Document:

ex10_2.htm

Exhibit 10.2

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement"), dated as of August 1, 2012, is made by and between BRANDON STAUBER ("Seller") and H.D.D. LLC, a California limited liability company ("Buyer").

 

  RECITALS

 

	
  

	
A.

	
Seller owns fifty percent (50%) of the outstanding membership interests in Wine Spies, LLC, a California limited liability company (the "Company").   

 

	
  

	
B.

	
Buyer desires to purchase from Seller, and the Seller desires to sell to Buyer, all of the membership interests in the Company held by Seller (the "Purchased Interest"), on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

  AGREEMENT

 

1.             Acquisition Of the Purchased Interest.  On the terms and conditions set forth in this Agreement, Seller agrees to sell the Purchased Interest to Buyer, and Buyer agrees to purchase the Purchased Interest from Seller.  Seller shall sell, assign, and transfer the Purchased Interest free and clear of any and all Encumbrances (as defined in Section 4.3(b)) and any voting agreements, proxies, or similar agreements to Buyer as of the close of business on the Closing Date (as defined in Section 3).  This Agreement, the Noncompetition Agreement (as defined in Section 6.3 below), the Consulting Agreement (as defined in Section 6.4 below) and the Transfer Documents (as defined in Section 6.11 below) shall be collectively referred to herein as the "Transaction Documents."

 

2.             Consideration.

 

	 	
2.1. 

	
Purchase Price.  The aggregate purchase price to be paid by Buyer to Seller for the Purchased Interest shall be Three Hundred Twenty-Five Thousand Dollars ($325,000) (the "Purchase Price").

 

	 	
2.2. 

	
Payment of the Purchase Price.  At the Closing, Buyer shall deliver to Seller (i) Two Hundred Seventy-Five Thousand Dollars ($275,000) by check or wire transfer, and (ii) a non-interest bearing promissory note payable to Seller in the principal amount of Fifty Thousand Dollars ($50,000) in the form attached hereto as Exhibit A (the "Note").  The Note shall be due and payable on or before March 1, 2013.

 

  

  

  

 

	 	
2.3. 

	
Purchase Price Adjustment.

 

(a)           Definitions.  As used in this Agreement, the following terms shall have the following meanings:

 

(1)           "Net Working Capital" shall mean the difference of (i) cash and total current accounts receivable of the Company as of the Closing Date less (ii) total current accounts payable of the Company within as of the Closing Date, each as computed in accordance with generally accepted accounting principles.

(2)           "Net Working Capital Target" shall mean Zero Dollars ($0.00).

 

(b)           Net Working Capital Adjustment.  The Purchase Price shall be adjusted as follows:  (i) in the event that the Net Working Capital as of the Closing Date exceeds the Net Working Capital Target by more than $10,000, then the Purchase Price shall be adjusted upward by an amount equal to one-half (1/2) of the difference between the excess amount and $10,000, in which case Buyer shall promptly, but in any event within five (5) business days following the determination in accordance with Section 2.3(b) hereof, increase the principal balance of the Note by one-half (1/2) of the difference between the excess amount and $10,000; or (ii) in the event that the Net Working Capital as of the Closing Date is less than the Net Working Capital Target by more than $10,000, then the Purchase Price shall be adjusted downward in an amount equal to one-half (1/2) of the difference between the deficiency amount and $10,000, in which case Buyer shall offset such difference between the deficiency amount and $10,000 against the principal balance of the Note.

 

(c)           Determination of Net Working Capital.  No later than thirty (30) days following the Closing Date, Buyer shall deliver to Seller a statement (the "Closing Balance Sheet") setting forth its computation of the Net Working Capital.  The Closing Balance Sheet shall be prepared in accordance with generally accepted accounting principles consistently applied.  The Closing Balance Sheet shall become final and binding upon the parties fifteen (15) days following Seller's receipt thereof unless Seller gives written notice of his disagreement ("Dispute Notice") to Buyer prior to such date.  Seller shall have such fifteen (15)-day period to bring a dispute, but only on the basis that the amounts reflected on the Closing Balance Sheet were not presented in accordance with generally accepted accounting principles or were inaccurate or incomplete.  Within thirty (30) days after delivery of such Dispute Notice, the parties hereto shall attempt to resolve such dispute and agree in writing upon the final content of the disputed Closing Balance Sheet.  If Buyer and Seller are unable to resolve any dispute within the thirty (30)-day period after Seller's receipt of a Dispute Notice, Seller and Buyer shall jointly engage as arbitrator an accounting firm acceptable to and jointly engaged by both Buyer and Seller, provided such accounting firm has not performed accounting, tax or auditing services for Buyer or Seller or any of their respective affiliates during the past three (3) years (the "Arbitrating Accountant").  The Arbitrating Accountant shall promptly, and in any event within forty-five (45) days after the date of its appointment, determine, based solely on presentations by Buyer and Seller, and not by independent review, only those issues in dispute and shall render a written report as to the dispute and the resulting computation of the Closing Balance Sheet and the Net Working Capital, which shall be conclusive and binding upon the parties and not subject to appeal or judicial review.  In resolving any disputed item, the Arbitrating Accountant may not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party.  Upon the resolution of all such disputes, the Closing Balance Sheet shall be revised to reflect such resolution.  The Arbitrating Accountant shall determine the proportion of its fees and expenses to be paid by each of Seller and Buyer, based primarily on the degree to which the Arbitrating Accountant has accepted the positions of the respective parties.

 

  

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3.             Closing.  Subject to the satisfaction or waiver of the conditions to closing set forth in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at 10:00 a.m. on July ____, 2012 (the "Closing Date"), at the offices of Spaulding McCullough & Tansil LLP, located at 90 South E Street, Suite 200, Santa Rosa, California  95404, or at such other time, date, and place as may be mutually agreed upon.

 

4.             Representations and Warranties of Seller.  Seller hereby represents and warrants to Buyer as follows:

 

4.1.           Good Standing.  The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of California and has all necessary power and authority to own and conduct the business now being conducted.

 

4.2.           Authorization.  Seller has the full right, capacity, power, and authority to execute and deliver the Transaction Documents, to perform his obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby.  Each of the Transaction Documents has been duly executed and delivered by Seller, and assuming due authorization, execution, and delivery by Buyer, constitutes the legal, valid, and binding obligations of Seller enforceable in accordance with its respective terms and conditions, except as such enforcement may be limited (i) by applicable bankruptcy, insolvency, reorganization, or other laws of general application affecting creditors' rights generally, or (ii) by general principles of equity.

 

4.3.           Trademark.  The Company has all right, title and interest in any trademark of the Company's name "The Wine Spies" (the "Trademark") and in the Service Marks (as defined in Section 6.5), together with the goodwill associated therewith, including but not limited to all rights of recovery for past infringement thereof.

 

4.4.           Ownership of the Company.

 

(a)           The Purchased Interest represents fifty percent (50%) of the issued and outstanding interests and rights in the Company including, without limitation, all economic interest, all rights to vote or participate in management, and all rights to information concerning the business and affairs of the Company.

 

(b)           Seller owns beneficially and of record the Purchased Interest and has full power and authority to sell and transfer the Purchased Interest to Buyer in the manner provided herein, free and clear of all liens, claims, charges, security interest, pledges, mortgages, rights of setoff, preemptive rights, trust arrangements, or other encumbrances of any character whatsoever (whether arising from contract, by operation of law, or otherwise) (collectively, "Encumbrances") or any voting agreements, proxies, or similar agreements.

 

  

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(c)           There are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company any membership interests or other equity interest or rights, or any securities convertible into or exchangeable for membership interests or other equity interest or rights of the Company.  The outstanding membership interests of the Company are owned by the persons, with the respective percentage interests specified in the Amended Operating Agreement of the Company dated as of March 26, 2007 (the "Operating Agreement").

 

4.5.           Noncontravention.  The execution and delivery of the Transaction Documents, the performance of Seller’s obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby will not (i) violate, conflict with, or result in a breach of, or default or loss of benefit under, or give rise to a right of termination, acceleration, modification, or cancellation under, or require any notice, consent, or waiver under, any material contract, indebtedness, or agreement to which Seller or the Company is a party which would have a material adverse effect on the Company's financial condition or business as now conducted (a "Material Adverse Effect"); (ii) violate or result in the loss of any benefit under any order, judgment, or decree applicable to the Company; or (iii) result in any violation, or conflict with, or constitute a default under, the Company's Articles of Organization or the Operating Agreement.

 

4.6.           No Consents.  No consent, approval, or authorization of, or declaration, filing, or registration with, any governmental authority or any other person is required to be obtained or made by the Company in connection with the execution, delivery, and performance of the transactions contemplated by the Transaction Documents.

 

4.7.           Books and Records.  The books and records of the Company, all of which have been made available to Buyer, are complete and correct and have been maintained in accordance with sound business practices.

 

4.8.           Taxes.  Within the times and in the manner prescribed by law, the Company has filed all federal, state, and local tax returns required by law and has paid, or will pay prior to becoming delinquent, all taxes, assessments, and penalties shown to be due and payable on such returns, including without limitation all sales and use taxes and the annual minimum franchise tax and "gross receipts" fee applicable to limited liability companies such as the Company, except where the failure to do so would not have a Material Adverse Effect.

 

4.9.           Claims and Legal Proceedings.  There is no claim, litigation, proceeding or governmental investigation pending or, to Seller's knowledge, threatened, or any order, injunction or decree outstanding, against the Company.  To Seller's knowledge, there is no reasonable basis for future claims, litigations, proceedings, or investigations against the Company.

 

  

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4.10.         Title; Liens.  The Company has good and marketable title to its properties and assets, and has good title to all its leasehold interests, in each case subject to no material mortgage, pledge, lien, lease, encumbrance or charge, other than (i) liens for current taxes not yet due and payable, (ii) liens imposed by law and incurred in the ordinary course of business for obligations not past due, (iii) liens in respect of pledges or deposits under workers' compensation laws or similar legislation, and (iv) liens, encumbrances and defects in title which do not in any case materially detract from the value of the property subject thereto or have a Material Adverse Effect, and which have not arisen otherwise than in the ordinary course of business.

 

4.11.         Financial Statements. The unaudited balance sheet (the "Balance Sheet") at June 30, 2012 (the "Balance Sheet Date"), the related unaudited statements of income and cash flows as of and for the period beginning January 1, 2011 and ended December 31, 2011 and the interim statements of income and cash flows as of and for the period beginning January 1, 2012 and ended June 30, 2012 (collectively, the "Financial Statements") of the Company, are attached as Exhibit B hereto. The Financial Statements were prepared in good faith, have been prepared in accordance with U.S. generally accepted accounting principles consistently applied ("GAAP"), and fairly and accurately present the Company's financial position, results of operations and cash flows as of the dates and for the periods indicated.

 

4.12.         Absence of Undisclosed Liabilities.  The Company does not have any liability (whether known or unknown and whether absolute or contingent), except for (a) liabilities shown on the Balance Sheet, (b) liabilities not in excess of $10,000 in the aggregate, which have arisen since the Balance Sheet Date in the ordinary course of business and which are similar in nature and amount to the liabilities which arose during the comparable period of time in the immediately preceding fiscal period, and (c) contractual and other liabilities incurred in the ordinary course of business which are not required by U.S. GAAP to be reflected on a balance sheet and which would not, either individually or in the aggregate, have or result in a Material Adverse Effect.

 

4.13.         Absence of Changes.  Since the Balance Sheet Date, there has been no material adverse change in the business, prospects, condition (financial or otherwise), or results of operations of the Company, other than changes occurring in the ordinary course of business (which ordinary course changes have not, individually or in the aggregate, had a Material Adverse Effect).

 

4.14.         Related Parties. None of the Company's members, managers, officers or employees, or any members of their immediate families, or any affiliate of the foregoing are, directly or indirectly, indebted to the Company or have any (i) material commercial, banking, consulting, legal, accounting or familial relationship with any of the Company's customers, suppliers, service providers, joint venture partners, licensees and competitors, (ii) direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or in any firm or corporation which competes with the Company except that such persons may own stock in (but not exceeding three percent (3%) of the outstanding capital stock of) publicly traded companies that may compete with the Company or (iii) financial interest in any contract with the Company.

 

  

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4.15.         Brokers and Finders.  Seller has not engaged any brokers, finders or agents and will not incur, directly or indirectly, as a result of any action taken by the Company, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with the Transaction Documents.

 

4.16.           Disclosure.  To Seller's knowledge, no representation or warranty by Seller contained in this Agreement, and no statement contained in any other document, certificate, or other instrument delivered pursuant to this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary, in light of the circumstances under which it was made, in order to make the statements herein or therein not misleading.  The representations and warranties made to Buyer are made with the knowledge and expectation that Buyer is relying thereon and the same shall not be affected by any investigation heretofore or hereafter made by or on behalf of Buyer.

 

5.             Representations and Warranties of Buyer.  Buyer hereby represents and warrants to Seller as follows:

 

5.1.           Good Standing.  Buyer is duly organized, validly existing and in good standing under the laws of the State of California and has all necessary power and authority to own and conduct the business now being conducted.

 

5.2.           Authorization.  Buyer has the full right, capacity, power, and authority to execute and deliver this Agreement, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby.  This Agreement has been duly executed and delivered by Buyer, and assuming due authorization, execution, and delivery by Seller, constitutes the legal, valid, and binding obligations of Buyer enforceable in accordance with its terms and conditions, except as such enforcement may be limited (i) by applicable bankruptcy, insolvency, reorganization, or other laws of general application affecting creditors' rights generally, or (ii) by general principles of equity.

 

5.3.           Noncontravention.  The execution and delivery of this Agreement, the performance of Buyer's obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby will not (i) violate, conflict with, or result in a breach of, or default or loss of benefit under, or give rise to a right of termination, acceleration, modification, or cancellation under, or require any notice, consent, or waiver under, any material contract, indebtedness, or agreement to which Buyer is a party or by which Buyer is bound; (ii) violate or result in the loss of any benefit under any order, judgment, or decree applicable to Buyer; or (iii) result in any material violation, or material conflict with, or constitute a material default under, Buyer's organizational documents, as may be amended to date.

 

5.4.           No Consents.  No consent, approval, or authorization of, or declaration, filing, or registration with, any governmental authority or any other person is required to be obtained or made by Buyer in connection with the execution, delivery, and performance of the transactions contemplated by this Agreement.

 

5.5.           Brokers and Finders.  Buyer has not engaged any brokers, finders or agents and neither Seller nor Buyer has, nor will, incur, directly or indirectly, as a result of any action taken by Buyer, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement.

 

  

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5.6.           Disclosure.  To Buyer's knowledge, no representation or warranty by Buyer contained in this Agreement, and no statement contained in any other document, certificate or other instrument delivered pursuant to this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary, in light of the circumstances under which it was made, in order to make the statements herein or therein not misleading.  The representations and warranties made to Seller are made with the knowledge and expectation that Seller is relying thereon and the same shall not be affected by any investigation heretofore or hereafter made by or on behalf of Seller.

 

6.             Certain Covenants.

 

6.1.           Inspection.  Prior to the Closing Date, Seller shall (i) give Buyer and its authorized representatives and advisors full access, during normal business hours, to all facilities of the Company; (ii) furnish Buyer and its authorized representatives and advisors with all documents and information relating to the Company as may be reasonably requested by Buyer and their authorized representatives and advisors; and (iii) permit Buyer and its authorized representatives and advisors to review all books, records, and contracts relating to the Company's operations.  The Buyer shall keep confidential and not use or disclose to any party any confidential information acquired by Buyer from Seller pursuant to this Section 6.1 or otherwise disclosed in connection with the negotiation of this Agreement and the consummation of the transactions contemplated hereby, unless Seller shall give its written consent to the contrary, or unless otherwise required or permitted by law.

 

6.2.           Company's Books and Records.  Prior to the Closing, Seller shall, upon at least twenty-four (24) hours advance written notice by Buyer, permit Buyer to inspect the Company's books and records.

 

6.3.           Noncompetition Agreement.  Seller shall enter into a Noncompetition, Nonsolicitation, and Nondisclosure Agreement in substantially the form attached hereto as Exhibit C (the "Noncompetition Agreement") pursuant to which Seller shall agree not to compete with the Company within the United States for a period of four (4) years.

 

6.4.           Consulting Agreement.  Seller shall enter into a consulting agreement between the Company and Seller in substantially the form attached hereto as Exhibit D  (the "Consulting Agreement") pursuant to which Seller shall provide services to the Company on the terms and conditions set forth therein.

 

6.5.           Use of Names.  Seller hereby agrees to not, and to cause each of his Affiliates (as defined herein) to not use the terms "The Wine Spies," "Agent White," "Agent Red," "Agent Sparkle," and "Agent Blush," or any derivation thereof (collectively, the "Service Marks", and together with the Trademark, the "Marks"), in connection with the formation, development, or expansion of any existing or new business venture.  As used herein, the term "Affiliate" shall mean any individual, partnership, limited partnership, limited liability company, corporation, trust, estate, association or any other entity, directly or indirectly, through one or more intermediaries, controlled by, or under common control of Seller.  The term "control" as used in the immediately preceding sentence shall mean with respect to a corporation or limited liability company the right to exercise, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the controlled corporation or limited liability company, and, with respect to any individual, partnership, trust, association, or other entity, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity.

 

  

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6.6.           Assignment of Marks.  Seller hereby recognizes and acknowledges the Company as the sole owner of the Marks.  To the extent Seller has, or may acquire, any rights in the Marks, Seller hereby irrevocably assigns and transfers to the Company all right, title and interest he has, or may acquire, in and to the ownership of the Marks together with the goodwill associated therewith, including but not limited to all rights of recovery for past infringement thereof.  To the extent Jason Seeber has, or may acquire, any rights in the Marks, Seller hereby agrees to obtain and deliver to Buyer at Closing an assignment of marks duly executed by Jason Seeber (the "Assignment of Marks") in which Jason Seeber irrevocably assigns and transfers to the Company all right, title and interest he has, or may acquire, in and to the ownership of the Marks together with the goodwill associated therewith, including but not limited to all rights of recovery for past infringement thereof.

 

6.7.           Resignation.  Effective as of the Closing Date, Seller does hereby resign as manager and employee of the Company.

