<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
SCHEID VINEYARDS INC.
(Name of Issuer)
CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of Class of Securities)
806403 10 1
(CUSIP Number)
Heidi M. Scheid
13470 Washington Blvd., Suite 300
Marina del Rey, California 90292
(310) 301-1555
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
JULY 29, 1997
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box / /.
Check the following box if a fee is being paid with the statement / /.
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent
of the class of securities described in Item 1; and (2) has filed no
amendment subsequent thereto reporting beneficial ownership of five percent
or less of such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
(Continued on following pages)
(Page 1 of 6 Pages)
<PAGE>
CUSIP NO. 806403 10 1 13D Page 2 of 6 Pages
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
HEIDI M. SCHEID
###-##-####
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)/ / (b)/ /
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (See Item 3 of this Filing)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
7 SOLE VOTING POWER
NUMBER 293,093 (See Item 5 of this Filing)
OF
SHARES
8 SHARED VOTING POWER
BENEFICIALLY
NONE
OWNED BY
REPORTING
9 SOLE DISPOSITIVE POWER
PERSON
293,093 (See Item 5 of this Filing)
WITH
10 SHARED DISPOSITIVE POWER
NONE
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
293,093 (See Item 5 of this Filing)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES
CERTAIN SHARES*
/ /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
12.8% (4.6% OF OUTSTANDING SHARES OF CLASS A
COMMON STOCK ASSUMING ALL OUTSTANDING SHARES OF CLASS B
COMMON STOCK ARE CONVERTED INTO SHARES OF CLASS A COMMON
STOCK) (See Item 5 of this Filing)
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the Class A Common Stock, $0.001 par
value (the "Class A Common Stock"), of Scheid Vineyards Inc., a Delaware
corporation, (the "Company"). The principal executive offices of the
Company are located at 13470 Washington Blvd., Suite 300, Marina del Rey,
California 90292.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This Schedule 13D is filed by Heidi M. Scheid.
(b) Ms. Scheid's business address is 13470 Washington Blvd., Suite
300, Marina del Rey, California 90292.
(c) Ms. Scheid is Vice President Finance, Chief Financial Officer and
a director of Scheid Vineyards Inc., which is located at 13470 Washington
Blvd., Marina del Rey, California 90292.
(d) During the past five years, Ms. Scheid has not been convicted in
a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the past five years, Ms. Scheid has not been a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which such person was or is subject to a
judgment, decree or final order enjoining future violations of or
prohibiting or mandating activity subject to federal or state securities
laws or finding any violation with respect to such laws.
(f) Ms. Scheid is a citizen of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Pursuant to the terms and conditions of an Exchange and
Contribution Agreement, dated as of July 29, 1997, by and among the
Company, Ms. Scheid and certain other persons, Ms. Scheid exchanged all of
her interests in a certain limited partnership and a certain limited
liability company for 290,093 shares of Class B Common Stock, $.001 par
value (the "Class B Common Stock"), of the Company. Each share of Class B
Common Stock has five votes compared to one vote for each share of Class A
Common Stock. The Class B Common Stock is also convertible at the option
of the holder thereof for shares of Class A Common Stock on a one-for-one
share basis, subject to certain restrictions on transfer.
ITEM 4. PURPOSE OF TRANSACTION
Mr. Scheid has no present plans or intentions which would result
in or relate to any of the transactions described in subparagraphs (a)
through (j) of Item 4 of Schedule 13D. The shares of Class A Common Stock
which may be deemed beneficially
3
<PAGE>
owned by Ms. Scheid were acquired in the exchange transaction described in
Item 3 above. Ms. Scheid expects to evaluate on an ongoing basis the
Company's financial condition, business, operations and prospects, the market
price of the Class A Common Stock, conditions in the securities markets
generally, general economic and industry conditions and other factors.
Accordingly, Ms. Scheid reserves the right to change her plans and intentions
at any time, as she deems appropriate. In particular, Ms. Scheid may
purchase additional shares of Class A Common Stock or Class B Common Stock or
may sell shares of Class A Common Stock or Class B Common Stock from time to
time and as the case may be. Any such transactions may be effected at any
time or from time to time, subject to any applicable limitations imposed on
the sale of her shares of Class A Common Stock, if any, or Class B Common
Stock by the Securities Act of 1933, as amended, the Lock-up Agreement and
the Buy-Sell Agreement, as described in Item 6.
ITEM 5 . INTEREST IN SECURITIES OF THE ISSUER.
(a) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Class A Common Stock
into which shares of Class B Common Stock may be converted on a one-for-one
basis within 60 days of August 7, 1997, are deemed outstanding for computing
the percentage of the reporting person holding such shares of Class B Common
Stock but are not deemed outstanding for computing the percentage of any
other person.
The approximate aggregate percentage of outstanding shares of Class
A Common Stock owned by Ms. Scheid is based on 2,000,000 shares of Class A
Common Stock (6,400,000 shares of Class A Common Stock assuming all 4,400,000
issued and outstanding shares of Class B Common Stock are converted into
shares of Class A Common Stock) and 293,093 shares of Class B Common Stock,
each of which is entitled to five votes per share, beneficially owned by Ms.
Scheid as of August 7, 1997. As of August 7, 1997:
(1) Ms. Scheid beneficially owned 293,093 shares of Class B
Common Stock, constituting approximately 12.8% of the voting power of the
shares of Class A Common Stock outstanding. Of such shares, 290,093 shares
are Class B Common Stock owned by Ms. Scheid, 1,000 shares are owned by Ms.
Scheid's husband, and 1,000 shares are owned by Ms. Scheid as co-trustee of
each of two trusts benefitting Ms. Scheid's children. Ms. Scheid disclaims
all pecuniary interest in the 2,000 shares of Class B Common Stock she owns
as co-trustee for the benefit of her two children.
(b) Ms. Scheid has the sole power to vote or to direct the voting of
securities she owns as well as the investment power, including the power to
dispose or to direct the disposition of securities she owns, which powers
are not shared and may be exercised only by Ms. Scheid; provided, however,
that Ms. Scheid shares voting and investment power over 2,000 shares held
in trust for the benefit of her children with her co-trustee.
(c) Ms. Scheid has not effected any transactions in the Class A
Common Stock other than as described herein during the 60 days prior to
August 7, 1997.
4
<PAGE>
(d) Not Applicable.
