UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 15, 1999
The Chalone Wine Group, Ltd.
(Exact Name of Registrant as Specified in Charter)
California 0-13406 94-1696731
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
621 Airpark Road
Napa, California 94558-4291
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 707-254-4200
<PAGE>
Item 2. Acquisition or Disposition of Assets
On June 15, 1999, The Chalone Wine Group, Ltd. (the "Company") acquired
all of the outstanding equity (the "Staton Hills Equity") of Staton Hills Winery
Company Limited ("Staton Hills") pursuant to a stock purchase agreement (the
"Purchase Agreement") between Peter Ansdell ("Ansdell"), SHW Equity Co., a
company wholly owned by Ansdell that held all of the outstanding equity of
Staton Hills ("SHW"), and the Company. Staton Hills produces, markets, and sells
premium white and red table wines.
Staton Hills has a wine production facility and approximately 21 acres
of real property located in Washington State, of which approximately ten acres
are producing vineyards (the "Winery"). Staton Hills also has ongoing contracts
to acquire grapes from approximately 90 acres of vineyards located in Washington
State. The Company intends to continue to use the Winery for the production and
marketing of Staton Hills-branded wine. The Winery will also form the core of a
new wine brand focusing on Cabernet Sauvignon and Merlot, which the Company
expects to introduce later this year.
Pursuant to the terms of the Purchase Agreement (attached hereto as
Exhibit 10.1 and incorporated herein by reference), the Company acquired the
Staton Hills Equity for $6,125,000, from which substantially all of Staton
Hills' existing liabilities were repaid, and of which $125,000 will be held back
by the Company for one year in order to secure Ansdell's indemnification
obligations. The source of funding for the acquisition was the Company's
existing line of credit with Rabobank Nederland, New York branch.
The Company anticipates that Ansdell will remain in a consulting
capacity with the Winery. Kevin Mott, formerly of Sainte Chapelle Winery in
Idaho, will assume responsibility for the Winery's management and grower
relations, under the direction of the Company.
When used in this Report, the words "anticipates," "intends," "expects"
and similar expressions are intended to identify forward-looking statements,
which are subject to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially. Each of
these factors, and other risks pertaining to the Company, the premium wine
industry and general business and economic conditions, are more fully discussed
in the Company's reports under the Securities Exchange Act of 1934, as amended,
filed from time to time with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release updates or revisions to these statements.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
After reviewing the financial statements of the Company and Staton Hills, the
Company has determined that the threshold for filing audited financial
statements as required by this Item 7(a) has not been met.
(b) Pro Forma Financial Information.
After reviewing the financial statements of the Company and Staton Hills, the
Company has determined that the threshold for filing pro forma financial
statements as required by this Item 7(b) has not been met.
(c) Exhibits.
Exhibit No. Description
----------- -----------
10.1 Purchase Agreement among Peter Ansdell,
SHW Equity Co. and the Company, dated
as of June 15, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 30, 1999
THE CHALONE WINE GROUP, LTD.
By: /s/ Francois P. Muse
---------------------------
Francois P. Muse
Chief Financial Officer
PURCHASE AGREEMENT
between
PETER ANSDELL
("Seller")
CHALONE WINE GROUP LTD.
("Buyer")
and
SHW EQUITY CO.
("SHW")
DATED: June 15, 1999
<PAGE>
Page No.
PURCHASE AGREEMENT............................................................1
RECITALS OF FACT..............................................................1
ARTICLE I - PURCHASE AND SALE.................................................2
1.1 Stock Purchase............................................................2
1.2 SHW Equity Purchase Price.................................................2
1.3 Payoff Amount............................................................2
1.4 Hokuriku Amount...........................................................2
1.5 Ansdell Amount............................................................2
ARTICLE II - CLOSING..........................................................2
2.1 Closing...................................................................2
2.2 Sale and Purchase Agreement...............................................2
REPRESENTATIONS AND WARRANTIES OF SELLER......................................3
3.1 Capitalization of SHW.....................................................3
3.2 Stock Ownership of SHW....................................................3
3.3 Organization of SHW.......................................................3
3.4 Capitalization of the Company.............................................3
3.5 Stock Ownership of the Company............................................4
3.6 Organization of the Company...............................................4
3.7 Authority.................................................................4
3.8 Sale and Purchase Agreement...............................................5
3.9 Financial Statements......................................................5
3.10 Absence of Undisclosed Liabilities of SHW................................5
3.11 Absence of Undisclosed Liabilities of the Company........................5
3.12 Absence of Changes.......................................................5
3.13 Title to and Sufficiency of the Assets...................................5
3.14 Real Property............................................................6
3.15 Condition of Tangible Assets.............................................7
3.16 Agreements...............................................................7
3.17 Litigation...............................................................7
3.18 Compliance; Governmental Authorization...................................7
3.19 Employee Benefit Plans...................................................9
3.20 Customers and Suppliers..................................................9
3.21 Intellectual Property....................................................9
3.22 Insurance................................................................9
3.23 Inventories.............................................................10
3.24 Tax Matters.............................................................10
3.25 Books and Records.......................................................10
3.26 Transactions with Certain Persons.......................................11
i
<PAGE>
3.27 Accounts and Notes Receivable...........................................11
3.28 Year 2000 Compliance....................................................11
3.29 Brokers.................................................................11
3.30 Disclosure..............................................................12
3.31 Insurance...............................................................12
3.32 Survival................................................................12
3.33 Best Knowledge of Seller................................................12
3.34 Current Operations of the Company.......................................12
3.35 Limit of Liability......................................................12
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER.........................12
4.1 Organization, Standing and Power.........................................13
4.2 Authority................................................................13
4.3 Investment Intent........................................................13
4.4 Brokers..................................................................13
4.5 Survival.................................................................13
ARTICLE V - COVENANTS OF SELLER..............................................13
5.1 Conduct of Business until Closing Date...................................14
5.2 Access to Properties and Records.........................................15
5.3 Advise of Changes........................................................16
5.4 Conduct..................................................................16
5.5 Approvals, Consents......................................................16
5.6 Insurance................................................................16
5.7 Further Assurances.......................................................16
5.8 Satisfaction of Conditions...............................................17
5.9 Confidentiality..........................................................17
ARTICLE VI - COVENANTS OF BUYER..............................................17
6.1 Confidentiality; Return of Documents.....................................17
6.2 Satisfaction of Conditions...............................................17
6.3 Advice of Changes........................................................17
6.4 Conduct..................................................................18
6.5 Approvals, Consents......................................................18
ARTICLE VII - CONDITIONS TO OBLIGATIONS OF BUYER.............................18
7.1 Accuracy of Representations and Warranties...............................18
7.2 Performance of Agreements................................................18
7.3 Performance of Sale and Purchase Agreement...............................18
7.4 Seller and SHW's Certificates............................................18
7.5 Opinion of Counsel.......................................................18
7.6 Consents, Authorizations.................................................19
7.7 Legislation..............................................................19
7.8 Corporate Records........................................................19
7.9 Good Standing Certificate................................................19
ii
<PAGE>
7.10 Lien Releases...........................................................19
7.11 Interim Financials......................................................19
7.12 Due Diligence Inspection................................................19
7.13 Transfer Documents......................................................20
7.14 Title Report............................................................20
7.15 CLTA Owner's Policy.....................................................20
7.16 No Material Adverse Change..............................................20
7.17 Release.................................................................20
7.18 Resignation of Directors and Officers...................................20
ARTICLE VIII - CONDITIONS TO OBLIGATIONS OF SELLER...........................20
8.1 Accuracy of Representations and Warranties...............................20
8.2 Performance of Agreements................................................20
8.3 Officer's Certification..................................................21
ARTICLE IX - TERMINATION.....................................................21
9.1 Termination..............................................................21
ARTICLE X - INDEMNIFICATION..................................................21
10.1 Obligation of Seller to Indemnify.......................................21
10.2 Obligation of Buyer to Indemnify........................................23
10.3 Claims..................................................................23
ARTICLE XI - MISCELLANEOUS...................................................24
11.1 Expenses................................................................24
11.2 Binding Effect..........................................................24
11.3 Entire Agreement; Amendments............................................24
11.4 Headings................................................................24
11.5 Notices.................................................................24
11.6 Publicity...............................................................25
11.7 Counterparts............................................................25
11.8 Governing Law...........................................................25
11.9 Waivers.................................................................25
11.10 Attorneys' Fees........................................................25
11.11 Arbitration of Disputes................................................25
iii
<PAGE>
PURCHASE AGREEMENT
This PURCHASE AGREEMENT ("Agreement") is entered into as of June 15,
1999 (the "Effective Date") by and between Peter Ansdell, an individual
("Seller"), SHW Equity Co., a Washington corporation ("SHW") and Chalone Wine
Group, Ltd., a California corporation ("Buyer").