 

6.8.           Seller's Release.

 

(a)           Except for the obligations created by this Agreement and that certain Joinder Agreement by and between Seller and Jason Seeber of even date herewith, Seller and his successors, heirs and assigns, do hereby absolutely, fully and forever release, relieve, waive, relinquish, absolve, acquit and discharge Buyer and the Company and their respective managers, members, agents and representatives of and from any and all manner of claims, demands, promises, cause or causes of action, action or actions, suits, debts, liabilities, obligations, costs, expenses, sums of money, controversies, damages, accounts, reckonings and liens of every kind or nature whatsoever, whether mature, contingent, direct, derivative, subrogated, personal, assigned, discovered, undiscovered, suspected, unsuspected or otherwise, which they have, may have or have owned, or held at any time by reason of any matter, cause or thing whatsoever from the beginning of time to the date hereof in any way arising out of or relating to, or in connection with, the Company's operations, Seller's ownership of membership interest in the Company, Seller's employment by the Company, Seller's relationship with the Company, or Seller's relationship with Buyer.

 

  

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(b)           Seller acknowledges and agrees that the release set forth in Section 6.8(a) above is a full and final release applying not only to all claims that are presently known, anticipated, or disclosed, but also to all claims that are presently unknown, unanticipated, and undisclosed.  SELLER HEREBY WAIVES ANY AND ALL RIGHTS OR BENEFITS THAT HE MAY NOW HAVE OR MAY HAVE IN THE FUTURE REGARDING CLAIMS, UNDER THE TERMS OF CALIFORNIA CIVIL CODE SECTION 1542 ("Section 1542"), WHICH PROVIDES AS FOLLOWS:

 

"A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor."

 

Seller, being aware of Section 1542, hereby expressly waives and relinquishes any rights or benefits he has or may have thereunder in connection with the release provided herein, as well as under any other statute or common law principle of similar effect.

 

6.9.           Right to Offset.  The Buyer expressly reserves against Seller the right to offset against sums payable to Seller under this Agreement and/or the Note an amount equal to any Damages (as defined in Section 8.2(a) below) sustained by either of Buyer or the Company for which they are entitled to be indemnified pursuant to Section 8.2(a) below.

 

6.10.         Public Announcements.  Each party agrees not to make any public announcement in regard to this Agreement or the transactions contemplated hereby and thereby without the other party’s prior written consent, except as may be required by law, in which case the parties shall use reasonable efforts to coordinate with each other with respect to the timing, form, and content of such required disclosures.

 

6.11.         Company Documents.  Upon request by Buyer, Seller hereby agrees to execute, acknowledge and deliver all such consents, minutes or waivers of the Company's members or managers reasonably necessary and appropriate to authorize the transactions contemplated by this Agreement or to comply with the requirements of the California Corporations Code (the "Company Documents").

 

6.12.         Transfer Documents.  Upon request by Buyer, Seller hereby agrees to deliver any agreements or instruments reasonably required by Buyer to evidence the unencumbered transfer of the Purchased Interest from Seller to Buyer (the "Transfer Documents").

 

6.13.         Taxes.  Seller shall pay all sales, use, transfer, and other taxes associated with the transactions contemplated by this Agreement.

 

6.14.         Further Actions.  At the Closing, and from time to time thereafter, upon the request of either party, the other party agrees to execute, acknowledge, and deliver all such further acts, deeds, assignments, transfers, conveyances, powers of attorney, assurances, and other documents as may be reasonably requested by the requesting party to evidence and implement the transactions described in this Agreement.

 

  

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7.             Conditions to Closing.

 

7.1.           Conditions Precedent to Obligations of Buyer.  The obligations of Buyer to consummate the transactions contemplated by this Agreement are expressly conditioned upon satisfaction of all the following conditions on or prior to the Closing, unless waived by each of Buyer:

 

(a)           Accuracy of Representations and Warranties.  The representations and warranties of Seller contained in the Transaction Documents shall be true and correct in all material respects on and as of the Closing with the same force and effect as though made on and as of such date;

 

(b)           Good Standing Certificates.  Seller shall deliver to Buyer at the Closing (i) a certificate of the Secretary of State of the State of California, dated as of a date within five (5) days of the Closing Date, with respect to the good standing of the Company and (ii) a certificate of the Franchise Tax Board of the State of California dated as of a date within five (5) days of the Closing Date, with respect to the good standing of the Company;

 

(c)           Certificate of Release.  Seller shall deliver to Buyer at the Closing a Certificate of Release from the California Employment Development Department (the "EDD") stating that, as of a date not more than fifteen (15) days before the Closing Date, no contributions, interest or penalties are due to the EDD from the Company;

 

(d)         Operating Agreement.  The Company, Buyer, and Jason Seeber shall enter into a mutually agreeable Amended and Restated Operating Agreement of the Company dated as of the Closing Date;

 

(e)         Approval. Seller shall satisfy, and the Company shall pay all fees and other costs related thereto, any and all applicable federal or state filing or licensing requirements and deliver to Buyer receipts of any and all applicable federal or state regulatory approvals which are required in connection with the transactions contemplated by the Transaction Documents;

 

(f)          Taxes.  The Company shall have filed all tax returns and paid in full all sales and income taxes in a timely manner, including estimated taxes, due to the Franchise Tax Board, Board of Equalization, and the Internal Revenue Service.

 

(g)           Bank Accounts.  The Company shall establish new signature cards and appoint Jim Bielenberg and Phillip Hurst as authorized persons and signatories for all of the Company's bank accounts.

 

(h)           Title and Transfer.  Seller shall deliver to Buyer an Assignment of Membership Interests representing the Purchased Interest in substantially the form attached hereto as Exhibit E (the "Assignment of Membership Interest");

 

(i)           Spousal Consent.  Seller shall deliver to Buyer a duly executed Spousal Consent substantially in the form attached hereto as Exhibit F (the "Spousal Consent"); 

 

  

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(j)           Assignment of Marks.  Seller shall deliver to Buyer an original of the Assignment of Marks duly executed by Jason Seeber;

 

(k)          Noncompetition Agreement.  Seller shall deliver to Buyer a duly executed counterpart of the Noncompetition Agreement;

 

(l)           Consulting Agreement.  Seller shall deliver to Buyer a duly executed counterpart of the Consulting Agreement;

 

(m)         Company Documents.  If requested by Buyer, Seller shall deliver or cause the delivery of the Company Documents to Buyer;

 

(n)          Transfer Documents.  If requested by Buyer, Seller shall deliver or cause the delivery of the Transfer Documents to Buyer; and

 

(o)          Performance.  Seller shall have performed and complied with the covenants and agreements required by the Transaction Documents to be performed and complied with by Seller on or prior to the Closing Date.

 

7.2.          Conditions Precedent to Obligations of Seller.  The obligations of Seller to consummate the transactions contemplated by this Agreement are expressly conditioned upon satisfaction of all the following conditions on or prior to the Closing, unless waived by Seller:

 

(a)           Accuracy of Representations and Warranties.  The representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects on and as of the Closing with the same force and effect as though made on and as of such date;

 

(b)           Promissory Note.  Buyer shall deliver to Seller a duly executed original of the Note;

 

(c)           Noncompetition Agreement. Buyer shall cause the delivery to Seller of a duly executed counterpart to the Noncompetition Agreement;

 

(d)           Consulting Agreement.  Buyer shall cause the delivery to Seller of a duly executed counterpart to the Consulting Agreement; and

 

(e)           Performance.  Buyer shall have performed and complied with the covenants and agreements required by this Agreement to be performed and complied with by Buyer on or prior to the Closing Date.

 

	 	
8.

	
Survival and Indemnification.

 

8.1.           Survival.  All representations and warranties of Seller contained in this Agreement or in any of the Transaction Documents or certificate delivered pursuant hereto or thereto shall survive the Closing for a period of two (2) years after the Closing Date, and shall not be deemed waived or otherwise affected by any investigation made or any knowledge acquired with respect thereto.  The covenants and agreements of Seller contained in this Agreement shall survive the Closing and shall continue until all obligations with respect thereto shall have been performed or satisfied or shall have been terminated in accordance with their terms.

 

  

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8.2.

	
Indemnification.

 

(a)           Seller shall indemnify, defend, and hold harmless Buyer and the Company (including each of their respective successors and assigns) from and against all losses, claims, assessments, demands, damages, liabilities, obligations, costs, and expenses, including without limitation, reasonable attorney fees and costs (collectively, "Damages") sustained or incurred by either of Buyer or the Company (i) by reason of the breach of any of the obligations, covenants, or provisions of the Transaction Documents, or the inaccuracy of any of the representations or warranties made by Seller; (ii) arising out of or relating to any liabilities or obligations of Seller; (iii) arising out of or relating to all third party claims or litigation relating to the intentional acts, willful misconduct, or negligence of Seller; or (iv) arising out of or relating to any liabilities of the Company not disclosed to Buyer in the Financial Statements.

 

(b)           Buyer shall indemnify, defend, and hold harmless Seller, from and against all Damages sustained or incurred by Seller (i) by reason of the breach of any of the obligations, covenants or provisions of this Agreement, or the inaccuracy of any of the representations or warranties made by, Buyer herein; (ii) arising out of or relating to any liabilities or obligations of Buyer; (iii) arising out of or relating to all third party claims or litigation relating to incidents occurring after the Closing Date in connection with the Company, except any Damages arising from or relating to the acts or omissions of Seller; or (iv) arising out of or relating to all third party claims or litigation related to any services provided by the Company after the Closing Date.

 

9.             Legal Representation.  The parties acknowledge that the law firm of Spaulding McCullough & Tansil LLP has prepared this Agreement and represents solely the interests of Buyer.  Seller does hereby represent and warrant that he has received, or has had the opportunity and adequate time to receive, independent tax and legal advice from counsel of such party's choice with respect to the advisability of entering into and performing such party's obligations under this Agreement.  Seller does hereby represent and warrant that such party has read and understands the terms and conditions of this Agreement.

 

10.           Notice.  Any notice required or permitted under this Agreement shall be given in writing and delivered as described herein.  A notice shall be deemed effectively given as follows:  (i) upon personal delivery and actual receipt by intended recipient; (ii) one (1) business day after transmission by electronic means, provided such transmission is electronically confirmed as having been successfully transmitted and a copy of such notice is deposited within 24 hours for either overnight delivery or for registered or certified mail, in accordance with clause (iii) or (iv) below, respectively; (iii) one (1) business day after deposit with a reputable overnight courier service, prepaid for overnight delivery; or (iv) three (3) business days after deposit with the United States Postal Service, postage prepaid, registered or certified with return receipt requested.  Addresses for notice shall be as, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties:

 

  

12

  

 

	
  

	
If to Seller:

 

	
  

	
Brandon Stauber

	
  

	
150 Front Street #24

	
  

	
Exeter, NH 03833

 

	
  

	
With a copy, which shall not constitute notice, to:

 

	
  

	
Ronald J. Stauber, Inc.

	
  

	
1880 Century Park East Suite 315

	
  

	
Los Angeles, CA  90067

	
  

	
Attn: Ronald J. Stauber

 

	
  

	
If to Buyer

 

	
  

	
H.D.D. LLC

	
  

	
P.O. Box 1532

	
  

	
Healdsburg, CA  95448

	
  

	
Attn: Managers

 

	
  

	
With a copy, which shall not constitute notice, to:

 

	
  

	
Spaulding McCullough & Tansil LLP

	
  

	
90 South E Street, Suite 200

	
  

	
Santa Rosa, CA  95404

	
  

	
Attn: Kevin J. McCullough

 

 

	 	
11.

	
Miscellaneous Provisions.

 

11.1. Further Assurances.  Each party shall execute and deliver such papers, documents, and instruments, and perform such acts as are necessary or appropriate to implement the terms of this Agreement and the intent of the parties hereto.

 

11.2. Survival.  Except as otherwise provided herein, all of the terms, representations, warranties, covenants, and other provisions of this Agreement shall survive and remain in effect after the Closing Date.

 

11.3. Expenses.  Each party shall pay its own costs and expenses, including, without limitation, the fees and expenses of their respective legal counsel and financial advisers incidental to the execution of this Agreement and the consummation of the transactions contemplated hereby.

 

11.4. Entire Agreement.  This Agreement constitutes the entire understanding and agreement of the parties with regard to the subject matter hereof and supersedes all prior understandings or agreements of the parties, whether written or oral.

 

11.5. Amendments.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the party or parties to be bound thereby.

 

  

13

  

 

11.6. Waivers.  No delay in the exercise of any right or remedy under this Agreement shall constitute a waiver thereof and the waiver by any party of any right or remedy under this Agreement on any one occasion shall not be deemed a waiver of such right or remedy on any subsequent occasion.

 

11.7. Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties and their respective heirs, executors, administrators, legal representatives, successors, and assigns.

 

11.8. Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

11.9. Survival.  Except as otherwise provided herein, all of the terms, representations, warranties, covenants, and other provisions of this Agreement shall survive and remain in effect after the date of this Agreement.

 

11.10. Construction.  Any rule of construction to the affect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Agreement.  Every covenant, term, and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party.  All words used herein will be construed to be of the gender or number the circumstances require.  Terms that are not specifically defined herein shall be given their ordinary meaning.  Every exhibit, schedule, attachment, or other appendix attached to this Agreement and referred to herein shall constitute a part of this Agreement and is hereby incorporated herein by reference.  Unless the context clearly requires otherwise, (i) plural and singular numbers will each be construed to include the other; (ii) the masculine, feminine, and neutral genders will each be construed to include the others; (iii) "shall," "will," "must," "agree," and "covenants" are each mandatory; (iv) "may" is permissive; (v) "or" is not exclusive; (vi) "includes" and "including" are not limiting; and (vii) "knowledge" will mean actual knowledge.

 

11.11. Headings.  The titles and subtitles used in this Agreement are used for convenience only and shall not be considered in construing or interpreting this Agreement.

 

11.12. Governing Law; Venue.  This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California.  The parties hereby acknowledge and agree that this Agreement was made in the County of Sonoma in the State of California, and hereby consent to the exclusive jurisdiction and venue of such county.

 

11.13. Dispute Resolution.

 

  

14

  

 

(a)           Mutual Discussion.  If any claim, controversy, or dispute of any kind whatsoever (a "Dispute") shall arise among the parties (including their subsidiaries and affiliates) in connection with, relating to, or arising out of this Agreement or any other agreement contemplated hereby, including without limitation the interpretation, performance, nonperformance, or termination hereof or thereof, the parties shall initially attempt to settle such Dispute through mutual discussion.  Such request shall be made by any party hereto by written notice to the other parties referencing this provision.  If such Dispute has not been resolved through mutual discussion within thirty (30) days following such notice, such Dispute shall be settled by binding arbitration pursuant to Section 11.13(b) hereof.

 

(b)           Arbitration.  Arbitration shall be conducted by the Arbitration and Mediation Center (the "AMC") of Sonoma County or such other arbitration service mutually agreeable to the parties.  Arbitration shall be conducted in Sonoma County, California, and in accordance with the California Arbitration Act, section 1280-1294.2 of the California Code of Civil Procedure, provided such rules are not inconsistent with the express provisions set forth in this Agreement.  Arbitration shall be conducted by one (1) arbitrator with the AMC panel or such other arbitrator mutually agreeable to the parties, and judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction.  Discovery may be conducted if determined necessary or appropriate by the arbitrator, but such arbitrator shall limit such discovery to the minimum necessary for preparation of the parties' prosecution and defense of any claim made in arbitration.  Costs of arbitration (including attorneys' fees and expenses) shall be made a part of the arbitrator's award to the prevailing party.  Arbitration pursuant to this Section 11.13 shall be the parties sole and exclusive venue for resolution of a Dispute.

 

(c)           Exclusions.  The dispute resolution provisions of this Section 11.13 shall not prohibit the parties from filing a judicial action to enable the recording of a notice of pending action or order of attachment, receivership, injunction, or other provisional remedy.

 

11.14. Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be or become prohibited or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

11.15. Attorneys’ Fees.  If any legal action or other proceeding, including arbitration or action for declaratory relief, is brought for the enforcement of this Agreement or because of an alleged dispute, breach, default, or misrepresentation in connection with this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs, in addition to any other relief to which the party may be entitled.  As used herein, "prevailing party" shall include without limitation:  (i) the party who dismisses an action in exchange for sums allegedly due; (ii) the party who receives performance from the other party of an alleged breach of covenant of a desired remedy where that is substantially equal to the relief sought in an action; or (iii) the party determined to be the prevailing party by a court of law or arbitrator.

 

11.16. Time of Essence.  Time is of the essence with respect to the terms, covenants, and conditions contained herein.

 

  

15

  

 

11.17. Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

 

 

  

16

  

 

 

IN WITNESS THEREOF. the parties have executed this Membership Interest Purchase Agreement as of the date first set forth above.

	  	
SELLER:

	  	  	  
	  	/s/ Brandon Stauber
	  	
Brandon Stauber

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	
BUYER:

	  	  	  
	  	
H.D.D. LLC.

	  	
a California limited liability company

	  	  	  
	  	  	  
	  	
By:

	
/s/ Phillip L. Hurst, Manager

	  	  	
Phillip L. Hurst, Manager

 

Exhibits:

A - Form of Promissory Note

B - Financial Statements of Company

C - Form of Noncompetition Agreement 

D - Form of Consulting Agreement

E - Form of Assignment of Membership Interest 

F - Form of Spousal Consent

 

  

  

 

 EXHIBIT A 

 

 FORM OF PROMISSORY NOTE 

 

 

 

 

 

 

 Exhibit A to MIPA – Form of Promissory Note 

 

 

 

 

 PROMISSORY NOTE 

	
 $50,000 

	
 Santa Rosa, California 

	
 July ______, 2012 

 

 FOR VALUE RECEIVED, H.D.D. LLC, a California limited liability company (“Maker”), promises to pay to the order of Brandon Stauber (“Payee”) the principal sum of Fifty Thousand Dollars ($50,000). 

 

 This Promissory Note (this “Note”) shall be payable on or before March 1, 2013.  No interest shall accrue on this Note. 

 

 This Note is issued pursuant to the terms and conditions of that certain Membership Interest Purchase Agreement dated as of July ____, 2012 by and between Maker and Payee (the “Purchase Agreement”). 

 

 Maker expressly reserves against Payee the right to offset against any sums due and payable under this Note an amount equal to the damages sustained by Maker in accordance with Section 8.2 of the Purchase Agreement. 

 

 In the event of default in the terms and conditions of this Note (or any document or agreement securing performance hereunder), such default not being cured, the outstanding principal balance and unpaid accrued interest shall, at the option of Payee, become immediately due and payable.  No delay in the exercise of any right or remedy hereunder shall constitute a waiver thereof and the waiver of any right or remedy hereunder on any one occasion shall not be deemed to be a waiver of such right or remedy on any subsequent occasion. 

 

 Maker shall pay a late charge of three percent (3%) of the payment due if not received by Payee within ten (10) days after issuance of written notice that such payment is due.  The parties agree that such sum is not a penalty, but represents the reasonable costs that would be incurred by Payee for any such delay in payment.  In addition, interest shall accrue on any principal amount past due at the rate equal to six percent (6%) per annum, computed on the basis of a 360-day year. 