(e) Not Applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
Pursuant to the terms of a Buy-Sell Agreement, dated as of July
29, 1997 (the "Buy-Sell Agreement"), among the Company, Ms. Scheid and
certain other holders of Class B Common Stock, no holder of shares of Class
B Common Stock may, with limited exceptions, transfer such stock or convert
such stock into Class A Common Stock without first offering such stock to
the Company and then to certain other parties to the Buy-Sell Agreement. A
copy of the Buy-Sell Agreement is attached hereto as Exhibit A and
incorporated herein by this reference. The Buy-Sell Agreement applies to a
broad range of transfers and dispositions other than transfers to (i) the
Company, (ii) any other Class B stockholder, (iii) a current or former
spouse or direct lineal descendant of any Class B stockholder including
without limitation, adopted persons (if adopted during minority) and
persons born out of wedlock, and excluding foster children and
stepchildren, (iv) a trust under which all of the beneficiaries are persons
described in clauses (ii) or (iii) above, and (v) a corporation,
partnership or limited liability company, all of the equity interests of
which are owned by persons or entities described in clauses (i), (ii),
(iii), and (iv) above or corporations, partnerships and limited liability
companies described in clause (v).
In addition, in connection with the initial public offering of
the Company's Class A Common Stock completed on July 30, 1997, Ms. Scheid
entered a lock-up agreement (the "Lock-up Agreement") with Cruttenden Roth
Incorporated pursuant to which, among other things, Ms. Scheid agreed not
to sell or otherwise dispose of any securities of the Company for one year
after July 29, 1997. The Lock-up Agreement exempts transfers and
dispositions permitted pursuant to the terms of the Buy-Sell Agreement. A
copy of the Lock-up Agreement is attached hereto as Exhibit B and
incorporated herein by this reference.
On July 24, 1997, Ms. Scheid was granted an incentive stock
option exercisable for 20,000 shares of Class A Common Stock under the
Company's 1997 Stock Option/Stock Issuance Plan. This option vests with
respect to 25% of the underlying Class A Common Stock on the first
anniversary of the grant date and with respect to the remaining 75% in 36
equal monthly installments over the following 36 months. A copy of Ms.
Scheid's Notice of Grant of Stock Option and Stock Option Agreement is
attached hereto as Exhibit C.
5
<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit A Buy-Sell Agreement, dated July 29, 1997,
among Scheid Vineyards Inc. and the
holders of Class B Common Stock named
therein.
Exhibit B Lock-Up Agreement, dated July 21, 1997,
between Heidi M. Scheid and Cruttenden
Roth Incorporated.
Exhibit C Notice of Grant of Stock Option and
Stock Option Agreement, dated July 24,
1997, between Heidi M. Scheid and Scheid
Vineyards Inc.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
August 8, 1997
By: /s/ HEIDI M. SCHEID
-------------------
Heidi M. Scheid
6
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO.
- ---------- -------------------- --------
A Lock-Up Agreement 8
B Buy-Sell Agreement 11
C Notice of Grant of Stock Option and
Stock Option Agreement 24
7
<PAGE>
EXHIBIT A
8
<PAGE>
SCHEID VINEYARDS INC.
LOCK-UP AGREEMENT
July 21, 1997
Cruttenden Roth Incorporated
Laidlaw Equities, Inc.
Rodman & Renshaw, Inc.
As Representatives of the Several Underwriters
c/o Cruttenden Roth Incorporated
18301 Von Karman, Suite 100
Irvine, California 92714
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the
several underwriters (the "Underwriters"), propose to enter into an
Underwriting Agreement with Scheid Vineyards Inc. (the "Company") providing
for the public offering (the "Public Offering") by the Underwriters,
including yourselves, of Class A Common Stock of the Company (the "Common
Stock") pursuant to the Company's Registration Statement on Form SB-2,
Registration No. 333-27871, filed with the Securities and Exchange Commission
on May 28, 1997 (the "Registration Statement").
In consideration of the Underwriters' agreement to purchase and make
the Public Offering of the Common Stock, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned
hereby agrees, for a period beginning on the date of the final prospectus
included in the Registration Statement and ending on the first anniversary
thereof (the "Lock-Up Period"), not to offer to sell, contract to sell or
otherwise sell, transfer, dispose of, loan, pledge or grant any rights with
respect to or solicit any offer to buy (collectively a "Disposition") any
shares of Common Stock, any options or warrants to purchase any shares of
Common Stock or any securities convertible into or exchangeable for shares of
Common Stock (collectively, "Securities") now owned or hereafter acquired
directly by the undersigned or with respect to which the undersigned has or
hereafter acquires the power of disposition, otherwise than (i) exercise (on
a cash or cashless basis not resulting in any public sale of Class A Common
Stock) of options to purchase Class A Common Stock, provided that the shares
of Class A Common Stock received (net of any shares delivered to the Company
in a traditional cashless exercise thereof) shall be subject to the terms
hereof; (ii) as a bona fide gift or gifts or upon death by will or intestacy,
provided each transferee thereof agrees to be bound by this Lock-Up
Agreement; (iii) as a distribution to limited partners or shareholders or
members of the undersigned, provided that the distributees thereof agree in
writing to be bound by the terms of this Lock-Up Agreement; (iv) transfers of
Class B Common Stock of the Company permitted pursuant to the Buy-Sell
Agreement among the holders of the Company's Class B Common Stock (provided
such transfers do not result in any public sale or distribution of any
Securities and the transferees agree in writing to hold such shares subject
to this Lock-Up Agreement); or (v) with the prior
9
<PAGE>
written consent of Cruttenden Roth Incorporated. The foregoing restriction
is expressly agreed to preclude the holder of the Securities from engaging in
any hedging, pledge or other transaction which is designed to or reasonably
expected to lead to or result in any Disposition of any Securities during the
Lock-Up Period even if such Securities are owned by a person other than the
undersigned and/or would be disposed of by someone other than the
undersigned. Such prohibited hedging, pledge or other transactions would
include, without limitation, any short sale (whether or not against the box),
any pledge of shares covering an obligation that matures, or could reasonably
be expected to mature, during the Lock-Up Period, or any purchase, sale or
grant of any right (including without limitation any put or call option) with
respect to any Securities or with respect to any security (other than a
broad-based market basket or index) that includes, relates or derives any
significant part of its value from Securities.
Furthermore, the undersigned hereby agrees and consents to the
entry of stop transfer instructions with the Company's transfer agent
against the transfer of the Securities held by the undersigned except in
compliance with this Lock-Up Agreement.
Very truly yours,
/s/ HEIDI M. SCHEID
-------------------
Heidi M. Scheid
Accepted as of the ____ day of July, 1997:
Cruttenden Roth Incorporated
Laidlaw Equities, Inc.
Rodman & Renshaw, Inc.
