Document:

ex10_13.htm

Exhibit 10.13

 

LEASE

 

THIS LEASE (the "Lease"), dated as of February 8, 2011, is made by and between HAMBRECHT WINE GROUP L.P., a California limited partnership ("Landlord") and H.D.D. LLC, a California limited liability company ("Tenant").

 

RECITALS

 

	
  

	
A.

	
Landlord is the owner of that certain real property located at 4035 Westside Road, Healdsburg, California (the "Property").

 

	
  

	
B.

	
Tenant desires to lease the Property from Landlord and Landlord desires to lease the Property to Tenant on the terms and conditions set forth in this Agreement.

 

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

 

AGREEMENT

 

1.             Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, subject to the terms and conditions contained herein, all of the buildings, grounds, parking areas and other facilities and equipment located at 4035 Westside Road, Healdsburg, California, including but not limited to the cottage; tasting room, lab and cellar (Building No. 2) (the "Tasting Room") and the administrative offices, barrel storage (Building No. 3) (the "Winery"), two water tanks, chiller, and reservoir/holding ponds, including all rights and privileges appurtenant thereto, those improvements constructed thereon, and all equipment and trade fixtures contained therein (the "Premises"), excluding therefrom all of Building No. 4 currently occupied by Alysian Wines and its adjacent parking area.

 

The term Premises shall also include all personal property of Landlord located on the Premises including but not limited to forklifts, office equipment, computers, lab equipment, phones and all other equipment and fixtures relating to the Winery and Tasting Room.

 

2.             Term, Option to Extend, and Right to Purchase Property.

 

(a)           Term.  Subject to Section 2(b), the term of this Lease is for five (5) years (the "Term"), commencing on March 1, 2011 (the "Commencement Date"), and ending on February 29, 2016. Unless otherwise set forth, all references herein to the "Term" shall be deemed to include the Option Term (as defined in Section 2(b)).

 

(b)           Option to Extend. Landlord hereby grants to Tenant one (1) option (the "Option") to extend the Term of this Lease for an additional period of five (5) years (the "Option Term"). The Option must be exercised, if at all, by written notice (the "Option Notice") delivered by Tenant to Landlord not earlier than nine (9) months and not later than four (4) months prior to the end of the initial Term of this Lease. Further, the Option shall not be deemed to be properly exercised if, as of the date of the Option Notice or at the end of the initial Term of this Lease Tenant is in default of this Lease. Provided Tenant has properly and timely exercised the Option, the initial Term of this Lease shall be extended by the Option Term, and all terms, covenants and conditions of this Lease shall remain unmodified and in full force and effect. If Tenant fails to timely give the Option Notice, the Option shall thereupon expire. Monthly Rent (as defined in Section 4) for the Option Term shall be calculated and paid pursuant to Section 4.

  

  

  

 

(c)           Right of First Refusal. In the event Landlord desires to sell the Property, or any portion or interest in the Property (the "Sale Property"), and shall have received an acceptable bona fide offer to purchase the Property or such interest (the "Offer"), Landlord shall give written notice of its intent to sell (the "Notice of Intent to Sell") to Tenant, together with an executed copy of the Offer setting forth all of the terms of the proposed purchase and identifying the prospective purchaser. Tenant shall then have an option to purchase the Sale Property on the same terms and conditions as set forth in the Offer; provided, however, if the terms and conditions of the Offer provide for an exchange of like-kind real property as payment of all or a portion of the purchase price, Tenant may exercise its option to purchase by stating in its written notice of exercise its willingness to participate in an exchange transaction in which Landlord shall identify certain real property which Tenant, at no additional cost or expense to Tenant, shall acquire and exchange with Landlord for the Sale Property on terms and conditions otherwise consistent with the Offer. If no exchange is contemplated in the Offer, Tenant shall have the further option of paying Landlord in cash at closing the full amount of the purchase price of the Sale Property, notwithstanding any non-cash terms set forth in the Offer. If Tenant elects to exercise its option, it shall give Landlord written notice of such election within thirty (30) days after receipt of the Notice of Intent to Sell. If Tenant fails to exercise its option within such thirty (30)-day period, (i) Landlord shall be free to accept an offer to sell the Sale Property on the terms set forth in the Offer at any time within ninety (90) days after the expiration of such thirty (30)-day period; provided (i) the prospective purchaser executes and delivers to Tenant any documents reasonably necessary to acknowledge that Tenant's right to possession of the Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the rent and observe and perform all of the provisions of this Lease; and (ii) Tenant shall, upon request, deliver to Landlord an acknowledgment of Tenant's failure to exercise the option and Landlord's right to sell the Sale Property pursuant to this Section 2(c). In the event Landlord has not completed such sale of the Sale Property within such ninety (90)-day period, Landlord shall not thereafter sell the Sale Property without first complying with the provisions of this Section 2(c). In the event the Sale Property comprises less than Landlord's entire interest in the Property, the remaining portion of or interest in the Property shall remain subject to this Section 2(c).

 

3.             Condition Upon Delivery.

 

(a)           Improvements. Landlord and Tenant each acknowledge that certain alterations and improvements to the Premises will be needed in order for the Premises to meet the business goals of Tenant. The cost of such improvements is estimated to be at least One Hundred Thousand Dollars ($100,000). Landlord and Tenant each agree to negotiate and, no later than sixty (60) days following the Commencement Date, to enter into a side letter agreement setting forth the manner in which Landlord and Tenant will share the cost of such alterations and improvements.

 

  

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(b)           Acceptance of Premises. Notwithstanding Section 3(a), Tenant hereby accepts the Premises in the condition existing as of the Commencement Date, "AS IS", and also accepts the Premises and this Lease subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, subject to all covenants, conditions and restrictions affecting the Property or Premises and subject to all liens, claims and encumbrances currently existing against the Premises or any part thereof, including all matters disclosed by any of the foregoing or by any exhibits attached hereto.

 

4.             Rent.

 

(a)           Rent. Tenant shall pay to Landlord as rent an amount equal to the sum of the Winery Rent (as defined below) and the Tasting Room Rent (as defined below). Any rent amounts described below shall be payable in twelve (12) monthly installments ("Monthly Rent"). Monthly Rent shall be payable in advance on the first day of each month commencing on the Commencement Date, except for the Tasting Room Rent which shall commence on April 1, 2011. All Monthly Rent shall be paid to Landlord in lawful money of the United States at the address to which notices to Landlord are given, or at such other address as Landlord may give Tenant in writing from time to time.

 

(b)           Initial Winery Rent. Commencing on March 1, 2011 and continuing through August 31, 2011, rent for the Winery (the "Winery Rent") shall be Five Thousand Dollars ($5,000) per month.

 

(c)           Annual Winery Rent. Commencing on September 1, 2011, the Winery Rent shall be calculated on a twelve (12) month basis commencing on September 1 and ending on August 31 of each year during the Term (a "Rent Year"), and shall be determined as follows:

 

(1)           Commencing on September 1, 2011, the Winery Rent for the first Rent Year shall be One Hundred Seventy-One Thousand Dollars ($171,000), which amount is equal to the Estimated Production Value (as defined below) for the first Rent Year, and which is subject to reconciliation to the Actual Production Value (as defined below) for such Rent Year pursuant to Section 4(c)(5) of this Lease.

 

(2)           Commencing on September 1, 2012 and on each September 1 of the Term thereafter (each a "Rent Adjustment Date"), the Winery Rent for the next Rent Year shall be adjusted to be an amount equal to eighty percent (80%) of the Estimated Production Value for such Rent Year which shall be reconciled to the Actual Production Value for such Rent Year pursuant to Section 4(c)(5) of this Lease. Notwithstanding anything contained herein to the contrary, eighty percent (80%) of the Estimated Production Value shall not be less than the product of fifty-seven thousand (57,000) cases multiplied by the then-applicable Per Case Value (as defined below).

 

(3)           Each year's "Estimated Production Value" shall be an amount equal to the Per Case Value multiplied by the number of cases of wine forecasted, in accordance with Section 4(c)(4), to be produced by Tenant in the Winery for such Rent Year. For the first Rent Year, the "Per Case Value" shall be Three Dollars ($3.00). On every Rent Adjustment Date the Per Case Value shall be increased by three percent (3%). As used in this Lease, the term "Actual Production Value" shall refer to the number of cases of wine actually produced by Tenant in the Winery as indicated in the Production Report (as defined below) for a given Rent Year multiplied by the then-applicable Per Case Value,

 

  

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(4)           No later than thirty (30) days prior to each Rent Adjustment Date, Tenant shall, using commercially reasonable estimates, forecast the number of cases of wine to be produced by Tenant in the Winery for the Rent Year commencing on such Rent Adjustment Date and shall submit such written forecast to Landlord (each an "Estimated Production Report"). The Estimated Production Report shall be used to determine that Rent Year's Estimated Production Value pursuant to Section 4(c)(3) of this Lease. The parties hereby acknowledge and agree that fifty-seven thousand (57,000) cases of wine are expected to be produced by Tenant in the Winery during the first Rent Year.