 

 Presentment and demand for payment, notice of dishonor, protest and notice of protest are hereby waived. 

 

 If any claim, controversy, or dispute (a “Dispute”) shall arise between Maker and Payee in connection with this Note, Maker agrees to settle such Dispute in accordance with the provisions set forth in Section 11.13 of the Purchase Agreement. 

 

 [SIGNATURE PAGE FOLLOWS] 

 

 

 Exhibit A to MIPA – Form of Promissory Note 

 

 

 

 IN WITNESS WHEREOF, Maker has executed this Promissory Note as of the date first set forth above. 

 

	   	

 MAKER 

	   
	   	   	   
	   	 H.D.D. LLC, 

 a California limited liability company 

	   
	   	   	   
	   	   	   
	   	   	   	   
	
 

	
 By:  

	 	   
	   	   	

 Phillip L. Hurst, Manager 

	   
	   	   	 	   
	   	   	   	   

 

 

 

 

 

 

 Exhibit A to MIPA – Form of Promissory Note 

 

 

 

 

 EXHIBIT B 

 

 FINANCIAL STATEMENTS OF COMPANY 

 

 

 

 

 

 Exhibit B to MIPA – Financial Statements 

 

 

 

 

	
 9:46 AM 

 3/26/12 

 Accrual Basis 

	
 The Wine Spies, LLC 

 Balance Sheet 

 As of December 31, 2011 

	   

	    	   	
 Dec 31, 11 

	   
	
 ASSETS 

	   	   	   
	
 Current Assets 

	   	   	   
	
 Checking/Savings 

	   	   	   
	
 MoneyBookers 

	   	   	 4.09 	   
	
 UBOC Checking 

	   	   	 123,779.80 	   
	
 UBOC Savings 

	   	   	 10.02 	   
	
 Total Checking/Savings 

	   	   	 123,793.91 	   
	
 Accounts Receivable 

	   	   	   	   
	
 Accounts Receivable 

	   	   	 793.50 	   
	
 Total Accounts Receivable 

	   	   	 793.50 	   
	
 Total Current Assets 

	   	   	 124,587.41 	   
	
 Other Assets 

	   	   	   	   
	
 Security Deposits 

	   	   	 550.00 	   
	
 Total Other Assets 

	   	   	 550.00 	   
	
 TOTAL ASSETS 

	   	   	 125,137.41 	   
	    	   	   	   	   
	
 LIABILITIES & EQUITY 

	   	   	   	   
	
 Liabilities 

	   	   	   	   
	
 Current Liabilities 

	   	   	   	   
	
 Accounts Payable 

	   	   	   	   
	
 Accounts Payable 

	   	   	 117,018.12 	   
	
 Total Accounts Payable 

	   	   	 117,018.12 	   
	
 Credit Cards 

	   	   	   	   
	
 Visa Credit Card 

	   	   	 945.56 	   
	
 Total Credit Cards 

	   	   	 945.56 	   
	
 Other Current Liabilities 

	   	   	   	   
	
 Sales Tax Payable 

	   	   	 3,602.07 	   
	
 Total Other Current Liabilities 

	   	   	 3,602.07 	   
	
 Total Current Liabilities 

	   	   	 121,565.75 	   
	
 Total Liabilities 

	   	   	 121,565.75 	   
	    	   	   	   	   
	
 Equity 

	   	   	   	   
	
 Retained Earnings 

	   	   	 2,625.58 	   
	
 Net Income 

	   	   	 946.08 	   
	
 Total Equity 

	   	   	 3,571.66 	   
	    	   	   	   	   
	
 TOTAL LIABILITIES & EQUITY 

	   	   	 125,137.41 	   

 

 Exhibit B to MIPA – Financial Statements 

 

 

 

 

	
 9:47 AM 

 03/26/12 

	
 The Wine Spies, LLC 

 Statement of Cash Flows 

 January through December 2011 

	   

	    	   	
 Jan – Dec 11 

	   
	
 OPERATING ACTIVITIES 

	   	   	   
	
 Net Income 

	   	   	 946.08 	   
	
 Adjustments to reconcile Net Income  

 to net cash provided by operations: 

	   	   	   	   
	
 Accounts Receivable 

	   	   	 391.50 	   
	
 Accounts Payable 

	   	   	 46,844.67 	   
	
 Visa Credit Card 

	   	   	 78.83 	   
	
 Sales Tax Payable 

	   	   	 246.69 	   
	
 Net cash provided by Operating Activities 

	   	   	 48,507.77 	   
	    	   	   	   	   
	
 INVESTING ACTIVITIES 

	   	   	   	   
	
 Vehicles: Delivery Van 

	   	   	 2,194.47 	   
	
 Net cash provided by Investing Activities 

	   	   	 2,194.47 	   
	
 Net cash increase for period 

	   	   	 50,702.24 	   
	
 Cash at beginning of period 

	   	   	 73,091.67 	   
	
 Cash at end of period 

	   	   	 123,793.91 	   

 

 Exhibit B to MIPA – Financial Statements 

 

 

 

 

	
 9:45 AM 

 03/26/12 

 Accrual Basis 

	
 The Wine Spies, LLC 

 Profit & Loss 

 January through December 2011 

	   

 

	    	   	

 Jan - Mar 11 

	   	   	

 Apr - Jun 11 

	   	   	

 Jul - Sep 11 

	   	   	

 Oct - Dec 11 

	   	   	

 TOTAL 

	   
	
 Ordinary Income/Expense 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Income 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Sales 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 CQD Incentive 

	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 1,981.13 	   	   	   	 1,981.13 	   
	
 Internet Wine Sales 

	   	   	 341,520.37 	   	   	   	 431,384.60 	   	   	   	 369,167.56 	   	   	   	 449,526.19 	   	   	   	 1,591,598.72 	   
	
 Marketing Service Fees 

	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 9.79 	   	   	   	 0.00 	   	   	   	 9.79 	   
	
 Retail Sales 

	   	   	 2,344.44 	   	   	   	 1,789.91 	   	   	   	 1,922.61 	   	   	   	 2,720.70 	   	   	   	 8,777.66 	   
	
 Shipping and Handling 

	   	   	 9,812.14 	   	   	   	 11,959.62 	   	   	   	 10,594.06 	   	   	   	 12,074.35 	   	   	   	 44,440.17 	   
	
 Total Sales 

	   	   	 353,676.95 	   	   	   	 445,134.13 	   	   	   	 381,694.02 	   	   	   	 466,302.37 	   	   	   	 1,646,807.47 	   
	
 Total Income 

	   	   	 353,676.95 	   	   	   	 445,134.13 	   	   	   	 381,694.02 	   	   	   	 466,302.37 	   	   	   	 1,646,807.47 	   
	
 Cost of Goods Sold 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Cost of Wine Sold 

	   	   	 207,112.24 	   	   	   	 275,550.93 	   	   	   	 225,741.54 	   	   	   	 280,200.43 	   	   	   	 988,605.14 	   
	
 Merchant Processing Fees 

	   	   	 11,471.98 	   	   	   	 15,633.01 	   	   	   	 15,962.64 	   	   	   	 17,885.14 	   	   	   	 60,952.77 	   
	
 Packaging Expense 

	   	   	 9,012.83 	   	   	   	 10,339.21 	   	   	   	 8,190.41 	   	   	   	 10,456.67 	   	   	   	 37,999.12 	   
	
 Sales Promotions and Discounts 

	   	   	 2,129.78 	   	   	   	 3,244.94 	   	   	   	 4,137.50 	   	   	   	 3,941.04 	   	   	   	 13,453.26 	   
	         Shipping Expense 	   	   	  38,222.97 	   	   	   	 35,326.95 	   	   	   	  38,045.30 	   	   	   	  48,553.03 	   	   	   	  160,148.25 	   
	

 Total COGS 

	   	   	  267,949.80 	   	   	   	  340,095.04 	   	   	   	  292,077.39 	   	   	   	  361,036.31 	   	   	   	  1,261,158.54 	   

	
 Gross Profit 

	   	   	 85,727.15 	   	   	   	 105,039.09 	   	   	   	 89,616.63 	   	   	   	 105,266.06 	   	   	   	 385,648.93 	   
	
 Expense 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Automobile Expense 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Employee Automobile Expense 

	   	   	 3,060.00 	   	   	   	 3,000.00 	   	   	   	 3,060.00 	   	   	   	 3,060.00 	   	   	   	 12,180.00 	   
	
 Fuel Expense 

	   	   	 806.03 	   	   	   	 910.12 	   	   	   	 960.00 	   	   	   	 911.02 	   	   	   	 3,587.17 	   
	
 License Fees 

	   	   	 211.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 211.00 	   
	
 Repairs & Maintenance 

	   	   	 112.00 	   	   	   	 898.65 	   	   	   	 1,023.75 	   	   	   	 24.92 	   	   	   	 2,059.32 	   
	
 Automobile Expense - Other 

	   	   	 0.00 	   	   	   	 1.25 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 1.25 	   
	
 Total Automobile Expense 

	   	   	 4,189.03 	   	   	   	 4,810.02 	   	   	   	 5,043.75 	   	   	   	 3,995.94 	   	   	   	 18,038.74 	   
	
 Bank Service Charges 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Payroll Processing Expense 

	   	   	 89.97 	   	   	   	 89.97 	   	   	   	 89.97 	   	   	   	 89.97 	   	   	   	 359.88 	   
	
 Bank Service Charges - Other 

	   	   	 0.00 	   	   	   	 100.00 	   	   	   	 -38.53 	   	   	   	 0.01 	   	   	   	 61.48 	   
	
 Total Bank Service Charges 

	   	   	 89.97 	   	   	   	 189.97 	   	   	   	 51.44 	   	   	   	 89.98 	   	   	   	 421.36 	   
	
 Depreciation Expense 

	   	   	 658.33 	   	   	   	 658.33 	   	   	   	 658.33 	   	   	   	 219.48 	   	   	   	 2,194.47 	   
	
 Dues and Subscriptions 

	   	   	 0.00 	   	   	   	 98.95 	   	   	   	 49.95 	   	   	   	 99.90 	   	   	   	 248.80 	   
	
 Insurance 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Automobile Insurance 

	   	   	 402.90 	   	   	   	 0.00 	   	   	   	 420.90 	   	   	   	 0.00 	   	   	   	 823.80 	   
	
 Liability Insurance 

	   	   	 173.39 	   	   	   	 173.37 	   	   	   	 256.74 	   	   	   	 373.00 	   	   	   	 976.50 	   
	
 Workers Compensation 

	   	   	 210.83 	   	   	   	 210.82 	   	   	   	 312.18 	   	   	   	 490.04 	   	   	   	 1,223.87 	   
	
 Insurance - Other 

	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 47.00 	   	   	   	 47.00 	   
	
 Total Insurance 

	   	   	 787.12 	   	   	   	 384.19 	   	   	   	 989.82 	   	   	   	 910.04 	   	   	   	 3,071.17 	   

 

 Exhibit B to MIPA – Financial Statements 

 

 

 

 

	   	   	   	

 Jan - Mar 11 

	   	   	   	

 Apr - Jun 11 

	   	   	   	

 Jul - Sep 11 

	   	   	   	

 Oct - Dec 11 

	   	   	   	

 TOTAL 

	   
	
 Internet Hosting 

	   	   	 1,497.90 	   	   	   	 1,154.70 	   	   	   	 1,154.70 	   	   	   	 1,579.70 	   	   	   	 5,387.00 	   
	
 Licenses and Permits 

	   	   	 549.51 	   	   	   	 564.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 1,113.51 	   
	
 Marketing & Advertising 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Affiliate Programs 

	   	   	 600.00 	   	   	   	 800.00 	   	   	   	 700.00 	   	   	   	 700.00 	   	   	   	 2,800.00 	   
	
 Email Marketing 

	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 405.00 	   	   	   	 405.00 	   	   	   	 810.00 	   
	
 Public Relations 

	   	   	 0.00 	   	   	   	 246.66 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 246.66 	   
	
 Search Engine Marketing 

	   	   	 300.00 	   	   	   	 194.82 	   	   	   	 300.00 	   	   	   	 300.00 	   	   	   	 1,094.82 	   
	
 Marketing & Advertising - Other 

	   	   	 35.00 	   	   	   	 35.00 	   	   	   	 24.11 	   	   	   	 0.00 	   	   	   	 94.11 	   
	
 Total Marketing & Advertising 

	   	   	 935.00 	   	   	   	 1,276.48 	   	   	   	 1,429.11 	   	   	   	 1,405.00 	   	   	   	 5,045.59 	   
	
 Merchant Fees 

	   	   	 308.42 	   	   	   	 303.57 	   	   	   	 310.27 	   	   	   	 329.17 	   	   	   	 1,251.43 	   
	
 Office Expenses 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Office Equipment 

	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 48.48 	   	   	   	 0.00 	   	   	   	 48.48 	   
	
 Office Supplies 

	   	   	 1,003.25 	   	   	   	 343.69 	   	   	   	 591.15 	   	   	   	 992.91 	   	   	   	 2,931.00 	   
	
 Postage and Delivery 

	   	   	 28.79 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 211.92 	   	   	   	 240.71 	   
	
 Office Expenses - Other 

	   	   	 0.00 	   	   	   	 4,000.00 	   	   	   	 0.00 	   	   	   	 9,200.00 	   	   	   	 13,200.00 	   
	
 Total Office Expenses 

	   	   	 1,032.04 	   	   	   	 4,343.69 	   	   	   	 639.63 	   	   	   	 10,404.83 	   	   	   	 16,420.19 	   
	
 Payroll Expenses 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Bonus & Holiday Pay 

	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 350.00 	   	   	   	 350.00 	   
	
 Guaranteed Salary 

	   	   	 3,000.00 	   	   	   	 16,000.00 	   	   	   	 12,300.00 	   	   	   	 9,000.00 	   	   	   	 40,300.00 	   
	
 Hourly Payroll 

	   	   	 4,160.70 	   	   	   	 4,672.25 	   	   	   	 5,266.52 	   	   	   	 5,767.08 	   	   	   	 19,866.55 	   
	
 Outside Contractors 

	   	   	 1,026.66 	   	   	   	 539.22 	   	   	   	 812.00 	   	   	   	 829.00 	   	   	   	 3,206.88 	   
	
 Salaries 

	   	   	 53,500.00 	   	   	   	 59,500.00 	   	   	   	 55,000.00 	   	   	   	 61,500.00 	   	   	   	 229,500.00 	   
	
 Total Payroll Expenses 

	   	   	 61,687.36 	   	   	   	 80,711.47 	   	   	   	 73,378.52 	   	   	   	 77,446.08 	   	   	   	 293,223.43 	   
	
 Professional Fees 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Accounting 

	   	   	 49.95 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 49.95 	   
	
 Logistics 

	   	   	 170.00 	   	   	   	 0.00 	   	   	   	 250.00 	   	   	   	 145.00 	   	   	   	 565.00 	   
	
 Total Professional Fees 

	   	   	 219.95 	   	   	   	 0.00 	   	   	   	 250.00 	   	   	   	 145.00 	   	   	   	 614.95 	   
	
 Rent 

	   	   	 1,650.00 	   	   	   	 1,650.00 	   	   	   	 1,650.00 	   	   	   	 1,650.00 	   	   	   	 6,600.00 	   
	
 Software Development 

	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 326.25 	   	   	   	 326.25 	   
	
 Taxes 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Employer FICA 

	   	   	 3,574.97 	   	   	   	 3,978.67 	   	   	   	 3,736.53 	   	   	   	 3,206.45 	   	   	   	 14,496.62 	   
	
 Employer FUTA 

	   	   	 145.29 	   	   	   	 37.37 	   	   	   	 26.62 	   	   	   	 13.69 	   	   	   	 222.97 	   
	
 Employer Medicare 

	   	   	 836.09 	   	   	   	 930.49 	   	   	   	 873.86 	   	   	   	 980.46 	   	   	   	 3,620.90 	   
	
 EMPLOYER UNEM. CALC 

	   	   	 369.47 	   	   	   	 158.85 	   	   	   	 150.84 	   	   	   	 77.51 	   	   	   	 756.67 	   
	
 State Taxes 

	   	   	 5,414.24 	   	   	   	 800.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 6,214.24 	   
	
 TRAINING TAX 

	   	   	 0.73 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 0.73 	   
	
 UNEMP TAX ADJUSTMENT 

	   	   	 -0.73 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 -0.73 	   
	
 Total Taxes 

	   	   	 10,340.06 	   	   	   	 5,905.38 	   	   	   	 4,787.85 	   	   	   	 4,278.11 	   	   	   	 25,311.40 	   

 

 Exhibit B to MIPA – Financial Statements 

 

 

 

 

	
 9:45 AM 

 03/26/12 

 Accrual Basis 

	
 The Wine Spies, LLC 

 Profit & Loss 

 January through December 2011 

	   

	    	   	

 

 Jan - Mar 11 

	   	   	

 

 Apr - Jun 11 

	   	   	

 

 Jul - Sep 11 

	   	   	

 

 Oct - Dec 11 

	   	   	

 

 TOTAL 

	   
	
 Telephone 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Employee Telephone Expense 

	   	   	 1,650.00 	   	   	   	 1,650.00 	   	   	   	 1,650.00 	   	   	   	 1,650.00 	   	   	   	 6,600.00 	   
	
 Telephone - Other 

	   	   	 0.00 	   	   	   	 70.00 	   	   	   	 0.00 	   	   	   	 60.00 	   	   	   	 130.00 	   
	
 Total Telephone 

	   	   	 1,650.00 	   	   	   	 1,720.00 	   	   	   	 1,650.00 	   	   	   	 1,710.00 	   	   	   	 6,730.00 	   
	
 Travel & Ent Meals 

	   	   	 32.25 	   	   	   	 29.10 	   	   	   	 92.35 	   	   	   	 113.75 	   	   	   	 267.45 	   
	
 Total Travel & Ent 

	   	   	 32.25 	   	   	   	 29.10 	   	   	   	 92.35 	   	   	   	 113.75 	   	   	   	 267.45 	   
	
 Total Expense 

	   	   	 85,626.94 	   	   	   	 103,799.85 	   	   	   	 92,135.72 	   	   	   	 104,703.23 	   	   	   	 386,265.74 	   
	
 Net Ordinary Income 

	   	   	 100.21 	   	   	   	 1,239.24 	   	   	   	 -2,519.09 	   	   	   	 562.83 	   	   	   	 -616.81 	   
	
 Other Income/Expense 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Other Income 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Other Income 

	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	
 Tax Discounts 

	   	   	 237.22 	   	   	   	 25.98 	   	   	   	 1,183.50 	   	   	   	 16.19 	   	   	   	 1,462.89 	   
	