As Representatives of the Several Underwriters
By: Cruttenden Roth Incorporated
By:
-------------------------
Title: ----------------------
10
<PAGE>
EXHIBIT B
11
<PAGE>
BUY-SELL AGREEMENT
THIS BUY-SELL AGREEMENT (this "AGREEMENT") is made as of July 29,
1997, by and among SCHEID VINEYARDS INC., a Delaware corporation (the
"CORPORATION"), ALFRED G. SCHEID, AS TRUSTEE OF THE ALFRED G. SCHEID
REVOCABLE TRUST, DATED OCTOBER 8, 1992 ("AGS"), SCOTT D. SCHEID ("SDS"),
HEIDI M. SCHEID ("HMS"), KURT J. GOLLNICK ("KJG"), EMANTY LIMITED LIABILITY
COMPANY, a California limited liability company ("EMANTY"), and the
additional stockholders of the Corporation, if any, identified on Exhibit A
attached hereto and by this reference incorporated herein (the "ADDITIONAL
STOCKHOLDERS" and, together with SDS, HMS, Emanty and KJG the "MINORITY
STOCKHOLDERS"). The Minority Stockholders and AGS are collectively
referred to herein as the "STOCKHOLDERS."
RECITALS
WHEREAS, the Stockholders are the holders of all of the outstanding
shares (the "SHARES") of Class B Common Stock of the Corporation;
WHEREAS, AGS, Emily K. Liberty ("EKL") and Tyler P. Scheid ("TPS") are
the sole members of Emanty.
WHEREAS, the Corporation and the Stockholders have determined that it
is in the best interests of the Corporation and the Stockholders that the
transferability of the Shares of the Minority Stockholders be restricted as
provided herein; and
WHEREAS, the parties hereto (the "PARTIES") have each independently
concluded that the method of valuation of the Shares provided in this
Agreement is fair and equitable.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual agreements and covenants contained herein, the Parties agree as
follows:
1. RESTRICTIONS ON TRANSFER. Except as expressly permitted or
required by this Agreement, no Minority Stockholder shall, voluntarily or
involuntarily (including, without limitation, by operation of law)
transfer, sell, exchange, give away, pledge, hypothecate or otherwise
dispose of ("TRANSFER") all or any portion of the Shares or any rights
therein. Any Transfer or attempted Transfer in violation of the preceding
sentence shall be null and void and of no effect whatever. Each Party
hereby acknowledges the reasonableness of the restrictions on Transfer
imposed by this Agreement in view of the relationship of the Parties.
Accordingly, the restrictions on Transfer contained herein shall be
specifically enforceable. Each Party hereby further agrees to hold each
other Party (and each other Party's successors and assigns) wholly and
completely harmless from any cost,
12
<PAGE>
liability or damage (including, without limitation, liabilities for income
taxes and costs of enforcing this indemnity) incurred by any of such
indemnified persons as a result of a Transfer or an attempted Transfer in
violation of this Agreement.
2. INSPECTION OF AGREEMENT. A copy of this Agreement duly executed
by each of the Parties shall be delivered to the Corporation, maintained by
the Corporation at its principal executive office, and made available for
inspection to any person requesting to see it.
3. PERMITTED TRANSFERS.
(a) GENERAL. Subject to the conditions and restrictions set
forth in this Section 3, each Minority Stockholder shall have the right to
Transfer all or any portion of such Minority Stockholder's Shares by means
of a Permitted Transfer.
(b) DEFINITION OF PERMITTED TRANSFER AND PERMITTED TRANSFEREES.
(i) A "PERMITTED TRANSFER" is any Transfer by any
Minority Stockholder of all or any portion of the Shares to a Permitted
Transferee, provided that such Transfer otherwise complies with the
conditions and restrictions of this Section 3.
(ii) A "PERMITTED TRANSFEREE" is any of the following
persons: (1) the Corporation, (2) any of AGS, SDS, HMS, Emanty, KJG, EKL
or TPS, (3) a current spouse, former spouse or direct lineal descendant of
any individual named in clause (2) above, including, without limitation,
adopted persons (if adopted during minority) and persons born out of
wedlock, and excluding foster children and stepchildren, (4) a trust under
which all of the beneficiaries are persons described in clauses (2) or (3)
above, or (5) a corporation, partnership or limited liability company all
of the equity interests of which are owned by the persons or entities
specified in clauses (1), (2), (3) and (4) above or corporations,
partnerships or limited liability companies described in this clause (5).
(c) CONDITION TO PERMITTED TRANSFERS. Each Permitted Transfer
must be preceded by a written notice given by the transferring Minority
Stockholder to the Corporation, and to each of AGS, SDS and HMS to the
extent he or she is not the transferring Minority Stockholder, at least ten
(10) business days prior to such Permitted Transfer. Each person or entity
(other than the Corporation and AGS) to whom or which Shares (or any right,
title or interest therein) are Transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such Transfer,
acknowledge in writing to the Corporation that such person or entity is
bound by the provisions of this Agreement and the transferred Shares (or
any right, title or interest therein) are subject to the covenants and
restrictions set forth in this Agreement to the same extent such Shares
would be so subject if retained by the transferring Minority Stockholder.
4. RIGHT OF FIRST REFUSAL. Each Minority Stockholder shall have the
right, from time to time, to Transfer or to convert into Class A Common
Stock of the Corporation in accordance with the Certificate of
Incorporation of the Corporation ("CONVERT"), all or any portion of such
Minority Stockholder's Shares, subject to the following rights of the other
Parties (the "RIGHT OF FIRST REFUSAL"), pursuant to the following steps:
13
<PAGE>
(a) SALE OR CONVERSION NOTICE. Such Minority Stockholder (the
"SELLING OR CONVERTING STOCKHOLDER") shall give written notice (the "SALE
OR CONVERSION NOTICE") to the Corporation, AGS, SDS and HMS of his, her or
its intention to Transfer or Convert Shares. The Sale or Conversion Notice
shall (i) identify the proposed transferee, if applicable, (ii) specify the
portion of the Shares to be transferred or converted, (iii) if applicable,
specify the price and the terms of payment (the "SALE TERMS"), and (iv) if
applicable, specify the Purchase Price and Payment Terms described in
Section 7 below.
(b) OPTION TO THE CORPORATION. The Corporation shall have the
first option to purchase all or any part of the Shares referred to in the
Sale or Conversion Notice at the lesser of (i) the Sale Terms, if
applicable, and (ii) the Purchase Price and upon the Payment Terms. Within
five (5) business days after delivery of the Sale or Conversion Notice to
the Corporation, the Corporation shall give written notice to AGS, SDS and
HMS regarding the portion or all of the Shares to be purchased by the
Corporation.
(c) OPTION TO AGS. If the Corporation does not elect to
purchase all of the Shares referred to in the Sale or Conversion Notice,
AGS shall have the option to purchase all of the Shares referred to in the
Sale or Conversion Notice (other than the Shares to be purchased by the
Corporation) at the lesser of (i) the Sale Terms, if applicable, and
(ii) the Purchase Price and upon the Payment Terms. Within ten (10)
business days after delivery of the Sale or Conversion Notice to AGS, AGS
shall give written notice to the Corporation, SDS and HMS regarding the
portion or all of the Shares to be purchased by AGS.
