Document:

ex10_15.htm

EXHIBIT 10.15

 

TRUETT-HURST, INC.

 

2012 STOCK INCENTIVE PLAN

 

1.             Purposes of the Plan.  The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.

 

2.             Definitions.  The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement.  In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2.

 

(a)           “Administrator” means the Board or any of the Committees appointed to administer the Plan.

 

(b)           “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

 

(c)           “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.

 

(d)           “Assumed” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

 

(e)           “Award” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit or other right or benefit under the Plan.

 

(f)            “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

 

(g)           “Board” means the Board of Directors of the Company.

 

(h)            “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “Cause” as such term (or word of like import) is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s:  (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person; provided, however, that with regard to any agreement that defines “Cause” on the occurrence of or in connection with a Corporate Transaction or a Change in Control, such definition of “Cause” shall not apply until a Corporate Transaction or a Change in Control actually occurs.

 

  

  

  

 

(i)            “Change in Control” means a change in ownership or control of the Company after the Registration Date effected through either of the following transactions:

 

(i)            the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or

 

(ii)           a change in the composition of the Board over a period of twelve (12) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.

 

(j)            “Code” means the Internal Revenue Code of 1986, as amended.

 

(k)           “Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan.

 

(l)            “Common Stock” means the common stock of the Company.

 

(m)           “Company” means Truett-Hurst, Inc., a Delaware corporation, or any successor entity that adopts the Plan in connection with a Corporate Transaction.

 

(n)           “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

 

(o)           “Continuing Directors” means members of the Board who either (i) have been Board members continuously for a period of at least twelve (12) months or (ii) have been Board members for less than twelve (12) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

 

  

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(p)           “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated.  In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws.  A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity.  Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement).  Notwithstanding the foregoing, except as otherwise determined by the Administrator, in the event of any spin-off of a Related Entity, service as an Employee, Director or Consultant for such Related Entity following such spin-off shall be deemed to be Continuous Service for purposes of the Plan and any Award under the Plan.  An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.  For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds three (3) months, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the expiration of such three (3) month period.

 

(q)           “Corporate Transaction” means any of the following transactions, provided, however, that the Administrator shall determine under parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive:

 

(i)             a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

 

(ii)            the sale, transfer or other disposition of all or substantially all of the assets of the Company;

 

(iii)           the complete liquidation or dissolution of the Company;

 

(iv)           any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger, , but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or

 

  

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(v)           acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.

 

(r)           “Covered Employee” means an Employee who is a “covered employee” under Section 162(m)(3) of the Code.

 

(s)           “Designated Entity” means any Affiliate or any other entity designated by the Administrator for participation in the Plan.

 

(t)            “Director” means a member of the Board or the board of directors of any Related Entity.

 

(u)           “Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy.  If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days.  A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

 

(v)           “Dividend Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect to Common Stock.

 

(w)           “Employee” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance.  The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

 

(x)           “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(y)           “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

 

(i)           If the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation The NASDAQ Global Select Market, The NASDAQ Global Market or The NASDAQ Capital Market of The NASDAQ Stock Market LLC, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

  

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(ii)            If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

 

(iii)           In the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.

 

(z)            “Good Reason” means the occurrence of any of the following events or conditions unless consented to by the Grantee (and the Grantee shall be deemed to have consented to any such event or condition unless the Grantee provides written notice of the Grantee’s non-acquiescence within 30 days of the effective time of such event or condition):

 

(i)             a change in the Grantee’s responsibilities or duties which represents a material and substantial diminution in the Grantee’s responsibilities or duties as in effect immediately preceding the change;

 

(ii)            a reduction in the Grantee’s base salary to a level below that in effect at any time within six (6) months preceding the reduction; provided that an across-the-board reduction in the salary level of substantially all other individuals in positions similar to the Grantee’s by the same percentage amount shall not constitute such a salary reduction; or

 

(iii)           requiring the Grantee to be based at any place outside a 50-mile radius from the Grantee’s job location except for reasonably required travel on business.

 

(aa)           “Grantee” means an Employee, Director or Consultant who receives an Award under the Plan.

 

(bb)           “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

 

(cc)           “Non-Qualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

 

(dd)           “Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

(ee)           “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.

 

(ff)            “Parent” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

  

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(gg)           “Performance-Based Compensation” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.