RECITALS OF FACT
A. SHW owns 100% of the authorized, issued, and outstanding capital
stock (the "Winery Stock") of Staton Hills Winery Company Limited, a Washington
corporation (the "Company").
B. Seller owns 100% of the outstanding capital stock of SHW (the
"Ansdell Stock") and has acted as the President and Chief Executive Officer of
the Winery (defined below) since approximately May 1992.
C. The Company presently owns and operates a winery known as the Staton
Hills Winery located at 71 Gangl Road, Wapato, Washington 98951 (the "Winery").
The improvements located at the Winery include the vineyards, a building housing
an office, tasting room and production area, a service and tool shed and all
other improvements and fixtures located at the Winery (such buildings and
structures are collectively referred to herein as the "Improvements"). The
Winery is located on approximately 21 acres of real property located in the
county of Yakima, in the State of Washington, which is more particularly
described on Exhibit A attached hereto (the "Land"). The Land and the
Improvements are collectively referred to herein as the "Real Property." The
Company also owns or leases equipment, fixtures, motorized vehicles, tools,
supplies, inventory (including bulk wine and case goods), accounts receivable,
trade names, trademarks, books, records, permits, and all other tangible and
intangible personal property located on the Land or owned or used in connection
with the Company's operations (collectively the "Assets").
D. Buyer is willing to purchase of Seller, and Seller is willing to
sell to Buyer, the Ansdell Stock, and SHW is willing to issue to Buyer 48,000
additional shares of SHW's common stock ("the New Issue"), pursuant to the terms
of this Agreement. The Ansdell Stock and the New Issue are referred to
collectively herein as the "SHW Stock."
NOW THEREFORE, incorporating the Recitals of Fact, and in consideration
of the mutual covenants and considerations set forth in this Agreement, the
parties hereby agree to enter into this Agreement on the terms set forth herein.
1
<PAGE>
ARTICLE I
PURCHASE AND SALE
1.1 Stock Purchase. Upon the terms and subject to the conditions of
this Agreement, on the Closing Date (as defined below), Seller shall sell,
assign, transfer and deliver to Buyer, and Buyer shall purchase and accept from
Seller, the Ansdell Stock in exchange for payment by Buyer of the Ansdell
Amount, and SHW shall issue and assign to Buyer, and Buyer shall purchase and
accept from SHW, the SHW Stock in exchange for payment by Buyer of the SHW
Equity Purchase Price, the Payoff Amount and the Hokuriku Amount, each as set
forth below. The total purchase price hereunder for the Ansdell Stock and the
SHW Stock shall be Six Million One Hundred Twenty Five Thousand Dollars
($6,125,000) (the "Stock Purchase Price").
1.2 SHW Equity Purchase Price. Simultaneously with payment of the Stock
Purchase Price, SHW shall pay, or, at SHW's option, Buyer shall pay and deduct
from the Stock Purchase Price, the Payoff Amount and the Hokuriku Amount by wire
transfer to the accounts designated on Schedule 1, attached hereto.
1.3 Payoff Amount. SHW shall pay Three Million Dollars ($3,000,000)
(the "Pay-off Amount") to the Bank of Tokyo-Mitsubishi by wire transfer to the
account designated on Schedule 1, attached hereto.
1.4 Hokuriku Amount. SHE shall pay Three Hundred Thousand Dollars
($300,000) (the "Hokuriku Amount") to the Hokuriku Coca-Cola Bottling Co. Ltd.
("Hokuriku") by wire transfer to the account designated on Schedule 1, attached
hereto.
1.5 Ansdell Amount. One Hundred Thousand Twenty Five Dollars ($125,000)
(the "Ansdell Amount") shall be retained by the Buyer and applied towards any
indemnification obligations of Seller pursuant to Article X of this Agreement.
Any remaining portion of the Ansdell Amount shall be delivered to Seller upon
the expiration of Seller's indemnification obligations.
ARTICLE II
CLOSING
2.1 Closing. If each party's preconditions to closing hereunder have
been satisfied or waived, the closing of the stock purchase contemplated hereby
("Closing") shall take place at the offices of R. Corbin Houchins, 3600 Columbia
Center, 701 Fifth Avenue, Seattle, Washington 98104 on June 11, 1999 or such
other time and/or place as may be agreed by the parties. The date on which
Closing occurs is herein referred to as the "Closing Date."
2.2 Sale and Purchase Agreement. Closing hereunder shall occur
simultaneously with transfer of all outstanding shares of the Company to SHW, as
contemplated by that certain Agreement for Sale and Purchase of Shares of Stock,
dated December 21, 1998, by and between Hokuriku and SHW, as amended (the "Sale
and Purchase Agreement"), provided, however, that
2
<PAGE>
the transfer of shares contemplated under the Sale and Purchase Agreement shall
be deemed to have occurred immediately prior to Closing hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the disclosure schedule ("Disclosure Schedule")
attached hereto as Exhibit B, Seller and SHW represent and warrant to Buyer as
follows, and such representations and warranties shall be true as of the date
hereof and as of the Closing Date:
3.1 Capitalization of SHW. Upon completion of Closing, the SHW Stock
shall consist of 49,000 shares, and all SHW Stock shall be duly authorized,
validly issued, fully paid, and non-assessable, and there shall be no
outstanding security convertible into or exchangeable for SHW Stock, option,
warrant, put, call, or other right to purchase or subscribe to SHW Stock, or
contract, commitment, agreement, understanding, or arrangement of any kind
relating to the issuance or disposition of SHW Stock or the issuance or
disposition of any security convertible into or exchangeable for SHW Stock.
3.2 Stock Ownership of SHW. All of the Ansdell Stock shall be directly
owned by Seller as of the Closing Date. All of the SHW Stock shall be free and
clear of all liens, encumbrances, security interests, charges, pledges, options,
restrictions on transfer, rights of refusal, or other adverse claims of any
kind. No person shall own or have any beneficial interest in any of the SHW
Stock except Seller. Seller shall have good and marketable title to the Ansdell
Stock. Neither Seller nor SHW has transferred, issued, or assigned, or entered
into any agreement or understanding to transfer, issue, or assign, any of the
SHW Stock or any of the voting rights pertaining thereto, except for the issue
of the Ansdell stock to Seller and the undertakings of Seller and SHW hereunder
to transfer, issue, or assign the SHW stock to Buyer.
3.3 Organization of SHW. SHW is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington and has
all requisite power and corporate authority to own, lease, and operate its
properties and to carry on its business as now being conducted. SHW is duly
qualified and in good standing to do business in every jurisdiction in which
such qualification is necessary because of the nature of the business conducted
by SHW. Seller has delivered or shall deliver prior to the Closing to Buyer
complete and correct copies of the Articles of Incorporation and Bylaws
(collectively, the "Organizational Documents") of SHW as amended to the date
thereof. SHW has no ownership interest in any other corporation, partnership,
limited liability company, or any other entity.
3.4 Capitalization of the Company. As of the Closing Date, the Winery
Stock shall consist of 12,000 shares of common stock of the Company, all of
which shall be duly authorized, validly issued, fully paid, and non-assessable,
and there shall exist no outstanding security convertible into or exchangeable
for Winery Stock; no option, warrant, put, call or other right to purchase or
subscribe to Winery Stock; no contract, commitment, agreement, understanding, or
arrangement of any kind, other than this Agreement and the Sale and Purchase
Agreement,
3
<PAGE>
affecting the issuance or disposition of Winery Stock; and no contract,
commitment, agreement, understanding, or arrangement of any kind calling for the
creation or issuance of any security convertible into or exchangeable for Winery
Stock.
3.5 Stock Ownership of the Company. All of the issued and outstanding
Winery Stock shall be directly owned by SHW upon completion of Closing, free and
clear of all liens, encumbrances, security interests, charges, pledges, options,
restrictions on transfer, rights of refusal or other adverse claims of any kind.
No person shall own or have any beneficial interest in the Winery Stock except
SHW. SHW shall have good and marketable title to the Winery Stock. Except as
expressly set forth in the Disclosure Schedule, SHW has not transferred or
assigned, or entered into any agreement or understanding to transfer or assign,
any of the Winery Stock or any of the voting rights pertaining thereto.
3.6 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington and has all requisite power and corporate authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Company is duly qualified and in good standing to do business in every
jurisdiction in which such qualification is necessary because of the nature of
the business conducted by it. Seller has delivered or shall deliver prior to the
Closing to Buyer complete and correct copies of the Articles of Incorporation
and Bylaws (collectively, "the Organizational Documents") of the Company as
amended to the date thereof. The Company has no ownership interest in any other
corporation, partnership, limited liability company, or other entity.