(d) OPTION TO SDS AND HMS. If the Corporation and/or AGS do not
elect to purchase all of the Shares referred to in the Sale or Conversion
Notice, (i) SDS and HMS (if neither SDS nor HMS is the Selling or
Converting Stockholder), jointly and (to the extent that each elects to
exercise such option) PRO RATA in proportion to the number of Shares held
by each, (ii) SDS (if HMS is the Selling or Converting Stockholder) or
(iii) HMS (if SDS is the Selling or Converting Stockholder), shall have the
option to purchase all of the Shares referred to in the Sale or Conversion
Notice (other than the Shares to be purchased by the Corporation and/or
AGS) at the lesser of (A) the Sale Terms, if applicable, and (B) the
Purchase Price and upon the Payment Terms. Within fifteen (15) business
days after delivery of the Sale of Conversion Notice to SDS and HMS, SDS
and/or HMS, as applicable, shall give written notice the Corporation, AGS
and SDS or HMS, as applicable, regarding the portion or all of the Shares
to be purchased by SDS and/or HMS.
(e) EXERCISE OF OPTION RIGHTS. If the Corporation, AGS, SDS
and/or HMS elect to purchase all of the Shares set forth in the Sale or
Conversion Notice, the Corporation, AGS, SDS and/or HMS, as applicable,
shall purchase all such Shares at the lesser of (i) the Sale Terms, if
applicable, and (ii) the Purchase Price and upon the Payment Terms.
(f) SALE TO PROPOSED TRANSFEREE. If the Corporation, AGS, SDS
and/or HMS do not elect to purchase all of the Shares set forth in the Sale
or Conversion Notice, such Shares, but not less than all of such Shares
referred to in the Sale or Conversion Notice, (i) in the case of a proposed
Transfer may be transferred at any time
14
<PAGE>
prior to the thirtieth (30th) business day after the date of the Sale or
Conversion Notice to the transferee identified in the Sale Notice on the Sale
Terms and (ii) in the case of a proposed conversion may be converted into
shares of Class A Common Stock of the Corporation in accordance with the
Certificate of Incorporation of the Corporation at any time prior to the
thirtieth (30th) business day after the date of the Sale or Conversion
Notice. No Transfer or conversion of the Shares shall be made after the end
of such thirty (30) business day period, nor shall any change in the terms
and conditions of Transfer or conversion be permitted, without the Selling or
Converting Stockholder first giving to the Corporation, AGS, SDS and HMS a
new Sale or Conversion Notice in compliance with the requirements of this
Section.
(g) CONVERSION ON DIVORCE OR LEGAL SEPARATION. Notwithstanding
the foregoing provisions of this Section 4, if any Minority Stockholder who
is an individual should divorce or became legally separated (a "SEPARATING
PARTY"), the spouse of such Party (the "SPOUSE") shall, if such Spouse
already is a Party, or if such Spouse is not already a Party then, such
Separating Party shall cause the Spouse to, promptly give a Sale or
Conversion Notice to the Corporation, AGS, SDS and HMS indicating that all
of the Shares owned by the Spouse are proposed to be converted into Class A
Common Stock of the Corporation and thereby providing the Corporation, AGS,
SDS and HMS with the options to purchase such Shares in the manner
specified herein. If the Corporation, AGS, SDS and HMS do not elect to
purchase all of the Shares set forth in the Spouse's Sale or Conversion
Notice, the Spouse shall, if such Spouse already is a Party, or if such
Spouse is not already a Party, then the Separating Party shall cause the
Spouse to, promptly convert all of the Shares owned by the Spouse into
Class A Common Stock of the Corporation in accordance with the Certificate
of Incorporation of the Corporation.
5. LIMITED SALES TO THIRD PARTIES. Notwithstanding the provisions
of Section 4, a Minority Stockholder shall have the right to Transfer all
or part of such Minority Stockholder's Shares, without compliance with the
Right of First Refusal, as follows:
(a) SALES BY SDS, HMS AND KJG. Each of SDS, HMS and KJG shall
be entitled to Transfer to persons other than Permitted Transferees:
(i) on or prior to December 31, 1998, an aggregate of 50,000 Shares (the
"INITIAL AMOUNT") and (ii) during 1999 and each calendar year thereafter,
40,600 Shares (the "ANNUAL AMOUNT"); provided, however, in the event that
such Minority Stockholder Transfers less than the Initial Amount on or
prior to December 31, 1998 and/or less than the Annual Amount in 1999 or
any calendar year thereafter, then such Minority Stockholder shall be
entitled, in 1999 or any subsequent calendar year, to Transfer Shares in an
amount up to the Annual Amount for such calendar year PLUS any then unused
Initial Amount PLUS any then unused Annual Amounts from prior calendar
years.
(b) SALES BY EMANTY. Emanty shall be entitled to Transfer to
persons other than Permitted Transferees: (i) on or prior to December 31,
1998, an aggregate of 100,000 Shares (the "EMANTY INITIAL AMOUNT") and
(ii) during 1999 and each calendar year thereafter, 81,200 Shares (the
"EMANTY ANNUAL AMOUNT"); provided, however, in the event that Emanty
Transfers less than the Emanty Initial Amount on or prior to December 31,
1998 and/or less than the Emanty Annual Amount in 1999 or any calendar
15
<PAGE>
year thereafter, then Emanty shall be entitled, in 1999 or any subsequent
calendar year, to Transfer Shares in an amount up to the Emanty Annual Amount
for such calendar year PLUS any then unused Emanty Initial Amount PLUS any
then unused Emanty Annual Amounts from prior calendar years.
(c) EFFECT OF TRANSFERS. All transferees of Shares pursuant to
this Section 5 shall take such Shares free and clear of the covenants and
restrictions set forth in this Agreement. Any legend with respect to this
Agreement set forth on any certificate evidencing Shares transferred
pursuant to this Section 5 shall be removed upon the consummation of such
Transfer.