 

(hh)           “Plan” means this 2012 Stock Incentive Plan.

 

(ii)      “Registration Date” means the first to occur of (i) the closing of the first sale to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, of (A) the Common Stock or (B) the same class of securities of a successor corporation (or its Parent) issued pursuant to a Corporate Transaction in exchange for or in substitution of the Common Stock; and (ii) in the event of a Corporate Transaction, the date of the consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such Corporate Transaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, on or prior to the date of consummation of such Corporate Transaction.

 

(jj)            “Related Entity” means any Parent or Subsidiary of the Company or a Designated Entity.

 

(kk)           “Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award.  The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

 

(ll)      “Restricted Stock” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

 

(mm)           “Restricted Stock Units” means an Award which may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.

 

(nn)           “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

 

(oo)           “SAR” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock.

 

(pp)           “Share” means a share of the Common Stock.

 

  

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(qq)           “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

3.             Stock Subject to the Plan.

 

(a)           Subject to the provisions of Section 10, below, the maximum aggregate number of Shares which may be issued pursuant to all Awards (including Incentive Stock Options) is 10,000 Shares, plus an annual increase to be added on the first day of the Company’s fiscal year beginning after the Registration Date equal to the least of (x) 1,000 Shares, (y) one percent (1%) of the number of Shares outstanding as of such date, or (z) a lesser number of Shares determined by the Administrator.  SARs payable in Shares shall reduce the maximum aggregate number of Shares which may be issued under the Plan only by the net number of actual Shares issued to the Grantee upon exercise of the SAR.  The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Common Stock.

 

(b)      To the extent not prohibited by the listing requirements of The NASDAQ Stock Market LLC (or other established stock exchange or national market system on which the Common Stock is traded) or Applicable Law, any Shares covered by an Award which are surrendered (i) in payment of the Award exercise or purchase price (including pursuant to the “net exercise” of an option pursuant to Section 7(b)(v)) or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares which may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.

 

4.             Administration of the Plan.

 

(a)           Plan Administrator.

 

(i)           Administration with Respect to Directors and Officers.  With respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3.  Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

 

(ii)           Administration With Respect to Consultants and Other Employees.  With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws.  Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.  The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time.

 

  

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(iii)           Administration With Respect to Covered Employees.  Notwithstanding the foregoing, as of and after the date that the exemption for the Plan under Section 162(m) of the Code expires, as set forth in Section 18 below, grants of Awards to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised solely of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation.  In the case of such Awards granted to Covered Employees, references to the “Administrator” or to a “Committee” shall be deemed to be references to such Committee or subcommittee.

 

(iv)           Administration Errors.  In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

 

(b)           Powers of the Administrator.  Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

 

(i)             to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

 

(ii)            to determine whether and to what extent Awards are granted hereunder;

 

(iii)           to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

 

(iv)           to approve forms of Award Agreements for use under the Plan;

 

(v)            to determine the terms and conditions of any Award granted hereunder;

 

(vi)            to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent, provided, however, that an amendment or modification that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be treated as adversely affecting the rights of the Grantee;

 

(vii)          to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan;

 

(viii)         to grant Awards to Employees, Directors and Consultants employed outside the United States on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to further the purpose of the Plan; and

 

(ix)           to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

 

  

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The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator; provided that the Administrator may not exercise any right or power reserved to the Board.  Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.

 

(c)           Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

 

5.             Eligibility.  Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.  Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company.  An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards.  Awards may be granted to such Employees, Directors or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time.

 

6.             Terms and Conditions of Awards.

 

(a)           Types of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash, (iii) an Option, (iv) a SAR, or (v) a similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions.  Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Stock, Restricted Stock Units or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.

 

  

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(b)           Designation of Award.  Each Award shall be designated in the Award Agreement.  In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option.  However, notwithstanding such designation, an Option will qualify as an Incentive Stock Option under the Code only to the extent the $100,000 limitation of Section 422(d) of the Code is not exceeded.  The $100,000 limitation of Section 422(d) of the Code is calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company).  For purposes of this calculation, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option.  In the event that the Code or the regulations promulgated thereunder are amended after the date the Plan becomes effective to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

 

(c)           Conditions of Award.  Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria.  The performance criteria established by the Administrator may be based on any one of, or combination of, the following:  (i) increase in share price, (ii) earnings per share, (iii) total stockholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added and (xvii) market share.  The performance criteria may be applicable to the Company, Related Entities and/or any individual business units of the Company or any Related Entity.  Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement.  In addition, the performance criteria shall be calculated in accordance with generally accepted accounting principles, but excluding the effect (whether positive or negative) of any change in accounting standards and any extraordinary, unusual or nonrecurring item, as determined by the Administrator, occurring after the establishment of the performance criteria applicable to the Award intended to be performance-based compensation.  Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of performance criteria in order to prevent the dilution or enlargement of the Grantee’s rights with respect to an Award intended to be performance-based compensation.

