for increases in the normal course of business and except for increases
involving payments or obligations on the part of Sellers that in the
aggregate are less than One Hundred Thousand Dollars ($100,000) per annum.
2.6 ASSETS OF BUSINESS. The Assets constitute all of the assets held for
use or used primarily in connection with the Business and are adequate to carry
on the Business as currently conducted. All of the tangible personal property
included in the Assets that is necessary for or used in the operation of the
Business is in good operating condition and repair, except for ordinary wear and
tear. The Accounts Receivable represent bona fide sales at arm's length to
customers of the Business, are not subject to any set-offs, counterclaims,
deductions, rights to return, or agreements for deduction, free goods, discounts
or other deferred price or quantity adjustments which do not have a sufficient
corresponding accrual. The Accounts Receivable are collectible in accordance
with their terms except to the extent of a sufficient reserve.
2.7 TITLE TO ASSETS. Except for Real Property and Leased Property
referenced in Section 2.23, Sellers have good and valid title to all the Assets,
free and clear of all Security Interests of any nature whatsoever, except
(a) such as are disclosed on Schedule 2.7,
(b) liens for (i) taxes and other governmental charges which are not
due and payable or which may thereafter be paid without penalty, or (ii)
mechanics', carriers', workmen's, repairmen's or other like liens arising
or incurred in the ordinary course of business that do not, in the
aggregate, represent encumbrances on the Assets in excess of $30,000 (liens
set forth in subsection (ii) collectively referred to herein as the
"Permitted Liens").
2.8 TRADEMARKS AND INTELLECTUAL PROPERTY. Sellers own the TRV Trademarks
and the intellectual property set forth on Schedule 1.1(a)(ix) (the TRV
Trademarks and scheduled intellectual property collectively referred to herein
as the "Intellectual Property"), whether registered or not, free and clear of
all liens, charges, claims, options, pledges, licenses, security interests, or
similar restrictions except for licenses included in the Contracts, if any, and
licenses previously granted to Buyer. There are no trademarks, service marks,
trade names, copyrights, patents, or other intellectual property owned or
licensed by the Sellers and used in the conduct of the Business, other than the
Intellectual Property. Neither the use, nor the registration, of the
Intellectual Property conflicts with the rights of any other Person, and no
other Person's operations conflict with the use or registration of the
Intellectual Property. There are no claims, suits or proceedings pending or to
the knowledge of the Sellers threatened against or by SVI or TRVG claiming
either an infringement or conflict by SVI or TRVG of or with any rights of any
Person or an infringement or conflict by any Person of or with any of the
Intellectual Property. To the knowledge of the Sellers, no intellectual property
right of any third party will be infringed by the use by the Buyer of the
Intellectual Property, provided such use is not materially different from the
manner in which such Intellectual Property has been used by Sellers. Except as
set forth on the DISCLOSURE SCHEDULE, the TRV Trademarks are registered, solely
in the name of TRVG, (A) on the Principal or Supplemental Register of the United
States Patent and Trademark Office, and (B) with the appropriate foreign
authorities necessary for protection of the TRV Trademarks in all foreign
markets where the TRV Trademarks are used, and each registration is valid, in
full force and effect, and enforceable. The United States Patent and Trademark
Office registration numbers, foreign registration numbers, and corresponding TRV
Trademarks are set forth on Schedule 2.8 hereto. All of the Intellectual
Property is in use in the jurisdictions in which it is registered, and no such
use has been discontinued for a period in excess of three (3) consecutive years.
All copyrightable materials are works for hire, authored by employees of
Sellers, or authored by third parties pursuant to written works for hire
agreements giving Sellers absolute right, title and interest in and to such
materials.
2.9 LITIGATION. Except as set forth in the DISCLOSURE SCHEDULE, (i) there
is no legal, administrative, arbitration or other proceeding, claim, dispute or
action of any nature or inquiry or investigation pending or threatened against
Sellers relating to the Business or against TRVG or any of the Assets, and (ii)
none of the Assets or Sellers in relation to the Business is subject to any
judgment, order or decree entered in any lawsuit or proceeding.
2.10 COMPLIANCE WITH LAW.
(a) GENERAL. Except as to the matters set forth in Sections 2.10(b),
2.11, 2.12 and 2.13 (which are addressed by the specific representations
regarding the subject matters thereof) SVI is in compliance with all Legal
Requirements applicable to the Business. Sellers have not received any
notification from any governmental entity that SVI, with respect to the
Business or the Assets, is in violation of any such Legal Requirements.
TRVG is in compliance with all
Legal Requirements applicable to the Business. Sellers have not received
any notification that TRVG is in violation of any such Legal Requirements.
(b) ENVIRONMENTAL. Sellers are in compliance with all Environmental
Laws, and there are, and have been, no past or present events, conditions,
circumstances, activities, practices, incidents, or actions which could
reasonably be expected to interfere with or prevent continued compliance
with any Environmental Laws. Except as set forth on the DISCLOSURE
SCHEDULE, Sellers have not received from any governmental authority or
other Person any notification that Sellers are in violation of any
Environmental Law. SVI has all licenses, permits, registrations, and
authorizations which are required for operation of the Business under any
Environmental Law and/or which are required from any governmental authority
having jurisdiction over any Hazardous Substance located in or on the Real
Property. No Hazardous Substances have been disposed of or buried at the
Real Property, nor have any been released except in full compliance with
Environmental Laws. There are no Hazardous Substances present at, in,
under, or upon the Real Property or the Improvements thereon and there are
no underground storage tanks of any kind located on any of the Real
Property, and, except as set forth on the DISCLOSURE SCHEDULE, there have
not previously been any such tanks. Neither Seller is subject to any
private, administrative, or judicial action relating to the present or
alleged presence of Hazardous Substances in, under, or upon the Real
Property or the Improvements thereon, and there are no pending or
threatened actions or proceedings from any governmental authority or any
other Person regarding any matter described in this paragraph (b).
2.11 TAX MATTERS.
(a) Each of the Sellers has filed all tax returns that it was required
to file. All such tax returns were correct and complete in all respects.
All taxes owed by the Sellers (whether or not shown on the tax returns)
have been paid. None of the Sellers currently is the beneficiary of any
extension of time within which to file any tax return. No claim has ever
been made by an authority in a jurisdiction where any of the Sellers does
not file tax returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the Assets that
arose in connection with any failure (or alleged failure) to pay any tax.
(b) The Sellers have withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) No stockholder, partner, director or officer (or employee
responsible for tax matters) of any of the Sellers expects any authority to
assess any additional taxes for any period for which tax returns have been
filed. There is no dispute or claim concerning any tax liability of any of
the Sellers either (A) claimed or raised by any authority in writing or (B)
as to which any of the stockholders, partners, directors or officers (or
employees responsible for tax matters) has knowledge based upon personal
contact with any agent of such authority.
2.12 EMPLOYEES.
(a) IDENTIFICATION. The DISCLOSURE SCHEDULE accurately sets forth,
with respect to each employee of either Seller (including any employee of
either Seller who is on a leave of
absence or on layoff status) whose employment is exclusively or primarily
for the Business (referred to individually as an "Employee", and
collectively as the "Employees"):
(i) the name of such Employee;
(ii) such Employee's title;
(iii) such Employee's annualized compensation as of the date of
this Agreement; and
(iv) each Company Plan in which such Employee participates or is
eligible to participate (including, without limitation, whether such
Employee is currently inactive by reasons of short term disability,
long term disability, or workers compensation).
(b) CONTRACTORS. The DISCLOSURE SCHEDULE contains a list of
individuals who are currently performing services for Sellers exclusively
or primarily in connection with the Business and are classified as
"consultants" or "independent contractors," and the respective compensation
of each such "consultant" or "independent contractor."
(c) TERMINABLE. The employment of each of Employee is terminable by
either Seller, as applicable, at will. Neither Seller is a party to or
bound by, and has never been a party to or bound by, any employment
agreement (except as set forth in the DISCLOSURE SCHEDULE), or any union
contract, collective bargaining agreement or similar contract in connection
with the Business.
(d) MANUALS. Sellers have made available to Buyer accurate and
complete copies of all employee manuals and handbooks, disclosure
materials, policy statements, and employment agreements relating to the
employment of the Employees.
(e) LEGAL REQUIREMENTS. Sellers have complied with all Legal
Requirements related to the employment of Employees. Sellers have not
received any notice in writing of any claim that either Seller has not
complied in any material respect with any Legal Requirements relating to
the employment of Employees, including any provisions thereof relating to
wages, hours, collective bargaining, the payment of Social Security and
similar taxes, equal employment opportunity, employment discrimination, the
WARN Act, employee safety, or that it is liable for any arrearages of wages
or any taxes or penalties for failure to comply with any of the foregoing.
(f) LABOR PRACTICES. Neither Seller is engaged, and has never been
engaged, in any unfair labor practice of any nature in connection with the
Business. There has never been any slowdown, work stoppage, labor dispute
or union organizing activity, or any similar activity or dispute, affecting
the Business or any of the Employees. There is not now pending, and to the
Knowledge of Sellers no person has threatened to commence, any such
slowdown, work stoppage or labor dispute in connection with the Business.
Neither Seller is a party to any collective-bargaining agreement with
respect to Employees and has not received notice of any proposed union
certification or recognition election with respect to the Business.
(g) TERMINATION OF EMPLOYEES. Schedule 2.12(g) sets forth a true and
accurate list of those employees of the Business terminated by the Sellers
within the last 90 days, and whether such termination was for cause or not.
(h) TRANSFERS OF EMPLOYEES. Schedule 2.12(h) sets forth a true and
accurate list of those employees of the Sellers and their Affiliates who
have been transferred between the Sellers and their Affiliates within the
twenty-four month period immediately preceding the date hereof.
2.13 BENEFIT PLANS; ERISA.
(a) PLANS. The DISCLOSURE SCHEDULE sets forth a true and complete list
of each written or oral employee benefit plan, including any retirement or
deferred compensation plan, incentive compensation plan, stock plan,
including stock option plans, unemployment compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance or hospitalization
program or any other fringe benefit arrangements for any current or former
employee, director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal understanding, regardless of whether an
"employee benefit plan," as defined in Section 3(3) of ERISA, policy or
agreement (including, any employment or consulting agreement or severance
agreement) that is maintained, or is or was contributed to by Sellers (all
and any Member of the Controlled Group of the foregoing) (the "Company
Plans"). A true and correct copy of each Company Plan as currently in
effect and, if applicable, the most recent annual report, summary plan
description, trust agreement and any determination letter issued by the
Internal Revenue Service for each Company Plan have been delivered to or
will be made available for review by Buyer. Neither Sellers nor any Member
of the Controlled Group has ever maintained or contributed to any plan
subject to Title IV of ERISA or Section 412 of the Internal Revenue Code of
1986, as amended (the "Code") (including any "Multiemployer Plan," as
defined in Section 3(37)(A) of ERISA) and no fact or event exists which
could give rise to any liability under Title IV of ERISA or Section 412 of
the Code. Neither Sellers nor any Member of the Controlled Group is, nor do
any of them expect to be, subject to (1) a security interest pursuant to
Section 412(f) of the Code or (2) a lien pursuant to Section 412(n) of the
Code or Sections 4068 or 302(f) of ERISA with respect to any Company Plan.
(b) ADMINISTRATION. Each Company Plan that is an "employee benefit
plan," as defined in Section 3(3) of ERISA, complies by its terms and has
been administered in compliance in all material respects with the
requirements provided by any and all statutes, orders or governmental rules
or regulations currently in effect and applicable to the Company Plan,
including, but not limited to, ERISA and the Code.