 

(5)           Commencing on September 30, 2012 and on each September 30 of the Term thereafter, the Winery Rent for the immediately preceding Rent Year shall be reconciled pursuant to this Section 4(c)(5) and Tenant shall furnish to Landlord a written statement showing the number of cases of wine actually produced by Tenant in the Winery during the immediately preceding Rent Year (each a "Production Report"). If the production totals set forth in such Production Report exceed the forecasts set forth in the applicable Estimated Production Report, Tenant shall pay to Landlord, no later than November 15 of that Rent Year, an amount equal to the product of the applicable Per Case Value multiplied by the greater of the number of cases of wine actually produced as stated in the Production Report or fifty-seven thousand (57,000) cases, less the Winery Rent previously paid.

 

(d)           Tasting Room Rent. The annual rent to be paid by Tenant to Landlord for the Tasting Room shall be Ninety Thousand Dollars ($90,000) (the "Tasting Room Rent"); provided, however, no Tasting Room Rent shall be due to Landlord until April 1, 2011 and on the first (l') day of each month thereafter during the Term. On every Rent Adjustment Date, the Tasting Room Rent shall be increased by three percent (3%).

 

(e)           Prorations. Monthly Rent for any partial month shall be prorated at the rate of one-thirtieth (1/30th) of the Monthly Rent per day. If this Lease terminates before the expiration date for reasons other than Tenant's default, Month Rent shall be prorated to the date of such termination and shall be reconciled pursuant to Section 4(c)(5).

 

5.             Late Charge; Interest. If any installment of Monthly Rent due from Tenant is not received by Landlord within fifteen (15) business days of the date due, Tenant shall pay to Landlord One Thousand Dollars ($1,000) as a late charge, plus interest at ten percent (10%) per annum. Landlord and Tenant acknowledge and agree that such charges, interest, and fees represent a fair and reasonable estimate of the costs Landlord may incur by reason of Tenant's late payment. Tenant's payment or Landlord's acceptance of any such charges, interest, or fees shall not excuse or cure any default by Tenant under this Lease. Landlord's right to collect such charges, interest, or fees shall not be deemed an extension of the date Monthly Rent is due, or prevent Landlord from exercising any other rights and remedies it may have under this Agreement or under law.

 

  

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6.             Personal Property Taxes.

 

(a)           Tenant Property. Tenant shall pay before delinquency all taxes, assessments, license fees, and other charges that are levied and assessed on Tenant's personal property installed or located in or on the Premises, and that become payable during the Term. Upon written request by Landlord, Tenant shall furnish Landlord satisfactory evidence of these payments.

 

(b)           Landlord Property. Landlord shall pay before delinquency all taxes, assessments, license fees, and other charges that are levied and assessed on Landlord's personal property, fixtures and equipment installed or located in or on the Premises, and that become payable during the Term. Upon written request by Tenant, Landlord shall furnish Tenant satisfactory evidence of these payments.

 

7.             Real Property Taxes. Landlord shall pay all real property taxes and general and special assessments levied and assessed against the Premises.

 

8.            Use. The Premises shall be used as a winery and tasting room and for activities related to such uses. No use shall be made or permitted to be made of the Premises, nor acts done in or about the Premises, which will in any way conflict with any law, ordinance, rule or regulation affecting the occupancy or use of the Premises which has been or is subsequently enacted or promulgated by any public authority, or which will increase the existing rate of insurance upon the building, or cause a cancellation of any insurance policy covering the building or any part thereof, nor shall Tenant sell, or permit to be kept, used or sold in or about the Premises, any article which may be prohibited by the standard form of fire insurance policy.

 

Permits for the operation of the Premises for the production of alcoholic beverages shall be maintained in accordance with the terms of the Interim Management Agreement, a copy of which is attached hereto as Exhibit A.

 

9.             Utilities. Tenant shall pay for all utilities and services relating to the Premises, including without limitation janitorial, security services, electricity, gas, propane, telephone, cable, Internet service, water, septic, garbage, and recycling services (collectively, "Utilities"). If any Utilities are not separately metered to the Premises or otherwise separately provided for (collectively, "Shared Utilities"), (i) Tenant shall pay to Landlord as additional rent a reasonable portion, to be determined by Landlord in a manner reflecting actual usage, of the charges for such Shared Utilities; and (ii) Landlord shall be responsible for the payment of all charges for such Shared Utilities used by all other tenants or occupants of the Property. Landlord shall use its best efforts to have all utilities separately metered to each tenant within the first year of the Term.

 

10.           Maintenance and Repairs.

 

(a)           Tenant Responsibilities.

 

(1)           General Responsibilities. Subject to Section 10(a)(2), Tenant shall, at Tenant's sole cost and expense, keep, repair and maintain the Premises, including all equipment, trade fixtures, plumbing fixtures, electrical components, interior wall surfaces, floor and floor coverings, any and all alterations and additions made by Tenant, and signs located in the areas which are adjacent to or included with the Premises, in all respects in good repair and in a clean and safe condition. Tenant shall, at Tenant's own expense, immediately replace all interior, exterior or other glass in or about the Premises that may be broken during the Term with glass at least equal to the specification and quality of the glass so replaced.

 

  

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(2)           Limitations. Notwithstanding Section 10(a)(1), Tenant's maintenance and repair responsibilities shall be limited as follows:

 

(A)           Tenant shall not be required to perform any repair or maintenance, regardless of location, if the cost of such repair or maintenance would exceed Five Thousand Dollars ($5,000), except for repairs necessitated solely by Tenant's gross negligence or willful misconduct.

 

(B)           Tenant shall not be required to perform any repair or maintenance on the exterior of the Premises, except that Tenant shall be responsible for any repairs necessitated solely by Tenant's gross negligence or willful misconduct.

 

(C)           Tenant shall not be required to perform any repair or maintenance on any equipment, fixture, system, or component if such equipment, fixture, system, or component is (including any portion thereof) located on the exterior of the Premises, underground, under any floor, on any roof, above any suspended ceiling, or inside any wall or crawlspace.

 

(D)           Tenant shall not be required to perform any repair or maintenance on any structural component of the Premises (including, without limitation, any roof, roof surface, subfloor, foundation, or any structural component of any wall) regardless of location.

 

(E)           Tenant shall not be required to make any capital improvements or replace any equipment located within the Premises.

 

(b)           Landlord Responsibilities.

 

(1)           Repairs to Premises. Landlord shall, at Landlord's sole cost and expense, keep, repair and maintain:

 

(A)           all of the Premises' systems (including any portion thereof) located underground, under any floor, on any roof, above any suspended ceiling, or inside any wall or crawlspace including, with limitation, all electrical and gas systems, plumbing systems, and HVAC systems, in all respects in good repair and in a clean and safe condition; and

 

(B)           all of the Premises' structural components (including, without limitation, any roof, roof surface, subfloor, foundation, or any structural component of any wall or ceiling) regardless of location, in all respects in good repair and in a clean and safe condition.

 

  

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(2)           Common Areas. Landlord shall, at Landlord's sole cost and expense, keep, repair and maintain all common areas of the Property, including, without limitation, all walks, driveways, parking and loading areas, lighting, fences, and lawns and landscaping, in all respects in good repair and in a clean and safe condition.

 

(3)           Major Repairs. Any required repair or maintenance to any portion of the Premises including, without limitation, all improvements, equipment, walls, floors, subfloors, floor coverings, and structural or nonstructural portion of any building where the cost of such repair or maintenance would equal or exceed Five Thousand Dollars ($5,000) shall be the sole responsibility of Landlord, except for repairs necessitated solely by Tenant's gross negligence or willful misconduct.

 

(4)           Building Exteriors. Landlord shall, at Landlord's sole cost and expense, maintain and repair all roofs (including surfaces) and all exterior walls of the Premises, regardless of cost.

 

(c)           All maintenance and repair work undertaken, or caused to be undertaken, by Tenant or Landlord shall be done in a workmanlike manner.

 

11.           Alterations.

 

(a)           Consent of Landlord. Except as provided in Section 12, Tenant shall not make any alterations to any portion of the Premises without Landlord's prior written consent. Unless otherwise provided by written agreement, all alterations shall be done at Tenant's sole cost and shall be done by or under the direction of Landlord, and shall be the property of Landlord and shall remain on and be surrendered with the Premises on expiration or termination of the Term.

 

(b)           Notice. If Tenant makes any alterations to the Premises, as provided herein, the alterations shall not be commenced until two (2) days after Landlord has received notice from Tenant stating the date the installation of the alterations is to commence, so that Landlord can post and record an appropriate notice of non-responsibility.

 

12.           Trade Fixtures. Subject to the provisions of Section 11, Tenant may install and maintain its trade fixtures on the Premises, provided that such fixtures, by reason of the manner in which they are affixed, do not become an integral part of the building or Premises. Tenant, if not in default hereunder, may at any time or from time to time during the Term hereof, or upon the expiration or termination of this Lease, alter or remove any such trade fixtures so installed by Tenant. If not so removed by Tenant on or before the expiration or termination of this Lease, Tenant, upon the request of Landlord so to do, shall thereupon remove the same. Any damage to the Premises caused by any such installation, alteration or removal of such trade fixtures shall be promptly repaired at the expense of Tenant.