 Other Income - Other 

	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 0.00 	   	   	   	 100.00 	   	   	   	 100.00 	   
	
 Total Other Income 

	   	   	 237.22 	   	   	   	 25.98 	   	   	   	 1,183.50 	   	   	   	 116.19 	   	   	   	 1,562.89 	   
	
 Total Other Income 

	   	   	 237.22 	   	   	   	 25.98 	   	   	   	 1,183.50 	   	   	   	 116.19 	   	   	   	 1,562.89 	   
	
 Net Other Income 

	   	   	 237.22 	   	   	   	 25.98 	   	   	   	 1,183.50 	   	   	   	 116.19 	   	   	   	 1,562.89 	   
	
 Net Income 

	   	   	 337.43 	   	   	   	 1,265.22 	   	   	   	 -1,335.59 	   	   	   	 679.02 	   	   	   	 946.08 	   

 

 Exhibit B to MIPA – Financial Statements 

 

 

 

 

	
 9:54 AM 

 07/30/12 

 Accrual Basis 

	
 The Wine Spies, LLC 

 Balance Sheet 

 As of June 30, 2012 

	   

	    	   	
 Jun 30, 12 

	   
	
 ASSETS 

	   	   	   
	
 Current Assets 

	   	   	   
	
 Checking/Savings 

	   	   	   
	
 MoneyBookers 

	   	   	 4.09 	   
	
 UBOC Checking 

	   	   	 131,523.57 	   
	
 UBOC Savings 

	   	   	 10.02 	   
	
 Total Checking/Savings 

	   	   	 131,537.68 	   
	
 Accounts Receivable 

	   	   	   	   
	
 Accounts Receivable 

	   	   	 793.50 	   
	
 Total Accounts Receivable 

	   	   	 793.50 	   
	    	   	   	   	   
	
 Total Current Assets 

	   	   	 132,331.18 	   
	
 Other Assets 

	   	   	   	   
	
 Security Deposits 

	   	   	 550.00 	   
	
 Total Other Assets 

	   	   	 550.00 	   
	
 TOTAL ASSETS 

	   	   	 132,881.18 	   
	
 LIABILITIES & EQUITY 

	   	   	   	   
	
 Liabilities 

	   	   	   	   
	
 Current Liabilities 

	   	   	   	   
	
 Accounts Payable 

	   	   	   	   
	
 Accounts Payable 

	   	   	 130,334.36 	   
	
 Total Accounts Payable 

	   	   	 130,334.36 	   
	
 Credit Cards 

	   	   	   	   
	
 Visa Credit Card 

	   	   	 448.96 	   
	
 Total Credit Cards 

	   	   	 448.96 	   
	
 Other Current Liabilities 

	   	   	   	   
	
 Sales Tax Payable 

	   	   	 937.24 	   
	
 Total Other Current Liabilities 

	   	   	 937.24 	   
	
 Total Current Liabilities 

	   	   	 131,720.56 	   
	
 Total Liabilities 

	   	   	 131,720.56 	   
	    	   	   	   	   
	
 Equity 

	   	   	   	   
	
 Retained Earnings 

	   	   	 3,571.66 	   
	
 Net Income 

	   	   	 -2,411.04 	   
	
 Total Equity 

	   	   	 1,160.62 	   
	    	   	   	   	   
	
 TOTAL LIABILITIES & EQUITY 

	   	   	 132,881.18 	   

 

 Exhibit B to MIPA – Financial Statements 

 

 

 

 

	
 9:54 AM 

 07/30/12 

	
 The Wine Spies, LLC 

 Statement of Cash Flows 

 January through June 2012 

	   

	    	   	
 Jan - Jun 12 

	   
	
 OPERATING ACTIVITIES 

	   	   	   
	
 Net Income 

	   	   	 -2,411.04 	   
	
 Adjustments to reconcile Net Income  

 to net cash provided by operations: 

	   	   	   	   
	
 Accounts Receivable 

	   	   	   	   
	
 Accounts Payable 

	   	   	 13,316.24 	   
	
 Visa Credit Card 

	   	   	 -496.60 	   
	
 Sales Tax Payable 

	   	   	 -2,664.83 	   
	
 Net cash provided by Operating Activities 

	   	   	 7,743.77 	   
	    	   	   	   	   
	
 Net cash increase for period 

	   	   	 7,743.77 	   
	
 Cash at beginning of period 

	   	   	 123,793.91 	   
	
 Cash at end of period 

	   	   	 131,537.68 	   

 

 Exhibit B to MIPA – Financial Statements 

 

 

 

	
 9:53 AM 

 07/30/12 

 Accrual Basis 

	
 The Wine Spies, LLC 

 Profit & Loss 

 January through June 2012 

	   

	    	   	
 Jan - Jun 12 

	   
	
 Ordinary Income/Expense 

	   	   	   
	
 Income 

	   	   	   
	
 Sales 

	   	   	   
	
 CQD Incentive 

	   	   	 0.00 	   
	
 Discounts Given 

	   	   	 -66.48 	   
	
 Internet Wine Sales 

	   	   	 657,496.74 	   
	
 Retail Sales 

	   	   	 1,560.81 	   
	
 Shipping and Handling 

	   	   	 18,712.42 	   
	
 Total Sales 

	   	   	 677,703.49 	   
	
 Total Income 

	   	   	 677,703.49 	   
	
 Cost of Goods Sold 

	   	   	   	   
	
 Cost of Wine Sold 

	   	   	 398,164.43 	   
	
 Merchant Processing Fees 

	   	   	 27,371.89 	   
	
 Packaging Expense 

	   	   	 15,041.90 	   
	
 Sales Promotions and Discounts 

	   	   	 6,008.08 	   
	
 Shipping Expense 

	   	   	 78,997.66 	   
	
 Total COGS 

	   	   	 525,583.96 	   
	
 Gross Profit 

	   	   	 152,119.53 	   
	
 Expense 

	   	   	   	   
	
 Automobile Expense 

	   	   	   	   
	
 Employee Automobile Expense 

	   	   	 6,140.00 	   
	
 Fuel Expense 

	   	   	 1,615.01 	   
	
 License Fees 

	   	   	 190.00 	   
	
 Repairs & Maintenance 

	   	   	 56.66 	   
	
 Automobile Expense - Other 

	   	   	 1.25 	   
	
 Total Automobile Expense 

	   	   	 8,002.92 	   
	
 Bank Service Charges 

	   	   	   	   
	
 Payroll Processing Expense 

	   	   	 179.94 	   
	
 Total Bank Service Charges 

	   	   	 179.94 	   
	
 Dues and Subscriptions 

	   	   	 484.00 	   
	
 Insurance 

	   	   	   	   
	
 Automobile Insurance 

	   	   	 420.90 	   
	
 Liability Insurance 

	   	   	 361.50 	   
	
 Workers Compensation 

	   	   	 422.54 	   
	
 Total Insurance 

	   	   	 1,204.94 	   
	
 Internet Hosting 

	   	   	 2,802.60 	   
	
 Licenses and Permits 

	   	   	 1,103.91 	   
	
 Marketing & Advertising 

	   	   	   	   
	
 Affiliate Programs 

	   	   	 1,200.00 	   
	
 Public Relations 

	   	   	 37.92 	   
	
 Search Engine Marketing 

	   	   	 600.00 	   
	
 Marketing & Advertising - Other 

	   	   	 11.00 	   
	
 Total Marketing & Advertising 

	   	   	 1,848.92 	   
	
 Merchant Fees 

	   	   	 605.54 	   
	
 Miscellaneous 

	   	   	 82.25 	   
	
 Office Expenses 

	   	   	   	   
	
 Office Equipment 

	   	   	 21.64 	   
	
 Office Supplies 

	   	   	 1,478.12 	   
	
 Office Expenses - Other 

	   	   	 63.88 	   
	
 Total Office Expenses 

	   	   	 1,563.64 	   
	
 Payroll Expenses 

	   	   	   	   
	
 Guaranteed Salary 

	   	   	 2,000.00 	   
	
 Hourly Payroll 

	   	   	 12,046.07 	   
	
 Outside Contractors 

	   	   	 1,623.00 	   
	
 Salaries 

	   	   	 96,500.00 	   
	
 Total Payroll Expenses 

	   	   	 112,169.07 	   

 

 Exhibit B to MIPA – Financial Statements 

 

 

 

 

	
 9:53 AM 

 07/30/12 

 Accrual Basis 

	
 The Wine Spies, LLC 

 Profit & Loss 

 January through June 2012 

	   

	    	   	
 Jan - Jun 12 

	   
	
 Professional Fees 

	   	   	   
	
 Accounting 

	   	   	 94.90 	   
	
 Logistics 

	   	   	 395.00 	   
	
 Total Professional Fees 

	   	   	 489.90 	   
	
 Rent 

	   	   	 3,300.00 	   
	
 Software Development 

	   	   	 79.00 	   
	
 Taxes 

	   	   	   	   
	
 Employer FICA 

	   	   	 6,729.86 	   
	
 Employer FUTA 

	   	   	 223.92 	   
	
 Employer Medicare 

	   	   	 1,573.92 	   
	
 Employer Taxes 

	   	   	 369.14 	   
	
 EMPLOYER UNEM. CALC 

	   	   	 1,053.46 	   
	
 State Taxes 

	   	   	 7,040.40 	   
	
 TRAINING TAX 

	   	   	 32.98 	   
	
 Total Taxes 

	   	   	 17,023.68 	   
	
 Telephone 

	   	   	   	   
	
 Employee Telephone Expense 

	   	   	 3,300.00 	   
	
 Total Telephone 

	   	   	 3,300.00 	   
	
 Travel & Ent 

	   	   	   	   
	
 Meals 

	   	   	 177.10 	   
	
 Travel 

	   	   	 1.25 	   
	
 Total Travel & Ent 

	   	   	 178.35 	   
	
 Total Expense 

	   	   	 154,418.66 	   
	
 Net Ordinary Income 

	   	   	 -2,299.13 	   
	
 Other Income/Expense 

	   	   	   	   
	
 Other Income 

	   	   	   	   
	
 Other Income 

	   	   	   	   
	
 Tax Discounts 

	   	   	 -45.43 	   
	
 Other Income - Other 

	   	   	 -66.48 	   
	
 Total Other Income 

	   	   	 -111.91 	   
	
 Total Other Income 

	   	   	 -111.91 	   
	
 Net Other Income 

	   	   	 -111.91 	   
	
 Net Income 

	   	   	 -2,411.04 	   

 

 Exhibit B to MIPA – Financial Statements 

 

 

 

 

 EXHIBIT C 

 

 FORM OF NONCOMPETITION AGREEMENT 

 

 

 

 

 

 

 Exhibit C – Form of Noncompetition Agreement 

 

 

 

 

 NONCOMPETITION, NONSOLICITATION AND 

 NONDISCLOSURE AGREEMENT 

 

 THIS NONCOMPETITION, NONSOLICITATION AND NONDISCLOSURE AGREEMENT (this “Agreement”), dated as of July ____, 2012, is made by and among H.D.D. LLC, a California limited liability company (“HDD”), THE WINE SPIES, LLC, a California limited liability company (the “Company”), and BRANDON STAUBER (“Seller”). 

 

 RECITALS 

 

	
    

	
 A. 

	
 Pursuant to that certain Membership Interest Purchase Agreement (the “Purchase Agreement”), dated as of July __, 2012, by and between HDD and Seller, HDD acquired fifty percent (50%) of the total membership interests of the Company (the “Purchased Interest”). 

 

	
    

	
 B. 

	
 Seller owned fifty percent (50%) of the outstanding membership interests of the Company prior to the consummation of the transactions contemplated by the Purchase Agreement. 

 

	
    

	
 C. 

	
 HDD would not be willing to consummate the transactions contemplated by the Purchase Agreement unless Seller agreed to be bound by the terms of this Agreement to protect the goodwill of the Company. 

 

	
    

	
 D. 

	
 In order to induce HDD to consummate the transactions contemplated by the Purchase Agreement, Seller has agreed to execute and deliver to the Company this Agreement. 

 

 AGREEMENT 

 

 NOW, THEREFORE, in consideration of the value of the goodwill included in the purchase price contemplated by the Purchase Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 

 

 1. Definitions.  Capitalized terms not expressly defined in this Agreement shall have the meanings ascribed to them in the Purchase Agreement. 

 

 2. Term.  The term of this Agreement shall be for the period commencing on the date of this Agreement and ending four (4) years after the date of this Agreement (the “Term”). 

 

 3. Consideration.  Consideration for the execution and delivery of this Agreement by Seller shall be Fifteen Thousand Dollars ($15,000) which is included in HDD’s payment of the Purchase Price under the Purchase Agreement. 

 

 4. Noncompetition. 

 

 Exhibit C – Form of Noncompetition Agreement 

 

 

 

 

 (a) Noncompetition.  During the Term, Seller shall not, directly or indirectly, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing or control of, be employed by, engaged as a consultant by, associated with or in any manner connected with, or render services or advice or other aid to, or guarantee any obligation of, any person engaged in or planning to become engaged in any business or company whose products or activities compete in whole or in part with the Company (each, a “Competitive Company”), anywhere within the United States; provided, however, that Seller may purchase or otherwise acquire up to (but not more than) three percent (3%) of any class of securities of any person (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under the Securities Exchange Act of 1934, as amended.  Seller agrees that this covenant is reasonable with respect to its duration, geographical area and scope. 

 

 (b) Extension of Term.  In the event of a breach by Seller of any covenant set forth in this Section, without limiting the availability of any other remedy, the term of such covenant will be extended by the period of the duration of such breach. 

 

 5. Nonsolicitation. 

 

 (a) Non-Solicitation of Customers.  During the Term, Seller shall not directly or indirectly, solicit, or attempt to persuade, influence or induce, or assist any other person in so persuading or inducing, any customer or supplier of the Company to cease doing business with the Company or to reduce the amount of business it does with the Company.  Seller acknowledges that this covenant is necessary to enable the Company to maintain a stable customer and supplier base in order to remain in business, and that it would disrupt, damage, impair and interfere with the Company’s business if Seller were to engage in such solicitation. 

 

 (b) Non-Solicitation of Employees.  During the Term, Seller shall not directly or indirectly, solicit, or attempt to persuade, influence or induce, or assist any other person in so persuading or inducing, any employee of the Company to leave the employ of the Company, or to accept any other employment or position unless (in each case prior to any such inducement or attempted inducement) such employee is no longer employed by the Company or has given written notice of his or her intention to terminate employment with the Company resulting in his or her termination of employment with the Company.  Seller acknowledges that the purpose of this covenant is to enable the Company to maintain a stable workforce in order to remain in business, and that it would disrupt, damage, impair and interfere with the Company’s business if Seller were to engage in such solicitation. 

 

 (c) Extension of Term.  In the event of a breach by Seller of any covenant set forth in this Section, without limiting the availability of any other remedy, the term of such covenant will be extended by the period of the duration of such breach. 

 

 6. Nonuse.  Seller shall not use the terms “The Wine Spies,” “Agent White,” “Agent Red,” “Agent Sparkle,” or “Agent Blush,” or any trade or service name of the Company or any derivative or abbreviation of any of the foregoing in any Competitive Company or in any manner a reasonable person would find confusingly similar to the Company being operated by the Company, provided, however, that Seller may use the name “The Wine Spies” for his tax filings to the extent necessary.  In the event of a breach by Seller of any covenant set forth in this Section, without limiting the availability of any other remedy, the term of such covenant will be extended by the period of the duration of such breach. 

 

 Exhibit C – Form of Noncompetition Agreement 

 

 

 

 

 7. Nondisparagement.  During the Term, Seller shall not disparage the Company, the Company or any officer, director, shareholder, member, manager, officer, employee, or agent of the Company.  In the event of a breach by Seller of any covenant set forth in this Section, without limiting the availability of any other remedy, the term of such covenant will be extended by the period of the duration of such breach. 

 

 8. Nondisclosure. 

 

 (a) Confidential Information.  Seller acknowledges that he has occupied a position of trust and confidence with respect to the Company prior to the date hereof and has had access to and has become familiar with the following, any and all of which constitute confidential information of the Company (collectively the “Confidential Information”): (i) any and all trade secrets concerning the business and affairs of the Company; (ii) any and all information concerning the business and affairs of the Company (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, contractors, agents, suppliers and potential suppliers, personnel training and techniques and materials, and purchasing methods and techniques, however documented); and (iii) any and all notes, analysis, compilations, studies, summaries and other material prepared in connection with the Company containing or based, in whole or in part, upon any information included in the foregoing.  Notwithstanding the foregoing, “Confidential Information” does not include any information that (i) was in the public domain at the time Seller learned of such information, (ii) is in the public domain at the time of communication by Seller through no fault of Seller, (iii) is or becomes available to Seller on a non-confidential basis from a source not known by Seller to be prohibited from disclosing such information by a legal or fiduciary obligation, or (iv) is disclosed with the prior written consent of the Company.  Seller acknowledges that (I) HDD has required that Seller make the covenants set forth in this Section as a condition to HDD’s purchase of the Purchased Interest; (II) the provisions of this Section are reasonable and necessary to protect and preserve HDD’s interests in the Purchased Interest from and after the Closing; and (III) HDD would be irreparably damaged if Seller were to breach the covenants set forth in this Section. 

 

 (b) Nondisclosure.  Seller hereby agrees not to disclose to any unauthorized persons or use for his own account or for the benefit of any third party any Confidential Information, whether or not such information is embodied in writing or other physical form or is retained in the memory of Seller, without the Company’s prior written consent, unless and to the extent that the Confidential Information is or becomes generally known to and available for use by the public other than as a result of the fault of Seller or the fault of any other person bound by a duty of confidentiality to Seller. 

 

 9. Notice of Agreement.  During the Term, Seller shall, within ten (10) days after accepting any employment, engagement as a consulting or independent contractor, or admission as an owner of a corporation, partnership, limited liability company, or other association, advise the Company of the identity of the new employer, client, partner, limited liability company, or other person with whom Seller has become associated.  The Company may serve notice upon each such person that Seller is bound by this Agreement and furnish each such person with a copy of this Agreement or relevant portions thereof. 

 

 Exhibit C – Form of Noncompetition Agreement 

 

 

 

 

 10. Specific Performance.  Seller acknowledges and agrees that (i) any breach of the restrictive covenants set forth in Sections 4, 5, 6, 7 or 8 of this Agreement will result in irreparable damage to the Company, for which there will be no adequate remedy at law, and (ii) in the event a court of competent jurisdiction determines Seller has committed a breach of any of the restrictive covenants set forth in Sections 4, 5, 6, 7 or 8 of this Agreement, Seller consents to an injunction in favor of the Company enjoining any breach of such covenant by any court of competent jurisdiction, without prejudice to any other right or remedy to which the Company may be entitled. 