3.7 Authority. Seller and SHW have the power, corporate authority, and
capacity to enter into, and consummate the sale and other transactions
contemplated by, this Agreement. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, as
applicable, on the part of Seller and SHW. This Agreement has been duly and
validly executed and delivered by Seller and SHW and is a valid and binding
obligation of Seller and SHW, enforceable in accordance with its terms. Neither
the execution, delivery and performance of this Agreement by Seller and SHW, the
consummation by Seller or SHW of the transactions contemplated hereby, nor
compliance by Seller or SHW with any of the provisions hereof will (i) conflict
with or result in a breach of any provision of the Organizational Documents or
SHW's Articles of Incorporation or Bylaws, (ii) cause a default (or give rise to
any right of termination, cancellation, or acceleration) under any of the terms,
conditions or provisions contained in any note, bond, lease, mortgage,
indenture, license, warranty or other instrument or agreement to which the SHW
or the Company is a party that would affect Buyer or the operations of SHW or
the Company, or by which SHW or the Company or any of its properties or assets
is or may be bound or benefited, or (iii) violate any law, statute, rule or
regulation or any order, writ, judgment, injunction or decree applicable to SHW,
Seller, the Company or any of their properties or assets. No consent or approval
by, or any notification of or filing with, any public body or authority is
required in connection with the execution, delivery and performance by Seller or
SHW of this Agreement, or the consummation by Seller or SHW of the transactions
contemplated hereby.
4
<PAGE>
3.8 Sale and Purchase Agreement. Seller has delivered a true and
complete copy of the Sale and Purchase Agreement to Buyer. There is no existing
default, no event has occurred that after notice or lapse of time, or both, will
constitute default, under the Sale and Purchase Agreement.
3.9 Financial Statements.
3.9.1 Exhibit C attached hereto contains copies of the
financial statements of the Company as of the conclusion of each of the
Company's three most recently completed fiscal years and the balance sheet of
the Company for the first four calendar months of 1999 ("the Balance Sheet").
The term "Balance Sheet Date" means 30 April 1999. The materials set forth in
said Exhibit C are referred to herein collectively as "the Financial
Statements."
3.9.2 Except as otherwise noted in the Financial Statements,
the Financial Statements are in all material respects accurate and complete, and
fairly present the financial position of the Company and the results of its
operations as of the dates thereof and for the periods set forth therein, in
conformity with generally accepted accounting principles applied on a consistent
basis.
3.10 Absence of Undisclosed Liabilities of SHW. As of the Closing Date
SHW has no liabilities or obligations of any nature.
3.11 Absence of Undisclosed Liabilities of the Company. At the Balance
Sheet Date and at the Closing Date (i) the Company has no material liabilities
or obligations of any nature (matured or not matured, fixed or contingent) that
were not provided for or disclosed in the Disclosure Schedule or in the
Financial Statements, except for those not required under generally accepted
accounting principles to be stated therein, (ii) all reserves and allowances
provided on the Balance Sheet were adequate for the purposes indicated therein,
and there were no loss contingencies, as that term is used in Statement of
Financial Accounting Standards No. 5, issued by the Financial Accounting
Standards Board ("FASB"), that were not adequately provided for in the Balance
Sheet. For purposes of this Agreement, "material" shall mean involving over
$10,000.00 or materially affecting the ongoing business or prospects of the
Company.
3.12 Absence of Changes. Since the Balance Sheet Date, the Company's
business has been operated in the ordinary course and there has not been any
material adverse change in the condition (financial or otherwise) of the
Company, any other assets of the Company, liabilities, earnings or business of
the Company, and the Company has not paid any dividends, made any distributions,
or paid any directors' fees.
3.13 Title to and Sufficiency of the Assets. Except as disclosed in the
Financial Statements and the Disclosure Schedule, Company has good and
marketable title to all of the Assets, free and clear of all mortgages, liens,
pledges, charges, security interests, easements, licenses, rights of way,
options, rights of first refusal, conditions, restrictions or encumbrances of
any kind or character, whether or not relating to the extension of credit or the
borrowing of money (collectively, "Encumbrances"). The Assets comprise all
personal property and rights necessary for the operations of the Company as
currently operated. The Company has performed
5
<PAGE>
all the obligations required to be performed by it with respect to all Assets
leased by it through the Closing Date.
3.14 Real Property. Except as otherwise described on the Disclosure
Schedule or the Title Insurance Report to Buyer by First American Title Company
("the Title Insurance Company") order number K-108573DR ("the Title Insurance
Report") with respect to the Real Property:
3.14.1 The Company owns all of the Real Property in fee simple
and such Real Property is free and clear of any Encumbrance, and the Company has
adequate rights of ingress and egress to the Real Property for all purposes
necessary for its operations.
3.14.2 There are no pending, or to the Best Knowledge of
Seller (as defined in Section 3.33) condemnation proceedings, lawsuits, claims
of violation of applicable law, or administrative actions relating to the Real
Property or other matters affecting adversely the current use, occupancy, or
value of the Real Property.
3.14.3 The Real Property does not serve any adjoining real
property for any purpose inconsistent with the current use of the Land by the
Company, and the Real Property is not located within any flood plain or to the
Best Knowledge of Seller, is subject to any similar type of restriction, any
permits or licenses necessary for the use of which have not been obtained.
3.14.4 There are no leases, subleases, licenses, concessions,
or other agreements, written or oral, granting to any person the right of use or
occupancy of any portion of the Real Property.
3.14.5 There are no outstanding options or rights of first
refusal to purchase or lease the Real Property, any portion thereof, or any
interest therein.
3.14.6 No person or entity other than the Company is in
possession of the Real Property.
3.14.7 The Company is not restricted in any adverse way in the
current use of its water rights, water supply, or mineral rights, and such water
rights and supply are sufficient for the current operations of the Company.
3.14.8 The Improvements have received all approvals of
governmental authorities (including certificates of occupancy, permits, and
licenses) required in connection with the ownership and operations of the
Company and have been operated and maintained in substantial compliance with all
applicable legal requirements.
3.14.9 To the Best Knowledge of the Seller, the Improvements
are structurally sound with no defects;
3.14.10 The Improvements are supplied with utilities and other
services reasonably necessary for the current operations of the Company with
respect thereto, including
6
<PAGE>
any necessary gas, electricity, water (including without limitation, the use and
right to a water supply sufficient for the current operations of the Company),
irrigation, sanitary and wastewater disposal;
3.14.11 Neither Seller nor SHW has observed evidence of
material infestation by phylloxera or material effects of other diseases or
pests on the Land.
3.15 Condition of Tangible Assets. The Disclosure Schedule contains a
listing of all fixed assets and tangible personal property, other than
inventories, owned by the Company and a list of all leases or other material
agreements under which the Company is lessee of or holds or operates any items
of machinery, equipment, motor vehicles, office furniture, computer software,
fixtures or other tangible personal property owned by any third party. All such
personal property (both owned and leased) is in good operating condition and
repair, normal wear and tear excepted, and is adequate and suitable to permit
the Company to continue operating the Company in the ordinary course.
3.16 Agreements. The Company has delivered to Buyer true and accurate
copies of all material contracts, agreements and instruments to which the
Company or SHW is a party , or materially complete descriptions of oral
agreements. The Company and SHW are not in material default under any material
contract, and Seller has no knowledge of any default by other parties under such
contracts.
3.17 Litigation. There are (i) no audits, inspections, actions, suits,
claims, investigations or legal, administrative or arbitration proceedings
pending or, to the Best Knowledge of Seller, threatened against the Company or
SHW whether at law or in equity, whether civil or criminal in nature or whether
before or by any Federal, state, municipal, or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, nor,
to the Best Knowledge of Seller, does any basis exist therefor; (ii) no
judgments, decrees, injunctions or orders of any court, governmental department,
commission, agency, instrumentality or arbitrator against the Company or SHW; or
(iii) no proceedings under any bankruptcy or insolvency laws have been commenced
by or against the Company, Seller or SHW which has not been terminated; no
general assignment for the benefit of creditors has been made by the Company,
Seller or SHW; and no trustee or receiver of the Company, Seller or SHW's
property has been appointed.
3.18 Compliance; Governmental Authorization.
3.18.1 In all material respects, the Company and Seller have
complied and are currently in compliance with all Federal, state, territorial
and local laws, ordinances, regulations or orders applicable to the Real
Property, and the Company, including, by way of description, and not limitation,
matters relating to the environment, usage of the Real Property, the production,
storage and marketing of any wine, anti-competitive practices, discrimination,
employment, health and safety, state, federal and local taxes, issuance of
securities, customs duties and requirements and foreign practices. The Company
has all Federal, state, territorial, local and foreign governmental licenses and
permits necessary in the conduct of its business as presently conducted, which
licenses and permits are in full force and effect. No violations are
7
<PAGE>
outstanding or uncured with respect to any such licenses or permits and no
proceeding is pending or, to the Best Knowledge of Seller, threatened to revoke
or limit any of the licenses or permits.