 

13.           Mechanics' Liens.

 

(a)           Cost. Except as otherwise agreed on in writing by Landlord and Tenant, Tenant shall pay all costs for construction done by it, or caused to be done by it, on the Premises, permitted by this Lease. Tenant shall keep the Premises free and clear of all mechanics' liens resulting from construction done by or for Tenant.

 

  

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(b)           Validity and Contest of Lien. Tenant shall have the right to contest the correctness or validity of any such lien if, immediately on demand by Landlord, Tenant procures and records a lien release bond issued by a corporation authorized to issue surety bonds in California in an amount equal to one and one-half (1-1/2) times the amount of the claim of the lien. The bond shall meet the requirements of Section 3143 of the California Civil Code and shall provide for the payment of any sum that the claimant may recover on the claim (together with costs of suit, if it recovers in the action).

 

14.           Indemnification.

 

(a)           Indemnification of Landlord. Tenant shall defend, indemnify and hold Landlord harmless from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorney fees and court costs) arising from or relating to Tenant's use of the Premises, the conduct of Tenant's business, any activity, work or things done, permitted or suffered by Tenant or any of Tenant's customers, agents, contractors, or employees in or about the Premises or elsewhere, or any negligence of Tenant or any of Tenant's agents, contractors, or employees.

 

(b)           Indemnification of Tenant. Landlord shall defend, indemnify and hold Tenant harmless from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorney fees and court costs) arising from or relating to Landlord's or any of Landlord's other tenants' use of the Property, the conduct of Landlord's or any of Landlord's other tenants' business, any activity, work or things done, permitted or suffered by Landlord or any of Landlord's other tenants agents, contractors, or employees in or about the Property or elsewhere, or any negligence of Landlord or any of Landlord's other tenants, agents, contractors, or employees.

 

15.           Insurance.

 

(a)           General Liability. Tenant at its sole cost and expense, but for the mutual benefit of Landlord and Tenant as named insureds, shall maintain commercial general liability insurance ("Liability Insurance") on an "occurrence basis" against claims for "personal injury," including without limitation, bodily injury, death or property damage, occurring upon, in or about the Premises and on, in or about the adjoining sidewalks, streets and passageways and for all other areas appurtenant thereto, such insurance to afford immediate minimum protection, at the time of the inception of this Lease, and at all times during the Term, to a limit of not less than Two Million Dollars ($2,000,000) with respect to personal injury or death to any one or more persons or to damage to property. Such insurance shall also include coverage against liability for bodily injury or property damage arising out of the use, by or on behalf of Tenant, or any other person or organization, of any owned, non-owned, leased or hired automotive equipment in the conduct of any and all operations called for under this Lease. The limits of said insurance shall not, however, limit the liability of Tenant hereunder. Tenant shall increase the amount of such insurance from time to time as mandated by Landlord to maintain commercially reasonable amounts of insurance.

 

  

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(b)           Extended Coverage. During the Term, Landlord shall keep the Premises and all improvements, fixtures and personal property therein and thereupon insured against loss or damage by fire and lightning and against loss or damage by other risks embraced by coverage, of the type now known as the broad form of extended coverage, including but not limited to fire, riot and civil commotion, vandalism and malicious mischief, special extended perils (all risk) and sprinkler leakage, and against such other risks or hazards as Landlord may from time to time reasonably designate, in amounts sufficient to prevent Landlord or Tenant from becoming a coinsurer under the terms of the applicable policies, but in any event in an amount not less than the full replacement cost of all such improvements, fixtures and personal property, without deduction for physical depreciation.

 

(c)           Tenant's Personal Property. Tenant shall maintain on all of its personal property, Tenant's improvements, and alterations in, on, or about the Premises, a policy of standard fire and extended coverage insurance, with vandalism and malicious mischief endorsements, to the extent of at least ninety percent (90%) of their full replacement value. The proceeds from any such policy shall be used by Tenant for the replacement of personal property or the restoration of Tenant's improvements or alterations.

 

(d)           Payment of Premiums. Each party shall pay the premiums for the insurance they are required to maintain under this Lease.

 

(e)           Policy Provisions. Each insurance policy maintained by Tenant under this Lease shall contain a provision requiring thirty (30) days' written notice from the insurance company to Landlord before any cancellation or change in the coverage, scope, or amount of the policy. Each policy, or a certificate of the policy, together with evidence of payment of premiums, shall be deposited with the other party at the commencement of the term, and on renewal of the policy, not less than twenty (20) days before expiration of the term of the policy.

 

16.           Waiver of Subrogation.

 

(a)           Waiver. The parties release each other, and their respective authorized representatives, from any claims for damage to any person, or to the Premises and to the fixtures, personal property, Tenant's improvements, and alterations of either Landlord or Tenant in or on the Premises that are caused by or result from the risks insured against under any insurance policies carried by the parties and in force at the time of any such damage.

 

(b)           Insurance. Each party shall cause each insurance policy obtained by it to provide that the insurance company waives all right of recovery by way of subrogation against either party in connection with any damage covered by any policy. Neither party shall be liable to the other for any damage caused by fire or any of the risks insured against under any insurance policy required by this Lease. If any insurance policy cannot be obtained with a waiver of subrogation, or is obtainable only by the payment of an additional premium charge above that charged by insurance companies issuing policies without waiver of subrogation, the party undertaking to obtain the insurance shall notify the other party of this fact. The other party shall have a period of ten (10) days after receiving the notice either to place the insurance with a company that is reasonably satisfactory to the other party and that will carry the insurance with a waiver of subrogation, or to agree to pay the additional premium if such policy is obtainable at additional cost. If the insurance cannot be obtained or the party in whose favor a waiver of subrogation is desired refuses to pay the additional premium charged, the other party is relieved of the obligation to obtain a waiver of subrogation rights with respect to the particular insurance involved.

 

  

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17.           Destruction. If the whole or any part of the Premises shall be destroyed by fire or other cause, or be so damaged thereby that they are untenantable and cannot be rendered tenantable within one hundred eighty (180) days from the date of such destruction or damage, this Lease may be terminated by Landlord or Tenant by written notice. Within forty-five (45) days from date of such destruction or damage, Landlord shall give written notice to Tenant as to whether or not the Premises will be rendered tenantable within one hundred eighty (180) days from the date of such destruction or damage. In case the damage or destruction does not permit termination of the Lease as provided above, or neither Landlord nor Tenant elects to terminate the Lease as provided above, Landlord shall within a reasonable time, render said Premises tenantable. The provisions of Sections 1932(2) and. 1933(4) of the California Civil Code shall not apply to this Lease, and Tenant waives the benefit of such provisions.

 

18.           Condemnation. Should the whole or any part of the Premises be condemned and taken by any competent authority for any public or quasi-public use or purpose, all awards payable on account of such condemnation and taking shall be payable to Landlord, and Tenant hereby waives all interest in or claim to such awards, or any part thereof. If the whole of the Premises shall be so condemned and taken, then this Lease shall terminate. If only a part of the Premises is condemned and taken and the remaining portion thereof is not suitable for the purposes for which Tenant has leased said Premises, this Lease shall terminate. If only a part of the Premises is condemned and taken and the remaining portion thereof is suitable for the purposes for which Tenant has leased said Premises, this Lease shall continue, but the rental shall be reduced in an amount proportionate to the value of the portion taken as it related to the total value of the Premises.

 

19.           Assignment and Subletting. Tenant shall not assign, mortgage or pledge this Lease, or any interest therein, and shall not sublet the Premises or any part thereof, or any right or privilege appurtenant thereto, or allow any other person (the agents and servants of Tenant excepted) to occupy or use the Premises, or any portion thereof.

 

20.           Tenant's Obligations Upon Termination. In addition to any other obligation contained in this Lease, upon termination hereof, Tenant shall (i) give Landlord all copies of all keys or opening devices to the Premises; (ii) vacate the Premises and surrender it to Landlord empty of all persons and personal property; (iii) vacate all parking and storage spaces; (iv) deliver the Premises to Landlord in the same condition specified in Section 2(c), normal wear and tear excepted, and in broom-clean condition; and (v) give written notice to Landlord of Tenant's forwarding address.

 

21.           Insolvency and Receivership. Either the appointment of a receiver to take possession of all, or substantially all, of the assets of Tenant or a general assignment by Tenant for the benefit of creditors, or any action taken or suffered by Tenant under any insolvency or bankruptcy act, shall constitute a breach of this Lease by Tenant.

 

  

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22.           Default and Re-Entry.

 

(a)           Right of Re-Entry. In the event of any breach of the terms and provisions of this Lease by Tenant, or if Tenant's interest herein, or any part thereof, be assigned or transferred without the written consent of Landlord, either voluntarily or by operation of law, whether by judgment, execution, death, receivership, or any other means, or if Tenant vacates or abandons the Premises, which shall be conclusively presumed if Tenant leaves the Premises closed or unoccupied continuously for twenty (20) days, then in any such event, Landlord, besides other rights or remedies it may have, shall have the immediate right of re-entry and may remove all persons and property from the Premises and may store such property at the cost of and for the account and risk of Tenant.