(c) NO PROHIBITED TRANSACTIONS; CLAIMS. With respect to each Company
Plan:
(i) no prohibited transactions (as defined in Section 406 or 407
of ERISA or Section 4975 of the Code) have occurred for which a
statutory exemption is not available; and
(ii) no action or claims (other than routine claims for benefits
made in the ordinary course of Company Plan administration for which
Company Plan administrative review procedures have not been exhausted)
are pending or, to Sellers' Knowledge, threatened or
imminent against or with respect to any Company Plan, any employer who
is participating (or who has participated) in any Company Plan or any
fiduciary (as defined in Section 3(21) of ERISA), of the Company Plan.
(d) COBRA. All of the Company Plans, to the extent applicable, are in
compliance in all material respects with the continuation of group health
coverage provisions contained in Section 4980B of the Code and Sections 601
through 608 of ERISA ("COBRA").
(e) NON-COBRA. Neither Seller nor any Member of the Controlled Group
maintains or contributes to any plan that provides health benefits to an
employee after the employee's termination of employment or retirement
except as required under COBRA.
(f) REPORTS. All reports, forms and other documents required to be
filed with any government entity or furnished to employees, former
employees or beneficiaries with respect to any Company Plan (including
summary plan descriptions, Forms 5500 and summary annual reports) have been
timely filed and furnished and are accurate.
(g) CERTAIN QUALIFICATIONS. Each of the Company Plans that is intended
to qualify under Section 401(a) of the Code has been determined by the
Internal Revenue Service to so qualify (pursuant to a current favorable
determination letter) after January 1, 1989, or has remaining a period of
time under applicable Treasury regulations or IRS pronouncements in which
to apply for such a letter and make any amendments necessary to obtain a
favorable determination as to the qualified status of each such Company
Employee Plan, and each trust maintained pursuant thereto has been
determined by the Internal Revenue Service to be exempt from taxation under
Section 501 of the Code. To Sellers' Knowledge, nothing has occurred that
could reasonably be expected to adversely affect the qualification of any
Company Plan and its related trust.
(h) CONTRIBUTIONS. All required contributions to the Company Plans for
all periods ending prior to the Closing Date (including periods from the
first day of the current plan year to the Closing Date) have been made or
will have been made prior to the Closing Date by Sellers.
(i) PREMIUMS. All insurance premiums required for insurance coverages
under the Company Plans have been paid in full or will have been paid in
full prior to the Closing Date, subject only to normal retrospective
adjustments in the ordinary course, with regard to the Company Plans for
plan years ending on or before the Closing Date.
(j) ACCRUAL OF EXPENSES AND LIABILITIES. All expenses and liabilities
relating to all of the Company Plans have been, and will on the Closing
Date be, fully and properly accrued on Sellers' books and records and
disclosed in accordance with generally accepted accounting principles and
in the financial statements of the respective Company Plans.
(k) AMENDMENT; TERMINATION. Each of the Company Plans provides that it
may be amended or terminated at any time and, except for benefits protected
under Section 411(d) of the Code, all benefits payable to current,
terminated employees or any beneficiary may be amended or terminated by the
Seller or the Business at any time without liability.
(l) OTHER LIABILITIES. Neither Sellers nor the Business nor any Member
of the Controlled Group has any liability or is threatened with any
liability (whether joint or several) (i) for any excise tax imposed by
Sections 4971, 4975, 4976, 4977 or 4979 of the Code, or (ii) to a fine
under Section 502 of ERISA.
(m) NEGOTIATIONS. There are no negotiations, demands or proposals
which are pending or have been made which concern matters now covered, or
that would be covered, by the type of agreement required to be listed in
the DISCLOSURE SCHEDULE.
2.14 INSURANCE. The DISCLOSURE SCHEDULE contains an accurate and complete
description of all policies of fire, liability, worker's compensation and other
forms of insurance owned or held by Sellers relating to the Business or the
Assets.
2.15 CONTRACTS; NO DEFAULT. Neither Seller is a party to any contract or
other agreement, whether written or oral, that (i) imposes, or will impose as of
the Closing Date, any Security Interest (other than the Security Interests set
forth on Schedule 6.9) on any of the Assets that will not be removed on or
before the Closing Date, or (ii) would prevent or threaten the consummation of
the transaction contemplated by this Agreement. True and complete copies of the
Contracts have been made available to Buyer prior to the execution and delivery
of this Agreement. All Contracts are to Sellers' Knowledge, valid and
enforceable in accordance with their respective terms; neither Seller is in
default in the performance of any of its obligations thereunder; to Sellers'
Knowledge, no default or event that (whether with or without notice, lapse of
time, or both, or the happening or the occurrence of any other event) would
constitute a default thereunder has occurred; and, to Sellers' Knowledge, all
other parties thereto are not in default thereunder and have no counterclaims,
offsets or defenses with respect thereto. Except as set forth on the DISCLOSURE
SCHEDULE, all consents to the transactions contemplated by this Agreement
required from parties to the Contracts have been obtained by Sellers, or will be
obtained prior to the Closing Date.
2.16 CUSTOMERS AND SUPPLIERS. Except as set forth on Schedule 2.16, since
January 1, 2000, there has been no adverse change in the business relationship
of Sellers with any customer or supplier which change is material to the
financial condition or operations of the Business. To Sellers' Knowledge, no
customer or supplier of the Business intends to materially reduce its purchases
from or sales to Sellers. None of the suppliers or customers of the Business
have informed the Sellers, in writing or, to Sellers' Knowledge, orally, that it
does not intend to do business with the Buyer following the Closing with respect
to the Business, except as may be set forth on the DISCLOSURE SCHEDULE.
2.17 LICENSES AND REGISTRATIONS. (i) Sellers have all permits, licenses,
registrations and approvals (collectively, "Approvals") necessary to conduct the
Business as presently conducted and as required by applicable laws, rules and
regulations, and (ii) neither Seller is in violation or breach of any of the
terms, requirements or conditions of any of said Approvals. The DISCLOSURE
SCHEDULE sets forth a complete and accurate listing of all of the Approvals
issued to, possessed by, or otherwise in effect with respect to the Business.
Such Approvals constitute all of the Approvals necessary to permit the Business
to be conducted in the manner in which it is now being conducted.
2.18 BOOKS AND RECORDS. The books of account, minute books and other
corporate and partnership records of Sellers properly and fairly reflect all
material transactions undertaken by Sellers and all such books and records have
been maintained in accordance with good business practice. At Closing, Sellers
will deliver to Buyer copies of all documents, books and records related to the
operation of the Business.
2.19 AS IS, WHERE IS SALE. Buyer acknowledges and agrees that it has been
or will prior to the date hereof be given a full opportunity to inspect and
investigate every aspect of the Assets, including all matters related to legal
status or requirements, physical condition, title, leasing, contracts, and other
matters of significance. Buyer specifically acknowledges and agrees that, except
for the specific representations and warranties set forth in Article 2, the
Assets are being sold in an "AS IS" condition and "WITH ALL FAULTS" as of the
date of this Agreement and as of the Closing.
2.20 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations
and warranties contained in Article 2, neither of the Sellers nor any other
Person makes any express or implied representation or warranty on behalf of the
Sellers, and each of the Sellers hereby disclaims any such representation or
warranty whether by the Sellers or any of their respective Affiliates, officers,
directors, employees, agents or representatives or any other Person.
2.21 FULL DISCLOSURE. To the Knowledge of the Sellers, the representations
and warranties contained in this Article 2, as supplemented by the Sellers'
schedules and DISCLOSURE SCHEDULE, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary, to
make the representations and warranties contained in this Article 2, as
supplemented by the Sellers' schedules and DISCLOSURE SCHEDULE, in the light of
the circumstances under which they were made, not misleading.
2.22 DISTRIBUTORS. Set forth on Schedule 2.22 is a true and complete list
of the Distributors.
2.23 REAL PROPERTY.
(a) Schedule 1.1(a)(i) sets forth a complete and correct list and the
legal descriptions of the Real Property. Sellers are not a party to any
contract, lease or other agreement regarding the Real Property, other than
this Agreement and the documents set forth on Schedule 2.23.
(b) Except for liens for current taxes not yet due and payable, the
Sellers have good and marketable title to the Real Property and valid
leasehold interests in and to all real property that is the subject of
leases included in the Contracts (the "Leased Property"), which Real
Property and Leased Property interests are not subject to any rights of any
other person or entity that are superior to such interests of Sellers,
other than easements of record and the documents set forth on Schedule
2.23. The easements of record and those set forth on Schedule 2.23 do not
materially interfere with the present use or occupation of the Real
Property or Leased Property.
(c) True, correct and complete copies of the real property leases
included in the Contracts (including without limitation any amendments and
underlying leases) are attached
to Schedule 1.1(a)(v). Such leases contain the entire agreement between the
landlord of each Leased Property and the appropriate Seller and there are
no other agreements between the landlord and the Sellers affecting such
Leased Property. Such leases are in full force and effect and all of the
representations and warranties of the Sellers therein are true and correct.
No material default of the tenant and/or subtenant (if any) has occurred
under any of such leases nor has any event occurred which, with the giving
of notice or the passage of time or both would constitute a material
default of the tenant and/or subtenant (if any) thereunder. Any default
under such leases has been cured within applicable cure periods provided
thereby. Without limiting the generality of the foregoing, the tenant
and/or subtenant (if any) under such leases, is current in the payment of
all rent due thereunder and has not prepaid more than one month's rent
thereunder. To the Sellers' Knowledge, no default of the landlord has
occurred under any such leases nor has any event occurred which, with the
giving of notice or the passage of time or both would constitute a default
of the landlord thereunder. To the Sellers' Knowledge, there are no claimed
set-offs against rent due, claims for indemnification by any party, known
claims or litigation regarding the Leased Property. The Sellers have free
and unimpeded vehicular and pedestrian access to the Leased Property via a
dedicated public way or appurtenant easements.
(d) The Sellers have all necessary approvals, certificates, consents,
permits and licenses, including but not limited to all water and irrigation
licenses and permits, (all of which are in current effect and in final,
non-appealable form) to use and operate the Business at or on the Real
Property and the Leased Property. The Sellers have not violated or failed
to hold any valid and effective certificates of occupancy, or certificates
relating to electrical work, subdivision, zoning or other approvals,
consents, permits and licenses (including, without limitation, building,
housing, safety, fire, health subdivision, zoning and similar permits and
approvals) required by applicable law with respect to any Real Property or
Leased Property. The Real Property and Leased Property is free from any use
or occupancy restrictions, except those imposed by applicable subdivision
and zoning laws, ordinances and regulations which permit the current use of
the Real Property and Leased Property, and from all special taxes or
assessments, except those specified on Schedule 2.23. Except as set forth
on Schedule 2.23, the Real Property and Leased Property and the Sellers'
use and operation thereof complies in all material respects with all (i)
federal, state and local directives, laws, ordinances, policies, rules,
regulations, requirements, and statutes applicable thereto (including,
without limitation, applicable building, health, fire, safety, subdivision,
zoning and other similar regulatory laws, ordinances , codes and
regulations and the Americans with Disabilities Act ) (collectively,
"Property Laws"), and (ii) insurance requirements applicable to any
buildings and improvements. To the Sellers' Knowledge, the Sellers have not
received, nor is there, any notice of any non-compliance with any Property
Laws regarding the Real Property or Leased Property, which have not been
resolved. None of the Real Property or Leased Property is located within a
flood plain requiring flood insurance, or evidence of such insurance is
attached to Schedule 2.23.