3.18.2 (b) Seller has delivered to Buyer a true and accurate
list of all of the aforesaid governmental licenses and permits, consents,
orders, decrees and other compliance agreements under which the Company is
operating or bound, and the Seller has furnished to Buyer true, complete and
correct copies thereof.
3.18.3 (c) Seller has furnished to Buyer copies of all reports
of inspections of the Company from 1 January 1996, through the date hereof under
OSHA, U.S. EPA and under all other applicable Federal, state and local health
and safety or environmental laws and regulations. The deficiencies, if any,
noted on such reports have been corrected.
3.18.4 As used in this Agreement:
"Hazardous Substance" shall mean any substance: that
now is defined as a hazardous or toxic waste or substance or is regulated,
governed by, or the handling of which requires investigation or remediation by
any governmental authority or instrumentality or under any law, regulation, rule
or order, or any amendment thereto, including the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C. ss.9601 et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. ss.6901 et seq.; and any applicable law
of the State of Washington or that is otherwise toxic, explosive, ignitable,
corrosive, reactive, flammable, infectious, mutagenic, radioactive,
carcinogenic, a pollutant or contaminant, dangerous or otherwise hazardous,
including gasoline, diesel, petroleum hydrocarbons, polychlorinated biphenyls
(PCBs), asbestos, radon, urea formaldehyde or underground storage tanks
associated with any Hazardous Substance.
"Environmental Laws" shall mean all present laws,
regulations, rules, policies, orders, permits, licenses, approvals,
authorizations and other requirements of any kind applicable to Hazardous
Substances, including common law tort principles (such as public and private
nuisance and strict liability for conducting abnormally dangerous activities)
and covenants, conditions and restrictions.
3.18.5 No asbestos-containing materials have been or are
installed or exposed in any of the Improvements, through demolition, renovation
or otherwise, at any time during or prior to the Company's occupancy of the Real
Property, (ii) no electrical transformers or other equipment containing PCB's
are or have been located on the Real Property at any time during or prior to the
Company's occupancy of the Real Property, (iii) no above-ground or underground
storage tanks for gasoline, heating oil or diesel fuel or any other substances
are or have been located on or under the Real Property at any time during or
prior to the Company's occupancy of the Real Property, (iv) except as set forth
in the Disclosure Schedule, no Hazardous Substances have been or are presently
located on, in or under the Real Property or have affected the Real Property or
any surface waters or ground waters on or under the Real Property at any time
during or prior to the Company's occupancy of the Real Property, and (v) the
Real Property has not been designated as "hazardous waste property" or "border
zone property" under the provisions of the environmental laws of the State of
Washington or any regulation adopted in accordance
8
<PAGE>
therewith, and to the Best Knowledge of Seller there has been no occurrence or
condition on any real property adjoining or in the vicinity of the Real Property
that could cause the Real Property or any part thereof to be designated as
"hazardous waste property" or "border zone property." To the extent that the
representations and warranties set forth in this Section 3.13(e) relate to
periods of time prior to the Company's ownership of the Real Property, such
representations and warranties shall be to the Best Knowledge of Seller.
3.19 Employee Benefit Plans. Seller has furnished to the Buyer lists of
all "employee pension benefit" plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), all "employee
welfare benefit" plans (as defined in Section 3(1) of ERISA) and any other
qualified or non-qualified plans, programs or letters of commitment promising
current or future benefits or deferred compensation maintained by the Company as
well as any oral or written employment contract between the Company and its
employees.
3.20 Customers and Suppliers. Seller has furnished to Buyer a true and
complete list of the grape and bulk wine suppliers (in dollar volume, tonnage
and variety) of the Company's operations during the calendar years 1997 and
1998, including the amount purchased from each during such period, plus the ten
largest other suppliers to the Company (in dollar volume). All market reports,
product surveys and customer surveys, which have been conducted by or for the
Company since 1 January 1996, if any, have been provided to Buyer.
3.21 Intellectual Property. The Seller has furnished to Buyer a list of
all material intellectual property rights used by the Company or used in
connection with the Company's operations, including without limitation all such
patents, patent applications, trade names, fictitious or assumed names,
trademarks, trademark applications, service marks, service mark applications,
copyrights, copyright applications, patterns, inventions, trade secrets,
proprietary processes and formulae, license agreements, and all other similar
proprietary rights, whether patentable or unpatentable (collectively, the
"Intellectual Property"). The Company owns or possesses adequate licenses or
other rights to use all Intellectual Property necessary to conduct its business
as now operated. All of such Intellectual Property is owned outright by the
Company except as is otherwise specifically noted in said list. To the Best
Knowledge of Seller, there is no infringement, misappropriation or other misuse
being made by any other party of the Intellectual Property. No claim is pending,
or, to the Best Knowledge of Seller, threatened to the effect that the present
or past operations of the Company infringes or conflicts with the asserted
rights of others in respect of any Intellectual Property, and no claim is
pending or, to the Best Knowledge of Seller, threatened to the effect that any
of such Intellectual Property is invalid or unenforceable.
3.22 Insurance. Seller has furnished to Buyer a list of all policies of
liability, theft, fidelity, life, fire, product liability, worker's
compensation, health and other forms of insurance held by the Company
(specifying the insurer, insured, amount of coverage, type of insurance, policy
number and any pending claims thereunder). The Company has not, during the last
three fiscal years, been denied or had revoked or rescinded any policy of
insurance.
9
<PAGE>
3.23 Inventories. contains a true and complete list of the case goods
and bulk wine inventory of the Company as of the Balance Sheet Date. The
inventory value as shown on the Balance Sheet has been determined in accordance
with the normal valuation policy of the Company, consistently applied and in
accordance with generally accepted accounting principles but without LIFO
adjustment. The inventories (and items of inventory acquired or manufactured
subsequent to the Balance Sheet Date) consist only of items of quality and
quantity commercially usable and salable in the ordinary course of business,
except for any items of obsolete material or material below standard quality,
all of which have been written down to realizable market value, or for which
adequate reserves have been provided, and the present quantities of all
inventories are reasonable in the present circumstances of the Company.
3.24 Tax Matters.
3.24.1 For purposes of this Agreement, the term "Taxes" means
all taxes of any kind or nature, including but not limited to U.S., state, local
and foreign income taxes, wine taxes, withholding taxes, branch profit taxes,
gross receipts taxes, franchise taxes, sales and use taxes, business and
occupation taxes, property taxes, VAT, custom duties or imposts, stamp taxes,
excise taxes, payroll taxes, intangible taxes and capital taxes and any
penalties or interest thereon.
3.24.2 The Company has filed within the time and in the manner
prescribed by law all tax returns and reports required to be filed by it under
the laws of the United States and each state or other jurisdiction, domestic or
foreign, in which it conducts business activities requiring the filing of tax
returns or reports. The Company has established adequate accruals in the Balance
Sheet with respect to all Taxes.
3.24.3 Except as set forth in the Disclosure Schedule, there
are no tax liens, whether imposed by the United States, any state, local,
foreign or other taxing authority, outstanding against the Company or any of the
Assets.
3.24.4 Except as set forth in the Disclosure Schedule, all
Taxes and assessments that the Company is required to withhold or to collect
have been duly withheld or collected and all withholdings and collections have
either been duly and timely paid over to the appropriate governmental
authorities or are, together with the payments due or to become due in
connection therewith, duly reflected on the Balance Sheet in accordance with
generally accepted accounting principles.
3.24.5 Seller is not a "foreign person" within the meaning of
IRC Section 1445(f)(3).
3.25 Books and Records. The books of account and other corporate
financial records of the Company are in all material respects complete and
correct, have been maintained in accordance with good business practices and
matters contained therein are appropriately and accurately reflected in the
Financial Statements. All historical records, including, without limitation,
records concerning sales, production, vineyards, grape purchases and regulatory
10
<PAGE>
matters, are in all material respects complete and correct and have been
maintained in accordance with good business practices.
3.26 Transactions with Certain Persons. Except as set forth in the
Disclosure Schedule, neither any officer, director, shareholder, or employee of
the Company or SHW nor any member of any such person's immediate family is
presently a party to any transaction with the Company relating to the Company's
operations, including without limitation, any contract, agreement or other
arrangement (i) providing for the furnishing of services by, (ii) providing for
the rental of real or personal property from, or (iii) otherwise requiring
payments to (other than for services as officers, directors or employees of the
Company) any such person or corporation, partnership, trust or other entity in
which any such person has a substantial interest as a shareholder, officer,
director, trustee or partner. Except as set forth in the Disclosure Schedule,
all such contracts, agreements or other arrangements are arms-length.