 

(b)           Possession and Termination. Should Landlord elect to re-enter as herein provided, or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law, it may either terminate this Lease or, pursuant to Section 1951.4 of the California Civil Code, and even though Tenant has breached this Lease and abandoned the Premises, continue the Lease in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord may enforce, all its rights and remedies under the lease, including the right to recover the rent as it becomes due.

 

(c)           Continuation. If Landlord elects to continue the Lease in effect, it may re-lease the Premises, or any part thereof, for such term or terms (which may be for a term extending beyond the Term of this Lease) and at such rental or rentals and upon such other terms and conditions as Landlord, in its sole discretion, may deem advisable and shall have the right to make alterations and repairs to the Premises.

 

(d)           Received Rents. Rents received by Landlord from such re-letting shall be applied as follows: (i) first, to the payment of any costs and expenses of such re-letting, including a reasonable attorney's fee and any real estate commission actually paid, and any costs and expenses of such alterations and repairs; (ii) second, to the payment of any indebtedness, other than rent, due hereunder from Tenant to Landlord; (iii) third, to the payment of rent due and unpaid hereunder; and (iv) the residue, if any, shall be held by Landlord and applied in payment of future rent or other obligations as the same may become due and payable hereunder. If the net rent from such re-letting during any month after first applying the rent received to such fees, costs, expenses, and other indebtedness, is less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord, and such deficiency shall be calculated and paid monthly.

 

(e)           Election to Terminate. No such re-entry or taking possession of said Premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. Notwithstanding any such re-letting without termination, Landlord may, at any time thereafter, elect to terminate this Lease for such previous breach.

 

  

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(f)           Termination by Landlord. Should Landlord at any time terminate this Lease for any breach, and thereafter seek relief pursuant to Section 1951.2 of the California Civil Code, interest shall be allowed upon unpaid rent for the purposes of Section 1951.2(b) at the rate of ten percent (10%) per annum. Landlord shall be entitled to recover at the time of an award of damages for default the worth of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of the rental loss that Tenant proves could reasonably be avoided. Unless otherwise agreed between the parties, any proof by Tenant under Sections 1951.2(a)(2), 1951.2(a)(3), or 1951.2(c)(1) of the California Civil Code, or any successor statutes, as to the amount of rental loss that could be reasonably avoided, shall be made in the following manner: Landlord and Tenant shall each select a licensed real estate broker in the business of renting property of the same type and use as the leased Premises and in the same geographic vicinity, the real estate brokers so selected shall then select a third real estate broker similarly qualified, and the three so selected shall determine the amount of the rental loss that could be reasonably avoided for the balance of the Term of this Lease after the time of award. The decision of the majority of said brokers shall be final and binding upon the parties hereto.

 

(g)           Remedies Cumulative. The foregoing rights and remedies shall be in addition to and cumulative with any other rights and remedies available to Landlord under the terms of this Lease or any applicable laws, statutes or regulations.

 

23.           Waiver. The waiver by Landlord of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition or of any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent.

 

24.           Removal of Property. Whenever Landlord shall remove any property of Tenant from the Premises and store the same elsewhere for the account, and at the expense and risk, of Tenant, as provided in Section 22, and Tenant shall fail to pay the cost of storing any such property after it has been stored for a period of thirty (30) days or more, Landlord may sell any or all such property at public or private sale, in such manner and at such times and places as Landlord in its sole discretion may deem proper, without notice to or demand upon Tenant, for the payment of any part of such charges or the removal of any such property, and shall apply the proceeds of such sale: first, to the cost and expenses of such sale, including reasonable attorney's fees actually incurred; second, to the payment of the charges for storing any such property; third, to the payment of any other sums of money which may then or thereafter be due to Landlord from Tenant under any of the terms hereof, and fourth, the balance, if any, to Tenant.

 

25.           Waiver of Damages For Re-Entry. Tenant hereby waives all claims for damages that may be caused by Landlord's re-entering and taking possession of the Premises or removing and storing the property of Tenant as herein provided. Tenant shall hold Landlord harmless from any loss, costs or damages occasioned thereby, and no such re-entry shall be considered or construed to be a forcible entry.

 

26.           Litigation Against Tenant. Should Landlord, without fault on Landlord's part, be made a party to any litigation instituted by or against Tenant, or by or against any person holding under or using the Premises by license of Tenant, or for the foreclosure of any lien for labor or material furnished to or for Tenant or any such other person or otherwise arising out of or resulting from any act or transaction of Tenant or of any such other person, Tenant covenants to pay to Landlord the amount of any judgment rendered against Landlord or the Premises or any part thereof, and all costs and expenses, including all attorney's fees, incurred by Landlord in or in connection with such litigation.

 

  

12

  

 

27.           Subordination.

 

(a)           Effect of Subordination. This Lease, at Landlord's option, shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation for security now or hereafter placed upon the Premises and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Tenant's right to possession of the Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect to have this Lease prior to the lien of its mortgage, deed of trust, or ground lease, and shall give written notice thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of trust or ground lease, whether this Lease is dated prior or subsequent to the date of said mortgage, deed of trust or ground lease or the date or recording thereof.

 

(b)           Documentation. Tenant agrees to execute any documents required to effectuate such subordination or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be, and failing to do so within ten (10) days after written demand, does hereby make, constitute and irrevocably appoint Landlord as Tenant's attorney-in-fact and in Tenant's name, place and stead, to do so. Tenant acknowledges that Tenant's failure to deliver documents referred to above may cause Landlord serious financial damage by causing the failure of a financing or sale transaction. Tenant shall be liable for all consequential damages to Landlord in the event of such failure.

 

28.           Holding Over. If Tenant holds over after the Term hereof, with or without the express or implied consent of Landlord, such tenancy shall be from month to month only, and not a renewal hereof or an extension for any further, term. In such case, rent shall be payable in the amount and at the time specified in Section 4, and such month to month tenancy shall be subject to every other term, covenant and agreement contained in this Lease.

 

29.           Entry and Inspection. Tenant will permit Landlord and its agents to enter into and upon the Premises at all reasonable times for the purpose of inspecting the same, or for the purpose of protecting the interest therein of Landlord, or to post notices of non-responsibility, or to make alterations or additions to the Premises, including the erection of scaffolding, props or other mechanical devices, or to provide any service provided by Landlord to Tenant hereunder, without any rebate of rent to Tenant for any loss of occupancy or quiet enjoyment of the Premises, or damage, injury or inconvenience thereby occasioned. Tenant will permit Landlord to bring prospective tenants or purchasers upon the Premises, for purposes of inspection or display. Landlord shall give Tenant twenty-four (24) hours' prior notice to any entry or inspection, unless shorter notice is reasonable under the circumstances.

 

  

13

  

 

30.           Sale or Transfer of Premises. Subject to the provisions of Section 2(c), if Landlord sells or transfers all or any portion of the Premises, Landlord, on consummation of the sale or transfer, shall be released from any liability thereafter accruing under this Lease. If any security deposit or prepaid rent has been paid by Tenant, Landlord can transfer the security deposit or prepaid rent to Landlord's successor and on such transfer Landlord shall be discharged from any further liability in reference to the security deposit or prepaid rent.

 

31.           Estoppel Certificate. Within ten (10) days after written request therefore, Tenant shall execute and deliver to Landlord, in a form provided by or satisfactory to Landlord, a certificate stating that this Lease is in full force and effect, describing any amendments or modifications hereto, acknowledging that this Lease is subordinate or prior, as the case may be, to any encumbrances, and stating any other information Landlord may reasonably request, including the Term, the Monthly Rent, the date to which rent has been paid, the amount of any security deposit or prepaid rent, whether either party hereto is in default under the terms of the Lease, and whether Landlord has completed its construction obligations hereunder (if any). Any person or entity purchasing, acquiring an interest in, or extending financing with respect to the Premises shall be entitled to rely upon any such estoppel certificate. If Tenant fails to deliver such certificate within ten (10) days after Landlord's written request therefore, Tenant shall be liable to Landlord for any damages incurred by Landlord including any profits or other benefits from any financing of the Premises or any interest therein which are lost or made unavailable as a result, directly or indirectly, of Tenant's failure or refusal to timely execute or deliver such estoppel certificate,

 

32.           Signs. Tenant may not erect or have erected any signs at or upon the Premises without the written consent of Landlord.