(e) Neither the whole nor any portion of the Real Property or Leased
Property is subject to any governmental decree or order to be sold nor, to
the Sellers' Knowledge, is being condemned, expropriated or otherwise taken
by any public authority with or without payment of compensation therefore
nor has any such condemnation, expropriation or taking been proposed. To
the Sellers' Knowledge, there are no zoning or other land-use regulation
proceedings, or any change in any applicable Property Laws, which could
affect the use, operation or value of the Real Property or Leased Property
affected thereby in any material respect, and the Sellers have
not received written notice of any special assessment proceedings affecting
the Real Property or Leased Property which have not been resolved.
(f) All Improvements on the Real Property and all structures,
buildings, building systems (including without limitation roof, HVAC,
electrical, plumbing, sprinklers and fire safety systems), irrigation
systems, fixtures and other improvements, together with the systems and
facilities servicing such structures, buildings, fixtures and other
improvements, located on the Leased Property (collectively, the "Leased
Property Improvements") are (i) in good working order and repair (ordinary
wear and tear excepted) and (ii) suitable for the use presently being made
of such Improvements and Leased Property Improvements by the Sellers.
(g) All water, sewer, gas, electric, communications, telephone,
irrigation and drainage facilities and all other utilities required by law
or for the present use and operation of the Real Property and Leased
Property ("Utilities Facilities") are: (i) installed to the boundary lines
of the Real Property or Leased Property and the buildings and vineyards
situate thereon, (ii) all connected and operating pursuant to valid
permits, consents and approvals, (iii) adequate to service the Real
Property and Leased Property and to permit compliance with all Property
Laws and the present usage of the Real Property and Leased Property, and
(iv) are connected to the Real Property or Leased Property by means of one
or more public or private easements extending from the Real Property or
Leased Property to one or more public streets, public rights-of way or
utility facilities ("Appurtenant Easements"). None of the Improvements,
Leased Property Improvements or Utility Facilities located on the Real
Property or Leased Property (v) encroaches on the property of others or
(vi) relies on any facilities located on other property not subject to
Appurtenant Easements (A) to comply with any Property Laws, or (B) for
agricultural use, structural support, material building systems,
operations, Improvements or Utility Facilities. All of the Utility
Facilities not located on the Real Property or Leased Property are situate
within and comply at all times with the provisions of the Appurtenant
Easements.
(h) The Sellers have not committed or obligated themselves in any
manner whatsoever to assign or sublease any Real Property or Leased
Property to any person or entity. Except as provided on Schedule 2.23, the
Sellers have not committed or obligated themselves in any manner whatsoever
to place any encumbrance on any Real Property or Leased Property or any
portion thereof. Except as provided on Schedule 2.23, the Sellers have not
hypothecated or assigned any rents or income from the Real Property or
Leased Property, or any portion thereof, in any manner.
(i) Except as provided on Schedule 2.23, the Sellers have not caused
any work or improvements to be performed upon or made to any of the Real
Property or Leased Property for which there remains outstanding any
material payment obligation that could result in the imposition of any lien
on any Real Property, Leased Property, Improvements or Leased Property
Improvements, except for the imposition of Permitted Liens. Prior to the
date of this Agreement, or as provided elsewhere in this Agreement, Sellers
have delivered (or will deliver) to Buyer true and correct copies of all
deeds to the Sellers, approvals, certificates, consents, easements,
encumbrances, instruments, licenses, mortgages, permits, surveys, title
insurance policies and other documents relating to or affecting the title
to the Real Property and Leased Property that are in the possession,
custody or control of the Sellers.
(j) To Sellers' Knowledge, the winery wastewater treatment systems at
any of the Real Property, including without limitation such systems which
utilize ponds and wetlands as part of the treatment process: (i) are being
operated, maintained and monitored in compliance with all applicable
Environmental Laws and Legal Requirements and in accordance with applicable
Operation and Maintenance Manuals and procedures; (ii) are fulfilling the
wastewater treatment purposes for which they were created; and (iii) do not
require significant modification to maintain continued proper operation and
compliance with Environmental Laws and Legal Requirements and fulfillment
of wastewater treatment purposes. The Sellers have all easements and rights
to operate the winery wastewater treatment systems and to utilize the
pipelines on adjoining properties in connection with such systems. Such
easements and rights are fully transferable to Buyer at Closing Date.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers on the date hereof and on and as
of the Closing Date as follows:
3.1 CORPORATE ORGANIZATION; ETC. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of New York. Buyer has full
power and authority to carry on its business as now being conducted and to own,
lease and operate its properties and assets.
3.2 AUTHORIZATION; ETC. Buyer has full corporate power and authority to
enter into this Agreement and to carry out the transactions contemplated hereby.
Buyer has taken all action required by its Articles of Incorporation, its Bylaws
or otherwise to authorize the execution and delivery of this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered, and no other corporate or other action is necessary to
effect such execution and delivery; and this Agreement is the valid and binding
obligation of Buyer enforceable against it in accordance with its terms, except
that (i) enforceability may be limited by bankruptcy, reorganization, insolvency
or other laws affecting the enforcement of creditors' rights generally, and (ii)
courts may award money damages rather than specific enforcement of contractual
provisions involving matters other than or in addition to the payment of money.
3.3 NO VIOLATION. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (a) violate any
provisions of the Articles of Incorporation or Bylaws of Buyer, (b) violate, or
be in conflict with, or constitute a default (or an event which, with or without
due notice or lapse of time, or both, would constitute a default) under or cause
the acceleration of the maturity of any debt, obligation, contract, commitment
or other agreement to which Buyer is a party, (c) result in the creation or
imposition of any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind, upon any property or assets of Buyer under
any debt, obligation, contract, agreement or commitment to which Buyer is a
party or by which Buyer is bound, or (d) violate any statute or law or any
judgment, decree, order, regulation, or rule of any court or governmental
authority.
3.4 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except for
approvals to be obtained from the State of California Department of Alcoholic
Beverage Control and Board of Equalization, (the "California Authorities") the
United States Bureau of Alcohol, Tobacco and Firearms (the "ATF"), and the
notification requirements and expiration or termination of the applicable
waiting period under the HSR Act, no material consent, approval or
authorizations of, or declaration, filing or registration with, any governmental
regulatory authority or third Person is required in connection with the
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated hereby. To the best of Buyer's
knowledge, there is no existing circumstance related to Buyer that would prevent
Buyer from obtaining the approvals specified above.
3.5 FUNDS. Buyer has available a commitment attached hereto as EXHIBIT C
(the "Commitment") from the Chase Manhattan Bank and Chase Securities Inc.
(collectively, "Chase") or will use its reasonable efforts to seek other funding
to provide sufficient funds to enable Buyer to consummate the transactions
contemplated herein. The Commitment is subject only to the terms and conditions
stated therein. Buyer is in full compliance with its credit facilities including
without limitation the credit facility referred to in the Commitment. Buyer will
take all reasonable steps necessary to cause Chase to fund the Commitment or for
Buyer to otherwise obtain sufficient funding for Buyer to consummate its
obligations hereunder. Buyer has no knowledge Chase will not fund the
Commitment. Buyer will not take any action that could reasonably be expected to
adversely affect the certainty of Buyer's ability to consummate the transactions
contemplated hereby or obtain the financing contemplated by the Commitment or
otherwise in amounts sufficient to enable Buyer to consummate the transactions
contemplated hereby.
3.6 Omitted.
3.7 DISCLOSURE OF INFORMATION. Buyer believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Assets pursuant to this Agreement. Buyer has had an opportunity to
ask questions and receive answers from Sellers regarding the terms and
conditions of sale of the Assets and the business, properties, prospects and
financial condition of the Business.
3.8 INVESTMENT EXPERIENCE. Buyer can bear the economic risk of its
investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the purchase of
the Assets.
3.9 Omitted.
3.10 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations
and warranties contained in this Article 3, Buyer nor any other Person makes any
express or implied representation or warranty on behalf of the Buyer, and Buyer
hereby disclaims any such representation or warranty whether by the Buyer or any
of their respective Affiliates, officers, directors, employees, agents or
representatives or any other Person.
ARTICLE 4
---------
CONDUCT OF BUSINESS PENDING THE CLOSING DATE
Sellers hereby agree that, pending the Closing Date, and except as
otherwise consented to or approved by Buyer in writing:
4.1 REGULAR COURSE OF BUSINESS. Sellers shall conduct the Business in the
ordinary course and substantially in the same manner as heretofore conducted.
Without limiting the generality of the foregoing:
(a) Sellers will not change in any manner the rate or terms of
compensation or bonus payable or to become payable to any management
employee, or change in any manner the rate or terms of any insurance,
pension or other employee benefit plan, payment or arrangement made to, for
or with any management employee;
(b) Sellers will not enter into any grape purchase contract;
(c) Sellers will not enter into any agreement to do any of the things
described in clause (a) or (b) above;
(d) The Sellers will use their best efforts to preserve their rights
to, and the goodwill associated with, the Intellectual Property.
(e) Subject to the terms and condition of this Agreement, Sellers will
use their reasonable efforts to keep available the services of the
Employees, and preserve the goodwill, reputation, and present relationships
of the Business with its suppliers, customers, licensors, and others having
such business relations with the Business.
(f) Except in the ordinary course of business, or except upon the
written consent of the Buyer, no Seller will (i) sell, lease, transfer, or
otherwise dispose of any of the Assets, (ii) create or permit to exist any
lien on the Assets other than Permitted Liens, or (iii) make any new
commitments for capital expenditures in the Business.
(g) No Seller will accelerate or delay the manufacture, shipment, or
sale of any inventory in a manner inconsistent with past practices,
including, without limitation, sell inventory to distributors in excess of
quantities which would constitute, as of the Closing Date, the lesser of
(i) inventories beyond which the distributor has historically purchased
during the comparable period in the prior year or (ii) a fifteen (15) day
supply for distributors located in the State of California and a forty-five
(45) day supply for other distributors (any such excess referred to herein
as "Loaded Sales to Distributors").
(h) The Sellers will (i) use reasonable efforts to maintain the Assets
in good repair, order, and condition, normal wear and tear excepted, (ii)
maintain their records relating to the Assets in the usual, regular, and
ordinary manner on a basis consistent with past practices, and (iii) use
reasonable efforts to perform and comply with their obligations under the
Contracts. The Sellers will not make any material alterations to the
Assets, other than in the ordinary course
of business consistent with past practices, without the prior written
consent of the Buyer, which consent shall not be unreasonably withheld or
delayed.
4.2 ORGANIZATION. Each of Seller shall use its best efforts to preserve its
existence and business organization intact, to keep available to Buyer, the
officers and key employees employed in the Business, and to preserve for Buyer
the Business's relationships with lenders, suppliers, customers and others
having business relations with the Business.