 

(d)           Acquisitions and Other Transactions.  The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.

 

(e)           Deferral of Award Payment.  The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award.  The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

 

  

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(f)            Separate Programs.  The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

 

(g)           Individual Limitations on Awards.

 

(i)           Individual Limit for Options and SARs.  Following the date that the exemption from application of Section 162(m) of the Code described in Section 18 (or any exemption having similar effect) ceases to apply to Awards, the maximum number of Shares with respect to which Options and SARs may be granted to any Grantee in any calendar year shall be five thousand (5,000) Shares.  In connection with a Grantee’s commencement of Continuous Service, a Grantee may be granted Options and SARs for up to an additional two thousand five hundred (2,500) Shares which shall not count against the limit set forth in the previous sentence.  The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below.  To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations with respect to a Grantee, if any Option or SAR is canceled, the canceled Option or SAR shall continue to count against the maximum number of Shares with respect to which Options and SARs may be granted to the Grantee.  For this purpose, the repricing of an Option (or in the case of a SAR, the base amount on which the stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the Common Stock) shall be treated as the cancellation of the existing Option or SAR and the grant of a new Option or SAR.

 

(ii)           Individual Limit for Restricted Stock and Restricted Stock Units.  Following the date that the exemption from application of Section 162(m) of the Code described in Section 18 (or any exemption having similar effect) ceases to apply to Awards, for awards of Restricted Stock and Restricted Stock Units that are intended to be Performance-Based Compensation, the maximum number of Shares with respect to which such Awards may be granted to any Grantee in any calendar year shall be five thousand (5,000) Shares.  The foregoing limitation shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below.

 

(h)           Deferral. If the vesting or receipt of Shares under an Award is deferred to a later date, any amount (whether denominated in Shares or cash) paid in addition to the original number of Shares subject to such Award will not be treated as an increase in the number of Shares subject to the Award if the additional amount is based either on a reasonable rate of interest or on one or more predetermined actual investments such that the amount payable by the Company at the later date will be based on the actual rate of return of a specific investment (including any decrease as well as any increase in the value of an investment).

 

  

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(i)           Early Exercise.  The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award.  Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

 

(j)           Term of Award.  The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of an Award shall be no more than ten (10) years from the date of grant thereof.  However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.  Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.

 

(k)           Transferability of Awards.  Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee.  Other Awards shall be transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator but only to the extent such transfers are made to family members, to family trusts, to family controlled entities, to charitable organizations, and pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the Grantee.  Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.

 

(l)           Time of Granting Awards.  The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other later date as is determined by the Administrator.

 

7.             Award Exercise or Purchase Price, Consideration and Taxes.

 

(a)           Exercise or Purchase Price.  The exercise or purchase price, if any, for an Award shall be as follows:

 

(i)            In the case of an Incentive Stock Option:

 

(A)           granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or

 

  

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(B)           granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(ii)            In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(iii)           In the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(iv)           In the case of SARs, the base appreciation amount shall not be less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(v)            In the case of other Awards, such price as is determined by the Administrator.

 

(vi)           Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(d), above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

 

(b)           Consideration.  Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator.  In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law:

 

(i)             cash;

 

(ii)            check;

 

(iii)          surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

 

(iv)           with respect to Options, if the exercise occurs on or after the Registration Date, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction;

 

  

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(v)           with respect to Options, payment through a “net exercise” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i) the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Administrator) less the exercise price per Share, and the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of Shares); or

 

(vi)           any combination of the foregoing methods of payment.

 

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwise restrict one or more forms of consideration.