 

33.           Miscellaneous Provisions.

 

(a)           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; (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 follows, or at such other address as such party may designate by ten (10) days' advance written notice to the parties:

 

If to Tenant:

 

H.D.D. LLC

P.O. Box 1532

Healdsburg CA 95448

Attn:   Managers

 

  

14

  

 

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

 

Spaulding McCullough & Tansil LLP

90 South E Street, Suite 200

Santa Rosa, California 95404

Attn:  Kevin J. McCullough

 

If to Landlord:

 

Hambrecht Wine Group, L.P.

c/o Hambrecht Wine Management, Inc. 4035 Westside Road

Healdsburg, CA 95448

Attn:   William R. Hambrecht

 

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

 

WR Hambrecht & Co

Pier 1, Bay 3

San Francisco, CA 94111

Attn:  Helen Miazga

 

(b)           Legal Representation. The parties acknowledge that the law firm of Spaulding McCullough & Tansil LLP has prepared this Lease and represents solely the interests of Tenant. Landlord hereby represents and warrants that such party has received, or has had the opportunity and adequate time to receive, independent tax and legal advise from counsel of such party's choice with respect to the advisability of entering into and performing such party's obligations under this Lease. Each party hereto represents and warrants that such party has read and understands the terms and conditions of this Lease.

 

(c)           Entire Agreement. This Lease constitutes and embodies the entire understanding and agreement of the parties hereto relating to the subject matter hereof and supersedes all prior agreements or understandings of the parties hereto, whether written or oral.

 

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

 

(e)           Construction. Any rule of construction to the affect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Lease. Every covenant, term, and provision of this Lease 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.

 

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

 

  

15

  

 

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

 

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

 

(i)           Severability. Whenever possible, each provision of this Lease shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Lease 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 Lease.

 

(j)           Arbitration. Any controversy between the parties involving the construction or application of any of the terms, covenants, or conditions of this Lease shall, on written request of one party served on the other, be submitted to binding arbitration, and such arbitration shall comply with and be governed by the provisions of the California Arbitration Act, Section 1280-1294.2 of the California Code of Civil Procedure. This provision 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.

 

(k)           Attorneys' Fees. If any legal action or other proceeding, including arbitration or action for declaratory relief; is brought for the enforcement of this Lease (including any action by Landlord for the recovery of rent or possession of the Premises) or because of an alleged dispute, breach, default, or misrepresentation in connection with this Lease, 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 or 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.

 

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

 

[SIGNATURE PAGE FOLLOWS]

 

  

16

  

 

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the date first above written.

 

	 	
LANDLORD:

 

HAMBRECHT WINE GROUP, L.P.,

 a California limited partnership

	 	 
	 	By:	
HAMBRECHT WINE MANAGEMENT INC.,

	 	 	
a California corporation

	 	Its: 	
General Partner

	 	 	 

 

	 	 	
By:

	/s/ William R. Hambrecht
	 	 	 	William R. Hambrecht, Chairman

 

 

	 	

TENANT:

 

H.D.D. LLC,

 a California limited liability company

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

	 	 	 
	 	 	 
	 	By:	/s/ Mark De Meulenaere
	 	 	
Mark De Meulenaere, Manager

	 	 	 

 

Exhibit:

A – Interim Management Agreement

  

17

  

 

 EXHIBIT A 

 INTERIM MANAGEMENT AGREEMENT 

 

 

 

 

 

 

 

  

 A-1 

  

 

 INTERIM MANAGEMENT AGREEMENT 

 

 THIS INTERIM MANAGEMENT AGREEMENT (the “Agreement”) dated as of February ___, 2011 (“Commencement Date”), is made by and between HAMBRECHT WINE GROUP, L.P., a California limited partnership (“Permittee”), and H.D.D. LLC, a California limited liability company (“Manager”). 

 

 RECITALS 

 

	
    

	
 A. 

	
 Manager leases from Permittee certain winery and tasting room facilities (the “Premises”) located at 4035 Westside Road, Healdsburg, California, pursuant to a lease of even date herewith (the “Lease”). 

 

	
    

	
 B. 

	
 Permittee holds a basic winery permit issued by United States Alcohol and Tobacco Tax and Trade Bureau (“TTB”) and a Type 02 winegrower license issued by California Department of Alcoholic Beverage Control (“ABC”) (collectively, the “Permittee Permits”).  Manager intends to apply for a basic winery permit issued by the TTB and a Type 02 winegrower  license issued by ABC for operation of the winery on the Premises (collectively, the “Manager Permits”). 

 

	
    

	
 C. 

	
 From the Commencement Date until the Termination Date (as hereinafter defined), Permittee and Manager desire that Permittee maintain Permittee Permits, and that Manager operate the Premises, on the terms and conditions contained herein. 

 

 NOW, THEREFORE, in consideration of the mutual agreements contained herein, the parties hereto agree as follows: 

 

 1.           Term.  This Agreement shall begin on the Commencement Date and terminate when all of the Manager Permits have been issued. 

 

 2.           Permits.   Manager shall apply for Manager Permits, and shall diligently prosecute the applications until such Manager Permits are issued.  Manager shall inform Permittee immediately upon issuance of any of the Manager Permits and provide true and complete copies thereof.  Permittee shall cooperate with Manager as necessary to enable Manager to obtain such permits, shall provide the information regarding the Premises necessary for Manager to apply for such permits, and shall cooperate and provide information regarding the Permittee Permits and modify the Permittee Permits as necessary to enable Manager to obtain the Manager Permits.  If Manager has not received its Manager Permits within three hundred (300) days of the Commencement Date, the parties shall make alternate arrangements concerning permits. 

 

 3.           Operations.  Permittee hereby engages Manager as its exclusive agent, and Manager hereby accepts such engagement, to operate the Premises.  Manager shall comply with all federal, state and local laws and regulations applicable to the Premises.  To support Manager’s efforts as exclusive agent, Permittee hereby undertakes and agrees: 

 

  

  

  

 

 (a)           to maintain its basic winery permit issued by TTB and winegrower permit issued by ABC in effect and in good standing, and to comply with all laws and regulations related thereto; 

 

 (b)           to prepare and file all monthly 702 reports and any other report required by TTB or ABC in connection with the operation of the winery business on the Premises; 

 

 (c)           to prepare and file all federal and state sales and excise tax returns and pay all sales and excise taxes owed by Permittee when due; 

 

 (d)           to cooperate with Manager in taking all other steps reasonably necessary to operate the Premises; 

 

 (e)           to comply with all federal, state and local laws and regulations applicable to the winery and the tasting room. 

 

 (f)           to notify TTB and ABC that Manager is operating the Premises under temporary permits and has applied for the Manager Permits. 

 

 4.           Compensation as Manager.  As compensation for its services, Manager shall retain all revenues generated from its operation of the Premises. 

 

 5.           Effect of Lease.  The parties’ rights and obligations hereunder are subject to the terms of the Lease. 

 

 [SIGNATURE PAGE FOLLOWS] 

 

 

 

 

 

 

 

  

 2 

  

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

 

	   	 
 MANAGER: 

	   
	   	   	   
	   	 H.D.D. LLC,  
 a California limited liability company 

	   
	   	   	   	   
	   	   	   	   
	
 

	
 By:  

	 	   
	   	 Mark De Meulenaere, Manager 	   
	   	   	 	   
	   	
 Address for Notice:  

 H.D.D. LLC  

 P.O. Box 1532  

 Healdsburg, CA  95448 

	   

 

 

 

	   	 
 
 PERMITTEE: 

	   
	   	   	   
	   	 
 HAMBRECHT WINE GROUP, L.P., 

 a California limited partnership 

	   
	   	   	   
	  By:    	 HAMBRECHT WINE MANAGEMENT INC.,  
 a California corporation 

 Its:      General Partner 

	   
	   	   	   	   
	   	   	   	   
	
 

	
 By:  

	 	   
	   	 William R. Hambrecht, Chairman 	   
	   	   	 	   
	   	 
 Address for Notice: 

 Hambrecht Wine Group, L.P. 

 c/o Hambrecht Wine Management, Inc. 

 4035 Westside Road 

 Healdsburg, CA  95448 

	   

 

 

 3ex10_15.htm

Exhibit 10.15

 

EXCHANGE AGREEMENT

 

EXCHANGE AGREEMENT (this “Agreement”), dated as of [  ], 2013, by and between Truett-Hurst, Inc., a Delaware corporation (the “Corporation”), and the holders of LLC Units (as defined herein) from time to time party hereto.

 

WHEREAS, the parties hereto are party to the Third Amended and Restated Operating Agreement, dated as of the date hereof;

 

WHEREAS, the parties hereto desire to provide for the exchange from time to time of LLC Units for shares of Class A Common Stock (as defined herein), on the terms and subject to the conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

SECTION 1.1  Definitions

 

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

 

A “Change in Control” shall be deemed to have occurred if or upon:

 

(i)           the stockholders of the Corporation approve the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Corporation’s assets (determined on a consolidated basis) to any person or group (as such term is used in Section 13(d)(3) of the Exchange Act, other than to any wholly owned subsidiary of the Corporation;

 

(ii)          the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other person, other than a merger or consolidation which would result in the Voting Securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 50.1% of the total voting power represented by the Voting Securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation;

 

(iii)         the stockholders of the Corporation approve the adoption of a plan the consummation of which would result in the liquidation or dissolution of the Corporation;

 

(iv)         the acquisition, directly or indirectly, by any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than (a) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation; or (b) a corporation or other entity owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation ((a) and (b) collectively are referred to herein as “Exempt Persons”)) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 50.01% of the aggregate voting power of the Voting Securities of the Corporation;

 

 

  

1

  

 

(v)         during any 12-month period, individuals who at the beginning of such period composed the Board of Directors of the Corporation (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Corporation was approved by a vote of 66 2/3% of the directors of the Corporation then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Corporation then in office; or

 

(vi)        the Corporation (or a directly or indirectly wholly owned subsidiary thereof) ceases to be the sole Managing Member of HDD.