4.3 INSURANCE; PROPERTY. Each Seller shall continue to insure all property,
real, personal and mixed, owned or leased by such Seller and used in the
Business, including the Assets, in the manner contemplated in Section 2.14 and
all such property shall be used, operated, maintained and repaired in a careful
and reasonable manner. Notwithstanding the foregoing, in the event of any
casualty affecting the Assets after the date hereof and prior to the Closing
Date (i) in an amount less than $200,000, Sellers shall have no obligation to
repair or restore the Assets provided Sellers assign to Buyer at Closing any
proceeds available to Sellers under any policy of casualty insurance covering
the Assets, and (ii) in an amount equal to or greater than $200,000, Sellers
shall have no obligation to repair or restore the Assets provided if Sellers do
not repair or restore such Assets prior to the Closing Date, Buyer's obligations
to effect the transactions contemplated herein shall be relieved, and Buyer may,
in its sole discretion, terminate this Agreement pursuant to Section 8.1 without
further obligation to Sellers.
For a period of twelve (12) months from the Closing Date, the Sellers shall
maintain, on an occurrence basis, comprehensive General Liability Insurance
(including, without limitation, contractual liability insurance and products
liability insurance) covering claims arising out of Sellers' operation of the
Business, and out of products or services sold by, or manufactured by Seller in
connection with the operation of the Business, on or prior to the Closing Date,
with limits of at least $1,000,000 for each occurrence, with a $25,000,000
aggregate limit, naming the Buyer as additional insured. Such policies shall be
written so that Buyer will receive 30 days written notice of any cancellation
and reasonable notice of any non-renewal or material change in coverage.
4.4 NO DEFAULT; AMENDMENT. Each Seller shall use its best efforts not to do
any act or omit to do any act, or permit any act or omission to act, that will
cause a breach of any material Contract. Neither Seller shall amend any material
Contract except in the ordinary course of business and with prior notice to
Buyer, provided that any amendment to a Contract or Contracts that individually,
or in the aggregate, increases the liability of Sellers by more than $100,000.00
requires the written consent of the Buyer.
4.5 COMPLIANCE WITH LAWS. Each Seller shall duly comply with all Legal
Requirements applicable to it and its properties, operations, business and
employees.
4.6 NO ACQUISITIONS; EXCLUSIVITY. Sellers shall not approve or undertake,
whether as the surviving, disappearing, acquiring or selling entity, any other
merger, consolidation, asset acquisition or disposition, tender offer or other
takeover transaction with respect to the Business or Assets or furnish or cause
to be furnished any information concerning the Business or Assets to any Person
(other than to Buyer) that is interested in any such transaction. Sellers shall
not
solicit or encourage, or pursue any unsolicited, inquiries or proposals for the
acquisition of all or any part of the capital stock, property, assets or
business of the Business or Assets.
ARTICLE 5
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COVENANTS OF SELLERS AND BUYER
5.1 FULL ACCESS. Sellers shall afford to Buyer, its counsel, accountants
and other authorized representatives reasonable access to Sellers' properties,
books and records to the extent they relate to the Business or Assets in order
that Buyer may have full opportunity to make such reasonable investigations as
Buyer shall desire to make of the Business. Sellers will cause Sellers'
employees and accountants to furnish such additional financial and operating
data and other information relating to the Business or Assets as Buyer shall
from time to time reasonably request. Any such investigation shall be conducted
during normal business hours in such a manner so as not to interfere
unreasonably with the operations of SVI and TRVG, and Buyer shall not contact
any sales representatives, distributors, brokers, customers, suppliers or
employees of Sellers concerning the transactions contemplated by this Agreement
without the prior written consent of Sellers.
5.2 CONSENTS, REMOVAL OF OBJECTIONS. It is the intent of Buyer and Sellers
to consummate the purchase and sale of Assets hereunder at the earliest
practicable time, and they respectively agree to exert their reasonable efforts
to cause the Closing to occur.
(a) Omitted.
(b) ANTITRUST NOTIFICATION. Each of Sellers and Buyer will as promptly
as practicable, but in no event later than January 31, 2001, file with the
United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ") the notification and report form, if any,
required for the transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the HSR Act. Any
such notification and report form and supplemental information will be in
substantial compliance with the requirements of the HSR Act. Each of Buyer
and Sellers shall furnish to the other such necessary information and
reasonable assistance as the other may request in connection with its
preparation of any filing or submission which is necessary under the HSR
Act. Sellers and Buyer shall keep each other apprised of the status of any
communications with, and inquiries or requests for additional information
from, the FTC and the DOJ and shall comply promptly with any such inquiry
or request. Each of Sellers and Buyer will use its reasonable efforts to
obtain any clearance required under the HSR Act for the purchase and sale
of the Assets.
(c) OTHER REGULATORY APPROVALS. Each of Sellers and Buyer will as
promptly as practical seek the approval of the California Authorities and
of the ATF for the transactions contemplated hereby including the transfer
of any licenses, permits, registrations and authorizations necessary for
operation of the Business. Such approval shall be sought in compliance with
applicable laws and regulations. Each of Buyer and Sellers shall furnish to
the other such necessary information and reasonable assistance as the other
may request in connection with seeking such approval. Sellers and Buyer
shall keep each other apprised of the status of any communications with,
and inquiries or requests for additional information from the
California Authorities and the ATF, and shall comply promptly with any such
inquiry or request. Each of Sellers and Buyer will use its reasonable
efforts to obtain the approval of the California Authorities and the ATF
for the purchase and sale of the Assets. For a period of one (1) year
following the Closing, Sellers shall cooperate with Buyer in connection
with Buyer's efforts to obtain "use-up" rights with respect to labels and
trade dress included in the Assets, including, if so requested by Buyer,
confirmation to federal and state alcoholic beverage authorities that the
Buyer is authorized by the Sellers to use such labels and trade dress.
(d) GOVERNMENTAL CONSENTS. Buyer and Sellers agree to use reasonable
efforts to obtain the consents and permits described in Section 6.3.
5.3 EMPLOYEES.
(a) From the date of this Agreement, Sellers shall afford to Buyer,
its counsel, and other authorized representatives reasonable access to the
Employees, except to the extent an Employee appears on Schedule 5.3 (the
"Unavailable Employees"), and the employment records thereof, for the
purpose of Buyer making a determination, in its sole discretion, as to
which Employees Buyer will extend offers of employment. Buyer shall be
permitted to make employment offers to all Employees, except the
Unavailable Employees. Any such Employee who accepts employment with Buyer
on the Closing Date is herein referred to as a "Transferred Employee".
Nothing herein shall obligate Buyer to extend employment offers.
(b) Buyer shall provide wages and salaries to the Transferred
Employees that are comparable, in the aggregate, to those provided by
Sellers as of the Closing Date and shall give each Transferred Employee
past service credit under its compensation and benefit plans and
arrangements for service with Sellers prior to the Closing Date as if such
service had been with Buyer; PROVIDED that such credit for past service
with Sellers shall be solely for purposes of vesting and eligibility, but
not benefit accrual. Sellers, in accordance with their past practices,
shall not offer or pay any severance pay to an Employee who is offered
employment by Buyer except if the offer of employment would have required a
significant increase in commute time to and from work, a significant
increase in travel time (sales), or would have required the Employee to
relocate.
(c) For a period of one (1) year after the Closing Date, neither
Sellers nor any Affiliates of the Sellers shall directly or indirectly
induce or attempt to induce in any manner any Transferred Employee to leave
the employment of Buyer or any Affiliate of Buyer nor employ or offer
employment to any Employee to whom Buyer has made an offer of employment.
5.4 FURTHER ASSURANCES. Buyer and Sellers shall each execute and deliver
such instruments and take such other actions as the other parties may reasonably
require in order to carry out the intent of this Agreement. After the Closing,
Sellers shall from time to time, at the reasonable request of Buyer and without
cost or expense to Sellers, execute and deliver such other instruments,
documents or agreements of conveyance and transfer and take such other actions,
including, without limitation, assistance in the reduction to possession of any
Assets, as Buyer or its counsel may reasonably request, in order to more
effectively consummate the transactions contemplated hereby and to vest in Buyer
good and marketable title to the Assets.
5.5 PUBLIC ANNOUNCEMENTS. Sellers and Buyer agree that immediately after
execution of this Agreement, Buyer may make a public announcement and issue a
press release in a form to be reasonably agreed upon by the parties. Otherwise,
except as required by law or in response to a request by regulatory or judicial
authorities having jurisdiction over the applicable party, neither party will
disclose to any third party the Confidential Information (as defined in the
Confidentiality Agreement) of the other parties, the terms of the proposed
transaction or the nature of discussions without the prior written permission of
the other party, other than information regarding the transaction which becomes
publicly available without violation of the terms hereof; provided, that neither
party is precluded by this Agreement from confidential discussions with its
stockholders, partners, key employees, legal counsel, accountants, banks and
other agents or advisors as reasonably deemed necessary by each party,
respectively, in order to facilitate the transaction contemplated hereby; and
provided further, that Buyer shall not be required to obtain the consent of
Sellers to enter into confidential discussions about the transactions
contemplated by this Agreement with potential private equity sources or to make
any press release or public statement required by law or any securities exchange
upon which Buyer's stock is publicly traded. Notwithstanding the foregoing, if
either of the Sellers or any of their officers, directors, stockholders, general
partners, key employees, legal counsel, accountants, banks or other agents or
advisors has or obtains any "material non-public" information (as contemplated
in Regulation FD of the Securities and Exchange Commission, herein referred to
as "Regulation FD") of the Business or the Buyer or its Affiliates, such Sellers
and their officers, directors, stockholders, general partners, key employees,
legal counsel, accountants, banks and other agents and advisors shall hold in
confidence, and shall not disclose, such material non-public information unless
and until the Buyer or its Affiliates have publicly disclosed such information
in compliance with Regulation FD. Sellers shall obtain agreement from any such
officers, directors, stockholders, general partners, key employees, legal
counsel, accountants, banks and other agents or advisors to whom such
Confidential Information or terms of the proposed transaction have been
disclosed, to abide by the obligations in this paragraph relating to holding in
confidence "material nonpublic" information of the Business or the Buyer or its
Affiliates.
5.6 ACTIONS OF BUYER AFFECTING REPRESENTATIONS AND WARRANTIES. Buyer shall
not take any action, nor suffer or permit to be taken any action, that would
cause any representations and warranties of Buyer contained in Article 3 hereof
to be incorrect on or as of the Closing Date.
5.7 ACTIONS OF SELLERS AFFECTING REPRESENTATIONS AND WARRANTIES. Sellers
shall not take any action, nor suffer or permit to be taken any action, that
would cause any representations and warranties of Sellers contained in Article 2
to be incorrect on or as of the Closing Date.
5.8 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the period between the date hereof and the Closing, Sellers
shall promptly notify Buyer in writing of the discovery by any of the
Sellers of: any event, condition, fact or circumstance that occurred or
existed on or prior to the date of this Agreement and that caused or
constitutes a breach of or inaccuracy in
any representation or warranty made by the Sellers in this Agreement; any
event, condition, fact or circumstance that occurs, arises or exists after
the date of this Agreement and that would cause or constitute a breach of
or inaccuracy in any representation or warranty made by Sellers in this
Agreement if (A) such representation or warranty had been made as of the
time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or circumstance
had occurred, arisen or existed on or prior to the date of this Agreement;
any breach of any covenant or obligation of any of the Sellers contained in
this Agreement; and any event, condition, fact or circumstance that may
make the timely satisfaction of any of the conditions set forth in Article
6 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to this Section 5.8 affects anything set forth in the
DISCLOSURE SCHEDULE, then the Sellers shall promptly deliver to Buyer an
update to the DISCLOSURE SCHEDULE (a "Disclosure Schedule Update")
specifying such change. No such Disclosure Schedule Update shall be deemed
to supplement or amend the DISCLOSURE SCHEDULE for the purpose of (i)
determining the accuracy of any of the representations and warranties made
by the Sellers in this Agreement as of the Closing, or (ii) determining
whether the conditions set forth in Article 6 have been satisfied.