3.27 Accounts and Notes Receivable. Seller has furnished to the Buyer a
true aged list of unpaid accounts and notes receivable owing to the Company from
third parties as of the Balance Sheet Date. All unpaid accounts and notes
receivable outstanding at the date hereof constitute, and those outstanding at
the Closing Date will constitute, valid and enforceable claims arising in bona
fide transactions in the ordinary course of business, except to the extent of
returns and disputes arising in the ordinary course of business and except as
enforceability is limited by applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance or similar laws affecting the enforcement of
creditors rights generally. There is (i) no account or note debtor who has
refused or, to the Best Knowledge of Seller, threatened to refuse to pay its
obligations or who has, to the Best Knowledge of Seller, threatened to set-off
such obligations for any reason, (ii) no account or note debtor who is, to the
Best Knowledge of Seller, insolvent or bankrupt and (iii) no account or note
receivable is, to the Best Knowledge of Seller, pledged to any third party.
3.28 Year 2000 Compliance. The Information Technology (as defined
below) of the Company is Year 2000 Compliant. "Year 2000 Compliant" means with
respect to the Company's Information Technology, the Information Technology is
designed to be used prior to, during and after the calendar year 2000 A.D., and
the Information Technology used during each such time period will accurately
receive, provide and process date/time data (including but not limited to,
calculating, comparing and sequencing) from, into and between the 20th and 21st
centuries, including the years 1999 and 2000, and leap year calculations and
will not malfunction, cease to function or provide invalid or incorrect results
as a result of date/time data, to the extent that other Information Technology,
used in combination with the Information Technology being acquired, properly
exchanges date/time data with it. "Information Technology" shall include
computer software, computer firmware, computer hardware (whether general or
specific purpose), and other similar or related items of automated,
computerized, or software system(s) that are use or relied on by the Company in
the conduct of its operations.
3.29 Brokers. Seller has not employed any broker or finder in
connection with the transactions contemplated by this Agreement. Seller shall
indemnify, defend and hold Buyer harmless from any and all claims or losses
relating to brokerage fees, commissions or finder's,
11
<PAGE>
fees owed or claimed to be owed to any broker or finder engaged or claimed to be
engaged by Seller.
3.30 Disclosure. Neither this Agreement (including the Disclosure
Schedule) nor any other document, certificate or written statement furnished to
Buyer by or on behalf of Seller or SHW in connection with the transactions
contemplated hereby, when considered in the aggregate with all other such
documents, certificates or statements, contains any misstatement of a material
fact or omission of a material fact necessary in order to make the statements
contained herein and therein not misleading.
3.31 Insurance. Seller represents to Buyer that the Improvements are
presently insured in an amount reflected on the policies designated in the
Disclosure Schedule.
3.32. Survival. All representations and warranties contained herein
shall survive the Closing and shall terminate on the first anniversary of the
Closing. After termination, no indemnity, representation or warranty shall be
the basis of any cause of action or any excuse for nonperformance of an
undertaking.
3.33 Best Knowledge of Seller. Seller represents and warrants that each
time a representation and warranty is based on "Best Knowledge" that means to
the knowledge of a reasonable person in Seller's position, in each case after
reasonable inquiry as to the subject matter involved.
3.34 Current Operations of the Company. Seller represents and warrants
that each time a representation and warranty references the current or continued
operations of the Company, such operations of the Company shall include
cultivation of the Company's vineyards.
3.35 Limit of Liability. Neither SHW, nor Seller shall be liable for
any breach of warranty, representation, covenant or other promise except to the
extent the damage to Buyer as a result from such breach and all other breaches
exceeds, cumulatively, $10,000.00. Seller's liability for breaches of
representations and warranties, whether as party hereto, as principal, as agent,
arising from the holding of any office, directorship, shares of stock, or other
rights related to SHW or the Company, as fiduciary, as indemnitor, derivative,
or on any other basis whatsoever, shall not exceed the Ansdell Amount. Without
limiting the generality of the foregoing, neither SHW nor Seller shall be liable
for any misstatement or omission with respect to any fact that is actually known
to Buyer in its correct and complete form or that would have been known to Buyer
but for Buyer's negligence.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
12
<PAGE>
4.1 Organization, Standing and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has all requisite corporate power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
4.2 Authority. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Buyer. This Agreement has been duly and validly executed and delivered by Buyer
and is a valid and binding obligation of Buyer, enforceable in accordance with
its terms. Neither the execution, delivery and performance of this Agreement,
nor the consummation of the transactions contemplated hereby, nor compliance by
Buyer with any of the provisions hereof will (a) conflict with or result in a
breach of any provision of its Articles of Incorporation or By-laws, (b) cause a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any agreement, instrument or
obligation to which Buyer is a party, or by which any of its properties or
assets may be bound, or (c) violate any statute, rule or regulation or judgment,
order, writ, injunction or decree of any court, administrative agency or
governmental body, in each case applicable to Buyer or any of its properties or
assets. No filing with, and no permit, authorization, consent or approval of,
any public body or authority is necessary for the consummation by Buyer of the
transactions contemplated by this Agreement.
4.3 Investment Intent. Buyer is acquiring the Winery Stock for
investment without a view to the sale, distribution, subdivision, transfer or
fractionalization thereof. Buyer acknowledges that the Winery Stock has not been
registered under the Securities Act of 1933 or any state securities law and
there is no commitment to register the Winery Stock, and (b) cannot be resold,
unless it is subsequently registered or an exemption from registration is
available.
4.4 Brokers. Buyer has not employed any broker or finder in connection
with the transactions contemplated by this Agreement. Buyer shall indemnify,
defend and hold Seller harmless from any and all claims or losses relating to
brokerage fees, commissions or finder's fees owed or claimed to be owed to any
broker or finder engaged or claimed to be engaged by Buyer.
4.5 Survival. All representations and warranties of Buyer contained
herein shall survive the Closing and shall terminate on the first anniversary of
the Closing.
ARTICLE V
COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer as set forth below. The
covenants of Seller affect the operations of the Company prior to Closing.
5.1 Conduct of Business until Closing Date. Except as permitted or
required hereby or as Buyer may otherwise consent in writing, between the date
hereof and the Closing Date, Seller shall or shall use his best efforts to cause
the Company to:
13
<PAGE>
(a) operate the business of the Winery only in the usual,
regular and ordinary manner as such business was conducted prior to the Balance
Sheet Date and, to the extent consistent with such operation, use its best
efforts to (i) preserve the present business organizations of the Winery intact,
and (ii) preserve the present business relationship of the Winery with
customers, suppliers, and others having business dealings with it; provided,
however, that the Company shall not enter into or terminate any material
contracts, including grape purchase agreements, and shall not sell any of its
inventory in bulk without the prior written consent of Buyer;
(b) maintain all properties necessary for the conduct of the
business of the Winery, whether owned or leased, in substantially the same
condition as they now are (reasonable wear and tear which are not such as to
materially adversely affect the operations of the Company and damage due to
unavoidable casualty excepted) and, in the event that any Asset is damaged by
any casualty prior to the Closing Date, Seller shall, at his option to the
extent such damage is not covered by insurance, restore such asset to its
condition prior to such damage, or replace it with another item of like quality
and condition or reduce the Stock Purchase Price, as the case may be, by the
amount of such loss;
(c) maintain the books, records and accounts of the Company
and the Winery in the usual, regular and ordinary manner, on a basis consistent
with prior periods;
(d) duly comply in all material respects with all laws
applicable to the conduct of the Company's business;
(e) perform all of the material obligations of the Company
(including the payment of tax liabilities) without default;
(f) unless it first receives Buyer's written consent, which
may be withheld in Buyer's sole discretion, not (i) encumber, mortgage, or
voluntarily subject to lien any of the Assets; (ii) convey, transfer or acquire
any material asset or property or any portion thereof other than in the usual
and ordinary course of business, provided that any capital expenditure in excess
of $5,000 shall be deemed outside the ordinary course of business; (iii) incur
any material fixed or contingent obligation other than in the usual and ordinary
course of business or increase any such obligation; (iv) issue any equity in the
Company; nor (v) enter into any lease or other obligation which is not
terminable on thirty (30) days' notice without penalty or payment;
(g) promptly give Buyer written notice of any damage,
individually or in the aggregate, in an amount greater than $5,000 to the
Assets;
(h) unless it first receives Buyer's written consent, not
adopt, announce nor implement any promotional programs, except for any in
progress as of the date hereof;
(i) not grant any power of attorney with respect to the
business, properties or assets of the Company; and
14
<PAGE>
(j) not make any distribution or dividends to its
shareholders, or value any payments of any kind to directors or make any bonus,
pension, retirement or insurance payment or arrangement to or with any employee
or consultant except those that may have been accrued as of the Balance Sheet
Date or increase the level of compensation payable to any employee or
consultant.