6. OPTION TO PURCHASE UPON CERTAIN EVENTS.
(a) SALE EVENTS. Upon the occurrence of any of the following
events (each a "SALE EVENT"), the Corporation, AGS, SDS and/or HMS shall
have the option to purchase all of the Shares of a Minority Stockholder
(the "AFFECTED STOCKHOLDER"), at the Purchase Price and upon the Payment
Terms, pursuant to the provisions of this Section 6:
(i) the death of the Affected Stockholder;
(ii) the entry of a judgment awarding all or any part
of the Shares of the Affected Stockholder to any person who is not a Party;
(iii) the filing or recording of any levy or attachment
against the Shares of the Affected Stockholder;
(iv) the occurrence, with respect to the Affected
Stockholder, of any of the following: (A) filing a voluntary petition in
bankruptcy or for reorganization or for the adoption of an arrangement
under the Federal Bankruptcy Code (as now or in the future amended) or an
admission seeking the relief therein provided; (B) making a general
assignment for the benefit of creditors; (C) consenting to the appointment
of a receiver for all or a substantial part of the Affected Stockholder's
property; (D) in the case of the filing of an involuntary petition in
bankruptcy, an entry of an order for relief; (E) the entry of a court order
appointing a receiver or trustee for all or a substantial part of the
Affected Stockholder's property without his consent; or (F) the assumption
of custody or sequestration by a court of competent jurisdiction of all or
substantially all of the Affected Stockholder's property; or
(v) in the event that KJG is the Affected Stockholder,
the termination of employment of such Affected Stockholder with the
Corporation, voluntarily or involuntarily, with or without cause.
(b) OPTION TO THE CORPORATION. Upon the occurrence of a Sale
Event, the Corporation shall have the first option to purchase all of the
Shares of the Affected Stockholder. Within five (5) business days after
the Sale Event, the Corporation shall give written notice to AGS, SDS and
HMS regarding the portion or all of the Shares to be purchased by the
Corporation.
16
<PAGE>
(c) OPTION TO AGS. If the Corporation does not elect to
purchase all of the Shares of the Affected Stockholder, AGS shall have the
option to purchase all of such Shares (other than the portion of the Shares
to be purchased by the Corporation). Within ten (10) business days after
the Sale Event, AGS shall give written notice to the Corporation, SDS and
HMS regarding the portion or all of the Shares to be purchased by AGS.
(d) OPTION TO SDS AND HMS. If the Corporation and/or AGS do not
elect to purchase all of the Shares of the Affected Stockholder, (i) SDS
and HMS (if neither SDS nor HMS is the Affected Stockholder), jointly and
(to the extent that each elects to exercise such option) PRO RATA in
proportion to the number of Shares held by each, (ii) SDS (if HMS is the
Affected Stockholder) or (iii) HMS (if SDS is the Affected Stockholder),
shall have the option to purchase all of such Shares (other than the
portion of the Shares to be purchased by the Corporation and/or AGS).
Within fifteen (15) business days after the Sale Event, SDS and/or HMS, as
applicable, shall give written notice to the Corporation, AGS and SDS or
HMS, as applicable, regarding the portion or all of the Shares to be
purchased by SDS and/or HMS.
(e) EXERCISE OF OPTION. If the Corporation, AGS, SDS and/or HMS
elect to purchase all of the Shares of the Affected Stockholder pursuant to
this Section 6, the Corporation, AGS, SDS and/or HMS, as applicable, shall
purchase all of such Shares at the Purchase Price and upon the Payment
Terms.
(f) EFFECT OF FAILURE TO EXERCISE OPTION. If the Corporation,
AGS, SDS and/or HMS do not elect to purchase all of the Shares of the
Affected Stockholder following a Sale Event, no portion of the Shares shall
be transferred pursuant to this Section 6 on account of such Sale Event.
7. PURCHASE PRICE AND PAYMENT TERMS.
(a) PURCHASE PRICE. "PURCHASE PRICE" means:
(i) if the Selling or Converting Stockholder or the
Affected Stockholder is a Minority Stockholder other than KJG under the
circumstances described in clause (ii) below, a price per Share equal to
the weighted average trading price of a share of the Class A Common Stock
of the Corporation over the twenty (20) trading days on which such shares
were actually traded immediately preceding the date of the Sale Notice or
the Sale Event, as applicable (the "AVERAGE TRADING PRICE"); or
(ii) if KJG is the Affected Stockholder and the Sale Event
is the termination of KJG's employment with the Corporation, (A) if such
termination is a "Voluntary Termination" as such term is defined in Section
7(a)(iv) of the Employment Agreement between the Corporation and KJG (the
"EMPLOYMENT AGREEMENT") which occurs prior to July 29, 2004, or is for
"Cause" as such term is defined in Section 7(a)(v) of the Employment
Agreement regardless of when such termination for Cause occurs, a price per
Share equal to the price per Share paid by KJG for such Shares and (B) if
such termination occurs for a reason or under circumstances other than as
described in subparagraph (A) above, a price per share equal to the Average
Trading Price.
17
<PAGE>
(b) PAYMENT TERMS. The payment of the Purchase Price shall be
made on the following terms (the "PAYMENT TERMS"): (i) if the Purchase
Price for the Shares is $100,000 or less, the Purchase Price shall be paid
in one lump sum within seven (7) business days after the Sale Event or the
Sale or Conversion Notice, as applicable; and (ii) if the Purchase Price
for the Shares is more than $100,000, the Purchase Price shall be paid, at
the option of the Corporation, AGS, SDS and/or HMS, as applicable (x) in
one lump sum within three (3) months after the Sale Event or the Sale or
Conversion Notice, as applicable; or (y) by payment of not less than fifty
percent (50%) of the Purchase Price (the "DOWN PAYMENT") within three (3)
months after the Sale Event or the Sale or Conversion Notice, as
applicable, and delivery of a promissory note evidencing the balance of the
Purchase Price, such promissory note to bear interest at the prime rate in
effect on the date of the Down Payment, to be payable in full one (1) year
after the date of the Down Payment and to be secured by the Shares being
purchased.
8. RESTRICTIVE LEGENDS. The stock certificates for the Shares shall
be endorsed with the following restrictive legends:
(1) "The shares represented by this certificate have
not been registered under the Securities Act of 1933. The shares
may not be sold or offered for sale in the absence of (a) an
effective registration statement for the shares under such Act,
(b) a 'no action' letter of the Securities and Exchange
Commission with respect to such sale or offer or (c) satisfactory
assurances to the Corporation that registration under such Act is
not required with respect to such sale or offer."
(2) "The shares represented by this certificate
are subject to certain rights to purchase and rights of first
refusal granted to the Corporation and certain stockholders of
the Corporation and accordingly may not be sold, assigned,
transferred, encumbered, or in any manner disposed of except in
conformity with the terms of a certain agreement between the
Corporation, the registered holder of the shares (or the
predecessor in interest to the shares) and certain other persons.
A copy of such agreement is maintained at the Corporation's
principal corporate offices."
9. TERMINATION OF AGREEMENT. This Agreement shall terminate upon
the occurrence of any one of the following events:
(a) The written agreement of the Parties to that effect; or
(b) The dissolution of the Corporation.
10. ALTERATIONS OR AMENDMENTS. This Agreement may be altered or
amended in whole or in part at any time, by filing with this Agreement a
written instrument setting forth the changes signed by each of the Parties.