5.9 CONDUCT PENDING THE CLOSING. The parties shall not take any action, or
omit to take any action, that could threaten or prevent the Closing of the
transaction contemplated by this Agreement, provided that nothing contained
herein shall restrict a party's right to terminate this Agreement pursuant to
Section 8.1.
5.10 ACCESS BY SELLERS; BOOKS AND RECORDS. Buyer shall cooperate with the
Sellers to make available to the Sellers all financial, tax and other
information (including the books and records of the Business), and the personnel
file of each Transferred Employee reasonably required by the Sellers in
connection with (i) any audit or other investigation by any taxing authority or
any required returns, responses to inquiries, reports or submissions (including
any consolidated financial or statutory reporting obligations and including any
tax returns or replies to the tax inquiries of the Sellers or their Affiliates)
to governmental authorities with respect to the Business related to periods
beginning prior to the Closing Date or (ii) matters relating to insurance
coverage of the Business, third-party litigation, claims, proceedings and
investigations. Buyer shall preserve such information and the books and records
for a period at least as long as Buyer's internal procedures and policies would
require. Notwithstanding the foregoing, risk of loss or damage for such
information after Closing shall remain with Sellers and the Buyer shall have no
liability or responsibility therefor so long as the Buyer has acted in good
faith to comply with its obligations under this Section 5.10.
5.11 PLANT CLOSINGS. Buyer shall not, at any time prior to the 61st day
following the Closing Date, without fully complying with the notice and other
requirements of the WARN Act, effectuate (i) a "plant closing" (as defined in
the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment of the Business or (ii) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment of the
Business. If Buyer takes any action within 180 days after the Closing Date which
independently, or in connection with any reduction in the size of the work force
of the Business occurring within the ninety day period prior to the Closing
Date, could be construed as a "plant closing" or "mass layoff" as those terms
are defined in the WARN Act, Buyer shall be solely responsible for providing any
notice required by the WARN Act and for making payments, if any, and paying all
penalties and costs, if any, which may result from any failure to provide such
notice.
5.12 CERTAIN FINANCIAL INFORMATION.
(a) Sellers shall, from the date hereof, provide, or cause to be
provided to, Buyer and assist in the preparation by Buyer of, audited and
unaudited financial and other information required for the preparation of
selected and 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, or an underwritten private offering of debt or
equity, and shall provide such management representation letters and shall
cause its outside public accountants to deliver such consents and comfort
letters as are customary under applicable accounting standards, as promptly
as reasonably practicable, but in no event later than forty-five (45) days
after receipt of such request. Buyer shall be responsible for the costs and
expenses incurred in the 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 accountant 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 5.12, or
any other information provided by Sellers to Buyer specifically for the
following purposes, in any registration statement, prospectus, offering
memorandum, Form 8-K or other public filing, or other document at any time
on and after the date of this Agreement.
(b) In addition to the foregoing, for a period of 15 months from the
date hereof, from time to time Buyer may request, and Sellers shall
provide, assistance in the preparation by Buyer of such audited and
unaudited financial and other information of the type, and for the
purposes, described in Subsection (a) above, and Sellers shall provide such
management representation letters and cause its outside public accountants
to deliver such consents and comfort letters as are customary for such
purposes under applicable accounting standards, as promptly as reasonably
practicable, but in no event later than forty-five (45) days after receipt
of such request. Buyer shall be responsible for the costs and expenses
incurred in the connection with such preparation, review and audit.
5.13 BULK SALES. The Buyer and Sellers hereby waive compliance with any
bulk sales or similar laws which may be applicable to the transactions
contemplated hereby.
5.14 DISTRIBUTORS. Promptly after the date hereof, the Sellers shall give
notice to the Distributors with respect to the distribution of products
associated with the TRV Trademarks. Such notice shall be in the form attached
hereto as Schedule 5.14, and shall be delivered to the Distributors as
designated on that Schedule.
5.15 MUTUAL ASSISTANCE ON ACCOUNTS RECEIVABLE. In the event Buyer, SVI or
TRVG receives payment on receivables owned by the other, then each shall
promptly repay to the other owning such receivables the amount erroneously
received with respect thereto.
5.16 TRANSITION SERVICES. SVI and Buyer shall enter into a transition
services agreement in the form attached hereto as EXHIBIT D (the "Transitional
Services Agreement").
5.17 TITLE MATTERS.
(a) The Sellers shall deliver or cause to be delivered to Buyer
promptly following the execution of this Agreement, all title insurance
policies and/or commitments (including any preliminary title reports) and
survey maps in the Sellers' possession regarding the Real Property and
Leased Property.
(b) The Sellers, at their expense, shall deliver to Buyer no later
than fourteen (14) days prior to the Closing Date current instrument survey
maps ("Surveys") of the Real Property and Leased Property, dated no earlier
than thirty (30) days before the Closing Date, and prepared: (i) by a
surveyor selected by Buyer and (ii) in accordance with the latest Minimum
Standard Detail Requirements for ALTA Land Title Surveys, certified to
Buyer, the Title Seller and such other parties as Buyer may designate, with
a form of certificate and Table A requirements depicted in a manner
satisfactory to Buyer, in its sole and absolute discretion, showing all the
Real Property and Leased Property, together with all improvements thereon,
and all easements, rights-of-way and encroachments affecting the Real
Property and certifying its exact acreage.
(c) The Sellers and Shareholder shall use commercially reasonable
efforts to assist Buyer in obtaining the Title Commitment and Title Policy
referenced in Section 6.9 of this Agreement.
5.18 LIENS. The Sellers shall obtain releases of all Permitted Liens and
Security Interests set forth on Schedule 2.7.
5.19 SELLERS' FINANCIAL STATEMENTS. At least 10 days prior to the Closing
Date, Sellers shall deliver to Buyer:
(a) the audited balance sheet of SVI as of June 30, 2000, and the
related audited income statement for the fiscal year then ended, and
footnotes thereto;
(b) the unaudited balance sheet of SVI as of December 31, 2000, and
the related unaudited income statement for the six months then ended which
Sellers' accountants will have reviewed in accordance with SAS 71;
(c) the unaudited balance sheet of TRVG as of December 31, 2000, and
the related unaudited income statement for the twelve months then ended;
(d) the Balance Sheet and the related income statement for the six
months then ended and the footnotes and details related thereto which
Sellers' accountants will have reviewed in accordance with SAS 71; and (e)
the audited balance sheet of the Business as of June 30, 2000, and the
related audited income statement for the fiscal year then ended and
footnotes and details thereto.
The balance sheets of SVI and related income statements delivered to Buyer
pursuant to this Section 5.19 shall be prepared in accordance with generally
accepted accounting principles applied on a consistent basis, shall fairly
present the financial condition and results of operations of SVI as of the dates
and for the periods presented, and shall be consistent with the books and
records of SVI. The Balance Sheet and related income statement delivered to
Buyer pursuant to this Section 5.19 shall be prepared consistent with the
Accounting Methodology and using generally accepted accounting principles,
consistently applied, except as set forth in the Accounting Methodology, shall
fairly present the financial condition and operations of the Business as of
December 31, 2000, and the six month period then ended, and shall be consistent
with the books and records of the Business. The balance sheet of the Business as
of June 30, 2000, and related income statement delivered to Buyer pursuant to
this Section 5.19 shall be prepared consistent with the Accounting Methodology
and using generally accepted principles, consistently applied, except as set
forth in the Accounting Methodology, shall fairly present the financial
condition and operations of the Business as of June 30, 2000, and the fiscal
year then ended, and shall be consistent with the books and records of the
Business.
At least 15 days prior to the Closing Date, Sellers shall deliver the Pro
Forma Closing Balance Sheet to Buyer which shall be prepared in the same manner
as the Balance Sheet.
5.20 BUSINESS INFORMATION.
(a) In connection with any future sale by Constellation Brands, Inc.
("CBI") of its securities, the Sellers acknowledge that the underwriter may
require that certain business information relating solely to the Business
be included in the prospectus or offering memorandum. Therefore, Sellers
hereby agree (i) to use during the 24 months following the date hereof
commercially reasonable efforts to provide CBI with, and to cooperate with
CBI in compiling such necessary information, and (ii) that such information
may be included in such prospectus or offering memorandum. Buyer shall
reimburse Sellers for all Sellers' out-of-pocket costs related to the
performance of Sellers' obligation under this Section 5.20.
(b) Incident to any prospectus or offering memorandum referred to in
this Section 5.20, and subject to applicable law, the Buyer will indemnify
and hold harmless each Seller from and against any and all Damages to which
they, or any of them, may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such Damages arise out of the use,
publication or distribution of the prospectus or offering memorandum.
ARTICLE 6
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CONDITIONS TO BUYER'S OBLIGATIONS
The obligation of Buyer to effect the transactions contemplated herein
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties
of Sellers contained herein, in the DISCLOSURE SCHEDULE, and in all certificates
and other documents delivered by Sellers to Buyer, pursuant hereto or in
connection with the transactions contemplated hereby, shall be true and correct,
and in each case shall be as of the date when made and as of the Closing Date as
though such representations and warranties were made at each such date (unless
otherwise expressly limited to a specific date or period), provided that this
condition shall be deemed waived by Buyer for purposes of this condition (but
shall remain a breach for purposes of indemnification in Section 9.2) so long as
any failures of such representations and warranties to be true and correct have
not resulted or do not result in any adverse change in or effect on the Business
or the Assets involving or likely to involve, in the aggregate, an amount equal
to or in excess of $3,000,000.
6.2 PERFORMANCE. Sellers shall have performed and complied with all
covenants, agreements, obligations, terms and conditions required by this
Agreement to be performed or complied with by Sellers on or prior to the Closing
Date, and all other terms and conditions to be satisfied by Sellers as provided
herein shall have been satisfied.
6.3 CONSENTS. All consents from governmental agencies required to
consummate the transactions contemplated hereby shall have been obtained. Buyer
shall have obtained all government licenses that are necessary to conduct the
winery business it intends to conduct with the Assets, including, without
limitation, appropriate licenses and permits from the California Authorities and
the ATF and all permits, registrations, certificates, licenses, approvals and
authorizations required under any Environmental Law. In addition, all consents
required by those Contracts set forth on Schedule 6.3 shall have been obtained.
6.4 HSR; NO PROCEEDING OR LITIGATION.
(a) Any applicable waiting periods under the HSR Act shall have been
terminated or expired;
(b) there shall not be any pending or threatened action or proceeding,
whether administrative or judicial, that shall have been brought on behalf
of or shall otherwise involve any governmental agency or authority and that
is directed toward challenging, restraining, prohibiting or invalidating
any of the transactions contemplated by this Agreement; and
(c) there shall not be any pending action or proceeding, whether
administrative or judicial, that shall have been brought on behalf of or
shall otherwise involve any other Person and that is directed toward
challenging, restraining, prohibiting or invalidating any of the
transactions contemplated by this Agreement, except for actions or
proceedings as to which Buyer shall have received a written opinion of
counsel for Buyer (which shall be subject only to such qualifications as
are customarily included in opinions of this type) to the effect that there
is no material likelihood that such Person will prevail in such action or
proceeding.
6.5 OPINIONS OF COUNSEL. Buyer shall have received an opinion of counsel to
Sellers, dated as of the Closing Date, in the form of EXHIBIT E attached hereto.