 

 11. Modification.  If any provision of Sections 4, 5, 6, 7 or 8 of this Agreement or the application of any such provision to any person or circumstance shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended for too great a period of time or too large a geographic area or over too great a range of activities, it should be interpreted to extend only over the maximum period of time, geographic area, or range of activities as to which such court would find it enforceable, and such determination of unenforceability will not affect any other provision of this Agreement. 

 

 12. Waiver.  Failure by the Company to insist upon strict compliance with any of the terms, covenants, or conditions of this Agreement shall not be deemed to be a waiver of such term, covenant, or condition, nor shall any relinquishment of any right or power under this Agreement by the Company at any one or more times be deemed a waiver or relinquishment of such right or power by the Company at any other time or times. 

 

 13. Miscellaneous. 

 

 (a) Amendments.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of all of the parties. 

 

 (b) Waivers.  No failure on the part of a party hereto or any of its agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall constitute a waiver thereof and the waiver by any party of any right or remedy under this Agreement on any one occasion shall not be deemed a waiver of such right or remedy on any subsequent occasion. 

 

 (c) Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties and their respective heirs, executors, administrators, legal representatives, successors, and assigns. 

 

 (d) Assignment.  This Agreement may not be assigned by Seller (whether by operation of law or otherwise) without the prior written consent of the Company.  Any assignment or purported assignment in violation of this Agreement shall be null and void. 

 

 Exhibit C – Form of Noncompetition Agreement 

 

 

 

 

 (e) Headings.  The titles and subtitles used in this Agreement are used for convenience only and shall not be considered in construing or interpreting this Agreement. 

 

 (f) Governing Law; Venue.  This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California.  The parties hereby acknowledge and agree that this Agreement was made and shall be performed in the County of Sonoma in the State of California, and hereby consent to the exclusive jurisdiction and venue of such county. 

 

 (g) Dispute Resolution. 

 

 (i) Mutual Discussion.  If any claim, controversy, or dispute of any kind whatsoever (a “Dispute”) shall arise among the parties (including their subsidiaries and affiliates) in connection with, relating to, or arising out of this Agreement or any other agreement contemplated hereby, including without limitation the interpretation, performance, non­performance, or termination hereof or thereof, the parties shall initially attempt to settle such Dispute through mutual discussion.  Such request shall be made by any party hereto by written notice to the other parties referencing this provision.  If such Dispute has not been resolved through mutual discussion within thirty (30) days following such notice, such Dispute shall be settled by binding arbitration pursuant to Section 13(g)(ii) hereof. 

 

 (ii) Arbitration.  Arbitration shall be conducted by the Arbitration and Mediation Center (the “AMC”) of Sonoma County or such other arbitration service mutually agreeable to the parties.  Arbitration shall be conducted in Sonoma County, California, and in accordance with the California Arbitration Act, section 1280-1294.2 of the California Code of Civil Procedure, provided such rules are not inconsistent with the express provisions set forth in this Agreement.  Arbitration shall be conducted by one (1) arbitrator with the AMC panel or such other arbitrator mutually agreeable to the parties, and judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction.  Discovery may be conducted if determined necessary or appropriate by the arbitrator, but such arbitrator shall limit such discovery to the minimum necessary for preparation of the parties’ prosecution and defense of any claim made in arbitration.  Costs of arbitration (including attorneys’ fees and expenses) shall be made a part of the arbitrator’s award to the prevailing party.  Arbitration pursuant to this Section 13(g) shall be the parties sole and exclusive venue for resolution of a Dispute. 

 

 (h) Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be or become prohibited or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. 

 

 Exhibit C – Form of Noncompetition Agreement 

 

 

 

 

 (i) Counterparts and Signature Pages.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be one and the same instrument.  The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes.  Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes. 

 

 [SIGNATURE PAGE FOLLOWS] 

 

 

 

 

 

 

 Exhibit C – Form of Noncompetition Agreement 

 

 

 

 IN WITNESS WHEREOF, the parties hereto have executed this Noncompetition, Nonsolicitation, and Nondisclosure Agreement effective as of the date first above written. 

 

	   	

 HDD: 

	   
	   	   	   
	   	 H.D.D. LLC, 

 a California limited liability company 

	   
	   	   	   
	   	   	   	   
	
 

	
 By:  

	 	   
	   	   	 Phillip L. Hurst, Manager 	   
	   	   	 	   
	   	   	   	   
	   	 COMPANY: 	   
	   	   	   
	   	 THE WINE SPIES, LLC, 

 a California limited liability company 

	   
	   	   	   	   
	   	   	   	   
	   	 By:  	   	   
	   	   	 Jason Seeber, Manager 	   
	   	   	   	   
	   	   	   
	   	 SELLER: 	   
	   	   	   	   
	   	   	   
	   	 Brandon Stauber 	   

 

 

 

 Exhibit C – Form of Noncompetition Agreement 

 

 

 

 

 EXHIBIT D

 

 FORM OF CONSULTING AGREEMENT 

 

 

 

 

 

 

 Exhibit D – Form of Consulting Agreement 

 

 

 

 

 CONSULTING AGREEMENT 

 

 THIS CONSULTING AGREEMENT (this “Agreement”), dated as of July ___, 2012, is made by and between THE WINE SPIES, LLC, a California limited liability company (the “Company”) and BRANDON STAUBER, an individual (“Consultant”). 

 

 RECITALS 

 

	
    

	
 A. 

	
 Consultant has executed that certain Membership Interest Purchase Agreement of even date herewith (the “Purchase Agreement”), pursuant to which H.D.D. LLC, a California limited liability company, purchased from Consultant all of his membership interests of the Company. 

 

	
    

	
 B. 

	
 The Company desires to retain Consultant as an independent contractor to provide certain services, and Consultant desires to be retained by the Company to provide such services, on the terms and conditions set forth in this Agreement. 

 

 AGREEMENT 

 

 NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 

 

 1. Term.  This Agreement shall become effective on the date of this Agreement and shall continue in full force on a month-to-month basis until otherwise terminated by either party with thirty (30) days written notice. 

 

 2. Compensation.  Consultant shall perform services related to the Company’s financial management and website-related activities.  Consultant shall work sixty (60) hours per month.  The Company shall pay to Consultant compensation at the rate of $4,500 per month, payable in accordance with the Company’s standard practices for independent contractors. 

 

 3. Services.  Consultant shall provide consulting services to and consult with the Company in an advisory capacity on matters pertaining to the Company’s financial management and website-related activities, and other duties as mutually agreed upon by the parties (the “Services”). 

 

 4. Expense Reimbursements.  In accordance with procedures established by the Company, and upon receipt of all documentation required by the Company, the Company shall reimburse Consultant for reasonable costs and expenses incurred by Consultant in connection with the performance of the Services, including without limitation telephone charges and travel and entertainment expenses, provided such costs and expenses were approved in advance in writing by the Company. 

 

 Exhibit D – Form of Consulting Agreement 

 

 

 

 

 5. Nature of Relationship.  No partnership or joint venture is formed by this 

 

 Agreement.  Consultant shall perform the Services hereunder as an independent contractor.  As an independent contractor, Consultant acknowledges and agrees that he may, but is not obligated, to do the following: (i) perform Services at times of Consultant’s choosing, provided the timing of performance of Services meets the reasonable expectations of the Company; (ii) hire, supervise and pay others in order to provide the Services; (iii) perform Services in any order or manner Consultant chooses, provided the performance of Services are in accordance with the Company’s accepted business practices; and (iv) perform service contracts for more than one person or entity concurrently, except as expressly limited by this Agreement.  As an independent contractor, Consultant acknowledges and agrees that he must do the following: (i) be responsible for any tools, materials and other equipment necessary to accomplish the Services; (ii) be responsible for any training of Consultant or Consultant’s personnel; and (iii) be responsible for satisfactory completion of all Services provided.  Consultant shall not enter into any agreement or incur any obligations on the Company’s behalf, or commit the Company in any manner without the Company’s prior written consent.  Any employees of Consultant are not employees of the Company. 

 

 6. Taxes.  Consultant acknowledges and agrees that Consultant is obligated to report as income all fees received by Consultant pursuant to this Agreement, and Consultant agrees to and acknowledges the obligation to pay all self-employment and other taxes thereon.  Neither Consultant nor Consultant’s employees shall be treated by the Company as its employees with respect to any Services performed hereunder for state or federal tax or any other purposes. 

 

 7. Worker’s Compensation.  As an independent contractor, Consultant specifically requests that the Company not provide worker’s compensation coverage, and hereby waives any right Consultant may have to file a claim under worker’s compensation or similar laws. 

 

 8. Miscellaneous. 

 

 (a) Entire Agreement.  This Agreement, including any other agreements and schedules to be entered into in connection with the transactions contemplated hereby, constitutes and embodies the entire understanding and agreement of the parties hereto relating to the subject matter hereof and supersedes all prior agreements or understandings of the parties hereto, whether written or oral. 

 

 (b) Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the party or parties to be bound thereby.  No delay in the exercise of any right or remedy under this Agreement shall constitute a waiver thereof and the waiver by any party of any right or remedy under this Agreement on any one occasion shall not be deemed a waiver of such right or remedy on any subsequent occasion. 

 

 (c) Successors and Assigns; No Third Party Beneficiaries.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties and their respective heirs, executors, administrators, legal representatives, successors and assigns.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 

 

 

 

 

 

 

 (d) Construction.  Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Agreement.  Every covenant, term, and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party. 

 

 (e) Headings.  The titles and subtitles used in this Agreement are used for convenience only and shall not be considered in construing or interpreting this Agreement. 

 

 (f) Governing Law, Venue.  This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California.  The parties consent to the exclusive jurisdiction and venue of the County of Sonoma in the State of California. 

 

 (g) Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be or become prohibited or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. 

 

 (h) Attorneys’ Fees.  If any legal action or other proceeding, including arbitration or action for declaratory relief, is brought for the enforcement of this Agreement or because of an alleged dispute, breach, default, or misrepresentation in connection with this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs, in addition to any other relief to which the party may be entitled.  As used herein, “prevailing party” shall include without limitation: (i) the party who dismisses an action in exchange for sums allegedly due; (ii) the party who receives performance from the other party of an alleged breach of covenant of a desired remedy where that is substantially equal to the relief sought in an action; or (iii) the party determined to be the prevailing party by a court of law or arbitrator. 

 

 (i) Dispute Resolution. 

 

 (i) Mutual Discussion.  If any claim, controversy, or dispute of any kind whatsoever (a “Dispute”) shall arise among the parties (including their subsidiaries and affiliates) in connection with, relating to, or arising out of this Agreement or any other agreement contemplated hereby, including without limitation the interpretation, performance, non-performance, or termination hereof or thereof, the parties shall initially attempt to settle such Dispute through mutual discussion.  Such request shall be made by any party hereto by written notice to the other parties referencing this provision.  If such Dispute has not been resolved through mutual discussion within thirty (30) days following such notice, such Dispute shall be settled by binding arbitration pursuant to Section 8(i)(ii) hereof. 

 

 Exhibit D – Form of Consulting Agreement 

 

 

 

 

 (ii) Arbitration.  Arbitration shall be conducted by the Arbitration and Mediation Center (the “AMC”) of Sonoma County or such other arbitration service mutually agreeable to the parties.  Arbitration shall be conducted in Sonoma County, California, and in accordance with the California Arbitration Act, section 1280-1294.2 of the California Code of Civil Procedure, provided such rules are not inconsistent with the express provisions set forth in this Agreement.  Arbitration shall be conducted by one (1) arbitrator with the AMC panel or such other arbitrator mutually agreeable to the parties, and judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction.  Discovery may be conducted if determined necessary or appropriate by the arbitrator, but such arbitrator shall limit such discovery to the minimum necessary for preparation of the parties’ prosecution and defense of any claim made in arbitration.  Costs of arbitration (including attorneys’ fees and expenses) shall be made a part of the arbitrator’s award to the prevailing party.  Arbitration pursuant to this Section 8(i) shall be the parties sole and exclusive venue for resolution of a Dispute. 

 

 (j) Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

 

 [SIGNATURE PAGE FOLLOWS] 

 

 

 

 

 

 

 Exhibit D – Form of Consulting Agreement 

 

 

 

 IN WITNESS WHEREOF, the parties hereto have executed this Consulting Agreement as of the date set forth above. 

 

	   	

 COMPANY: 

	   
	   	   	   	   
	   	 THE WINE SPIES, LLC, 

 a California limited liability company 

	   
	   	   	   
	   	   	   
	
 

	
 By:  

	 	   
	   	   	 Jason Seeber, Manager 	   
	   	   	 	   
	   	   	   	   
	   	 CONSULTANT: 	   
	   	   	   	   
	   	   	   
	   	 Brandon Stauber 	   

 

 

 

 Exhibit D – Form of Consulting Agreement 

 

 

 

 

 EXHIBIT E

 

 FORM OF ASSIGNMENT OF MEMBERSHIP INTEREST 

 

 The undersigned hereby assigns, and transfers to H.D.D. LLC, a California limited liability company, all of his right, title and interest in a fifty percent (50%) Membership Interest (the “Membership Interest”) in THE WINE SPIES, LLC, a California limited liability company (the “LLC”), and irrevocably constitutes and appoints Spaulding McCullough & Tansil, LLP as agent to transfer the Membership Interest, with full power of substitution in the premises.  The undersigned represents and warrants that the Membership Interest transferred hereby represents all of the interest the undersigned holds in the LLC and all of his right, title and interest in the equity and profits of the LLC. 

 

 Dated: July __, 2012 

 

	
 

	
 By:  

	 	   
	   	   	 Brandon Stauber 	   
	   	   	 	   
	   	   	   	   

 

 

 

 

 

 

 Exhibit E – Form of Assignment of Membership Interest 

 

 

 

 

 EXHIBIT F

 

 CONSENT OF SPOUSE OR REGISTERED DOMESTIC PARTNER 

 

 I acknowledge that I have read the foregoing Membership Interest Purchase Agreement to which a copy of this Consent is attached (the “Agreement”), and that I know and agree to its contents.  I am aware that by its provisions my spouse or registered domestic partner agrees to sell all of his Membership Interest in the Company (the “Purchased Interest”), including my community interest therein (if any).  I hereby consent to such sale, approve the provisions of the Agreement, and agree that the Purchased Interest and my interest in them are subject to the provisions of the Agreement and that I will take no action at any time to hinder the operation of the Agreement on the Purchased Interest.  I acknowledge that I have been advised to discuss this consent with legal counsel of my choice and that I have had the time and opportunity to do so. 

 

	    	    	    
	
 Date 

	    	
 (Signature) 

	    	    	    
	    	    	    
	    	    	
 (Printed Name) 

 

 OR 

 

 By his signature below, Member represents that he is not legally married or in a registered domestic partnership as of the date of executing this Agreement. 

 

	    	    	    
	
 Date 

	    	
 (Member’s Signature) 

	    	    	    
	    	    	    
	    	    	
 (Member’s Printed Name) 

 

 

 

 

 Exhibit F – Consent of Spouseex10_5.htm

Exhibit 10.5

 

 

 

RECORDING REQUESTED BY: 

 

Bank of the West

 

AND WHEN RECORDED MAIL TO:

 

Bank of the West

Fresno Documentation Center

6873 N. West Avenue, Suite 102 

Fresno, California 93711

 

Attention: Collateral Unit (North Coast ABC)

 

Assessor's Identification Number: 090-230-030 and 090-230-040.

 

SPACE ABOVE THE LINE FOR RECORDER'S USE

 

 

DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS, AND PROFITS,

AND FIXTURE FILING

 

This DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS, AND PROFITS, AND FIXTURE FILING (this "Deed of Trust") is entered into as of July 16, 2012, among H.D.D. LLC, a California limited liability company, with an address of 5610 Dry Creek Road, Healdsburg, California 95448 (the "Trustor") and First Santa Clara Corporation, with an address of  2527 Camino Ramon, San Ramon, California 94583 (the "Trustee") for the use and benefit of Bank of the  West, a California banking corporation, with an address of 700 Main Street, Suite 212, Napa, California 94559 (the "Beneficiary"), and the Beneficiary.

 

The real property which is the subject matter of this Deed of Trust has the following address(es): 5610 Dry Creek Road, Healdsburg, Sonoma County, California 95448 (the "Address(es)").

 

NOTICE: THE OBLIGATIONS SECURED HEREBY PROVIDE FOR PERIODIC INCREASES AND/OR DECREASES IN THE APPLICABLE INTEREST RATE AND ACCRUAL OF INTEREST WHICH MAY RESULT IN INCREASES IN THE PRINCIPAL BALANCE ABOVE THE FACE PRINCIPAL AMOUNT OF THE APPLICABLE NOTE(S).

 

 

  

  

  

 

1.             DEED OF TRUST, OBLIGATIONS AND FUTURE ADVANCES

 

1.1           Deed of Trust.  For valuable consideration paid and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Trustor hereby irrevocably and unconditionally mortgages, grants, bargains, transfers, sells, conveys, sets over and assigns to the Trustee and its successors and assigns, IN TRUST, for the benefit and security of the Beneficiary forever, WITH POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, all of Trustor's right, title and interest in and to the "Property" described below, to secure the prompt payment and performance of the Obligations (as hereinafter defined), including without limitation, all amounts due and owing to the Beneficiary and all obligations respecting the Term Note, in the original principal amount of $3,381,000.00; dated July 16, 2012, by H.D.D. LLC in favor of the Beneficiary (the "Note"; and collectively, along with this Deed of Trust and all other agreements, documents, certificates and instruments delivered in connection therewith, the "Loan Documents"), and any substitutions, modifications, extensions or amendments to any of the Loan Documents.

 

The amount of principal obligations outstanding and evidenced by the Loan Documents and secured by this Deed of Trust total $3,381,000.00 as of the date of this Deed of Trust.

 

1.2           Security Interest in Property. As continuing security for the Obligations the Trustor hereby pledges, assigns and grants to the Beneficiary, and its successors and assigns, a security interest in any of the Property (as hereinafter defined) constituting personal property or fixtures. This Deed of Trust is and shall be deemed to be a security agreement and financing statement pursuant to the terms of the Uniform Commercial Code of California (the "Uniform Commercial Code") as to any and all personal property and fixtures and as to all such property the Beneficiary shall have the rights and remedies of a secured party under the Uniform Commercial Code in addition to its rights hereunder. This Deed of Trust constitutes a financing statement filed as a fixture filing under Section 9-502(c) of the Uniform Commercial Code covering any Property which now is or later may become a fixture.