 

“Change in Control Event” means any of the following (i) the commencement of, or the first public announcement of the intent to commence, any transaction, including, without limitation, a tender or exchange offer by any person or entity (other than any Exempt Person), the consummation of which would result in a Change in Control; (ii) the commencement of, or the first public announcement of the intent to commence, any proxy solicitation by any person or entity subject to Rule 14a-12(c) under the Exchange Act, the consummation of which would result in a Change in Control; (iii) the Corporation, HDD or any affiliate thereof entering into an agreement with any person or entity which, if consummated, would result in a Change in Control; or (iv) the adoption by the Board of Directors of the Corporation of resolutions authorizing any transaction or event which, if consummated, would result in a Change in Control.

 

“Class A Common Stock” means the Class A common stock, par value $0.001 per share, of the Corporation.

 

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

 

“Corporation” means Truett-Hurst, Inc., a Delaware corporation, and any successor thereto.

 

“Exchange” has the meaning set forth in Section 2.1(a) of this Agreement.

 

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

 

“Exchange Rate” means the number of shares of Class A Common Stock for which an LLC Unit is entitled to be Exchanged. On the date of this Agreement, the Exchange Rate shall be 1 for 1, subject to adjustment pursuant to Section 2.2 of this Agreement.

 

“HDD” means H.D.D. LLC, a California limited liability company, and any successor thereto.

 

  

2

  

 

“HDD Operating Agreement” means the Third Amended and Restated Operating Agreement of HDD, dated on or about the date hereof, as such agreement may be amended from time to time.

 

“IPO” has the meaning set forth in Section 2.1(a)(i) of this Agreement.

 

“LLC Unit” means (i) each LLC Unit (as such term is defined in the HDD Operating Agreement) issued as of the date hereof and (ii) each LLC Unit or other interest in HDD that may be issued by HDD in the future that is designated by the Corporation as an “LLC Unit.”

 

“LLC Unitholder” means each holder of one or more LLC Units that may from time to time be a party to this Agreement.

 

“Permitted Transferee” has the meaning given to such term in Section 3.1 of this Agreement.

 

“Takeover Law” has the meaning given to such term in Section 3.1 of this agreement.

 

“Voting Securities” shall mean any securities of the Corporation which are entitled to vote generally in matters submitted for a vote of the Corporation’s stockholders or generally in the election of the Corporation’s board of directors.

 

ARTICLE II

 

SECTION 2.1  Exchange of LLC Units for Class A Common Stock.

 

(a)           (i)           Subject to Section 2.1(a)(ii) and Section 2.1(f) hereof, from and after the date of the closing of the initial public offering and sale of Class A Common Stock (as contemplated by the Corporation’s Registration Statement on Form S-1 (File No. 333-[  ])) (the “IPO”), each LLC Unitholder shall be entitled at any time and from time to time, upon the terms and subject to the conditions hereof, to surrender LLC Units in exchange for the delivery by the Corporation of (x) a number of shares of Class A Common Stock that is equal to the product of the number of LLC Units surrendered multiplied by the Exchange Rate (such exchange, an “Exchange”), provided that any such Exchange is for a minimum of the lesser of 1,000 LLC Units or all of the LLC Units held by such LLC Unitholder or (y) if the Corporation so elects, an amount of cash calculated in accordance with Section 2.1(f) hereof.

 

(ii)           Notwithstanding anything to the contrary herein, upon the occurrence of any Change in Control Event, each LLC Unitholder shall be entitled, upon the terms and subject to the conditions hereof, to elect to Exchange LLC Units for shares of Class A Common Stock, or cash at the election of the Corporation; provided, that any such Exchange pursuant to this sentence shall be effective immediately prior to the consummation of the Change in Control (and, for the avoidance of doubt, shall not be effective if such Change of Control is not consummated); and provided further, that any such election pursuant to this Section 2.1(a)(ii) may be withdrawn by the LLC Unitholder who submitted such election by providing written notice to the Corporation not less than four business days prior to the consummation of the Change in Control.

 

  

3

  

 

(b)           An LLC Unitholder shall exercise its right to Exchange LLC Units as set forth in Section 2.1(a) above by delivering to the Corporation a written election of exchange in respect of the LLC Units to be Exchanged substantially in the form of Exhibit A hereto, duly executed by such holder or such holder’s duly authorized attorney, in each case delivered during normal business hours at the principal executive offices of the Corporation.  Should the Exchange be satisfied in shares of Class A Common Stock, subject to Section 2.1(a)(ii), as promptly as practicable following the delivery of such a written election of exchange, and in any event within three business days, the Corporation shall deliver or cause to be delivered at the offices of the then-acting registrar and transfer agent of the Class A Common Stock or, if there is no then-acting registrar and transfer agent of the Class A Common Stock, at the principal executive offices of the Corporation, the number of shares of Class A Common Stock deliverable upon such Exchange, registered in the name of the relevant Exchanging LLC Unitholder; to the extent the Class A Common Stock is settled through the facilities of The Depository Trust Company, the Company will, subject to Section 2.1(c) below, upon the written instruction of an Exchanging Unitholder, use its reasonable best efforts to deliver the shares of Class A Common Stock deliverable to such Exchanging Unitholder, through the facilities of The Depository Trust Company, to the account of the participant of The Depository Trust Company designated by such Exchanging Holder.

 

(c)           The Corporation and each Exchanging LLC Unitholder shall bear their own expenses in connection with the consummation of any Exchange, whether or not any such Exchange is ultimately consummated, except that the Corporation shall bear any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, any Exchange; provided, however, that if any shares of Class A Common Stock are to be delivered in a name other than that of the LLC Unitholder that requested the Exchange, then such LLC Unitholder and/or the person in whose name such shares are to be delivered shall pay to the Corporation the amount of any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, such Exchange or shall establish to the reasonable satisfaction of the Corporation that such tax has been paid or is not payable.

 

(d)           The Corporation covenants and agrees that, prior to taking or causing to be taken any action that would cause interests in HDD to not meet the requirements of Treasury Regulation section 1.7704-1(h), including, without limitation, issuing any LLC Units in a transaction required to be registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, it will provide at least 15 business days’ advance written notice describing the proposed action in reasonable detail to the LLC Unitholders and provide each LLC Unitholder with the opportunity to effect an Exchange of all such LLC Unitholder’s LLC Units in accordance with the terms of this Agreement; provided, however, that in no event will the Corporation take or cause to be taken any action that would cause interests in HDD to not meet the requirements of Treasury Regulation section 1.7704-1(h) prior to the first anniversary of the closing of the IPO. Provided that the notice and opportunity to Exchange contemplated by the previous sentence has been provided to the LLC Unitholders, then, notwithstanding anything to the contrary herein, if the Board of Directors of the Corporation, after consultation with its outside legal counsel and tax advisor, shall determine in good faith that interests in HDD do not meet the requirements of Treasury Regulation section 1.7704-1(h), the Corporation may impose such restrictions on Exchange as the Corporation may reasonably determine to be necessary or advisable so that HDD is not treated as a “publicly traded partnership” under Section 7704 of the Code.

 

  

4

  

 

(e)           For the avoidance of doubt, and notwithstanding anything to the contrary herein, an LLC Unitholder shall not be entitled to Exchange LLC Units to the extent the Corporation reasonably determines in good faith that such Exchange (i) would be prohibited by law or regulation or (ii) would not be permitted under any other agreement with the Corporation or its subsidiaries to which such LLC Unitholder is then subject (including, without limitation, the HDD Operating Agreement) or any written policies of the Corporation relating to insider trading then applicable to such LLC Unitholder. For avoidance of doubt, no Exchange shall be deemed to be prohibited by any law or regulation pertaining to the registration of securities if such securities have been so registered or if any exemption from such registration requirements is reasonably available.

