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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
SCHEID VINEYARDS INC.
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(NAME OF ISSUER)
CLASS A COMMON STOCK, PAR VALUE $0.001 PER SHARE
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(TITLE OF CLASS OF SECURITIES)
806403 10 1
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(CUSIP NUMBER)
KURT J. GOLLNICK
13470 WASHINGTON BLVD., SUITE 300
MARINA DEL REY, CALIFORNIA 90292
(310) 301-1555
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
JULY 29, 1997
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(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)
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- ---------------------------------- -----------------------------------
CUSIP NO. 806403 10 1 13D Page 2 of 6 Pages
- ---------------------------------- -----------------------------------
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1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
KURT J. GOLLNICK
###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / / (b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (See Item 3 of this Filing)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
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7 SOLE VOTING POWER
NUMBER 290,093 (See Item 5 of this Filing)
OF -----------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY None
OWNED BY -----------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 290,093 (See Item 5 of this Filing
WITH -----------------------------------------------
10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
290,093 (See Item 5 of this Filing)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
/ /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
12.7% (4.5% 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 the
Filing)
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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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 Kurt J. Gollnick.
(b) Mr. Gollnick's business address is 13470 Washington Blvd., Suite
300, Marina del Rey, California 90292.
(c) Mr. Gollnick is Vice President Vineyard Operations of Scheid
Vineyards Inc., which is located at 13470 Washington Blvd., Marina del Rey,
California 90292.
(d) During the past five years, Mr. Gollnick has not been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) During the past five years, Mr. Gollnick 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) Mr. Gollnick 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, Mr. Gollnick and
certain other persons, Mr. Gollnick exchanged all of his 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. Gollnick 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 owned by Mr. Gollnick were acquired in the exchange
transaction described in Item 3
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above. Mr. Gollnick 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, Mr. Gollnick
reserves the right to change his plans and intentions at any time, as he deems
appropriate. In particular, Mr. Gollnick 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 his 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 Mr. Gollnick 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 290,093 shares of Class B Common Stock, each of
which is entitled to five votes per share, beneficially owned by Mr. Gollnick as
of August 7, 1997. As of August 7, 1997:
(1) Mr. Gollnick beneficially owned 290,093 shares of Class B
Common Stock, constituting approximately 12.7% of the voting power of the shares
of Class A Common Stock outstanding. Of such shares, all 290,093 shares are
Class B Common Stock owned by Mr. Gollnick.
(b) Mr. Gollnick has the sole power to vote or to direct the voting of
securities he owns as well as the investment power, including the power to
dispose or to direct the disposition of securities he owns, which powers are not
shared and may be exercised only by Mr. Gollnick.
(c) Mr. Gollnick 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.
(d) Not Applicable.
(e) Not Applicable.
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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, Mr. Gollnick 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, Mr. Gollnick entered
a lock-up agreement (the "Lock-up Agreement") with Cruttenden Roth Incorporated
pursuant to which, among other things, Mr. Gollnick 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, Mr. Gollnick 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 Mr. Gollnick's Notice of Grant of Stock Option
and Stock Option Agreement is attached hereto as Exhibit C.
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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 Kurt J. Gollnick and Cruttenden
Roth Incorporated.
Exhibit C Notice of Stock Option Grant and Stock
Option Agreement, dated July 24, 1997,
between Kurt J. Gollnick 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/Kurt J. Gollnick
----------------------------------
Kurt J. Gollnick
6
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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
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EXHIBIT A
8
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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 written consent
of Cruttenden Roth Incorporated. The foregoing restriction is expressly
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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/ Scott D. Scheid
----------------------------------------
Scott D. 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
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EXHIBIT B
11
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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, liability or damage (including,
without limitation, liabilities for income taxes and costs of enforcing this
indemnity) incurred by any of such
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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:
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(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 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
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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 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
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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.
(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
16
<PAGE>
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.
(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
17
<PAGE>
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.
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.
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<PAGE>
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.
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<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
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<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: Scott D. 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, 2007
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.
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<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/ Scott D. Scheid
------------------------------------------
SCOTT D. 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.
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<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
and (II) to the
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<PAGE>
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 to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on
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<PAGE>
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 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
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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:
- 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
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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.
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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.
- ------------------
---------------------------------------
Kurt J. Gollnick, Optionee
13470 Washington Blvd., Suite 300,
Marina del Rey, CA 90292
Print name in exact manner
it is to appear on the
stock certificate: Kurt J. Gollnick
Address to which certificate
is to be sent, if different
from address above:
---------------------------------------
---------------------------------------
Social Security Number:
Employee Number:
---------------------------------------
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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:
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(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.
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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.
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