 

1.3           Collateral Assignment of Leases and Rents. The Trustor hereby irrevocably and unconditionally assigns to the Beneficiary, and its successors and assigns, as collateral security for the Obligations all of the Tustor's rights and benefits under any and all Leases (as hereinafter defined) and any and all rents and other amounts now or hereafter owing with respect to the Leases or the use or occupancy of the Property.  This collateral assignment shall be absolute and effective immediately, but the Trustor shall have a license, revocable by the Beneficiary, to continue to collect rents owing under the Leases until an Event of Default (as hereinafter defined) occurs and the Beneficiary exercises its rights and remedies to collect such rents as set forth herein.

 

1.4           Conditions to Grant. The Trustee shall have and hold the above granted Property unto and to the use and benefit of the Beneficiary, IN TRUST, for the benefit and security of the Beneficiary, and to the Beneficiary, as the case may be, and their successors and assigns, forever; provided, however, the conveyances, grants and assignments contained in this Deed of Trust are upon the express condition that, if Trustor shall irrevocably pay and perform the Obligations in full, including, without limitation, all principal, interest and premium thereon and other charges, if applicable, in accordance with the terms and conditions in the Loan Documents (as hereinafter defined) and this Deed of Trust, shall pay and perform all other Obligations as set forth in this Deed of Trust and shall abide by and comply with each and every covenant and condition set forth herein and in the Loan Documents, the conveyances, grants and assignments contained in this Deed of Trust shall be appropriately released and discharged.

 

1.5           Property. The term "Property," as used in this Deed of Trust, shall mean that certain parcel of land and the fixtures, structures and improvements and all personal property constituting fixtures, as that term is defined in the Uniform Commercial Code, now or hereafter thereon located at the Address(es), as more particularly described in Exhibit A attached hereto, together with: (i) all rights now or hereafter existing, belonging, pertaining or appurtenant thereto; (ii) all water, water rights, watercourses and ditch rights (including stock in utilities with ditch or irrigation rights); (iii) all judgments, awards of damages and settlements hereafter made as a result or in lieu of any Taking, as hereinafter defined; (iv) all of the rights and benefits of the Trustor under any present or future leases and agreements relating to the Property, including, without limitation, rents, issues and profits, or the use or occupancy thereof together with any extensions and renewals thereof, specifically excluding all duties or obligations of the Trustor of any kind arising thereunder (the "Leases"); and (v) all contracts, permits and licenses respecting the use, operation or maintenance of the Property.

 

  

2

  

 

1.6           Obligations. The term "Obligation(s)," as used in this Deed of Trust, shall mean all amounts outstanding when due pursuant to the terms of any of the Loan Documents. Said term shall also include all interest and other charges chargeable to the Trustor or due from the Trustor to the Beneficiary from time to time and all advances, costs and expenses referred to in this Deed of Trust, including without limitation  the costs and expenses (including reasonable attorney's fees) of enforcement of the Beneficiary's rights hereunder or pursuant to any document or instrument executed in connection herewith. In addition, Obligations shall also include any amounts due and owing, directly or indirectly, to Lender in connection with any rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity options, equity or equity index swaps, equity or equity index options, bond options, interest  rate options, foreign exchange transactions, cap transactions, floor transactions, collar transactions, forward transactions, currency swap transactions, cross-currency rate swap transactions or currency options, whether now existing or hereafter entered in connection with any indebtedness evidenced by any of the Loan Documents, all of which shall be deemed additional interest or a related expense (in the sole discretion of Lender) due in connection with such underlying indebtedness.

 

2.    REPRESENTATIONS, WARRANTIES, COVENANTS

 

2.1           Representations and Warranties. The Trustor represents and warrants that:

 

	
(a)

	
This Deed of Trust has been duly executed and delivered by the Trustor and is the legal, valid and binding obligation of the Trustor enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally;

 

	
(b)

	
The Trustor is the sole legal owner of the Property, holding good and marketable fee simple title to the Property, subject to no liens, encumbrances, leases, security interests or rights of others, other than as set forth in detail in Exhibit B hereto (the "Permitted Encumbrances");

 

	
(c) 

	
The Trustor is the sole legal owner of the entire lessor's interest in Leases, if any, with full power of attorney to  encumber the Property in the manner set forth herein, and the Trustor has not executed any other assignment of Leases or any of the rights or rents arising thereunder;

 

	
(d) 

	
As of the date hereof, there are no Hazardous Substances (as hereinafter defined) in, on or under the Property, except as disclosed in writing to and acknowledged by the Beneficiary; and

 

	
(e) 

	
Each Obligation is a commercial obligation and does not represent a loan used for personal, family or household purposes and is not a consumer transaction.

 

2.2           Recording Further Assurances. The Trustor covenants that it shall, at its sole cost and expense and upon the request of the Beneficiary, cause this Deed of Trust, and each amendment, modification or supplement hereto, to be recorded and filed in such manner and in such places, and shall at all times comply with all such statutes and regulations as may be required by law in order to establish, preserve and protect the interest of the Beneficiary in the Property and the rights of the Beneficiary under this Deed of Trust. Trustor will from time to time execute and deliver to the Beneficiary such documents, and take or cause to be taken, all such other or further action, as the Beneficiary may request in order to effect and confirm or vest more securely in the Beneficiary all rights contemplated by this Deed of Trust (including, without limitation, to correct clerical errors) or to vest more fully in, or assure to the Beneficiary the security interest in, the Property or to comply with applicable statute or law. To the extent permitted by applicable law, Trustor authorizes the Beneficiary to file financing statements, continuation statements or amendments, and any such financing statements, continuation statements or amendments may be filed at any time in any jurisdiction.  The Beneficiary may at any time and from time to time file financing statements, continuation statements and amendments thereto that describe the Property as defined in this Deed of Trust and which contain any other information required by Article 9 of the Uniform Commercial Code for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether Trustor is an organization, the type of organization and any organization identification number issued to Trustor; Trustor also authorizes the Beneficiary to file financing statements describing any agricultural liens or other statutory liens held by the Beneficiary. Trustor agrees to furnish any such information to the Beneficiary promptly upon request.  In addition, Trustor shall at any time and from time to time, take such steps as the Beneficiary may reasonably request for the Beneficiary (i) to obtain an acknowledgment, in form and substance satisfactory to the Beneficiary, of any bailee having possession of any of the Property that the bailee holds such Property for the Beneficiary, and (ii) otherwise to insure the continued perfection and priority of the Beneficiary's security interest in any of the Property and the preservation of its rights therein.   Trustor hereby constitutes the Beneficiary its attorney-in-fact to execute and file all filings required or so requested for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; and such power, being coupled with an interest, shall be irrevocable until this Deed of Trust terminates in accordance with its terms, all Obligations are paid in full and the Property is released.

 

  

3

  

 

2.3         Restrictions on the Trustor. The Trustor covenants that it will not, nor will it permit any other person to, directly or indirectly, without the prior written approval of the Beneficiary in each instance:

 

	
(a) 

	
Sell, convey, assign, transfer, mortgage, pledge, hypothecate, lease or dispose of all or any part of any legal or beneficial interest in the Trustor or the Property or any part thereof or permit any of the foregoing, except as expressly permitted by the terms of this Deed of Trust;

 

	
(b) 

	
Permit the use, generation, treatment, storage, release or disposition of any oil or other material or substance constituting hazardous waste or hazardous materials or substances under any applicable Federal or state law, regulation or rule ("Hazardous Substances"); or

 

	
(c) 

	
Permit to be created or suffer to exist any mortgage, lien, security interest, attachment or other encumbrance or charge on the Property or any part thereof or interest therein (except for the Permitted Encumbrances), including, without limitation, (i) any lien arising under any Federal, state or local statute, rule, regulation or law pertaining to the release or cleanup of Hazardous Substances and (ii) any mechanics' or materialmen's lien. The Trustor further agrees to give the Beneficiary prompt written notice of the imposition, or notice, of any lien referred to in this Section and to take any action necessary to secure the prompt discharge or release of the same.  The Trustor agrees to defend its title to the Property and the Beneficiary’s interest therein against the claims of all persons and, unless the Beneficiary requests otherwise, to appear in and diligently contest, at the Trustor's sole cost and expense, any action or proceeding that purports to affect the Trustor's title to the Property or the priority or validity of this Deed of Trust or the Beneficiary's interest hereunder.

 

2.4           Operation of Property. The Trustor covenants and agrees as follows:

 

	
(a) 

	
The Trustor will not permit the Property to be used for any unlawful or improper purpose, will at all times comply with all Federal, state and local laws, ordinances and regulations, and the provisions of any Lease, easement or other agreement affecting all or any part of the Property, and will obtain and maintain all governmental or other approvals relating to the Trustor, the Property or the use thereof, including without limitation, any applicable zoning or building codes or regulations and any laws or regulations relating to the handling, storage, release or cleanup of Hazardous Substances, and will give prompt written notice to the Beneficiary of (i) any violation of any such law, ordinance or regulation by the Trustor or relating to the Property, (ii) receipt of notice from any Federal, state or local authority alleging any such violation and (iii) the presence or release on the Property of any Hazardous Substances;

 

	
(b)

	
The Trustor will at all times keep the Property insured for such losses or damage, in such amounts and by such companies as may be required by law and which the Beneficiary may require, provided that, in any case, the Trustor shall maintain: (i) physical hazard insurance on an "all risks" basis in an amount not less than 100% of the full replacement cost of the Property; (ii) flood insurance if and as required by applicable Federal law and as otherwise required by the Beneficiary; (iii) comprehensive commercial general liability insurance; (iv) rent loss and business interruption insurance; and (v) such other insurance as the Beneficiary may require from time to time, including builder's risk insurance in the case of construction loans. All policies regarding such insurance shall be issued by companies licensed to do business in the state where the policy is issued and also in the state where the Property is located, be otherwise acceptable to the Beneficiary,  provide deductible amounts acceptable to the Beneficiary, name the Beneficiary as mortgagee, loss payee and additional insured, and provide that no cancellation or material modification of such policies shall occur without at least 30 days prior written notice to the Beneficiary. Such policies shall include (i) a mortgage endorsement determined by the Beneficiary in good faith to be equivalent to the "standard"mortgage endorsement so that the insurance, as to the interest of the Beneficiary, shall not be invalidated by any act or neglect of the Trustor or the owner of the Property, any foreclosure or other proceedings or notice of sale relating to the Property, any change in the title to or ownership of the Property, or the occupation or use of the Property for purposes more hazardous than are permitted at the date of inception of such insurance policies; (ii) a replacement cost endorsement; (iii) an agreed amount endorsement; (iv) a contingent liability from operation endorsement; and (v) such other endorsements as the Beneficiary may request.  The Trustor will furnish to the Beneficiary upon request such original policies, certificates of insurance or other evidence of the foregoing as are acceptable to the Beneficiary. The terms of all insurance policies shall be such that no coinsurance provisions apply, or if a policy does contain a coinsurance provision, the Trustor shall insure the Property in an amount sufficient to prevent the application of the coinsurance provisions;

 

  

4

  

 

	
(c) 

	
Trustor will not enter into or modify the Leases in any material respect without the prior written consent of the Beneficiary, execute any assignment of the Leases except in favor of the Beneficiary, or accept any rentals under any Lease for more than one month in advance and will at all times perform and fulfill every term and condition of the Leases;

 

	
(d) 

	
Trustor will at all times (i) maintain complete and accurate records and books regarding the Property in accordance with generally accepted accounting principles and (ii) permit the Beneficiary and the Beneficiary's agents, employees and representatives, at such reasonable times as the Beneficiary may request, to enter and inspect the Property and such books and records; and

 

	
(e) 

	
Trustor will at all times keep the Property in good and first-rate repair and condition (damage from casualty not excepted) and will not commit or permit any strip, waste, impairment, deterioration or alteration of the Property or any part thereof.

 

2.5           Payments. The Trustor covenants to pay when due: all Federal, state, municipal, real property and other taxes, betterment and improvement assessments and other governmental levies, water rates, sewer charges, insurance premiums and other charges on the Property, this Deed of Trust or any Obligation secured hereby that could, if unpaid, result in a lien on the Property or on any interest therein. If and when requested by the Beneficiary, the Trustor shall deposit from time to time with the Beneficiary sums determined by the Beneficiary to be sufficient to pay when due the amounts referred to in this Section.  The Trustor shall have the right to contest any notice, lien, encumbrance, claim, tax, charge, betterment assessment or premium filed or asserted against or relating to the Property; provided that it contests the same diligently and in good faith and by proper proceedings and, at the Beneficiary's request, provides the Beneficiary with adequate cash security, in the Beneficiary's reasonable judgment, against the enforcement thereof. The Trustor shall furnish to the Beneficiary the receipted real estate tax bills or other evidence of payment of real estate taxes for the Property within 30 days prior to the date from which interest or penalty would accrue for nonpayment thereof. The Trustor shall also furnish to the Beneficiary evidence of all other payments referred to above within fifteen (15) days after written request therefor by the Beneficiary.  If Trustor shall fail to pay such sums, the Beneficiary may, but shall not be obligated to, advance such sums.  Any sums so advanced by the Beneficiary shall be added to the Obligations, shall bear interest at the highest rate specified in any note evidencing the Obligations, and shall be secured by the lien of this Deed of Trust.

 

2.6           Notices; Notice of Default. The Trustor will deliver to the Beneficiary, promptly upon receipt of the same, copies of all notices or other documents it receives that affect the Property or its use, or claim that the Trustor is in default in the performance or observance of any of the terms hereof or that the Trustor or any tenant is in default of any terms of the Leases.  The Trustor further agrees to deliver to the Beneficiary written notice promptly upon the occurrence of any Event of Default hereunder or event that with the giving of notice or lapse of time, or both, would constitute an Event of Default hereunder.

 

  

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2.7           Takings. In case of any condemnation or expropriation for public use of, or any damage by reason of the action of any public or governmental entity or authority to, all or any part of the Property (a "Taking"), or the commencement of any proceedings or negotiations that might result in a Taking, the Trustor shall immediately give written notice to the Beneficiary, describing the nature and extent thereof. The Beneficiary may, at its option, appear in any proceeding for a Taking or any negotiations relating to a Taking and the Trustor shall immediately give to the Beneficiary copies of all notices, pleadings, determinations and other papers relating thereto. The Trustor shall in good faith and with due diligence and by proper proceedings file and prosecute its claims for any award or payment on account of any Taking. The Trustor shall not settle any such claim without the Beneficiary's prior written consent. The Trustor shall hold any amounts received with respect to such awards or claims, by settlement, judicial decree or otherwise, in trust for the Beneficiary and immediately pay the same to the Beneficiary.  The Trustor authorizes any award or settlement due in connection with a Taking to be paid directly to the Beneficiary in amounts not exceeding the Obligations.  The Beneficiary may apply such amounts to the Obligations in such order as the Beneficiary may determine.

 

2.8           Insurance Proceeds. The proceeds of any insurance resulting from any loss with respect to the Property shall be paid to the Beneficiary and, at the option of the Beneficiary, be applied to the Obligations in such order as the Beneficiary may determine; provided, however, that if the Beneficiary shall require repair of the Property, the Beneficiary may release all or any portion of such proceeds to the Trustor for such purpose.  Any insurance proceeds paid to the Trustor shall be held in trust for the Beneficiary and promptly paid to it.

 

3.    CERTAIN RIGHTS OF THE BENEFICIARY

 

3.1           Legal Proceedings. The Beneficiary shall have the right, but not the duty, to intervene or otherwise participate in any legal or equitable proceeding that, in the Beneficiary's reasonable judgment, might affect the Property or any of the rights created or secured by this Deed of Trust. The Beneficiary shall have such right whether or not there shall have occurred an Event of Default hereunder.

 

3.2           Appraisals/Assessments. The Beneficiary shall have the right, at the Trustor's sole cost and expense, to obtain appraisals, environmental site assessments or other inspections of the portions of the Property that are real estate at such times as the Beneficiary deems necessary or as may be required by applicable law, or its prevailing credit or underwriting policies.

 

3.3           Financial Statements. The Beneficiary shall have the right, at the Trustor's sole cost and expense, to require delivery of financial statements in form and substance acceptable to the Beneficiary from the Trustor or any guarantor of any of the Obligations and the Trustor hereby agrees to deliver such financial statements and/or cause any such guarantor to so deliver any such financial statement when required by the Beneficiary.

 

3.4           Substitution of Trustee. The Beneficiary may from time to time, without notice to the Trustor or Trustee and with or without cause and with or without the resignation of Trustee, substitute a successor or successors to the Trustee named herein or acting hereunder.  Upon such appointment, the successor trustee shall be vested with all title, powers and duties conferred upon the Trustee named herein or acting hereunder. Each such appointment and substitution shall be made by a writing executed by Beneficiary and when duly recorded in the appropriate office shall be conclusive proof of proper appointment of such successor Trustee. The procedure herein provided for substitution of the Trustee shall be conclusive of all other provisions for substitution, statutory or otherwise.

 

4.    DEFAULTS AND REMEDIES

 

4.1           Events of Default. Event of Default shall mean default of any liability, obligation, covenant or undertaking of the Trustor or the occurrence of an event of default under this Deed of Trust or any of the other Loan Documents including without limitation under any note evidencing any of the Obligations and, with respect to any Obligation due and payable on DEMAND, the failure of any such Obligation to be paid upon DEMAND.