 

(f)           If the Corporation elects to satisfy an Exchange in cash, then an Exchanging LLC Unitholder may receive cash in lieu of shares of Class A Common Stock in exchange for LLC Units surrendered in accordance with Section 2.1(a), in an amount equal to the Market Value of the shares of Class A Common Stock that such Exchanging LLC Unitholder would have received absent such an election by the Corporation.  For the purposes of this Section 2.1(f), the “Market Value” as of a particular date shall be determined as follows: (i) if, at the time of the Exchange, the LLC Units are convertible for shares of Class A Common Stock (or the securities of any successor company to the Corporation) that trade on a national securities exchange, the Market Value shall be the average of the closing sale prices over the ten (10) trading days ending one (1) day prior to the date of the Exchange; (ii) if, at the time of the Exchange, the LLC Units are convertible for Class A Common Stock (or the securities of any successor company to the Corporation) that trade over-the-counter, the Market Value shall be the average of the closing bid or sale prices (whichever is applicable) over the ten (10) day period ending three (3) days prior to the date of the Exchange; and (iii) if the LLC Units are not convertible for securities of the Corporation, or any other entity the securities of which are listed or traded on an established securities market, then the Market Value shall be the fair market value thereof, as determined in good faith by the Board of Directors of the Corporation.  If the the Exchanging LLC Unitholder does not receive notice of the Corporation’s cash election substantially in the form of Exhibit B within five (5) business days of the Corporation’s receipt of such Exchanging LLC Unitholder’s election of exchange, the Corporation shall forfeit the right to satisfy such Exchange in cash.

 

SECTION 2.2  Adjustment.

 

(a)           The Exchange Rate shall be adjusted accordingly if there is: (a) any subdivision (by any unit split, unit distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse unit split, reclassification, reorganization, recapitalization or otherwise) of the LLC Units that is not accompanied by an identical subdivision or combination of the Class A Common Stock; or (b) any subdivision (by any stock split, stock dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock split, reclassification, reorganization, recapitalization or otherwise) of the Class A Common Stock that is not accompanied by an identical subdivision or combination of the LLC Units. 

 

  

5

  

 

If there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Common Stock are converted or changed into another security, securities or other property, then upon any subsequent Exchange, an exchanging LLC Unitholder shall be entitled to receive the amount of such security, securities or other property that such exchanging LLC Unitholder would have received if such Exchange had occurred immediately prior to the effective date of such reclassification, reorganization, recapitalization or other similar transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the effective time of such reclassification, reorganization, recapitalization or other similar transaction.  For the avoidance of doubt, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Common Stock are converted or changed into another security, securities or other property, this Section 2.2 shall continue to be applicable, mutatis mutandis, with respect to such security or other property. This Agreement shall apply to the LLC Units held by the LLC Unitholders and their Permitted Transferees as of the date hereof, as well as any LLC Units hereafter acquired by an LLC Unitholder and his or her or its Permitted Transferees. This Agreement shall apply to, mutatis mutandis, and all references to “LLC Units” shall be deemed to include, any security, securities or other property of HDD which may be issued in respect of, in exchange for or in substitution of LLC Units by reason of any distribution or dividend, split, reverse split, combination, reclassification, reorganization, recapitalization, merger, exchange (other than an Exchange) or other transaction.

 

SECTION 2.3  Class A Common Stock to be Issued.

 

(a)           If the Corporation does not elect to satisfy an Exchange in cash pursuant to Section 2.1(f), the Corporation covenants and agrees to deliver shares of Class A Common Stock that have been registered under the Securities Act with respect to any Exchange to the extent that a registration statement is effective and available for such shares.  In the event that any Exchange in accordance with this Agreement is to be effected at a time when any required registration has not become effective or otherwise is unavailable, upon the request and with the reasonable cooperation of the LLC Unitholder requesting such Exchange, the Corporation shall use its reasonable best efforts to promptly facilitate such Exchange pursuant to any reasonably available exemption from such registration requirements. The Corporation shall use its reasonable best efforts to list the Class A Common Stock required to be delivered upon exchange prior to such delivery upon each national securities exchange or inter-dealer quotation system upon which the outstanding Class A Common Stock may be listed or traded at the time of such delivery. Nothing contained herein shall be construed to preclude the Corporation or HDD from satisfying their obligations in respect of the exchange of the LLC Units by delivery of Class A Common Stock which are held in the treasury of the Corporation or HDD or any of their subsidiaries.

 

(b)           The Corporation shall at all times reserve and keep available out of its authorized but unissued Class A Common Stock, solely for the purpose of issuance upon an Exchange, such number of shares of Class A Common Stock as shall be deliverable upon any such Exchange; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such Exchange by delivery of purchased shares of Class A Common Stock (which may or may not be held in the treasury of the Corporation or any subsidiary thereof).

 

  

6

  

 

(c)           Prior to the date of this Agreement, the Corporation has taken all such steps as may be required to cause to qualify for exemption under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and be exempt for purposes of Section 16(b) under the Exchange Act, any acquisitions or dispositions of equity securities of the Corporation (including derivative securities with respect thereto) and any securities which may be deemed to be equity securities or derivative securities of the Corporation for such purposes that result from the transactions contemplated by this Agreement, by each director or officer of the Corporation who may reasonably be expected to be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Corporation upon the registration of any class of equity security of the Corporation pursuant to Section 12 of the Exchange Act (with the authorizing resolutions specifying the name of each such officer or director whose acquisition or disposition of securities is to be exempted and the number of securities that may be acquired and disposed of by each such person pursuant to this Agreement).

 

(d)           If any Takeover Law or other similar law or regulation becomes or is deemed to become applicable to this Agreement or any of the transactions contemplated hereby, the Corporation shall use its reasonable best efforts to render such law or regulation inapplicable to all of the foregoing.

 

(e)           The Corporation covenants that all Class A Common Stock issued upon an Exchange will, upon issuance, be validly issued, fully paid and non-assessable and not subject to any preemptive right of stockholders of the Corporation or to any right of first refusal or other right in favor of any person or entity.

 

ARTICLE III

 

SECTION 3.1  Representations and Warranties of the Corporation. The Corporation represents and warrants that (i) it is a corporation duly incorporated and is existing in good standing under the laws of the State of Delaware, (ii) it has all requisite corporate power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby and to issue the Class A Common Stock in accordance with the terms hereof, (iii) the execution and delivery of this Agreement by the Corporation and the consummation by it of the transactions contemplated hereby (including without limitation, the issuance of the Class A Common Stock) have been duly authorized by all necessary corporate action on the part of the Corporation, including but not limited to all actions necessary to ensure that the acquisition of shares Class A Common Stock pursuant to the transactions contemplated hereby, to the fullest extent of the Corporation’s Board of Directors’ power and authority and to the extent permitted by law, shall not be subject to any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws and regulations” of any jurisdiction that may purport to be applicable to this Agreement or the transactions contemplated hereby (collectively, “Takeover Laws”), (iv) this Agreement constitutes a legal, valid and binding obligation of the Corporation enforceable against the Corporation in accordance with its terms, except as enforcement may be limited by 

 

  

7

  

 

equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally, and (v) the execution, delivery and performance of this Agreement by the Corporation and the consummation by the Corporation of the transactions contemplated hereby will not (A) result in a violation of the Certificate of Incorporation of the Corporation or the Bylaws of the Corporation or (B) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Corporation is a party, or (C) result in a violation of any law, rule, regulation, order, judgment or decree applicable to the Corporation or by which any property or asset of the Corporation is bound or affected, except with respect to clauses (B) or (C) for any conflicts, defaults, accelerations, terminations, cancellations or violations, that would not reasonably be expected to have a material adverse effect on the Corporation or its business, financial condition or results of operations.

 

 

SECTION 3.2  Representations and Warranties of the LLC Unitholders. Each LLC Unitholder, severally and not jointly, represents and warrants that (i) if it is not a natural person, that it is duly incorporated or formed and, to the extent such concept exists in its jurisdiction of organization, is in good standing under the laws of such jurisdiction, (ii) it has all requisite legal capacity and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby, (iii) if it is not a natural person, the execution and delivery of this Agreement by it of the transactions contemplated hereby have been duly authorized by all necessary corporate or other entity action on the part of such LLC Unitholder, (iv) this Agreement constitutes a legal, valid and binding obligation of such LLC Unitholder enforceable against it in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally, and (v) the execution, delivery and performance of this Agreement by such LLC Unitholder and the consummation by such LLC Unitholder of the transactions contemplated hereby will not (A) if it is not a natural person, result in a violation of the Certificate of Incorporation and Bylaws or other organizational documents of such LLC Unitholder or (B) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such LLC Unitholder is a party, or (C) result in a violation of any law, rule, regulation, order, judgment or decree applicable such LLC Unitholder, except with respect to clauses (B) or (C) for any conflicts, defaults, accelerations, terminations, cancellations or violations, that would not in any material respect result in the unenforceability against such LLC Unitholder of this Agreement.

 

ARTICLE IV

 

SECTION 4.1  Additional LLC Unitholders. To the extent an LLC Unitholder validly transfers any or all of such holder’s LLC Units to another person in a transaction in accordance with, and not in contravention of, the HDD Operating Agreement, then such transferee (each, a “Permitted Transferee”) shall have the right to execute and deliver a joinder to this Agreement, substantially in the form of Exhibit C hereto, whereupon such Permitted Transferee shall become an LLC Unitholder hereunder. To the extent HDD issues LLC Units in the future, then the holder of such LLC Units shall have the right to execute and deliver a joinder to this Agreement, substantially in the form of Exhibit C hereto, whereupon such holder shall become an LLC Unitholder hereunder.