 

(c)           Taxes.  No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares.  Upon exercise or vesting of an Award the Company shall withhold or collect from the Grantee an amount sufficient to satisfy such tax obligations, including, but not limited to, by surrender of the whole number of Shares covered by the Award sufficient to satisfy the minimum applicable tax withholding obligations incident to the exercise or vesting of an Award (reduced to the lowest whole number of Shares if such number of Shares withheld would result in withholding a fractional Share with any remaining tax withholding settled in cash).

 

8.             Exercise of Award.

 

(a)           Procedure for Exercise; Rights as a Stockholder.

 

(i)           Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

 

(ii)           An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been made, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iv).

 

(b)           Exercise of Award Following Termination of Continuous Service.  In the event of termination of a Grantee’s Continuous Service for any reason other than Disability or death (but not in the event of a Grantee’s change of status from Employee to Consultant or from Consultant to Employee), such Grantee may, but only during the post-termination exercise period (but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination or such other portion of the Grantee’s Award as may be determined by the Administrator.  The Grantee’s Award Agreement may provide that upon the termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Award shall terminate concurrently with the termination of Grantee’s Continuous Service.  In the event of a Grantee’s change of status from Employee to Consultant, an Employee’s Incentive Stock Option shall convert automatically to a Non-Qualified Stock Option on the day three (3) months and one day following such change of status.  To the extent that the Grantee’s Award was unvested at the date of termination, or if the Grantee does not exercise the vested portion of the Grantee’s Award within the post-termination exercise period, the Award shall terminate.

 

  

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(c)           Disability of Grantee.  In the event of termination of a Grantee’s Continuous Service as a result of his or her Disability, such Grantee may, but only within six (6) months from the date of such termination (or such longer period as specified in the Award Agreement but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination; provided, however, that if such Disability is not a “disability” as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically convert to a Non-Qualified Stock Option on the day three (3) months and one day following such termination.  To the extent that the Grantee’s Award was unvested at the date of termination, or if Grantee does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

(d)           Death of Grantee.  In the event of a termination of the Grantee’s Continuous Service as a result of his or her death, or in the event of the death of the Grantee during the post-termination exercise period or during the six (6) month period following the Grantee’s termination of Continuous Service as a result of his or her Disability, the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance may exercise the portion of the Grantee’s Award that was vested as of the date of termination, within six (6) months from the date of death (or such longer period as specified in the Award Agreement but in no event later than the expiration of the term of such Award as set forth in the Award Agreement).  To the extent that, at the time of death, the Grantee’s Award was unvested, or if the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

(e)           Extension if Exercise Prevented by Law.  Notwithstanding the foregoing, if the exercise of an Award within the applicable time periods set forth in this Section 8 is prevented by the provisions of Section 9 below, the Award shall remain exercisable until one (1) month after the date the Grantee is notified by the Company that the Award is exercisable, but in any event no later than the expiration of the term of such Award as set forth in the Award Agreement and only in a manner and to the extent permitted under Code Section 409A.

 

9.             Conditions Upon Issuance of Shares.

 

(a)      If at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of an Award shall be suspended until the Administrator determines that such delivery is lawful and shall be further subject to the approval of counsel for the Company with respect to such compliance.  The Company shall have no obligation to effect any registration or qualification of the Shares under federal or state laws.

 

  

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(b)      As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

 

10.          Adjustments Upon Changes in Capitalization.  Subject to any required action by the stockholders of the Company and Section 11 hereof, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any Grantee in any calendar year, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii)  any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.”  In the event of any distribution of cash or other assets to stockholders other than a normal cash dividend, the Administrator shall also make such adjustments as provided in this Section 10 or substitute, exchange or grant Awards to effect such adjustments (collectively “adjustments”).  Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits under such Awards.  In connection with the foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards or other issuance of Shares, cash or other consideration pursuant to Awards during certain periods of time. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.

 

11.          Corporate Transactions and Changes in Control.

 

(a)           Termination of Award to Extent Not Assumed in Corporate Transaction.  Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate.  However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

 

  

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(b)           Acceleration of Award Upon Corporate Transaction or Change in Control.  The Administrator shall have the authority, exercisable either in advance of any actual or anticipated Corporate Transaction or Change in Control or at the time of an actual Corporate Transaction or Change in Control and exercisable at the time of the grant of an Award under the Plan or any time while an Award remains outstanding, to provide for the full or partial automatic vesting and exercisability of one or more outstanding unvested Awards under the Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such Awards in connection with a Corporate Transaction or Change in Control, on such terms and conditions as the Administrator may specify.  The Administrator also shall have the authority to condition any such Award vesting and exercisability or release from such limitations upon the subsequent termination of the Continuous Service of the Grantee within a specified period following the effective date of the Corporate Transaction or Change in Control.  The Administrator may provide that any Awards so vested or released from such limitations in connection with a Change in Control, shall remain fully exercisable until the expiration or sooner termination of the Award.