 

4.2           Remedies. On the occurrence of any Event of Default the Beneficiary may, at any time thereafter, at its option and, to the extent permitted by applicable law, without notice, exercise any or all of the following remedies:

 

	
(a) 

	
Declare the Obligations due and payable, and the Obligations shall thereupon become immediately due and payable, without presentment, protest, demand or notice of any kind, all of which are hereby expressly waived by the Trustor except for Obligations due and payable on demand, which shall be due and payable on demand whether or not an event of default has occurred hereunder;

 

  

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(b)

	
Direct the Trustee to, or enter, take possession of, manage and operate the Property (including all personal property and all records and documents pertaining thereto) and any part thereof and exclude the Trustor therefrom, take all actions it deems necessary or proper to preserve the Property and operate the Property as a mortgagee in possession with all the powers as could be exercised by a receiver or as otherwise provided herein or by applicable law; provided, however, the entry by the Beneficiary upon the Property for any reason shall not cause the Trustee or the Beneficiary to be a mortgagee in possession, except upon the express written declaration of the Beneficiary;

 

	
(c)

	
With or without taking possession, by itself or through a receiver, receive and collect all rents, income, issues and profits ("Rents") from the Property (including all real estate and personal property and whether past due or thereafter accruing), including as may arise under the Leases, and the Trustor appoints the Beneficiary as its true and lawful attorney with the power for the Beneficiary in its own name and capacity to demand and collect Rents and take any action that the Trustor is authorized to take under the Leases.  The Beneficiary shall (after payment of all costs and expenses incurred) apply any Rents received by it to the Obligations in such order as the Beneficiary determines, or in accordance with any applicable statute, and the Trustor agrees that exercise of such rights and disposition of such funds shall not be deemed to cure any default or constitute a waiver of any foreclosure once commenced nor preclude the later commencement of foreclosure for breach thereof. The Beneficiary shall be liable to account only for such Rents actually received by the Beneficiary. Lessees under the Leases are hereby authorized and directed, following notice from the Beneficiary, to pay all amounts due the Trustor under the Leases to the Beneficiary, whereupon such lessees shall be relieved of any and all duty and obligation to the Trustor with respect to such payments so made

 

	
(d)

	
In addition to any other remedies, to sell the Property or any part thereof or interest therein pursuant to exercise of its power of sale or otherwise at public auction on terms and conditions as the Beneficiary may determine, or otherwise foreclose this Deed of Trust in any manner permitted by law, and upon such sale the Trustor shall execute and deliver such instruments as the Beneficiary may request in order to convey and transfer all of the Trustor's interest in the Property, and the same shall operate to divest all rights, title and interest of the Trustor in and to the Property.  In the event this Deed of Trust shall include more than one parcel of property or subdivision (each hereinafter called a "portion"), the Beneficiary shall, in its sole and exclusive discretion and to the extent permitted by applicable law, be empowered to foreclose upon any such portion without impairing its right to foreclose subsequently upon any other portion or the entirety of the Property from time to time thereafter.  In addition, the Beneficiary may in its sole and exclusive discretion subordinate this Deed of Trust to one or more Leases for the sole purpose of preserving any such Lease in the event of a foreclosure;

 

	
(e) 

	
Choose to dispose of some or all of the Property in any combination consisting of both real and personal property, together in one sale, public or private, to held in accordance with law and procedures applicable to real property, as permitted by Section 9604 of the Uniform Commercial Code.  Trustor agrees that such a sale of personal property together with real property constitutes a commercially reasonable sale of the personal property. Before any sale, Beneficiary or Trustee shall give such notice of default and election to sell as may then be required by law.  When all time periods then legally mandated have expired, and after such notice of sate as may then be legally required has been given, Trustee may sell the property being sold at a public auction to be held at the time and place specified in the notice of sale. Neither Trustee nor Beneficiary shall have any obligation to make demand on Trustor before any sale, From time to time in accordance with then applicable law, Trustee may, and in any event at Beneficiary's request shall, postpone any sale by public announcement at the time and place noticed for that sale. Notwithstanding the foregoing, Beneficiary shall be under no obligation to consummate a sale if, in its judgment, none of the offers received by it equals the fair value of the property offered for sale.  At any sale, any person including Beneficiary may bid for and acquire the property or any part thereof to the extent permitted by then applicable law. Instead of paying cash for such property, Beneficiary may settle for the purchase price by crediting the sales price of the property against the expenses of sale, costs of any action and any other sums for which Trustor is obligated to pay or reimburse Beneficiary or Trustee under this Deed of Trust and all other Obligations in any order and proportion as Beneficiary in its sole discretion may choose.  The foregoing procedures do not constitute the only procedures that may be commercially reasonable and, Beneficiary and Trustee may choose, for example, if the Property consists of more than one parcel, to sell and dispose of such parcels in separate or combined sales in such order as Beneficiary may elect. The proceeds of any such disposition of Property shall not cure any Event of Default or reinstate any Obligations for purposes of Section 2924c of the California Civil Code. For purposes of this power of sale, either a sale of real property alone, or a sale of both real and personal property together in accordance with Uniform Commercial Code Section 9604, will sometimes be referred to as a "Trustee's Sale";

 

  

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(f) 

	
In accordance with Section 736 of the California Code of Civil Procedure, Beneficiary may bring an action for breach of contract against Trustor for breach of any "environmental provision" (as such term is defined in such Section) made by Trustor herein or in any other Loan Document for the recovery of damages and/or the enforcement of the environmental  provision.  In accordance with the California Code of Civil Procedure, Section 726.5, Beneficiary may waive the security under this Deed of Trust with respect to any parcel of the Property that is "environmentally impaired" or is an "affected property" (as such terms are defined in such Section), and as to any personal property which is attached to such parcel, and thereafter exercise against Trustor, to the extent permitted by such Section, the rights and remedies of an unsecured creditor, including reduction of Beneficiary's claim against Trustor to judgment, and any other rights and remedies permitted by law.  In the event Beneficiary elects, in accordance with the California Code of Civil Procedure, Section 726.5, to waive all or part of the security under this Deed of Trust and proceed against Trustor on an unsecured basis, the valuation of the real property, the determination of the environmentally impaired status of such security and any cause of action for money judgment shall, at the request of Beneficiary, be referred to a referee in accordance with the California Code of Civil Procedure, Section 638 et seq.  Such referee shall be an M.A.I. appraiser selected by Beneficiary and approved by Trustor, which approval shall not be unreasonably withheld or delayed.  The decision of such referee shall be binding upon both Beneficiary and Trustor and judgment upon the award rendered by such referee shall be entered in the court in which such proceeding was commenced in accordance with the California Code of Civil Procedure, Sections 644 and 645.  Trustor shall pay all costs and expenses incurred by Beneficiary in connection with any proceeding under the California Code of Civil Procedure, Section 726.5;

 

	
(g) 

	
Cause one or more environmental assessments to be taken, arrange for the cleanup of any Hazardous Substances or otherwise cure the Truste's failure to comply with any statute, regulation or ordinance relating to the presence or cleanup of Hazardous Substances, and the Trustor shall provide the Beneficiary or its agents with access to the Property for such purposes; provided that the exercise of any of such remedies shall not be deemed to have relieved the Trustor from any responsibility therefor or given the Beneficiary "control" over the Property or cause the Beneficiary to be considered to be a mortgagee in possession, "owner" or "operator" of the Property for purposes of any applicable law, rule or regulation pertaining to Hazardous Substances; and

 

	
(h) 

	
Take such other actions or proceedings as the Beneficiary deems necessary or advisable to protect its interest in the Property and ensure payment and performance of the Obligations, including, without limitation, appointment of a receiver (and the Trustor hereby waives any right to object to such appointment) and exercise of any of the Beneficiary's remedies provided herein or in any other document evidencing, securing or relating to any of the Obligations or available to a secured party under the Uniform Commercial Code or under other applicable law.

 

  

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Due on Sale or Transfer. Beneficiary may, at its option, declare immediately due and payable all sums secured by this Deed of Trust upon the sale or transfer, without Beneficiary's prior written consent, of all or any part of the Property, or any interest in the Property. A "sale or transfer" means the conveyance of the Property or any right, title or interest therein; whether legal, beneficial or equitable; whether voluntary or involuntary; whether by outright sale, deed, installment sale contract, land contract, contract for deed, option contract, or by sale, assignment or transfer of any beneficial interest in or to any land trust holding title to the Property, or by any other method of conveyance of a real property interest. If Trustor is a corporation, transfer also includes any change in ownership of more than 10% of the issued and outstanding capital stock.  For a general partnership, limited partnership, or limited liability partnership, transfer shall include a change in any general partner or a change affecting the control of the Trustor. For a limited liability company, transfer includes any change in a manager or member or change affecting control of the Trustor. This option shall not be exercised by Beneficiary if such exercise is prohibited by applicable law.

 

Power of Sale.  Trustor hereby grants to the Trustee, and its successor and assigns, for the benefit and security of the Beneficiary, a power of sale under California Civil Code Section 2924, and accordingly, the Beneficiary and the Trustee shall have all of the rights and powers granted by California law to the holder of a Deed of Trust containing a power of sale, including the right, to the extent permitted by California law, to foreclose, by exercising the power of sale, without first commencing a foreclosure action or obtaining a foreclosure decree, and to give such notices and to do all other acts as are permitted or required by California Civil Code Section 2924 to foreclose a Deed of Trust without judicial action.

 

In addition, the Trustee and the Beneficiary shall have all other remedies provided by applicable law, including, without limitation, the right to pursue a judicial sale of the Property or any portion thereof by deed, assignment or otherwise.

 

The Trustor agrees and acknowledges that the acceptance by the Trustee or the Beneficiary of any payments from either the Trustor or any guarantor after the occurrence of any Event of Default, the exercise by the Trustee or the Beneficiary of any remedy set forth herein or the commencement, discontinuance or abandonment of foreclosure proceedings against the Property shall not waive Trustee's or the Beneficiary's subsequent or concurrent right to foreclose or operate as a bar or estoppel to the exercise of any other rights or remedies of the Trustee or the Beneficiary. The Trustor agrees and acknowledges that the Trustee or the Beneficiary, by making payments or incurring costs described herein, shall be subrogated to any right of the Trustor to seek reimbursement from any third parties, including, without limitation, any predecessor in interest to the Trustor's title or other party who may be responsible under any law, regulation or ordinance relating to the presence or cleanup of Hazardous Substances.

 

4.3           Advances. If the Trustor fails to pay or perform any of its obligations respecting the Property, the Beneficiary may in its sole discretion do so without waiving or releasing Trustor from any such obligation. Any such payments may include, but are not limited to, payments for taxes, assessments and other governmental levies, water rates,  insurance  premiums,  maintenance,  repairs  or  improvements constituting part of the Property.  Any amounts paid by the Beneficiary hereunder shall be, until reimbursed by the Trustor, part of the Obligations and secured by this Deed of Trust, and shall be due and payable to the Beneficiary, on demand, together with interest thereon to the extent permitted by applicable law, at the highest rate permitted under any of the notes evidencing the Obligations.

 

4.4           Cumulative Rights and Remedies.  All of the foregoing rights, remedies and options (including without limitation the right to enter and take possession of the Property, the right to manage and operate the same, and the right to collect Rents, in each case whether by a receiver or otherwise) are cumulative and in addition to any rights the Beneficiary might otherwise have, whether at law or by agreement,. and may be exercised separately or concurrently and none of which shall be exclusive of any other.  The Trustor further agrees that the Trustee and the Beneficiary may exercise any or all of its rights or remedies set forth herein without having to pay the Trustor any sums for use or occupancy of the Property.

 

4.5           Trustor's Waiver of Certain Rights. To the extent permitted by applicable law, the Trustor hereby waives the benefit of all present and future laws (i) providing for any appraisal before sale of all or any portion of the Property or (ii) in any way extending the time for the enforcement of the collection of the Obligations or creating or extending a period of redemption from any sale made hereunder.

 

4.6           Transfer of Title.  Upon the completion of any sale or sales of any Property, Trustee shall execute and deliver to the accepted purchaser or purchasers a good and sufficient deed of conveyance or assignment and transfer, lawfully conveying, assigning, and transferring the Property sold, but without any covenant or warranty, express or implied.

 

  

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4.7           Effect of Sale. Any sale or sales made by virtue of or under this Deed of Trust, whether under any power of sale herein granted or through judicial proceedings, shall, to the fullest extent permitted by law, operate to divest all right, title, estate, interest, claim, and demand whatsoever, either at law or in equity, of Trustor in and to the property so sold, or any part thereof from, through or under Trustor, its successors and assigns.  The receipt by Trustee of such purchase money shall be full and sufficient discharge to any purchaser of the Property or any part thereof sold as aforesaid for the purchase money; and no purchaser or his representatives, grantees or assigns after paying such purchase money, shall be bound to see to the application of such purchase money upon or for any trust or purpose of this Deed of Trust, or in any manner whatsoever be answerable for any loss, misapplication or non-application of any such purchase money or be bound to inquire as to the authorization, necessity, expedience or regularity of any such sale.

 

4.8           Reconveyance. Upon written request of the Beneficiary and surrender of this Deed of Trust and any Notes to Trustee for cancellation or endorsement, and upon payment of its fees and charges, Trustee shall reconvey, without warranty, all or any part of the Property then subject to this Deed of Trust. Any reconveyance, whether full or partial, shall be made to the person or persons legally entitled thereto, and the recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof.

 

5.    MISCELLANEOUS

 

5.1           Costs and Expenses. To the extent permitted by applicable law, the Trustor shall pay to the Trustee and the Beneficiary, on demand, all reasonable expenses (including attorneys' fees and expenses and reasonable consulting, accounting, appraisal, brokerage and similar professional fees and charges) incurred by the Trustee and the Beneficiary in connection with the Trustee's and the Beneficiary's interpretation, recordation of this Deed of Trust, exercise, preservation or enforcement of any of its rights, remedies and options set forth in this Deed of Trust and in connection with any litigation, proceeding or dispute whether arising hereunder or otherwise relating to the Obligations, together with interest thereon to the extent permitted by applicable law, until paid in full by the Trustor at the highest rate set forth in any of the notes evidencing the Obligations. Any amounts owed by the Trustor hereunder shall be, until paid, part of the Obligations and secured by this Deed of Trust, and the Beneficiary shall be entitled, to the extent permitted by law, to receive and retain such amounts in any action for a deficiency against or redemption by the Trustor, or any accounting for the proceeds of a foreclosure sale or of insurance proceeds.

 

5.2           Limit on Interest. If from any circumstances whatsoever, fulfillment of any provision of this Deed of Trust, any Note or any other Loan Document, at the time performance of such provision becomes due, would exceed the limit on interest then permitted by any applicable usury statute or any other applicable law, the Beneficiary may, at its option (a) reduce the Obligations to be fulfilled to such limit on interest, or (b) apply the amount in excess of such limit on interest to the reduction of the outstanding principal balance of the Obligations, and not to the payment of interest, with the same force and effect as though Trustor had specifically designated such sums to be so applied to principal and Beneficiary had agreed to accept such extra payments(s) as a premium-free prepayment, so that in no event shall any exaction he possible under this Deed of Trust or any other Loan Document that is in excess of the applicable limit on interest. It is the intention of Trustor and Beneficiary that the total liability for payments in the nature of interest shall not exceed the limits imposed by any applicable state or federal interest rate laws. The provisions of this Section shall control every other provision of this Deed of Trust, and any provision of any other Loan Document in conflict with this Section.

 

5.3           Indemnification Regarding Leases. The Trustor hereby agrees to defend, and does hereby indemnify and hold the Beneficiary, Trustee, and each of their respective directors, officers, employees, agents and attorneys (each an "Indemnitee") harmless from all losses, damages, claims, costs or expenses (including attorneys' fees and expenses) resulting from the assignment of the Leases and from all demands that may be asserted against such Indemnitees arising from any undertakings on the part of the Beneficiary to perform any obligations under the Leases. It is understood that the assignment of the Leases shall not operate to place responsibility for the control or management of the Property upon the Beneficiary or any Indemnitee or make them liable for performance of any of the obligations of the Trustor under Leases, respecting any condition of the Property or any other agreement or arrangement, written or oral, or applicable law.

 

  

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5.4           Indemnification Regarding Hazardous Substances. The Trustor hereby agrees to defend, and does hereby indemnify and hold harmless each lndemnitee from and against any and all losses, damages, claims, costs or expenses, including, without limitation, litigation costs and attorneys' fees and expenses and fees or expenses of any environmental engineering or cleanup firm incurred by such Indemnitee and arising out of or in connection with the Property or resulting from the application of any current or future law, regulation or ordinance relating to the presence or cleanup of Hazardous Substances on or affecting the Property.   The Trustor agrees its obligations hereunder shall be continuous and shall survive termination or discharge of this Deed of Trust and/or the repayment of all debts to the Beneficiary including repayment of all Obligations.

 

5.5            Indemnitee's Expenses. If any lndemnitee is made a party defendant to any litigation or any claim is threatened or brought against such Indemnitee concerning this Deed of Trust or the Property or any part thereof or therein or concerning the construction, maintenance, operation or the occupancy or use thereof by the Trustor or other person or entity, then the Trustor shall indemnify, defend and hold each Indemnitee harmless from and against all liability by reason of said litigation or claims, including attorneys' fees and expenses incurred by such Indemnitee in connection with any such litigation or claim, whether or not any such litigation or claim is prosecuted to judgment. The within indemnification shall survive payment of the Obligations, and/or any termination, release or discharge executed by the Beneficiary in favor of the Trustor.

 

5.6            Waivers. The Trustor waives notice of nonpayment, demand, presentment, protest or notice of protest of the Obligations and all other notices, consents to any renewals or extensions of time of payment thereof, and generally waives any and all suretyship defenses and defenses in the nature thereof.  No delay or omission of the Beneficiary in exercising or enforcing any of its rights, powers, privileges, remedies, immunities or discretion (all of which are hereinafter collectively referred to as "the Beneficiary's rights and remedies") hereunder shall constitute a waiver thereof; and no waiver by the Beneficiary of any default of the Trustor hereunder or of any demand shall operate as a waiver of any other default hereunder or of any other demand.  No term or provision hereof shall be waived, altered or modified except with the prior written consent of the Beneficiary, which consent makes explicit reference to this Deed of Trust. Except as provided in the preceding sentence, no other agreement or transaction, of whatsoever nature, entered into between the Beneficiary and the Trustor at any time (whether before, during or after the effective date or term of this Deed of Trust) shall be construed as a waiver, modification or limitation of any of the Beneficiary's rights and remedies under this Deed of Trust (nor shall anything in this Deed of Trust be construed as a waiver, modification or limitation of any of the Beneficiary's rights and remedies under any such other agreement or transaction) but all the Beneficiary's rights and remedies not only under the provisions of this Deed of Trust but also under any such other agreement or transaction shall be cumulative and not alternative or exclusive, and may be exercised by the Beneficiary at such time or times and in such order of preference as the Beneficiary in its sole discretion may determine.

 

5.7           Waiver of Homestead. To the maximum extent permitted under applicable law, the Trustor hereby waives and terminates any homestead rights and/or exemptions respecting the Property under the provisions of any applicable homestead laws, including without limitation, California Code of Civil Procedure Sections 704-710 et seq.

 

5.8           Joint and Several.  If there is more than one Trustor, each of them shall be jointly and severally liable for payment and/or performance of all obligations secured by this Deed of Trust and the term "Trustor" shall include each as well as all of them.

 

5.9           Severability. If any provision of this Deed of Trust or portion of such provision or the application thereof to any person or circumstance shall to any extent be held invalid or unenforceable, the remainder of this Deed of Trust (or the remainder of such provision) and the application thereof to other persons or circumstances shall not be affected thereby.

 

5.10         Complete Agreement. This Deed of Trust and the other Loan Documents constitute the entire agreement and understanding between and among the parties hereto relating to the subject matter hereof, and supersedes all prior proposals, negotiations, agreements and understandings among the parties hereto with respect to such subject matter.