18
<PAGE>
11. NOTICES. Any and all notices or other communications required or
permitted by this Agreement or by law to be served on, given to, or
delivered to any Party by any other Party shall be in writing and shall be
deemed duly served, given, or delivered when personally delivered to the
Party or to an officer of the Party, or in lieu of such personal delivery,
on the third day after deposit in the United States Mail, registered or
certified, return receipt requested, addressed to a Party at the address
set forth below such Party's name on the signature pages hereof, or such
other address as shall have been provided to the Parties in accordance with
the provisions of this Section.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Parties and, except as restricted above with
regard to Transfers, each of their heirs, executors, administrators,
successors and assigns.
13. SEVERABILITY. Should any provisions or portion of this Agreement
be held unenforceable and invalid for any reason, the remaining provisions
and portions of this Agreement shall continue in full force and effect.
14. GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of California.
15. ENFORCEMENT. In the event of any breach of any covenant in, or
any other default under, this Agreement, any Party may proceed to protect
and enforce his, her or its rights by suit in equity or action at law,
whether for the specific performance of any term contained in this
Agreement or for an injunction against the breach of any such term or in
aid of the exercise of any power granted in this Agreement, or to enforce
any other legal or equitable right of such Party, or to take any one or
more of such actions. In the event a Party brings such an action against
another Party, the prevailing party in such dispute shall be entitled to
recover from the losing party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect to this Agreement,
including without limitation such reasonable fees and expenses of attorneys
and accountants. None of the rights, powers or remedies conferred upon any
Party shall be mutually exclusive, and each such right, power or remedy
shall be cumulative and in addition to every other right, power or remedy,
whether conferred hereby or now or hereafter available at law, in equity,
by statute or otherwise. Except as expressly provided in this Agreement,
no course of dealing between or among the Parties and no delay in
exercising any such right, power or remedy conferred hereby or now or
hereafter existing at law, in equity, by statute or otherwise, shall
operate as a waiver of, or otherwise prejudice, any such right, power or
remedy.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto respecting the transferability of the
Shares and correctly sets forth the rights, duties, and obligations of each
to the other in relation thereto as of its date. Any prior agreements,
promises, negotiations, or representations concerning its subject matter
not expressly set forth or referenced in this Agreement are of no force or
effect.
19
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above set forth.
SCHEID VINEYARDS INC., a Delaware
corporation
By /s/ ALFRED G. SCHEID
--------------------
Name: Alfred G. Scheid
Title: Chief Executive Officer
Address: 13470 Washington Boulevard
Suite 300
Marina del Rey, California 90292
/s/ ALFRED G. SCHEID
--------------------
ALFRED G. SCHEID, AS TRUSTEE OF THE ALFRED G.
SCHEID REVOCABLE TRUST, DATED OCTOBER 8, 1992
Address: 13470 Washington Boulevard
Suite 300
Marina del Rey, California 90292
/s/ SCOTT D. SCHEID
-------------------
SCOTT D. SCHEID
Address: 13470 Washington Boulevard
Suite 300
Marina del Rey, California 90292
/s/ HEIDI M. SCHEID
-------------------
HEIDI M. SCHEID
Address: 13470 Washington Boulevard
Suite 300
Marina del Rey, California 90292
20
<PAGE>
EMANTY LIMITED LIABILITY COMPANY,
a California limited liability company
By: /s/ ALFRED G. SCHEID
--------------------
Name: Alfred G. Scheid, as Trustee
of the Alfred G. Scheid
Revocable Trust,
Dated October 8, 1992
Title: Managing Member
Address: 13470 Washington Boulevard
Suite 300
Marina del Rey, California 90292
/s/ KURT J. GOLLNICK
--------------------
KURT J. GOLLNICK
Address: 29 Paseo Hermosa
Salinas, California 93908
AGREED AND ACKNOWLEDGED:
/s/ SHIRLEY GLADDEN SCHEID
- --------------------------
SHIRLEY GLADDEN SCHEID, AS
TRUSTEE UNDER DECLARATION OF
TRUST, DATED MARCH 12, 1997
/s/ JOYCE C. PERRY
- ------------------
JOYCE C. PERRY
21
<PAGE>
/s/ ARTHUR R. LIBERTY
- ---------------------
ARTHUR R. LIBERTY
/s/ PETER J. PUGNALE
- --------------------
PETER J. PUGNALE
/s/ NANCY B. SCHEID
- -------------------
NANCY B. SCHEID
/s/ HEIDI M. SCHEID
- -------------------
HEIDI M. SCHEID, AS
TRUSTEE OF THE SIENA C. PUGNALE
TRUST, DATED APRIL 4, 1993
/s/ SCOTT D. SCHEID
- -------------------
SCOTT D. SCHEID, AS
TRUSTEE OF THE SIENA C. PUGNALE
TRUST, DATED APRIL 4, 1993
/s/ HEIDI M. SCHEID
- -------------------
HEIDI M. SCHEID, AS
TRUSTEE OF THE COOPER J. PUGNALE
TRUST, DATED MAY 16, 1995
/s/ SCOTT D. SCHEID
- -------------------
SCOTT D. SCHEID, AS
TRUSTEE OF THE COOPER J. PUGNALE
TRUST, DATED MAY 16, 1995
22
<PAGE>
EXHIBIT A
ADDITIONAL STOCKHOLDERS
Shirley Gladden Scheid, as Trustee under Declaration of Trust, dated
March 12, 1997.
Joyce C. Scheid
Arthur R. Liberty
Peter J. Pugnale
Nancy B. Scheid
Heidi M. Scheid and Scott D. Scheid, Trustees of the Siena C. Pugnale
Trust, dated April 4, 1993.
Heidi M. Scheid and Scott D. Scheid, Trustees of the Cooper J. Pugnale
Trust, dated May 16, 1995.
23
<PAGE>
EXHIBIT C
24
<PAGE>
SCHEID VINEYARDS INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Class A Common Stock of Scheid
Vineyards Inc. (the "Corporation"):
OPTIONEE: Heidi M. Scheid
GRANT DATE: July 24, 1997
VESTING COMMENCEMENT DATE: July 24, 1997
EXERCISE PRICE: $10.00 per share
NUMBER OF OPTION SHARES: 20,000 shares
EXPIRATION DATE: July 23, 1997
TYPE OF OPTION: Incentive Stock Option
EXERCISE SCHEDULE: The Option shall become exercisable with
respect to twenty five percent (25%) of the Option Shares upon
Optionee's completion of one (1) year of Service measured from
the Vesting Commencement Date and shall become exercisable for
the balance of the Option Shares in thirty-six (36) successive
equal monthly installments upon Optionee's completion of each
additional month of Service over the thirty-six (36) month period
measured from the first anniversary of the Vesting Commencement
Date. In no event shall the Option become exercisable for any
additional Option Shares after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the Scheid Vineyards Inc.