6.6 CERTIFICATES. Buyer shall have received a certificate dated the Closing
Date from each of the Sellers, certifying (i) the incumbency of each officer of
each of the Sellers who has signed this Agreement or any instrument delivered in
connection with this Agreement, which certificate shall contain specimens of the
signatures of each of the officers whose incumbency is certified, and (ii) as to
the matters set forth in Sections 6.1 and 6.2.
6.7 ADVERSE CHANGES. No material Adverse Effect shall have occurred since
the date of the Balance Sheet.
6.8 FUNDS. The Commitments shall have been funded; PROVIDED, HOWEVER, if
any failure to fund shall be due to a breach by Buyer of Buyer's representations
and warranties set forth in Section 3.5, the condition set forth in this Section
6.8 shall be deemed satisfied.
6.9 TITLE TO REAL PROPERTY.
(a) Buyer shall have obtained from Chicago Title Company (the "Title
Company") a commitment to issue (the "Title Commitment") on the date of
Closing, upon the sole condition of the payment by Buyer of its regularly
scheduled premium, its latest standard ALTA Form (with the "creditor's
rights" exclusion deleted (or equivalent)) owner's policy of title
insurance (the "Title Policy"), insuring in an amount reasonably related to
the appraised value of Real Property and Leased Property obtained as the
result of the appraisal set forth in Section 1.3(b), that fee simple title
in and to the Real Property and the Buyer's leasehold interests in and to
the Leased Property will, as of Closing, be vested of record in the Buyer,
subject to no exceptions other than those acceptable to Buyer, in its sole
and absolute discretion, and those exceptions expressly approved by Buyer
in Schedule 6.9.
(b) The receipt by Buyer of satisfactory evidence, in Buyer's sole
discretion, that there are no governmental regulations or legal
restrictions which would interfere with the current use of the Property by
the Buyer, and that Sellers possess or have all appurtenant easements
required to utilize and maintain the pipelines over, under or through
adjoining properties between 4614 West Turner Road and 5852 West Turner
Road.
6.10 FIRPTA CERTIFICATE.
Buyer shall have received either (a) a certificate of non-foreign status as
described in Section 1445 of the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder (collectively the "Code") from each
Seller who is not a non-resident alien individual, foreign corporation, foreign
partnership, foreign trust or foreign estate, or (b) a certification, signed by
the Presidents of the Sellers (as provided in Section 1445 of the Code) stating
under penalty of perjury that such Seller is not and during the last five years
has not been
a United States Real Property Holding Corporation as such term is defined in
Section 897 of the Code.
6.11 TRANSITIONAL SERVICES. At the Closing, SVI shall execute the
Transitional Services Agreement.
6.12 LIST OF PAYABLE AND ACCOUNTS RECEIVABLE. At the Closing, Sellers shall
deliver to Buyer a list of all accounts payable of the Business as of the date
two days prior to the Closing Date and a list of all accounts receivable as of
the Closing Date. Two days after the Closing Date, Sellers shall deliver a list
of all accounts payable and receivable of the Business to the Buyer.
ARTICLE 7
---------
CONDITIONS TO SELLER'S OBLIGATIONS
The obligation of Sellers to effect the transactions contemplated hereby
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties
of Buyer contained herein shall be in all material respects true and accurate as
of the date when made and as of the Closing Date as though such representations
and warranties were made at each such date.
7.2 PERFORMANCE. Buyer shall have performed and complied with all
covenants, agreements, obligations, terms and conditions required by this
Agreement to be performed or complied with by Buyer on or prior to the Closing
Date and all other terms and conditions to be satisfied by Buyer as provided
herein shall have been satisfied.
7.3 HSR; NO PROCEEDING OR LITIGATION.
(a) Any applicable waiting periods under the HSR Act shall have been
terminated or expired;
(b) there shall not be any pending or threatened action or proceeding,
whether administrative or judicial, that shall have been brought on behalf
of or shall otherwise involve any governmental agency or authority and that
is directed toward challenging, restraining, prohibiting or invalidating
the transactions contemplated by this Agreement; and
(c) there shall not be any pending action or proceeding, whether
administrative or judicial, that shall have been brought on behalf of or
shall otherwise involve any other Person and that is directed toward
challenging, restraining, prohibiting or invalidating any of the
transactions contemplated by this Agreement, except for actions or
proceedings as to which Sellers shall have received a written opinion of
counsel for Buyer (which shall be subject only to such qualifications as
are customarily included in opinions of this type) to the effect that there
is no material likelihood that such Person will prevail in such action or
proceeding.
7.4 CONSENTS. All consents from governmental agencies required to
consummate the transactions contemplated hereby shall have been obtained.
7.5 OPINIONS OF COUNSEL. Sellers shall have received the opinion of counsel
to Buyer, dated as of the Closing Date, in the form of EXHIBIT F, attached
hereto.
7.6 CERTIFICATE. Sellers shall have received a certificate dated the
Closing Date from Buyer certifying (i) the incumbency of each officer of Buyer
who has signed this Agreement or any instrument delivered in connection with
this Agreement on behalf of Buyer, which certificate shall contain specimens of
the signatures of each of the officers whose incumbency is certified, and (ii)
as to the matters set forth in Sections 7.1 and 7.2.
7.7 TRANSITIONAL SERVICES. At the Closing, Buyer shall execute the
Transitional Services Agreement.
ARTICLE 8
---------
TERMINATION AND ABANDONMENT
8.1 METHODS OF TERMINATION. This Agreement may be terminated, and the
purchase and sale of Assets herein contemplated may be abandoned:
(a) by mutual written consent of Sellers and Buyer;
(b) by Buyer on or after April 15, 2001, if any of the terms or
conditions to be met or performed as required in Article 6 of this
Agreement shall not have been met or performed, or waived in writing by
Buyer on or prior to such date, provided such failure of a condition is not
due to the action or inaction of Buyer in breach of the terms of Article 5;
(c) by Sellers on or after April 15, 2001, if any of the terms or
conditions to be met or performed as required in Article 7 of this
Agreement shall not have been met or performed, or waived in writing by
Sellers, on or prior to such date, provided such failure of a condition is
not due to the action or inaction of one or both Sellers in breach of the
terms of Article 5; or
(d) By Buyer as provided in Section 4.3 in the event of certain
casualty affecting the Assets.
8.2 PROCEDURE UPON TERMINATION. In the event of termination and abandonment
by Buyer or either Sellers, pursuant to Section 8.1, written notice thereof
shall forthwith be given to the other party and this Agreement shall terminate,
and the purchase and sale of the Assets contemplated herein shall be abandoned,
without further action by Buyer or Sellers. If this Agreement is terminated as
provided herein:
(a) each party shall return all documents, work papers and other
material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the party
furnishing the same; and
(b) notwithstanding anything to the contrary contained herein, Buyer,
upon termination of this Agreement pursuant to Section 8.1(b), or 8.1(d)
and Sellers, upon termination of this Agreement pursuant to Section 8.1(c),
shall have the right to pursue any remedies available to it at law or in
equity.
ARTICLE 9
---------
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS.
(a) The respective representations and warranties of Buyer and Sellers
contained herein or in any certificate, document or other writing delivered
pursuant hereto or in connection herewith shall not be deemed waived or
otherwise affected by any investigation made by the other party hereto.
Representations and warranties shall survive until the first anniversary of
the Closing Date, except that the representations and warranties set forth
in Section 2.11, shall survive until the termination of applicable statutes
of limitation; provided, however, that if, at any time on or prior to the
first anniversary of the Closing Date if either Buyer delivers to Sellers,
or the Sellers deliver to the Buyer a written notice indicating that Buyer
has on the one hand, or Sellers have on the other hand, determined, in good
faith, that there has been a breach of any such representation or warranty,
then the obligation of Sellers or Buyer, as applicable, to indemnify and
hold harmless Buyer or Sellers, as applicable, with respect to such breach
shall survive until all indemnification claims relating to such breach have
been fully and finally resolved.
(b) The respective covenants of Buyer and Sellers contained herein or
in any certificate, document or other writing delivered pursuant hereto or
in connection herewith shall not be deemed waived or otherwise affected by
any investigation made by the other party hereto. The covenants of Sellers
and Buyer set forth in this Agreement shall survive until fully performed
in accordance with this Agreement; provided, however, that nothing stated
herein shall waive in any manner the right of Buyer or Sellers to enforce
their respective rights for any breach of a covenant by the other prior to
such full performance.
9.2 INDEMNIFICATION BY SELLERS. Each of SVI and TRVG jointly and severally
shall indemnify Buyer, its affiliates and each of their respective officers,
directors, employees and agents (each a, "Buyer Indemnified Party") and hold
them harmless from any Damages suffered or incurred by any such Buyer
Indemnified Party to the extent arising from (a) any breach by either of the
Sellers of any representation or warranty contained in this Agreement or in any
certificate, instrument or other document delivered pursuant hereto to the
extent and during the period such representation or warranty survives the
Closing, (b) any breach of any covenant of such Seller contained in this
Agreement, (c) waiver of compliance with bulk sales laws which may be applicable
to the transactions contemplated hereby, and (d) the Retained Liabilities,
PROVIDED, HOWEVER, that:
(i) Sellers shall not have any liability under clause (a) above
unless the aggregate of all Damages relating thereto for which Sellers
would, but for this proviso, be
liable exceeds on a cumulative basis an amount equal to $3,000,000
(the "Threshold Damages") and then only to the extent of any such
excess; and
(ii) Sellers' aggregate liability under clause (a) above shall in
no event exceed $100,000,000; provided, however, that the limitations
set forth in (i) and (ii) shall not apply to any breach of a
representation or warranty, set forth herein, or in any schedule,
certificate, instrument or other document delivered pursuant hereto,
by Sellers when Sellers had Knowledge of such breach on or prior to
Closing.
Buyer acknowledges and agrees that, from and after the Closing, its sole
and exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions set
forth in this Section 9.2.
Buyer further acknowledges and agrees that, other than the representations
and warranties of Sellers specifically contained in this Agreement, there are no
representations or warranties of Sellers either expressed or implied with
respect to the Business or Assets.
9.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify each of the Sellers,
their affiliates and each of their respective officers, directors, employees and
agents (each a, "SVI Indemnified Party") against and hold them harmless from any
Damage suffered or incurred by any such SVI Indemnified Party to the extent
arising from (a) any breach of any representation or warranty of Buyer contained
in this Agreement or in any certificate, instrument or other document delivered
pursuant hereto or in connection herewith, (b) any breach of any covenant of
Buyer contained in this Agreement (including without limitation the covenants
regarding the conduct of the inspection of inventory set forth in Section
1.4(c)), (c) any assertion against either of the Sellers of any obligations or
liabilities of Buyer, including any such obligations or liabilities in the
Contracts assumed by Buyer under Section 1.1(b)(i), (d) any claim against any
SVI Indemnified Party relating to the use of the Assets or the operation of the
Business by Buyer after the Closing Date, other than a claim related to the
Excluded Assets or Retained Liabilities, or for which Buyer is responsible under
this Section 9.3 or (e) any material damage to the Real Property or other Assets
caused by Buyer or its representatives or consultants during the course of due
diligence; provided, however, that:
(i) Omitted.
(ii) Buyer shall not have any liability under clause (a) above
unless the aggregate of all Damages relating thereto for which Buyers
would, but for this proviso, be liable exceeds on a cumulative basis
an amount equal to the Threshold Damages and then only to the extent
of any such excess; and
(iii) Buyer's aggregate liability under clause (a) above shall in
no event exceed an amount equal to $100,000,000.