 

  

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5.11         Binding Effect of Agreement. This Deed of Trust shall run with the land and be binding upon and inure to the benefit of the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, and shall remain in full force and effect (and the Beneficiary shall be entitled to rely thereon) until all Obligations are fully and indefeasibly paid. The Beneficiary may transfer and assign this Deed of Trust and deliver any collateral to the assignee, who shall thereupon have all of the rights of the Beneficiary; and the Beneficiary shall then be relieved and discharged of any responsibility or liability with respect to this Deed of Trust and such collateral. Except as expressly provided herein or in the other Loan Documents, nothing, expressed or implied, is intended to confer upon any party, other than the parties hereto, any rights, remedies, obligations or liabilities under or by reason of this Deed of Trust or the other Loan Documents.

 

5.12         Notices. Any notices under or pursuant to this Deed of Trust shall be deemed duly received and effective if delivered in hand to any officer of agent of the Trustor or Beneficiary, or if mailed by registered or certified mail, return receipt requested, addressed to the Trustor or Beneficiary at the address set forth in the Loan Agreement or as any party may from time to time designate by written notice to the other party.

 

5.13         Governing Law. This Deed of Trust shall be governed by federal law applicable to the Beneficiary and, to the extent not preempted by federal law, the laws of the State of California without giving effect to the conflicts of laws principles thereof.

 

5.14         Reproductions. This Deed of Trust and all documents which have been or may be hereinafter furnished by the Trustor to the Beneficiary may be reproduced by the Beneficiary by any photographic, photostatic, microfilm, xerographic or similar process, and any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business).

 

5.15         Jurisdiction and Venue. The Trustor irrevocably submits to the nonexclusive jurisdiction of any Federal or state court sitting in California, over any suit, action or proceeding arising out of or relating to this Deed of Trust.  The Trustor irrevocably waives, to the fullest extent it may effectively do so under applicable law, any objection it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that the same has been brought in an inconvenient forum.  The Trustor hereby consents to process being served in any such suit, action or proceeding (i) by the mailing of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to the Trustor's address set forth herein or such other address as has been provided in writing to the Beneficiary and (ii) in any other manner permitted by law, and agrees that such service shall in every respect be deemed effective service upon the Trustor.

 

5.16          Waiver Of Jury Trial. THE TRUSTOR AND BENEFICIARY ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, AND THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR TRANSACTION BETWEEN THE PARTIES.

 

5.17          Judicial Reference Provision. In the event the above Jury Trial Waiver is unenforceable, the parties elect to proceed under this Judicial Reference Provision. With the exception of the items specified below, any controversy, dispute or claim between the parties relating to this Agreement or any other document, instrument or transaction between the parties (each, a "Claim"), will be resolved by a reference proceeding in California pursuant to Sections 638 et seq. of the California Code of Civil Procedure, or their successor sections, which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject to reference. Venue for the reference will be the Superior Court in the County where real property involved in the action, if any, is located, or in a County where venue is otherwise appropriate under law (the "Court"). The following matters shall not be subject to reference: (i) nonjudicial foreclosure of any security interests in real or personal property, (ii) exercise of self-help remedies (including without limitation set-off), (iii) appointment of a receiver, and (iv) temporary, provisional or ancillary remedies (including without limitation writs of attachment, writs of possession, temporary restraining orders or preliminary injunctions). The exercise of, or opposition to, any of the above does not waive the right to a reference hereunder.

 

  

12

  

 

The referee shall be selected by agreement of the parties. If the parties do not agree, upon request of any party a referee shall be selected by the Presiding Judge of the Court. The referee shall determine all issues in accordance with existing case law and statutory law of the State of California, including without limitation the rules of evidence applicable to proceedings at law. The referee is empowered to enter equitable and legal relief, and rule on any motion which would be authorized in a court proceeding, including without limitation motions for summary judgment or summary adjudication. The referee shall issue a decision, and pursuant to CCP §644 the referee's decision shall be entered by the Court as a judgment or order in the same manner as if tried by the Court. The final judgment or order from any decision or order entered by the referee shall be fully appealable as provided by law. The parties reserve the right to findings of fact, conclusions of law, a written statement of decision, and the right to move for a new trial or a different judgment, which new trial if granted, will be a reference hereunder. AFTER CONSULTING (OR HAVING THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE, EACH PARTY AGREES THAT ALL CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT A JURY.

 

EXECUTED as of the date first above written.

 

	 	
Trustor:

 

H.D.D. LLC

	 	 	 
	  	
By:

	 /s/ Phillip L. Hurst 
	  	  	
Phillip L. Hurst, Manager

	 	 	 
	  	
By:

	/s/ William R. Hambrecht
	  	  	
William R. Hambrecht, Manager

	 	 	 
	  	
By:

	/s/ Paul E. Dolan, III
	  	  	
Paul E. Dolan, III, Manager

	  	 	  
	 	
By:

	/s/ Heath E. Dolan 
	  	  	
Heath E. Dolan, Manager

	  	 	  
	 	
By:

	/s/ J. Barrie Graham 
	  	  	
J. Barrie Graham, Manager

	 	 	 
	  	
By:

	/s/ Daniel A. Carroll  
	  	  	
Daniel A. Carroll, Manager

	 	 	 
	 	 	
 

 

 

  

13

  

 

STATE OF CALIFORNIA 

COUNTY OF Sonoma

 

On August 14th, 2012, before me, Morgan Merritt (Notary Public), personally appeared J. Barrie Graham who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

 

 

 

	
WITNESS my hand and official seal.

	[Notary Seal]
	 	 
	Signature /s/ Morgan Merritt (Seal)	 

 

 

STATE OF CALIFORNIA 

COUNTY OF Sonoma

 

On August 16th, 2012, before me, Rachael Manning, Notary Public, personally appeared Daniel A. Carroll who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

 

 

 

	
WITNESS my hand and official seal.

	[Notary Seal]
	 	 
	Signature /s/ Rachael Manning (Seal)	 

 

  

16

  

 

STATE OF CALIFORNIA 

COUNTY OF Sonoma

 

On August 21st, 2012, before me, Rachael Manning, Notary Public, personally appeared Philip L. Hurst who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

 

 

 

	
WITNESS my hand and official seal.

	[Notary Seal]
	 	 
	Signature /s/ Rachael Manning (Seal)

 

 

STATE OF CALIFORNIA 

COUNTY OF _________

 

On____________________, before me, _________________________, personally appeared William R, Hambrecht who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

 

 

 

	
WITNESS my hand and official seal.

	 
	 	 
	Signature _______________________ (Seal)	 

 

  

14

  

 

STATE OF CALIFORNIA 

COUNTY OF _________

 

On____________________, before me, _________________________, personally appeared Phillip L. Hurst who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

 

 

 

	
WITNESS my hand and official seal.

	 
	 	 
	Signature _______________________ (Seal)	 

 

 

STATE OF NEW YORK

COUNTY OF NEW YORK

 

On August 23, 2012, before me, Allison Corado, personally appeared William R, Hambrecht who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

 

 

 

	
WITNESS my hand and official seal.

	[Notary Seal]
	 	 
	Signature /s/ Allison Corado (Seal)	 

 

  

14

  

 

STATE OF CALIFORNIA 

COUNTY OF Sonoma

 

On August 17, 2012, before me, Rachael Manning, Notary Public, personally appeared Paul E. Dolan, III who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

 

 

 

	
WITNESS my hand and official seal.

	[Notary Seal]
	 	 
	Signature /s/ Rachael Manning (Seal)

 

 

STATE OF CALIFORNIA 

COUNTY OF Sonoma

 

On August 17, 2012, before me, Rachael Manning, Notary Public, personally appeared Heath E. Dolan who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

 

 

 

	
WITNESS my hand and official seal.

	[Notary Seal]
	 	 
	Signature /s/ Rachael Manning (Seal)

 

  

15

  

 

 EXHIBIT “A” 

 Property Description 

 

 

 

 

 

 

 

  

  

  

 Order Number:  4017990 

 Page Number: 6 

 

 LEGAL DESCRIPTION 

 

 Real property in the unincorporated area of the County of Sonoma, State of California, described as follows: 

 

 PARCEL ONE: 

 

 BEING A PORTION OF THE ORIGINAL J.G. BEST PLACE, DESCRIBED AS FOLLOWS, TO WIT: 

 

 BEGINNING AT THE SOUTHEAST CORNER OF THE LANDS OF W.G. RACKLIFF, NOW OR FORMERLY; THENCE SOUTH TO THE LAND OF BULLOCK, NOW OR FORMERLY; THENCE WEST TO DRY CREEK; THENCE NORTH TO THE SAID LAND OF W.G. RACKLIFF, NOW OR FORMERLY; THENCE EAST TO THE PLACE OF BEGINNING. 

 

 PARCEL TWO: 

 

 BEGINNING AT THE SOUTHWEST CORNER OF THE LAND OF O.J. LEBARON, NOW OR FORMERLY THE J.G. BEST PLACE, AND RUNNING THENCE SOUTH 75° 52’ WEST TO THE CENTERLINE OF DRY CREEK; THENCE MEANDERING UP THE MIDDLE LINE OF DRY CREEK TO A POINT WHERE THE NORTHWESTERLY LINE OF THE VALLEY LAND OF O.J. LEBARON IF PRODUCED WESTERLY WOULD INTERSECT THE MIDDLE LINE OF DRY CREEK; THENCE NORTH 39° 45’ EAST TO THE SOUTHWEST CORNER OF THE VALLEY LANDS OF O.J. LEBARON, NOW OR FORMERLY BEING ALSO THE SOUTHEAST CORNER OF THE LANDS OF O.F. PHILLIPS, NOW OR FORMERLY; THENCE WITH THE WESTERLY LINE OF LANDS OF O.J. LEBARON TO THE POINT OF BEGINNING.  COMMONLY KNOWN AND DESCRIBED AS “BEST PLACE”. 

 

 PARCEL THREE: 

 

 A PART OF LOT TWENTY-THREE (23) OF THE TZABACO RANCHO BOUNDED AS FOLLOWS, TO WIT:  NORTH BY THE LANDS OF HOTTMAN AND LEBARON, NOW OR FORMERLY, EAST BY THE COUNTY ROAD LEADING UP THE EAST SIDE OF DRY CREEK VALLEY; SOUTH BY THE LANDS OF JOHN W. SKELTON, NOW OR FORMERLY, AND WEST BY THE LAND OF KELLY, NOW OR FORMERLY. 

 

 SAVING AND EXCEPTING THEREFROM: 

 

 FIRST:  THAT PORTION OF THE ABOVE DESCRIBED LANDS CONVEYED TO NORTHWESTERN PACIFIC RAILROAD COMPANY, A CORPORATION, BY O.J. LEBARON AND LORA LEBARON, HIS WIFE, BY DEED DATED MAY 27, 1911, AND RECORDED JUNE 12, 1911, IN LIBER 277 OF DEEDS, PAGE 42, AND LIBER 277 OF DEEDS, PAGE 44, RESPECTIVELY, SONOMA COUNTY RECORDS. 

 

 First American Title 

  

  

  

 Order Number:  4017990 

 Page Number:  7 

 

 SECOND:  BEGINNING AT THE POINT OF INTERSECTION OF THE SOUTHEASTERLY LINE OF THE ABOVE DESCRIBED TRACT OF LAND WITH THE SOUTHWESTERLY LINE OF THE COUNTY ROAD LEADING UP THE EAST SIDE OF DRY CREEK VALLEY; THENCE NORTHWESTERLY ALONG THE SOUTHWESTERLY LINE OF SAID COUNTY ROAD, A DISTANCE OF 208.7 FEET; THENCE SOUTHWESTERLY, AND PARALLEL WITH THE SOUTHEASTERLY LINE OF THE ABOVE DESCRIBED TRACT OF LAND, A DISTANCE OF 208.7 FEET; THENCE SOUTHEASTERLY PARALLEL TO THE SOUTHWESTERLY LINE OF SAID COUNTY ROAD, A DISTANCE OF 208.7 FEET TO THE SOUTHEASTERLY LINE OF THE ABOVE DESCRIBED TRACT OF LAND; THENCE NORTHEASTERLY ALONG THE SOUTHEASTERLY LINE OF THE ABOVE DESCRIBED TRACT OF LAND, A DISTANCE OF 208.7 FEET TO THE POINT OF BEGINNING. 

 

 PARCEL FOUR : 

 

 COMMENCING AT THE NORTHEAST CORNER OF THE VALLEY LAND OF O.J. LEBARON RANCH, NOW OWNED BY ALBERTO RAFANELLI, IDENTICAL WITH THE SOUTHEAST CORNER OF VALLEY LAND OF HAROLD PHILLIPS IN THE CENTER OF THE COUNTY ROAD LEADING UP THE EAST SIDE OF DRY CREEK; THENCE SOUTH 37° 45’ EAST ALONG CENTER OF SAID ROAD, 310.00 FEET TO A POINT, THE PLACE OF BEGINNING, THENCE NORTH 60° 35’ EAST, 95 FEET TO AN IRON PIPE; THENCE SOUTH 16° 35’ EAST 130.50 FEET TO AN IRON PIPE; THENCE SOUTH 65° 20’ WEST, 67 FEET TO A POINT IN THE CENTER OF SAID COUNTY ROAD; THENCE UP THE CENTER OF SAID ROAD NORTH 29° 4’ WEST, 121.28 FEET TO THE POINT OF BEGINNING. 

 

 PARCEL FIVE : 

 

 ALL THAT PORTION OF THE FOLLOWING DESCRIBED TRACT OF LAND LYING WESTERLY OF THE CENTERLINE OF THE COUNTY ROAD LEADING UP THE EAST SIDE OF DRY CREEK,TO-WIT: 

 

 BEGINNING AT THE SOUTHEAST CORNER OF THE LANDS OF W.G. RACKLIFF, NOW OR FORMERLY, AND RUNNING THENCE SOUTH TO THE LAND OF BULLOCK, NOW OR FORMERLY; THENCE EAST ALONG SAID SOUTH LINE TO THE EASTERN BOUNDARY OF THE FRISBIE & PATTERSON HILL TRACT; THENCE NORTH TWO RODS MORE THAN HALF THE DISTANCE TO THE LAND OF ELLA G. RACKLIFF, TO THE LAND OF W.G. RACKLIFF, NOW OR FORMERLY; THENCE WEST ALONG THE LINE OF W.G. RACKLIFF’S LAND TO THE PLACE OF BEGINNING. 

 

 PARCEL SIX: 

 

 ALSO A STRIP OF LAND 100 FEET IN WIDTH LYING 50 FEET ON EACH SIDE OF THE ORIGINAL LOCATED CENTERLINE OF THE NORTHWESTERN PACIFIC RAILROAD COMPANY’S RAILROAD SAID CENTERLINE BEING DESCRIBED AS FOLLOWS: 

 

 BEGINNING AT THE POINT OF INTERSECTION OF SAID CENTERLINE WITH THE NORTHWESTERLY BOUNDARY OF LAND NOW OR FORMERLY OF O.J. LEBARON AND LORA LEBARON, HIS WIFE; THENCE SOUTHEASTERLY, 1200 FEET, MORE OR LESS, TO A POINT IN THE SOUTHWESTERLY EXTENSION OF THE NORTHWESTERLY BOUNDARY OF LAND NOW OR FORMERLY OF J.E. DUTRO.  THE SIDE LINES OF SAID STRIP OF LAND TERMINATE ON THE NORTH IN SAID NORTHWESTERLY LINE OF LAND NOW OR FORMERLY OF O.J. LEBARON AND LORA LEBARON, HIS WIFE, AND ON THE SOUTH IN SAID NORTHWESTERLY BOUNDARY OF LAND NOW OR FORMERLY OF J.E. DUTRO, AND THE SOUTHWESTERLY EXTENSION THEREOF. 

 

 First American Title 

  

  

  

 Order Number:  4017990 

 Page Number:  8 

 

 BEING ALL OF THAT CERTAIN 1.47 ACRE PARCEL OF LAND DESCRIBED IN DEED DATED MAY 27, 1911 FROM O.J. LEBARON AND LORA LEBARON, HIS WIFE, TO NORTHWESTERN PACIFIC RAILROAD COMPANY, RECORDED JUNE 12, 1911 IN BOOK 277 OF DEEDS, PAGE 44, SONOMA COUNTY RECORDS, ALL OF THAT CERTAIN 0.27 ACRE PARCEL OF LAND DESCRIBED IN DEED DATED MAY 27, 1911, FROM O.J. LEBARON AND LORA LEBARON TO THE NORTHWESTERN PACIFIC RAILROAD COMPANY, RECORDED JUNE 12, 1911 IN BOOK 277 OF DEEDS, PAGE 42, SONOMA COUNTY RECORDS, AND A PORTION OF THAT CERTAIN 3.07 ACRE PARCEL OF LAND DESCRIBED IN DEED DATED MAY 20, 1911 FROM WILLIAMS KELLY AND MARGARET E. KELLY, HIS WIFE, TO NORTHWESTERN PACIFIC RAILROAD COMPANY, RECORDED MAY 31, 1911 IN BOOK 273 OF DEEDS, PAGE 479, SONOMA COUNTY RECORDS. 

 

 EXCEPTING FROM PARCELS ONE THROUGH SIX ABOVE THOSE PORTIONS DESCRIBED IN THE FOLLOWING INSTRUMENTS : 

 

 (A) BOOK 2031 OFFICIAL RECORDS, PAGE 876 (B) BOOK 2273 OFFICIAL RECORDS, PAGE 60 (C) BOOK 2573 OFFICIAL RECORDS, PAGE 892. 

 

 ALSO EXCEPTING FROM THE ABOVE PARCELS ALL THAT PORTION LYING SOUTHWESTERLY AND SOUTHERLY OF THE OF THE AGREED BOUNDARY LINE, AS DISCLOSED BY BOUNDARY LINE AGREEMENT RECORDED MARCH 2, 2004, AS DOCUMENT NO. 2004028638, SONOMA COUNTY RECORDS. 

 

 PARCEL SEVEN: 

 

 ALL THAT PORTION LYING NORTHEASTERLY AND NORTHERLY OF THE AGREED BOUNDARY LINE, AS DISCLOSED BY BOUNDARY LINE AGREEMENT RECORDED MARCH 2, 2004, AS DOCUMENT NO. 2004028638, SONOMA COUNTY RECORDS. 

 

 APN:  090-230-040 and 090-230-030 

 

 

 

 First American Title 

  

  

  

 

 EXHIBIT “B” 

 Permitted Encumbrances 

 A lien of first encumbrance, certain real property described in the attached Exhibit “A” (the “Real Property”), located in the County of Sonoma, State of California, subject only to current taxes and assessments not yet due and payable and exceptions numbered 1 – 8, 12 – 20, all as listed on a certain Preliminary Title Report No. 4017990 (the “Permitted Title Exceptions”) dated June 21, 2012 and issued by First American Title Company for the Real Property located in Sonoma County.

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