 

(c)           Effect of Acceleration on Incentive Stock Options.  Any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded.

 

12.          Effective Date and Term of Plan.  The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company.  It shall continue in effect for a term of ten (10) years unless sooner terminated.  Subject to Section 17, below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

 

13.          Amendment, Suspension or Termination of the Plan.

 

(a)      The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws.

 

(b)      No Award may be granted during any suspension of the Plan or after termination of the Plan.

 

(c)      No suspension or termination of the Plan (including termination of the Plan under Section 11, above) shall adversely affect any rights under Awards already granted to a Grantee.

 

14.          Reservation of Shares.

 

(a)      The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

(b)      The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

 

  

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15.          No Effect on Terms of Employment/Consulting Relationship.  The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without cause, including, but not limited to, Cause, and with or without notice.  The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.

 

16.          No Effect on Retirement and Other Benefit Plans.  Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation.  The Plan is not a “Pension Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

 

17.          Stockholder Approval.  The grant of Incentive Stock Options under the Plan shall be subject to approval of the Plan by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted excluding Incentive Stock Options issued in substitution for outstanding Incentive Stock Options pursuant to Section 424(a) of the Code.  Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws.  The Administrator may grant Incentive Stock Options under the Plan prior to approval by the stockholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable.  In the event that stockholder approval is not obtained within the twelve (12) month period provided above, all Incentive Stock Options previously granted under the Plan shall be exercisable as Non-Qualified Stock Options.

 

18.          Effect of Section 162(m) of the Code.  Section 162(m) of the Code does not apply to the Plan prior to the Registration Date.  Following the Registration Date, the Plan, and all Awards issued thereunder, are intended to be exempt from the application of Section 162(m) of the Code, which restricts under certain circumstances the Federal income tax deduction for compensation paid by a public company to named executives in excess of $1 million per year.  The exemption is based on Treasury Regulation Section 1.162-27(f), in the form existing on the effective date of the Plan, with the understanding that such regulation generally exempts from the application of Section 162(m) of the Code compensation paid pursuant to a plan that existed before a company becomes publicly held.  Under such Treasury Regulation, this exemption is available to the Plan for the duration of the period that lasts until the earlier of (i) the expiration of the Plan, (ii) the material modification of the Plan, (iii) the exhaustion of the maximum number of shares of Common Stock available for Awards under the Plan, as set forth in Section 3(a), (iv) the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the Company first becomes subject to the reporting obligations of Section 12 of the Exchange Act, or (v) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder.  To the extent that the Administrator determines as of the date of grant of an Award that (i) the Award is intended to qualify as Performance-Based Compensation and (ii) the exemption described above is no longer available with respect to such Award, such Award shall not be effective until any stockholder approval required under Section 162(m) of the Code has been obtained.

 

  

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19.          Unfunded Obligation.  Grantees shall have the status of general unsecured creditors of the Company.  Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended.  Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations.  The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder.  Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

 

20.          Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

 

21.          Nonexclusivity of The Plan.  Neither the adoption of the Plan by the Board, the submission of the Plan to the stockholders of the Company for approval, nor any provision of the Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of Awards otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

 

 

19ex10_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.

 

  

7

  

 

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:

 

  

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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.

 

  

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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.

 

  

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(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.

 

  

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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]

 

 

 

 

 

 

  

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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 B

 

  FINANCIAL STATEMENTS OF COMPANY

 

 

 

 

 

 

  

  

  

 

 EXHIBIT C

 

FORM OF NONCOMPETITION AGREEMENT

 

 

 

 

 

 

 

 

 

 

  EXHIBIT D

 

FORM OF CONSULTING AGREEMENT

 

 

 

 

 

 

 

 

 

 

  EXHIBIT E

 

  FORM OF ASSIGNMENT OF MEMBERSHIP INTEREST

 

 

 

 

 

 

 

 

 

 

  EXHIBIT F

 

  CONSENT OF SPOUSE OR REGISTERED DOMESTIC PARTNER

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