1997 Stock Option/Stock Issuance Plan (the "Plan"). Optionee further
agrees to be bound by the terms of the Plan and the terms of the Option as
set forth in the Stock Option Agreement attached hereto as Exhibit A. A
copy of the Plan is available upon request made to the Corporate Secretary
at the Corporation's principal offices.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or in
the attached Stock Option Agreement or Plan shall confer upon Optionee any
right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining Optionee)
or of Optionee, which rights are hereby expressly reserved by each, to
terminate Optionee's Service at any time for any reason, with or without
cause.
25
<PAGE>
DEFINITIONS. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED: JULY 24, 1997
SCHEID VINEYARDS INC.
By:
--------------------------
Title:
-----------------------
/s/ HEIDI M. SCHEID
-------------------
HEIDI M. SCHEID, OPTIONEE
Address: 13470 Washington Blvd., Suite 300
Marina del Rey, CA 90292
ATTACHMENTS:
EXHIBIT A - STOCK OPTION AGREEMENT
26
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
27
<PAGE>
SCHEID VINEYARDS INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors in the service of the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee,
as of the Grant Date, an option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph
2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10)
years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in
accordance with Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws
of descent and distribution following Optionee's death and may be
exercised, during Optionee's lifetime, only by Optionee. However, if this
option is designated a Non-Statutory Option in the Grant Notice, then this
option may, in connection with the Optionee's estate plan, be assigned in
whole or in part during Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established for the exclusive
benefit of one or more such family members. The assigned portion shall be
exercisable only by the person or persons who acquire a proprietary
interest in the option pursuant to such assignment. The terms applicable
to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem
appropriate.
4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant
Notice. As the option becomes exercisable for such installments, those
installments shall accumulate and the option shall remain exercisable for
the accumulated installments until the Expiration Date or sooner
termination of the option term under Paragraph 5 or 6.
28
<PAGE>
5. CESSATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(a) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while this
option is outstanding, then Optionee shall have a period of three (3)
months (commencing with the date of such cessation of Service) during which
to exercise this option, but in no event shall this option be exercisable
at any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance
with the laws of inheritance shall have the right to exercise this option.
Such right shall lapse, and this option shall cease to be outstanding, upon
the EARLIER of (i) the expiration of the twelve (12)-month period measured
from the date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a
period of twelve (12) months (commencing with the date of such cessation of
Service) during which to exercise this option. In no event shall this
option be exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more
than the number of vested Option Shares for which the option is exercisable
at the time of Optionee's cessation of Service. Upon the expiration of
such limited exercise period or (if earlier) upon the Expiration Date, this
option shall terminate and cease to be outstanding for any vested Option
Shares for which the option has not been exercised. However, this option
shall, immediately upon Optionee's cessation of Service for any reason,
terminate and cease to be outstanding with respect to any Option Shares in
which Optionee is not otherwise at that time vested or for which this
option is not otherwise at that time exercisable.
(e) Should Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to remain
outstanding.
29
<PAGE>
6. SPECIAL ACCELERATION OF OPTION.
(a) In the event of any Corporate Transaction, the Option
Shares at the time subject to this option but not otherwise fully exercisable
shall automatically accelerate so that this option shall, immediately prior
to the effective date of the Corporate Transaction, become exercisable for
all of the Option Shares at the time subject to this option and may be
exercised for any or all of those Option Shares as fully-vested shares of
Class A Common Stock. No such acceleration of this option shall occur,
however, if and to extent: (i) this option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation (or
parent thereof) or to be replaced with a comparable option to purchase shares
of the capital stock of the successor corporation (or parent thereof) or (ii)
this option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested Option Shares
at the time of the Corporate Transaction (the excess of the Fair Market Value
of those Option Shares over the aggregate Exercise Price payable for such
shares) and provides for subsequent payout in accordance with the same option
exercise/vesting schedule as set forth in the Grant Notice. The
determination of option comparability under clause (i) shall be made by the
Plan Administrator, and such determination shall be final, binding and
conclusive.
(b) Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) in connection with
the Corporate Transaction.
(c) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and
class of securities which would have been issuable to Optionee in
consummation of such Corporate Transaction had the option been exercised
immediately prior to such Corporate Transaction, and appropriate
adjustments shall also be made to the Exercise Price, PROVIDED the
aggregate Exercise Price shall remain the same.
(e) This Agreement shall not in any way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
30
<PAGE>
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to
the Class A Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Class A Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the total number and/or class of securities subject to this
option and (ii) the Exercise Price in order to reflect such change and
thereby preclude a dilution or enlargement of benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not
have any stockholder rights with respect to the Option Shares until such
person shall have exercised the option, paid the Exercise Price and become
a holder of record of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the
option) must take the following actions:
(i) Execute and deliver to the Corporation a
Notice of Exercise for the Option Shares for which the option is
exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation;
(B) a promissory note payable to the
Corporation, but only to the extent authorized by the Plan
Administrator in accordance with Paragraph 13;
(C) shares of Class A Common Stock held by
Optionee (or any other person or persons exercising the
option) for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise
Date; or
(D) to the extent the option is exercised
for vested Option Shares, through a special sale and
remittance procedure pursuant to which Optionee (or any
other person or persons exercising the option) shall
concurrently provide irrevocable instructions (I) to a
Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason
of such exercise
31
<PAGE>
and (II) to the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order
to complete the sale.
Except to the extent the sale and remittance procedure
is utilized in connection with the option exercise, payment
of the Exercise Price must accompany the Notice of Exercise
delivered to the Corporation in connection with the option
exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option
(if other than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining
Optionee) for the satisfaction of all Federal, state and local
income and employment tax withholding requirements applicable to
the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any
fractional shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the
Nasdaq National Market, if applicable) on which the Class A Common Stock
may be listed for trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Class A Common Stock
pursuant to this option shall relieve the Corporation of any liability with
respect to the non-issuance or sale of the Class A Common Stock as to which
such approval shall not have been obtained. The Corporation, however,
shall use its best efforts to obtain all such approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and Optionee, Optionee's assigns and the legal
representatives, heirs and legatees of Optionee's estate.
12. NOTICES. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any
notice required to be given or delivered
32
<PAGE>
to Optionee shall be in writing and addressed to Optionee at the address
indicated below Optionee's signature line on the Grant Notice. All notices
shall be deemed effective upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.
13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the
terms of repayment) shall be established by the Plan Administrator in its
sole discretion.