5.2 Access to Properties and Records. Seller shall give to Buyer and to
its counsel, accountants, and other representatives reasonable access during
normal business hours to the properties, personnel, books, tax returns,
contracts, commitments and records of the Company and the right to make copies
thereof. Seller will furnish to Buyer and such representatives all such
additional documents and financial and other information as Buyer or its
representatives may from time to time reasonably request and permit Buyer and
such representatives to examine all records and working papers relating to the
preparation, review and audits of the financial statements and tax returns of
the Company.
Buyer shall have the right to inspect and investigate the Real Property
and all improvements thereon as well as the bulk and bottled wine and the
condition of the vineyards included in the Assets, including roof, plumbing,
soils tests, electrical, sprinkler, water, sewer, engineering studies, heating
and air conditioning system or systems, and structural integrity of the
Improvements (including structural pest control reports), measurement of the
square footage of the Real Property (including land and any improvements), legal
status and requirements pertaining to the Real Property (including building
codes, zoning, environmental, public health and fire safety laws), hazardous
substance inspections including preparation of an environmental assessment,
suitability of the Real Property for Buyer's purposes and all other matters of
significance to Buyer. Buyer will provide Seller a copy of any assessment or
report promptly upon receipt. Buyer agrees to keep the results of such testing
and inspections confidential, except to the extent that disclosure is required
by law (in which case, Buyer will notify Seller prior to making any such
disclosure). Buyer shall order and pay all costs and expenses with respect to
such inspections and investigations.
Seller shall promptly provide Buyer with a copy of each:
(a) Copies of all service, maintenance, farming, management
and other contracts and agreements, if any, related to the operation and
management of the Winery or Real Property.
(b) Copies of all soils, engineering and environmental reports
relating to the Real Property, if any, in the Seller's possession.
(c) Copies of all equipment leases and all material amendments
thereto.
(d) Any document referenced in the Disclosure Schedule.
15
<PAGE>
5.3 Advise of Changes. Between the date hereof and the Closing Date,
Seller shall advise Buyer promptly in writing of any fact of which they become
aware, which, if known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Agreement.
5.4 Conduct. Except as permitted or required hereby or as Buyer may
otherwise consent in writing, Seller shall not enter into any transaction, take
any action, or fail to take any action, which would result in any of the
representations and warranties contained in this Agreement not being true and
correct at and as of the time immediately after such transaction has been
entered into or such event has occurred and on the Closing Date. From the date
of this Agreement until either the Closing or the termination of this Agreement,
Seller agrees that he shall not solicit, negotiate, encourage, initiate or
otherwise participate in any discussions, or provide information to any third
party, with respect to the sale of any of the Winery Stock, or any merger,
business combination, or similar transaction involving the Company.
5.5 Approvals, Consents. Except as otherwise disclosed in the
Disclosure Schedule, Seller shall obtain in writing prior to the Closing Date
all approvals, consents and waivers, required to be obtained by him in order to
effectuate the transactions contemplated hereby, and shall deliver to Buyer
copies thereof, reasonably satisfactory in form and substance to Buyer.
Approvals required of Seller cannot, without the written consent of Buyer, be
obtained at a cost or other adverse consequence to Buyer or the Company.
5.6 Insurance. Seller agrees to maintain the insurance policies in
effect for the Improvements through the Closing Date, and upon Buyer's request,
to provide Buyer a certificate of such insurance.
5.7 Further Assurances. Seller shall at any time and from time to time,
both before and after the Closing, upon the request of Buyer but at no cost or
expense to Seller, (a) do, execute, acknowledge and deliver, and cause to be
done, executed, acknowledged or delivered, all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney or assurances as may be
reasonably required for the better transferring, assigning, conveying, granting,
assuring and confirming to Buyer, or for aiding and assisting in the collection
of or reducing to possession by Buyer, of the SHW Stock or to vest in Buyer
good, valid and marketable title to the SHW Stock and otherwise to consummate
the transactions contemplated by this Agreement; (b) cooperate and assist Buyer
or the Winery in connection with any tax, environmental or other governmental
audit and any litigation or claims related to the business or assets of the
Company through the Closing Date; and (c) promptly convey to Buyer after receipt
of any payments, correspondence or notices relating to the Winery or any of the
Real Property; provided that Seller shall be entitled to be reimbursed for any
material expense and to be compensated for material amounts of time resulting
directly from Buyer's request.
5.8 Satisfaction of Conditions. Seller shall take all actions and
execute all documents required for the satisfaction, to the extent within the
control of Seller, of the conditions to Closing set forth in Articles VII and
VIII below.
16
<PAGE>
5.9 Confidentiality. Seller will keep in confidence all proprietary and
financial information of Buyer or the Company all information concerning the
terms and conditions of this Agreement and will not, except to the extent
required by law or to the extent any such information is otherwise publicly
available, without the prior written consent of Buyer, reveal any such financial
or proprietary information to any third party other than counsel, accountants or
experts retained by Buyer who shall be bound by the same restrictions. If the
transactions contemplated by this Agreement are not consummated, Seller shall
return to Buyer, at Buyer's request, all documents supplied to Seller by Buyer
pursuant to the provisions of this Agreement. This covenant shall survive the
Closing and shall terminate on the one year anniversary of the Closing Date or
the one year anniversary of the termination date of this Agreement.
ARTICLE VI
COVENANTS OF BUYER
6.1 Confidentiality; Return of Documents. Unless and until the
transactions contemplated by this Agreement are consummated, Buyer will keep in
confidence all proprietary and financial information of Seller and the Company
and will not, except to the extent required by law or to the extent any such
information is otherwise publicly available, without the prior written consent
of the Seller reveal any such financial or proprietary information to any third
party other than counsel, accountants or experts retained by Buyer who shall be
bound by the same restrictions. If the transactions contemplated by this
Agreement are not consummated, Buyer shall return to Seller, at Seller's
request, all documents supplied to Buyer by Seller pursuant to the provisions of
this Agreement, and Buyer shall continue to be bound to respect its
confidentiality undertaking following any termination of this Agreement.
6.2 Satisfaction of Conditions. Buyer shall take all actions and
execute all documents required for the satisfaction, to the extent within the
control of Buyer, of the covenants and conditions to Closing set forth in
Articles V, VII and VIII.
6.3 Advice of Changes. Between the date hereof and the Closing Date,
Buyer shall advise Seller promptly in writing of any fact of which Buyer becomes
aware, which, if known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Agreement.
6.4 Conduct. Except as permitted or required hereby or as Seller may
otherwise consent in writing, Buyer shall not enter into any transaction, take
any action, or fail to take any action, which would result in any of the
representations and warranties of Buyer contained in this Agreement not being
true and correct at and as of the time immediately after such transaction has
been entered into or such event has occurred and on the Closing Date.
6.5 Approvals, Consents. Buyer shall use its best efforts to obtain in
writing prior to the Closing Date all governmental approvals, consents and
waivers, required to be obtained by Buyer in order to effectuate the
transactions contemplated hereby, and shall deliver to Seller copies thereof.
17
<PAGE>
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to perform its obligations under this Agreement
is subject to the satisfaction at or prior to the Closing Date (unless otherwise
specifically indicated to the contrary) of the following conditions unless
waived by Buyer in its sole discretion.
7.1 Accuracy of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement and the Disclosure Schedule
shall be true and accurate in all material respects on the Closing Date, with
the same force and effect as if made on such Closing Date, except as affected by
transactions required or permitted hereby, and except that any such
representation or warranty made as of a specified date (other than the date of
this Agreement) shall have been true and accurate in all material respects on
and as of such date.
7.2 Performance of Agreements. Seller shall have performed and complied
with all covenants, obligations and agreements to be performed or complied with
by them on or before the Closing Date pursuant to this Agreement.
7.3 Performance of Sale and Purchase Agreement. All obligations of SHW
and Hokuriku pursuant to the Sale and Purchase Agreement shall have been
performed and fulfilled on or before the Closing Date, except for obligations to
pay funds that will be paid pursuant to this Agreement.
7.4 Seller and SHW's Certificates. Buyer shall have received an
accurate certificate of Seller, certifying as to the fulfillment of the matters
specified in Sections 7.1, and 7.2 and an accurate certificate of SHW,
certifying as to the fulfillment of the matters specified in Section 7.3, each
dated as of the relevant Closing Date and in a form and substance satisfactory
to Buyer and its counsel.
7.5 Opinion of Counsel. Buyer shall have received an opinion of counsel
for SHW in the form attached hereto as Exhibit D and for the Company in the form
attached hereto as Exhibit E.