Sellers acknowledge and agree that, from and after the Closing, their sole
and exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions set
forth in this Section 9.3.
Sellers acknowledge and agree that, other than the representations and
warranties of Buyer specifically contained in this Agreement, there are no
representations or warranties of Buyer either expressed or implied with respect
to the transactions contemplated hereunder.
9.4 TERMINATION OF INDEMNIFICATION. The obligations to indemnify and hold
harmless a party hereto, pursuant to Sections 9.2 and 9.3 shall terminate to the
extent the applicable representation or warranty or covenant terminates pursuant
to Section 9.1; PROVIDED, HOWEVER, that such obligations to indemnify and hold
harmless shall not terminate with respect to any item as to which the person to
be indemnified or the related party hereto shall have, before the expiration of
the applicable period, previously made a claim by delivering a notice (stating
in reasonable detail the basis of such claim) to the indemnifying party.
9.5 PROCEDURES RELATING TO INDEMNIFICATION. In order for a SVI Indemnified
Party or a Buyer Indemnified Party (either, an "Indemnified Party") to be
entitled to any indemnification provided for under this Agreement in respect of,
arising out of or involving a claim or demand made by any person, firm,
governmental authority or corporation against the Indemnified Party (a "Third
Party Claim"), such Indemnified Party must notify the indemnifying party in
writing, and in reasonable detail, of the Third Party Claim within 30 business
days after receipt by such Indemnified Party of written notice of the Third
Party Claim; PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure (except that the indemnifying party shall not be liable for any expenses
incurred during the period in which the Indemnified Party failed to give such
notice). Thereafter, the Indemnified Party shall deliver to the indemnifying
party, within ten business days after the Indemnified Party's receipt thereof,
copies of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim; PROVIDED, HOWEVER, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall have been actually
prejudiced as a result of such failure.
If a Third Party Claim is made against an Indemnified Party, the
indemnifying party will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the Indemnified Party. Should
the indemnifying party so elect to assume the defense of a Third Party Claim,
the indemnifying party will not be liable to the Indemnified Party for legal
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof. If the indemnifying party assumes such defense, the Indemnified
Party shall have the right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the fees and
expenses of counsel employed by the Indemnified Party for any period during
which the indemnifying party has not assumed the defense thereof (other than
during any period in which the Indemnified Party shall have failed to give
notice of the Third Party Claim as provided above). If the indemnifying party
chooses to defend or prosecute any Third Party Claim, all the parties hereto
shall cooperate in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the indemnifying party's request) the provision
to the indemnifying party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the indemnifying
party shall have assumed the defense of a Third Party Claim, the Indemnified
Party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the indemnifying party's prior written
consent (which consent shall not be unreasonably withheld).
9.6 SELLERS' REPRESENTATIVE.
(a) Each Seller hereby irrevocably authorizes, directs and appoints
Richard Cuneo (the "Representative") to act as the sole and exclusive
agent, attorney-in-fact and representative of such Seller, Seller's
representatives and successors, assigns and designees (the "Seller
Parties") to (i) take any and all actions (including executing and
delivering any documents), incurring any costs and expenses for the account
of the Seller Parties and making any and all determinations which may be
required or permitted to be taken by them in connection with this Article 9
or the Escrow Agreement; (ii) exercise such rights, power and authority as
are authorized, delegated and granted to the Representative under this
Agreement; and (iii) exercise such rights, power and authority as are
incidental to the foregoing. It shall be the obligation of the
Representative to inform each Seller Party of all notices received and all
actions, decisions, notices and exercises of any rights, power or authority
proposed to be done, given or taken by him, and he shall act only as
directed jointly by those Seller Parties holding a majority in interest in
the Escrow; provided, that Buyer shall have no obligation to confirm that
the Representative has taken all necessary action or received appropriate
direction. Any actions, exercises of rights, power or authority and any
decisions or determinations made by the Representative in good faith and in
accordance with this Section 9.6(a) shall be absolutely and irrevocably
binding on each Seller Party as if each Seller Party personally had taken
such action, exercised such rights, power or authority or made such
decision or determination in such Seller Party's individual capacity.
(b) With respect to the matters covered by or related to this Section
9 and the Escrow Agreement, (i) each Seller Party irrevocably relinquishes
such Seller Party's right to act independently and other than through the
Representative with respect to such subject matter (except with respect to
the right to vote with the other Seller Parties as to the direction of the
Representative as to any action, decision, notice or exercise of rights on
behalf of the Seller Parties, and with respect to the removal and/or the
appointment of a successor Representative), and (ii) no Seller Party shall
have any right to institute any suit, action or proceeding against the
Buyer or the Escrow Agent with respect to any such matter (except in the
case of fraud on the part of the Buyer or in the case of fraud or gross
negligence on the part of the Escrow Agent), any such right being
irrevocably and exclusively delegated to the Representative. Without
limiting the generality of the foregoing, any notice hereunder delivered to
Buyer by Sellers other than through the Representative shall be of no
effect, and each notice delivered by Buyer or any other Buyer Indemnified
Party to the Representative shall be effective as against each such Seller
Party.
(c) The Representative may resign at any time upon thirty (30) days
notice by submitting a written resignation to the Seller Parties, with a
copy to the Buyer at their addresses as set forth in Section 10.5. The
Representative may be removed any time upon notice of action taken jointly
by those Seller Parties holding a majority in interest in the Escrow. In
the event of the removal, death, physical or mental incapacity or
resignation of the Representative, the Seller
parties shall promptly (and in any event within thirty (30) days of notice
of such event) appoint a successor Representative.
(d) Richard Cuneo hereby acknowledges and accepts the foregoing
authorization and appointment and agrees to serve as Representative in
accordance with this Agreement and the Escrow Agreement.
Nothing in this Agreement is intended to impose, and nothing in this
Agreement shall be interpreted as imposing, upon the Representative, as
Representative, any personal liability, personal economic obligation, or
personal guarantee in favor of any party to this Agreement or any third party.
The Sellers agree to severally (in proportion to their respective ownership
interests in the Escrow) indemnify and hold the Representative harmless against
any loss, liability or expense incurred without gross negligence or willful
misconduct on the part of the Representative, arising out of or in connection
with carrying out his duties hereunder, including the costs and expenses of
defending himself against any claim of liability in connection with the exercise
or performance of any of their powers or duties hereunder (including the
reasonable fees, expenses and disbursements of their counsel(s)).
ARTICLE 10
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MISCELLANEOUS PROVISIONS
10.1 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, the breach thereof, or the transactions contemplated hereby,
except as provided for in Section 1.4, shall be solely and finally settled by
binding arbitration in San Francisco, California in accordance with the then
prevailing Commercial Arbitration Rules of the American Arbitration Association.
By written notice to the other party, either party may demand that a disputed
matter be submitted to arbitration. In the demand notice, the party shall
specify the nature of the dispute. Within twenty (20) days of the notice, each
party shall nominate an arbitrator. Within thirty (30) days of the nomination
and appointment of the two arbitrators, the two arbitrators shall select a third
arbitrator, and if they fail to do so, a neutral arbitrator shall be chosen in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
10.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement
may be amended or supplemented only by written agreement of Buyer and Sellers at
any time prior to the Closing Date with respect to any of the terms contained
herein.
10.3 WAIVER OF COMPLIANCE. Any failure of Sellers or Buyer to comply with
any obligation, covenant, agreement or condition herein may be expressly waived
in writing by the other party, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or an estoppel with respect to, any subsequent or other
failure.
10.4 EXPENSES; ATTORNEYS' FEES. Whether or not the transactions
contemplated by this Agreement are consummated, and except as otherwise
expressly provided in this Agreement,
each party shall pay its own expenses incurred by it or on its behalf in
connection with this Agreement or any transaction contemplated by this
Agreement. If any action is brought for the enforcement of this Agreement or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party as determined by the arbitrator(s) shall be entitled to recover
reasonable attorneys' fees and other costs incurred in arbitration, as
determined by the arbitrator(s), in addition to any other relief to which such
party may be entitled.
10.5 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing or by telex or telecopy and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given and received when delivered by hand, against receipt, or, if mailed, three
(3) business days after deposit in the mail, with postage prepaid for registered
or certified mail, return receipt requested, or, in the case of telex or
telecopy notice, when sent, if answer back or confirmation received, and
addressed to the party at its address set forth immediately below, or at such
other address as the party shall have furnished the other parties in accordance
with this Section.
(a) If to either of the Sellers, to:
Sebastiani Vineyards, Inc.
389 Fourth Street East
Sonoma, CA 95476-5790
Fax: (707) 933-3371
Attention: Don Sebastiani
with a copy to:
Sebastiani Vineyards, Inc.
389 Fourth Street East
Sonoma, CA 95476-5790
Fax: (707) 933-3367
Attention: Mary Ann Sebastiani Cuneo
with a copy to:
Sebastiani Vineyards, Inc.
389 Fourth Street East
Sonoma, CA 95476-5790
Fax: (707) 933-3367
Attention: Richard Cuneo
with a copy to:
Morrison & Foerster, LLP
425 Market Street
San Francisco, CA 94105
Fax: (415) 268-7522
Attention: Robert S. Townsend, Esq.
(b) If to Buyer, to:
Canandaigua Wine Company, Inc.
116 Buffalo Street
Canandaigua, New York 14424
Fax: (716) 396-8870
Attention: Office of General Counsel
with a copy to:
Nixon Peabody, LLP
Clinton Square
P.O. Box 31051
Rochester, New York 14603-1051
Fax: (716) 263-1600
Attention: James A. Locke III, Esq.
or to such other persons or addresses as Buyer or the Sellers shall furnish to
the other in writing.
10.6 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Buyer shall have the right to
assign this Agreement and all or any part of Buyer's rights, interests or
obligations hereunder to any Affiliate of Buyer, provided that Buyer shall not
be relieved of its obligations under this Agreement in the event such Affiliate
fails to perform. Otherwise, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by Buyer or Sellers without
the prior written consent of the other party.
10.7 GOVERNING LAW. This Agreement is to be construed in accordance with
and governed by the internal laws of the State of California (as permitted by
Section 1646.5 of the California Civil Code (or any similar successor
provision)) without giving effect to any choice of law rule that would cause the
application of the laws of any jurisdiction other than the internal laws of the
State of California to the rights and duties of the parties.
10.8 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.9 ENTIRE AGREEMENT. This Agreement, including the Exhibits attached
hereto, the DISCLOSURE SCHEDULE and the other documents referred to herein which
form a part hereof, excluding the Confidentiality Agreement between the parties
dated May 12, 2000 (the "Confidentiality Agreement") embody the entire agreement
and understanding of Buyer and Sellers in respect of the subject matter
contained herein and therein. There are no restrictions, promises, warranties,
covenants, or undertakings other than those expressly set forth or referred to
herein or therein. This Agreement supersedes all prior agreements and
understandings between Buyer and Sellers including, without limitation, those
set forth in the Confidentiality Agreement.
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 CERTAIN DEFINITIONS.
"Accounting Firm" shall have the meaning set forth in Section 1.4(a)
hereof.
"Accounting Methodology" shall mean the accounting principles, reserve
methodology and procedures described on Schedule 1.4(a) hereto.
"Adjusted Closing Purchase Price" shall have the meaning set forth in
Section 1.4(b) hereof.