14. CONSTRUCTION. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects
limited by and subject to the terms of the Plan. All decisions of the Plan
Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
15. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
16. EXCESS SHARES. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Class A
Common Stock which may be issued under the Plan as last approved by the
stockholders, then this option shall be void with respect to those excess
shares, unless stockholder approval of an amendment sufficiently increasing
the number of shares of Class A Common Stock issuable under the Plan is
obtained in accordance with the provisions of the Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the
event this option is designated an Incentive Option in the Grant Notice,
the following terms and conditions shall also apply to the grant:
- This option shall cease to qualify for favorable
tax treatment as an Incentive Option if (and to the extent) this
option is exercised for one or more Option Shares: (A) more than
three (3) months after the date Optionee ceases to be an Employee
for any reason other than death or Permanent Disability or (B)
more than twelve (12) months after the date Optionee ceases to be
an Employee by reason of Permanent Disability.
- No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the
extent) the aggregate Fair Market Value (determined at the Grant
Date) of the Class A Common Stock for which such installment
first becomes exercisable hereunder would, when added to the
aggregate value (determined as of the respective date or dates of
grant) of the Class A Common Stock or other securities for which
this option or any other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other
option plan of the
33
<PAGE>
Corporation or any Parent or Subsidiary) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate. Should such One Hundred Thousand Dollar
($100,000) limitation be exceeded in any calendar year, this option
shall nevertheless become exercisable for the excess shares in such
calendar year as a Non-Statutory Option.
- Should the exercisability of this option be
accelerated upon a Corporate Transaction, then this option shall
qualify for favorable tax treatment as an Incentive Option only
to the extent the aggregate Fair Market Value (determined at the
Grant Date) of the Class A Common Stock for which this option
first becomes exercisable in the calendar year in which the
Corporate Transaction occurs does not, when added to the
aggregate value (determined as of the respective date or dates of
grant) of the Class A Common Stock or other securities for which
this option or one or more other Incentive Options granted to
Optionee prior to the Grant Date (whether under the Plan or any
other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed
One Hundred Thousand Dollars ($100,000) in the aggregate. Should
the applicable One Hundred Thousand Dollar ($100,000) limitation
be exceeded in the calendar year of such Corporate Transaction,
the option may nevertheless be exercised for the excess shares in
such calendar year as a Non-Statutory Option.
- Should Optionee hold, in addition to this option,
one or more other options to purchase Class A Common Stock which
become exercisable for the first time in the same calendar year
as this option, then the foregoing limitations on the
exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are
granted.
18. LEAVE OF ABSENCE. The following provisions shall apply upon
the Optionee's commencement of an authorized leave of absence:
(a) The exercise schedule in effect under the Grant
Notice shall be frozen as of the first day of the authorized
leave, and this option shall not become exercisable for any
additional installments of the Option Shares during the period
Optionee remains on such leave.
(b) Should Optionee resume active Employee status
within sixty (60) days after the start date of the authorized
leave, Optionee shall, for purposes of the exercise schedule set
forth in the Grant Notice, receive Service credit for the entire
period of such leave. If Optionee does not resume active
Employee status within such sixty (60)-day period, then no
Service credit shall be given for the period of such leave.
(c) If the option is designated as an Incentive Option
in the Grant Notice, then the following additional provision
shall apply:
34
<PAGE>
- If the leave of absence continues for more
than three (3) months, then this option shall automatically
convert to a Non-Statutory Option under the Federal tax laws
at the end of such three (3)-month period, unless the
Optionee's reemployment rights are guaranteed by statute or
by written agreement. Following any such conversion of the
option, all subsequent exercises of such option, whether
effected before or after Optionee's return to active
Employee status, shall result in an immediate taxable event,
and the Corporation shall be required to collect from
Optionee the Federal, state and local income and employment
withholding taxes applicable to such exercise.
(d) In no event shall this option become exercisable
for any additional Option Shares or otherwise remain outstanding
if Optionee does not resume Employee status prior to the
Expiration Date of the option term.
35
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Scheid Vineyards Inc. (the "Corporation") that I
elect to purchase ______ shares of the Corporation's Class A Common Stock
(the "Purchased Shares") at the option exercise price of $10.00 per share
(the "Exercise Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's 1997 Stock Option/Stock Issuance Plan
on July 24, 1997.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a
condition for exercise. Alternatively, I may utilize the special
broker-dealer sale and remittance procedure specified in my agreement to
effect payment of the Exercise Price.
_____________
-------------------------
Heidi M. Scheid, Optionee
13470 Washington Blvd., Suite 300
Marina del Rey, CA 90292
Print name in exact manner
it is to appear on the
stock certificate: Heidi M. Scheid
Address to which certificate
is to be sent, if different
from address above: ------------------------------
------------------------------
Social Security Number:
Employee Number: ------------------------------
36
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CLASS A COMMON STOCK shall mean shares of the Corporation's Class
A Common Stock, which shall be registered under Section 12(g) of the 1934
Act and shall have the right to one (1) vote per share on all matters
subject to stockholder approval.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which (i) the Corporation is a party
while the Parent of the Named Subsidiary or (ii) the Named Subsidiary is a
party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined
voting power of the outstanding securities of the Corporation or
the Named Subsidiary (as the case may be) are transferred to a
person or persons different from the person or persons holding
those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation or the Named
Subsidiary (as the case may be) in complete liquidation or
dissolution of the Corporation or the Named Subsidiary.
F. CORPORATION shall mean Scheid Vineyards Inc., a Delaware
corporation.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and
the manner and method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price payable per Option
Share as specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires
as specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Class A Common Stock on any
relevant date shall be determined in accordance with the following
provisions:
37
<PAGE>
(i) If the Class A Common Stock is at the time traded
on the Nasdaq National Market, then the Fair Market Value shall
be the closing selling price per share of Class A Common Stock on
the date in question, as the price is reported by the National
Association of Securities Dealers on the Nasdaq National Market.
If there is no closing selling price for the Class A Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Class A Common Stock is at the time listed
on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Class A Common Stock on the
date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Class A Common
Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling
price for the Class A Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
L. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of
the basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure
by Optionee of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by
Optionee adversely affecting the business or affairs of the Corporation (or
any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of Optionee or any other person in the Service of
the Corporation (or any Parent or Subsidiary).
P. NAMED SUBSIDIARY shall mean Scheid Vineyards California Inc., a
California corporation and a Subsidiary of the Corporation, and any
successor corporation to all or substantially all of the assets or voting
stock of Scheid Vineyards California Inc.
Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
R. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
38
<PAGE>
S. OPTION SHARES shall mean the number of shares of Class A Common
Stock subject to the option.
T. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
U. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided
each corporation in the unbroken chain (other than the Corporation) owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
V. PERMANENT DISABILITY shall mean the inability of Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in
death or has lasted or can be expected to last for a continuous period of
twelve (12) months or more.
W. PLAN shall mean the Corporation's 1997 Stock Option/Stock
Issuance Plan.
X. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.
Y. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or
independent advisor.
Z. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
AA. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
39