7.6 Consents, Authorizations. Except as disclosed in the Disclosure
Schedule, all consents, authorizations, permits, licenses, orders or approvals
of, and filings or registrations with and the expiration of all waiting periods
imposed by, any third party, including, without limitation, any Federal, state
or local commission, board or other regulatory body, lessor, lender, licensor or
supplier which are required for or in connection with (a) the execution and
delivery of this Agreement by Seller and the consummation of the transactions
contemplated hereby, and (b) in order to permit or enable Buyer and the Company
to conduct the Winery's business after the Closing as conducted by Seller as of
the date hereof shall have been duly obtained or made and shall be in full force
and effect.
7.7 Legislation. No federal, state or local statute, rule or regulation
shall have been enacted after the date of this Agreement which prohibits,
restricts, delays or materially adversely
18
<PAGE>
affects the business of the Company or the consummation of the transactions
contemplated by this Agreement or any of the conditions to the consummation of
such transactions. No temporary restraining order or injunction shall be in
effect, or threatened by a governmental agency, restraining the consummation of
the transactions contemplated hereby.
7.8 Corporate Records. Buyer shall have received copies of the minute
books, stock ledgers and financial records of the Company and SHW.
7.9 Good Standing Certificate. Buyer shall have received certificates
dated within ten days before the Closing Date from the Secretary of State of (a)
Washington, certifying that SHW and the Company are in good standing under the
laws of such jurisdiction and a certified copy of the Articles of Incorporation
and all amendments, and (b) each jurisdiction in which SHW and the Company are
qualified to do business as a foreign corporation, certifying that SHW and the
Company are so qualified and in good standing.
7.10 Lien Releases. All Encumbrances other than Encumbrances permitted
hereunder shall have been released with respect to the Assets.
7.11 Interim Financials. Buyer shall have received the unaudited
balance sheet of the Company as of the month-end immediately preceding the
Closing Date (or the prior month-end if the Closing occurs prior to the
fifteenth day of a month), and all available related unaudited statements
prepared by the Company, but without a LIFO adjustment, which such financial
statements shall be deemed Financial Statements for purposes of Section 3.5.
7.12 Due Diligence Inspection. Buyer shall have completed to its sole
and absolute satisfaction the review and inspections described in Section 5.2,
and a satisfactory inspection with respect to the operating condition and
capacity of the Winery, the Assets and the Real Property.
7.13 Transfer Documents. All transfer documents and actions in
connection with such transfers shall be satisfactory in form and substance to
Buyer and shall have been received by Buyer.
7.14 Title Report. Buyer shall have reviewed and approved the Title
Report, and shall have received a commitment satisfactory in form to it that at
the Closing, the Title Company will issue the Title Policy referred to in
Section 7.15 below.
7.15 CLTA Owner's Policy. Evidence of title in the Company shall be
confirmed by the issuance at the Final Closing by a title company reasonably
acceptable to Buyer of its CLTA Owner's Policy of Title Insurance insuring that
fee title in the Land is vested in the Company, subject to obligations for local
real estate taxes and assessments not yet due or payable; and such other
exceptions as may be approved in writing by Buyer (the "Title Policy"). The
Title Policy shall include such endorsements as Buyer may reasonably request
prior to the Closing Date.
19
<PAGE>
7.16 No Material Adverse Change. Prior to the Closing, the business of
the Company and the condition of the Real Property will not have suffered any
material adverse change from the date hereof.
7.17 Release. Seller shall have provided Buyer with a release of each
of Seller, Hokuriku and the sellers of the Winery Stock to Hokuriku of any and
all claims against the Company in substantially the form attached as Exhibit F
hereto.
7.18 Resignation of Directors and Officers. Seller shall have caused
the Company and SHW to provide resignations for all officers and directors
effective on Closing.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligation of Seller to perform its obligations under this
Agreement is subject to the satisfaction at or prior to the Closing Date of the
following conditions unless waived by Seller in its sole discretion:
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and accurate in
all material respects on and as of the Closing Date, with the same force and
effect as if made on the Closing Date, except as affected by transactions
required or permitted hereby, and except that any such representation or
warranty made as of a specified date (other than the date of this Agreement)
shall have been true and accurate in all material respects on and as of such
date.
8.2 Performance of Agreements. Buyer shall have performed and complied
in all material respects with all covenants, obligations and agreements to be
performed or complied with by it on or before the Closing Date pursuant to this
Agreement, and Buyer shall have executed and delivered all other documents and
agreements referred to herein.
8.3 Officer's Certification. Seller shall have received an accurate
certificate, dated the Closing Date, of a duly authorized officer of Buyer,
satisfactory in form and substance to Seller and its counsel, certifying as to
the fulfillment of the matters specified in Sections 8.1 and 8.2.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date upon the following terms and conditions:
(a) by Buyer, if a condition set forth in Article VII has not
been satisfied or if there has been a violation or breach by Seller of any
material agreement, representation or warranty of Seller contained in this
Agreement, which such failure, violation or breach has not
20
<PAGE>
been cured to the reasonable satisfaction of Buyer within fifteen (15) days of
written notice to Seller; or
(b) by Seller, if there has been a violation or breach by
Buyer of any material agreement, representation or warranty of Buyer contained
in this Agreement or if a condition set forth in Article VIII has not been
satisfied, which such failure, violation or breach has not been cured to the
reasonable satisfaction of Seller within fifteen (15) days of written notice to
Buyer; or
(c) by Seller or Buyer at any time after the later of the
Closing Date or any extension thereof as provided in Section 2 or after July 30,
1999 in all events.
In the event of termination of this Agreement and abandonment of the
transactions contemplated hereby pursuant to this Section 9.1 prior to the
Closing, written notice thereof shall forthwith be given to the other party and
this Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto, except for any
promise which expressly survives any termination of this Agreement.
ARTICLE X
INDEMNIFICATION
10.1 Obligation of Seller to Indemnify. Seller shall indemnify Buyer
and hold harmless and, upon Buyer's request, defend Buyer, its affiliates,
subsidiaries, directors, officers, employees, agents and assigns of each from
and against any claims, demands, causes of action, proceedings, losses,
liabilities, damages, deficiencies, interest, penalties, expenses, judgments and
costs (including reasonable attorneys', consultants' and accountants' fees and
disbursements, court costs, amounts paid in settlement and expenses of
investigation) incurred by Buyer (collectively, "Losses") provided, however,
that Seller's obligations to indemnify Buyer pursuant to this Section, combined
with any claims based on representations or warranties under this Agreement,
shall be limited to an aggregate of $125,000, based upon, arising out of or
otherwise in respect of:
(i) The breach of any representation, warranty, covenant or
agreement of Seller contained in this Agreement or in any
document or other writing delivered pursuant to this
Agreement;
(ii) Any liability of Seller for personal injury, real
property damage or other loss arising from any act or omission
occurring on or prior to the Closing Date related in any way
to any product manufactured or distributed by the Winery to
the extent that such losses exceed any insurance proceeds
actually received by Buyer or the Company or by any party for
the benefit of Buyer;
(iii) To the extent of Seller's Best Knowledge (x) Hazardous
Substances existing on, in or under the Real Property prior to
or as of the Closing Date due to the acts or omissions of the
Company, Seller or their affiliates, directors, officers,
21
<PAGE>
employees, agents, contractors, or invitees ("Preexisting
Hazardous Substances"), (y) Preexisting Hazardous Substances
which have migrated or migrate at anytime (whether before or
after the Closing Date) from the Real Property, and (z)
liabilities arising out of or related to Preexisting Hazardous
Materials removed from the Real Property after the same have
been removed from the Real Property;
(iv) To the extent of Seller's Best Knowledge, Compliance with
and/or violation or breach of any Environmental Law occurring
at anytime (whether before or after the Closing Date) with
respect to Preexisting Hazardous Substances; and
(v) All taxes imposed on Seller or the Company regardless of
when imposed for any period prior to and including the Closing
Date, including any taxes arising from either the purchase and
sale of the Winery Stock or the Assets to the extent such
taxes are not reserved for on the Interim Balance Sheet;
including, without limitation, consequential damages, damages for personal or
bodily injury, property damage, damage to natural resources occurring on or off
the Real Property, encumbrances, liens, defense costs of any claims (whether or
not such claim is ultimately defeated), good faith settlements, losses
attributable to the diminution of value or loss of use or use of any portion of
the Real Property, and the cost of any reasonable remedial, removal, response,
abatement, clean-up, investigative and monitoring costs and any other reasonable
related costs and expenses, whether or not such Losses are known or unknown as
of the date of this Agreement, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable. Any action taken or expense incurred by Buyer at
the direction of any governmental authority shall be deemed reasonable for
purposes of this Section 10.1.