"Adverse Effect" means any change in or effect on the business, operations,
properties or financial condition of the Business or the Assets that is adverse
to such business, operations, properties or financial condition other than
changes or effects arising from the execution of this Agreement, any
announcement of this Agreement, the consummation of the transactions
contemplated hereby or from general economic, market or industry conditions.
"Affiliate" has the meaning assigned thereto in Rule 405, as currently
promulgated under the Securities Act of 1933, as amended.
"Agreement" means this Purchase Agreement dated as of January 30, 2000.
"Approvals" shall have the meaning set forth in Section 2.17 hereof.
"Appurtenances" shall have the meaning set forth in Section 1.1(a)(ii)
hereof.
"Assets" shall have the meaning set forth in Section 1.1(a) hereof.
"Assumed Liabilities" shall have the meaning set forth in Section 1.1(b)
hereof.
"ATF" shall have the meaning set forth in Section 3.4 hereof.
"Balance Sheet" shall have the meaning set forth in Section 2.4 hereof.
"Business" shall have the meaning set forth in the recitals of this
Agreement.
"Buyer" shall have the meaning set forth in the recitals of this Agreement.
"Buyer Indemnified Party" shall have the meaning set forth in Section 9.2
hereof.
"California Authorities" shall have the meaning set forth in Section 3.4
hereof.
"Closing" shall have the meaning set forth in Section 1.3(a) hereof.
"Closing Balance Sheet" shall have the meaning set forth in Section 1.4(a)
hereof.
"Closing Date" shall have the meaning set forth in Section 1.3(a) hereof.
"Closing Purchase Price" shall have the meaning set forth in Section
1.3(a)(i)(A) hereof.
"COBRA" shall have the meaning set forth in Section 2.13(d) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Plan" shall have the meaning set forth in Section 2.13(a) hereof.
"Confidential Information Memorandum" shall have the meaning set forth in
Section 2.20(b).
"Confidentiality Agreement" shall have the meaning set forth in Section
10.9 hereof.
"Contracts" shall have the meaning set forth in Section 1.1(a)(v) hereof.
"Damages" means the amount of any loss, damage, injury, liability, claim,
fee (including any legal fee, expert fee, accounting fee or advisory fee)
demand, settlement, judgment, award, fine, penalty, tax, charge or cost.
"Disclosure Schedule Update" shall have the meaning set forth in Section
5.8(b) hereof.
"Disclosure Schedule" shall have the meaning set forth in Article 2 hereof.
"Distributors" shall mean the distributors, wholesalers, and brokers used
by the Sellers in the Business, whether in the United States or elsewhere.
"DOJ" shall have the meaning set forth in Section 5.2(b) hereof.
"Employee" shall have the meaning set forth in Section 2.12(a) hereof.
"Employee Welfare Plan" shall mean any employee welfare benefit plan, as
defined in Section 3(1) of ERISA, whether or not terminated, including, but not
limited to, any severance
agreement or plan, any material fringe benefit plan or program, any medical
plan, life insurance plan, short-term or long-term disability plan, dental plan,
personnel policy, vacation time, holiday pay, bonus programs, service award,
moving expense reimbursement program, tool allowance, safety equipment
allowance, and sick leave, which any Seller or any Member of the Controlled
Group has at any time within the past six (6) years maintained, made
contributions to, obligated itself to make contributions to, or had any other
liability with respect to.
"Environmental Law" shall mean all Legal Requirements concerning protection
of the environment and/or human health and/or regulating Hazardous Substances,
including, but not limited to, the following, each as amended: the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.ss. 9601 et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901 et seq.;
the Federal Water Pollution Control Act, 33 U.S.C. ss.ss.1251 et seq.; the Clean
Air Act, 42 U.S.C. ss.ss. 7401 et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. ss.ss.1471 et seq.; Toxic Substances Control Act, 15 U.S.C.ss.ss.
2601 et seq.; Refuse Act, 33 U.S.C. ss.ss. 407 et seq.; Safe Drinking Water Act,
42 U.S.C. ss.ss. 300(f) et seq.; Emergency Planning and Community Right-To-Know
Act, 42 U.S.C. ss.ss. 11001 et seq.; Occupational Safety and Health Act, 29
U.S.C. ss.ss. 65 et seq. to the extent it includes the emission of any Hazardous
Substance and includes any Hazardous Substance for which hazard communication
standards have been established; California Hazardous Substance Account Act,
California Health & Safety Code ss.ss. 25300 et seq.; California Asbestos
Notification Laws, California Health & Safety Code ss.ss. 25915 et seq.;
California Hazardous Waste Control Law, California Health & Safety Code ss.ss.
22100 et seq.; California Hazardous Materials Release Response Plans and
Inventory Act, California Health & Safety Code ss.ss. 25500 et seq.; California
Clean Air Act, California Health & Safety Code ss.ss. 39608 et seq.; California
Toxic Pits Cleanup Act, California Health & Safety Code ss.ss. 25208 et seq.;
California Pipeline Safety Act, California Government Code ss.ss. 51010 et seq.;
California Toxic Air Contaminants Law, California Health & Safety Code ss.ss.
39650 et seq.; California Porter-Cologne Water Quality Act, California Water
Code ss.ss. 13000 et seq.; California Toxic Injection Well Control Act,
California Health & Safety Code ss.ss.25159.10 et seq.; California Safe Drinking
Water and Toxic Enforcement Act of 1986, California Health & Safety
Code ss.ss. 25249.5 et seq.; California Underground Storage Tank Act, California
Health & Safety Code ss.ss. 25280 et seq.; California Occupational Carcinogens
Control Act, California Labor Code ss.ss. 9000 et seq.; any other laws of this
nature applicable to the Assets or operation of the Business; and all
regulations promulgated under any of the foregoing.
"Equipment" shall have the meaning set forth in Section 1.1(a)(iv) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means those Assets described in Schedule 1.1(c) attached
hereto.
"Final Closing Balance Sheet" means the balance sheet prepared by the
Accounting Firm for the purposes provided in Section 1.4.
"FTC" shall have the meaning set forth in Section 5.2(b) hereof.
"Hazardous Substance" shall mean any substance, material, chemical or waste
that is listed, or contains material amounts of one or more components that are
defined, designated, classified, considered or listed, as hazardous, acutely
hazardous, toxic, radioactive, or dangerous under any Legal Requirements, as
well as any "solid waste", industrial waste, industrial wastewater sewage,
asbestos or asbestos containing material, petroleum, petroleum product or
by-product, crude oil or any fraction thereof, natural gas, natural gas liquids,
liquefied natural gas, synthetic gas useable as fuel, or polychlorinated
biphenyls (PCBs).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Improvements" shall have the meaning set forth in Section 1.1(a)(iii)
hereof.
"Indemnified Party" shall have the meaning set forth in Section 9.5 hereof.
"Inventory" shall have the meaning set forth in Section 1.1(a)(vii) hereof.
"Inventory Adjustment" shall have the meaning set forth in Section 1.5
hereof.
"Knowledge" of either Seller means the actual knowledge, after a diligent
investigation of the type reasonably required to impart actual knowledge of the
facts in questions, of any of Don Sebastiani, Mary Ann Sebastiani Cuneo, Sam
Sebastiani, Richard Cuneo, Richard Conley, Paul Bergna, James O'Connor, Robert
Carroll, Emma Swain, and Victoria Bonnington.
"Legal Requirement" means all federal, state, local, municipal, law,
statute, ordinance, code, rule, regulation, requirement, specification of any
federal, state, county, municipal or local governmental body that is in force.
"Listed Employee" shall have that meaning set forth in Section 5.3(a)
hereof.
"Loaded Sales to Distributors" shall have that meaning set forth in Section
4.1(g).
"Member of the Controlled Group" means each trade or business, whether or
not incorporated, that would be treated as a single employer with either Seller
under Section 4001 of ERISA or Sections 414(b), (c), (m) or (o) of the Code.
"Minimum Damages" shall have the meaning set forth in Section 6.1 hereof.
"Multiemployer Plan" shall have the meaning set forth in Section 2.13(a)
hereof.
"Notice of Disagreement" shall have the meaning set forth in Section 1.4(a)
hereof.
"Offer to Purchase" shall have the meaning set forth in Section 10.9
hereof.
"Partnership Agreement" means the partnership agreement dated as of the
27th of April, 1994, by and between MAJiC Vice, Inc., a California corporation,
Lucinco, Inc., a California corporation, and E.T.K., Inc., a California
corporation.
"Permitted Liens" shall have the meaning set forth in Section 2.7(b)(ii)
hereof.
"Person" shall include any individual, firm, corporation, partnership,
government, governmental agency or other entity, whether acting in an
individual, a fiduciary or any other capacity.
"Pro Forma Closing Balance Sheet" shall mean the balance sheet of the
Business estimated as of February 28, 2001, prepared by Sellers in good faith,
and delivered to Buyer fifteen (15) days prior to the Closing Date.
"Real Property" shall have the meaning set forth in Section 1.1(a)(i)
hereof.
"Receivables" shall have the meaning set forth in Section 1.1(a)(viii)
hereof.
"Retained Liabilities" shall have the meaning set forth in Section 1.1(a)
hereof.
"Security Interests" means all deeds of trust, mortgages, pledges, liens,
security interests, encumbrances, restrictions, charges, limitations, adverse
claims, or other agreements relating to disposition of any kind.
"Sellers" means SVI and TRVG.
"Survival Period" shall have that meaning set forth in Section 9.1 hereof.
"SVI" means Sebastiani Vineyards, Inc.
"SVI Indemnified Party" shall have the meaning set forth in Section 9.3
hereof.
"Third Party Claim" shall have the meaning set forth in Section 9.5 hereof.
"Threshold Damages" shall have the meaning set forth in Section 9.2(a)( i)
hereof.
"Total Shareholders Equity" shall be that accounting entry bearing the same
title on the Pro Forma Balance Sheet, the Closing Balance Sheet, or the Final
Closing Balance Sheet, as the case may be.
"Transferred Employee" shall have the meaning set forth in Section 5.3(a)
hereof.
"TRV Brandnames" shall have the meaning set forth in Section 1.1(a)(vi)
hereof.
"TRV Trademarks" shall have the meaning set forth in Section 1.1(a)(vi)
hereof.
"TRVG" means Tuolomne River Vintners Group.
"Unavailable Employees" shall have the meaning set forth in Section 5.3(a).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
CANANDAIGUA WINE COMPANY, INC., a New York corporation
By: /s/ Jon Moramarco
-------------------------------------------------
Jon Moramarco, President
SEBASTIANI VINEYARDS, INC., a Delaware corporation
By: /s/ Don Sebastiani
-------------------------------------------------
Don Sebastiani, Chief Executive Officer
TUOLOMNE RIVER VINTNERS GROUP, a California partnership
By: MAJiC Vine, Inc., a California corporation,
General Partner
By: /s/ Mary Ann Sebastiani Cuneo
-------------------------------------------------
Mary Ann Sebastiani Cuneo, President
By: Lucinco, Inc., a California corporation,
General Partner
By: /s/ Sam Sebastiani
-------------------------------------------------
Sam Sebastiani, President
By: E.T.K. Inc., a California corporation,
General Partner
By: /s/ Don A. Sebastiani
-------------------------------------------------
Don A. Sebastiani, President
The undersigned agrees to be bound by the obligations and duties of Sellers'
Representative set forth in Section 9.6.
/s/ Richard Cuneo
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Richard Cuneo