10.2 Obligation of Buyer to Indemnify. Buyer shall indemnify, defend
and hold harmless Seller and his spouse, its partners, employees, agents and
assigns of each from and against any Losses (as the term "Losses" is defined in
Section 10.1 above), provided, however, that Buyer's obligations to indemnify
Seller pursuant to this Section shall be limited to an aggregate of $100,000,
based upon, arising out of or otherwise in respect of (i) a breach of any
representation, warranty, covenant or agreement of Buyer contained in this
Agreement or in any document or other papers delivered pursuant to this
Agreement, or (ii) any liability for personal injury, property damage or other
loss arising from any act, or omission of Buyer or its agents in connection with
the operation of the Winery after the Closing (including acts or omissions by
Buyer after Closing with respect to violation of environmental laws), and its
due diligence investigation pursuant to Section 5.2 (Access to Property and
Records) including, without limitation, consequential damages, damages for
personal or bodily injury, property damage, damage to natural resources
occurring on or off the Real Property, encumbrances, liens, defense costs of any
claims (whether or not such claim is ultimately defeated), good faith
settlements, losses attributable to the diminution of value or loss of use or
use of any portion of the Real Property, and the cost of any reasonable
remedial, removal, response, abatement, clean-up, investigative and monitoring
costs and any other reasonable related costs and expenses, whether or not such
Losses are known or unknown as of the date of this Agreement, contingent or
22
<PAGE>
otherwise, matured or unmatured, foreseeable or unforeseeable. Any action taken
or expense incurred by Seller at the direction of any governmental authority
shall be deemed reasonable for purposes of this Section 10.2.
10.3 Claims. If any party (the "Indemnitee") receives notice of
circumstances that would give rise to a claim by such party or notice of any
claim or the commencement of any action or proceeding with respect to which any
other party (or parties) is obligated to provide indemnification (the
"Indemnifying Party") pursuant to Section 10.1 or 10.2 (a "Claim"), the
Indemnitee shall promptly give the Indemnifying Party notice thereof. Within 30
days after such notice, the Indemnifying Party will notify the Indemnitee
whether it irrevocably elects to make payment of the amount claimed or, with
respect to third party claims, to contest such claim by appropriate legal
proceedings. The failure of the Indemnifying Party to notify the Indemnitee of
its intention within such 30 days shall constitute an irrevocable election by
them that it will pay the amount claimed. Any defense of a claim shall be
conducted by counsel of good standing chosen by Indemnitee and satisfactory to
Indemnifying Party. Such defense shall be conducted at the expense of
Indemnifying Party, except that if any proceeding involves both claims against
which indemnity is granted hereunder and other claims for which indemnification
is not granted hereunder, the expenses of defending against such claims shall be
borne by the Indemnifying Party and the Indemnitee in respective proportions to
the dollar amount of the claims for which they may be liable based on the
aggregate dollar amount of the claims.
This indemnification obligations of the parties under this Article X
shall survive the Closing and shall expire one (1) year after the Closing Date.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. All fees, costs and expenses incurred by a party in
connection with, relating to or arising out of the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, legal and accounting fees
and expenses, shall be borne by such party unless this Agreement terminates due
to a breach by the other party in which case the breaching party (in addition to
any liquidated damages to be paid by such party) shall reimburse the
non-breaching party for all of such expenses, provided, however, that the
Company shall bear any expenses incurred by Seller in connection with completing
the transactions contemplated by the Sale and Purchase Agreement described in
Section 2.2, and may, in its discretion, bear any or all such costs and expenses
of SHW.
11.2 Binding Effect. This Agreement shall not be assignable by either
Buyer or Seller without the prior written consent of the other, except that
without relieving Buyer of any of its obligations under this Agreement, Buyer
may assign this Agreement to an entity which is under common control with Buyer.
Subject to the foregoing, this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the respective successors, heirs, legal
representatives, and assigns of the parties hereto. This Agreement constitutes
an agreement
23
<PAGE>
among the parties hereto and none of the agreements, covenants, representations
or warranties contained herein shall be for the benefit of any third party not a
party to this Agreement.
11.3 Entire Agreement; Amendments. This Agreement (including the
Disclosure Schedules and Exhibits attached hereto and the ancillary agreements
referred to herein), and the other writings referred to herein or delivered
pursuant hereto contain the entire understanding of the parties with respect to
its subject matter. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof.
This Agreement may be amended only by a written instrument duly executed by the
parties, and any condition to a party's obligations hereunder may only be waived
in writing by such party. Whenever the term "including" is used in this
document, it shall be deemed to mean including without limitation the matters
following thereafter.
11.4 Headings. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.5 Notices. The terms "Notice" and "Notify" means all notices,
claims, certificates, requests, demands and other communications hereunder which
shall be in writing and shall be deemed given if delivered personally or mailed
by registered or certified mail, return receipt requested and postage prepaid,
or sent by facsimile to the parties at the addresses and facsimile numbers set
forth on Exhibit G hereto, provided that if a party has a facsimile terminal,
Notice must include facsimile transmission.
Notice or other communication shall be deemed to have been given on the date of
receipt.
11.6 Publicity. The parties agree that, except as otherwise required by
law, the issuance of any reports, statements or releases pertaining to this
Agreement or the transactions contemplated hereby prior to Closing is subject to
mutual consent.
11.7 Counterparts. This Agreement may be executed in counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement.
11.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California
11.9 Waivers. Any provision of this Agreement may be waived only by a
written instrument executed by the party to be charged with such waiver. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
11.10 Attorneys' Fees. If there is any litigation or arbitration
between the parties related to this Agreement or the transactions contemplated
by this Agreement, the prevailing
24
<PAGE>
party shall be entitled to recover all reasonable costs and expenses (including,
without limitation, reasonable attorneys', accountants' and other professional
fees and expenses).
11.11 Arbitration of Disputes. Any dispute arising from, or relating
to, this Agreement shall be resolved at the request of either party through
binding arbitration. Within 14 business days after demand for arbitration has
been made by either party, the parties, and/or their counsel, shall meet to
discuss the issues involved, to discuss a suitable arbitrator and arbitration
procedure, and to agree on arbitration rules particularly tailored to the matter
in dispute, with a view to the dispute's prompt, efficient, and just resolution.
Upon the failure of the parties to agree upon arbitration rules and procedures
within a reasonable time (not longer than thirty (30) days from the demand), the
Commercial Arbitration Rules of the American Arbitration Association shall be
applicable. Likewise, upon the failure of the parties to agree upon an
arbitrator within a reasonable time (not longer than thirty (30) days from the
demand), there shall be a panel comprised of one (1) arbitrator, to be appointed
by the American Arbitration Association. At least thirty (30) days before the
arbitration hearing, the parties shall allow each other reasonable written
discovery including the inspection and copying of documents and other tangible
items relevant to the issues which are to be presented at the arbitration
hearing. The arbitrator shall be empowered to decide any disputes regarding the
scope of discovery. Fees for the arbitrator shall be divided equally between the
parties, and the parties will be individually responsible for the payment of the
fees. The prevailing party in any arbitration, proceeding or legal action
arising out of, or in connection with, this Agreement shall be entitled to
recover its reasonable attorneys' fees and costs incurred in connection with
such arbitration, proceeding or legal action. The arbitrator shall determine who
the prevailing party is for this purpose.
The award rendered by the arbitrator shall be final and binding upon
both parties. The arbitration shall be conducted in San Francisco, California.
The California State Superior Court located in San Francisco, California shall
have exclusive jurisdiction over disputes between the parties in connection with
such arbitration and the enforcement thereof. The parties consent to the
jurisdiction and venue of the California State Superior Court located in San
Francisco, California. Notwithstanding the fact that the parties have agreed to
have any disputes arising from, or related to, this Agreement resolved by
binding arbitration, such arbitration provision shall not prevent the parties
from seeking ancillary or equitable relief in connection therewith from the
California State Superior Court, including lis pendens and specific performance.
"NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES' PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO
HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN
THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND
APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION
25
<PAGE>
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR
AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY."
BUYER: ___________________________ SELLER: __________________________
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
Buyer: CHALONE WINE GROUP LTD.,
- ------ a California corporation
By: /s/ Thomas B. Selfridge
--------------------------
--------------------------
Its: President & CEO
--------------------------
SELLER: /s/ Peter Ansdell
- ------- --------------------------
PETER ANSDELL
SHW: SHW EQUITY CO.,
- ---- a Washington corporation
By: /s/ Peter Ansdell
--------------------------
Peter Ansdell
Its: President
27
<PAGE>
SCHEDULE OF EXHIBITS
Exhibit A The Land
Exhibit B Disclosure Schedule
Exhibit C Financial Statements
Exhibit D Opinion of Counsel of SHW
Exhibit E Opinion of Counsel of the Company
Exhibit F Release of Seller, Hokuriku and the sellers of the Winery Stock
to Hokuriku
Exhibit G Notices
28