 

  

8

  

 

SECTION 4.2  Addresses and Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by courier service, by fax, by electronic mail (delivery receipt requested) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be as specified in a notice given in accordance with this Section 3.2):

 

(a)           If to the Corporation, to:

 

P.O. Box 1532

Healdsburg, CA 95448

Attention: Chief Financial Officer

Fax: (707) 431-4402

Electronic Mail: james@truetthurst.com

 

With a copy to:

 

Anna T. Pinedo, Esq.

Morrison & Foerster LLP

1290 Avenue of the Americas

New York, NY 10104

Fax: (212) 468-7900

Electronic Mail: apinedo@mofo.com

(b)           If to any LLC Unitholder, to the address and other contact information set forth in the records of HDD from time to time.

 

SECTION 4.3  Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

 

SECTION 4.4  Binding Effect. This Agreement shall be binding upon and inure to the benefit of all of the parties and, to the extent permitted by this Agreement, their successors, executors, administrators, heirs, legal representatives and assigns.

 

SECTION 4.5  Severability. If any term or other provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions is not affected in any manner materially adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

  

9

  

 

SECTION 4.6  Amendment. The provisions of this Agreement may be amended only by the affirmative vote or written consent of each of (i) the Corporation and (ii) LLC Unitholders holding at least two thirds of the then outstanding LLC Units (excluding LLC Units held by the Corporation); provided that except as otherwise provided herein (including, without limitation, in Section 2.1(d)), no amendment may materially and adversely affect the rights of an LLC Unitholder, as such, other than on a pro rata basis with other LLC Unitholders without the consent of such LLC Unitholder (or, if there is more than one such LLC Unitholder that is so affected, without the consent of a majority of such affected LLC Unitholder in accordance with their holdings of LLC Units).

 

SECTION 4.7  Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.

 

SECTION 4.8  Submission to Jurisdiction; Waiver of Jury Trial.

 

(a)           Any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) shall be finally settled by arbitration conducted by a single arbitrator in New York in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce.  If the parties to the dispute fail to agree on the selection of an arbitrator within thirty (30) days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

 

(b)           Notwithstanding the provisions of paragraph (a), the parties hereto may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each party hereto (i) expressly consents to the application of paragraph (c) of this Section 4.8 to any such action or proceeding and (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate.

 

(c)           (i)             EACH PARTY HERETO IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 4.8, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the fora designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another.

 

  

10

  

 

(ii)           The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in the preceding paragraph of this Section 4.8 and such parties agree not to plead or claim the same.

 

SECTION 4.9  Counterparts. This Agreement may be executed and delivered (including by facsimile transmission or by e-mail delivery of a “.pdf” format data file) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Copies of executed counterparts transmitted by telecopy, by e-mail delivery of a “.pdf” format data file or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 4.9.

 

SECTION 4.10  Tax Treatment. This Agreement shall be treated as part of the partnership agreement of HDD as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations promulgated thereunder.

 

SECTION 4.11  Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to specific performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.

 

SECTION 4.12  Independent Nature of LLC Unitholders’ Rights and Obligations. The obligations of each LLC Unitholder hereunder are several and not joint with the obligations of any other LLC Unitholder, and no LLC Unitholder shall be responsible in any way for the performance of the obligations of any other LLC Unitholder under hereunder.  The decision of each LLC Unitholder to enter into to this Agreement has been made by such LLC Unitholder independently of any other LLC Unitholder.  Nothing contained herein, and no action taken by any LLC Unitholder pursuant hereto, shall be deemed to constitute the LLC Unitholders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the LLC Unitholders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby and the Corporation acknowledges that the LLC Unitholders are not acting in concert or as a group, and the Corporation will not assert any such claim, with respect to such obligations or the transactions contemplated hereby.

 

SECTION 4.13  Applicable Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York.

 

 

[Signature page follows]

 

  

11

  

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered, all as of the date first set forth above.

 

	 	TRUETT-HURST, INC.	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name: 	 
	 	 	Title:	 
	 	 	 	 

 

	 	

LLC UNITHOLDERS

	 
	 	 	 	 
	 	
THE HURST FAMILY REVOCABLE TRUST dated August 1, 2004

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	
Phillip L. Hurst, Co-Trustee

	 
	 	 	 	 
	 	 	 	 
	 	By: 	 	 
	 	 	Sylvia M. Hurst, Co-Trustee	 

 

 

	 	

HAMBRECHT WINE GROUP, L.P.,

   a California limited partnership

	 
	 	 	 	 
	 	
 

	 
	 	
By:       HAMBRECHT WINE MANAGEMENT INC., a 

California corporation

Its:       General Partner

	 
	 	 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	

William R. Hambrecht, Chairman

	 

 

 

	 	

THE DOLAN 2005 FAMILY TRUST U/T/D dated August 24, 2005

	 
	 	 	 	 
	 	
 

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	

Heath E. Dolan, Trustee

	 

 

[Exchange Agreement]

 

  

  

  

 

	 	

THE DOLAN 2003 FAMILY TRUST U/T/A dated June 5, 2003

	 
	 	 	 	 
	 	
 

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	

Paul E. Dolan, III, Trustee

	 
	 	 	 	 
	 	 	 	 
	 	THE CARROLL-OBREMSKEY FAMILY REVOCABLE TRUST DATED APRIL 5, 1996	 
	 	 	 	 
	 	 	 	 
	 	By: 	 	 
	 	 	
Daniel A. Carroll, Trustee

	 
	 	 	 	 
	 	 	 	 
	 	By:  	 	 
	 	 	Stasia A. Obremskey, Trustee	 

 

 

	 	 	 	 
	 	Mark De Meulenaere	 

 

 

	 	 	 	 
	 	Forrester R. Hambrecht	 

 

 

	 	 	 	 
	 	Barrie Graham	 

 

  

	 	 	 	 
	 	Anna Schweizer	 

 

	 	 	 	 
	 	Virginia Marie Lambrix	 

 

 

 

 

[Exchange Agreement]

 

  

  

 

 EXHIBIT A

 

 FORM OF 

 ELECTION OF EXCHANGE 

 

 Truett-Hurst, Inc. 

 P.O. Box 1532 

 Healdsburg, CA 95448 

 Attention: Chief Financial Officer 

 

 Reference is hereby made to the Exchange Agreement, dated as of [ ], 2013 (the “Exchange Agreement”), by and between Truett-Hurst, Inc., a Delaware corporation, and the holders of LLC Units (as defined herein) from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Exchange Agreement. 

 

 The undersigned LLC Unitholder hereby transfers to the Corporation the number of LLC Units set forth below in Exchange for shares of Class A Common Stock or cash, pursuant to Section 2.1(f) of the Exchange Agreement.  If the Exchange is for Class A Common Stock, such shares are to be issued in the name set forth below, as set forth in the Exchange Agreement. 

 

	
 Legal Name of LLC Unitholder: 

	    
	   	   
	
 Address: 

	    
	   	   
	
 Number of LLC Units to be  

 Exchanged: 

	    

 

 The undersigned hereby represents and warrants that (i) the undersigned has full legal capacity to execute and deliver this Election of Exchange and to perform the undersigned’s obligations hereunder; (ii) this Election of Exchange has been duly executed and delivered by the undersigned and is the legal, valid and binding obligation of the undersigned enforceable against it in accordance with the terms thereof or hereof, as the case may be, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and the availability of equitable remedies; (iii) the LLC Units subject to this Election of Exchange are being transferred to the Corporation free and clear of any pledge, lien, security interest, encumbrance, equities or claim; and (iv) no consent, approval, authorization, order, registration or qualification of any third party or with any court or governmental agency or body having jurisdiction over the undersigned or the LLC Units subject to this Election of Exchange is required to be obtained by the undersigned for the transfer of such LLC Units to the Corporation. 

 

 The undersigned hereby irrevocably constitutes and appoints any officer of the Corporation as the attorney of the undersigned, with full power of substitution and resubstitution in the premises, to do any and all things and to take any and all actions that may be necessary to transfer to the Corporation the LLC Units subject to this Election of Exchange and to deliver to the undersigned the shares of Class A Common Stock to be delivered in Exchange therefor. 

 

 A-1 

    

    

 

 IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Election of Exchange to be executed and delivered by the undersigned or by its duly authorized attorney. 

 

	   	   	   
	   	
 Name: 

	   
	   	   	   
	   	
 Dated: 

	   

 

 

 

 

 A-2 

    

    

 

 EXHIBIT B 

 

 FORM OF 

 CASH ELECTION NOTICE 

 

 [Exchanging LLC Unitholder] 

 [Address] 

  

 Reference is hereby made to the Exchange Agreement, dated as of [ ], 2013 (the “Exchange Agreement”), by and between Truett-Hurst, Inc., a Delaware corporation (the “Corporation”), and the holders of LLC Units (as defined therein) from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Exchange Agreement. 

 

 The Corporation received an Election of Exchange from the below LLC Unitholder on [  ], 20[  ].  Pursuant to Section 2.1(f) of the Exchange Agreement, the Corporation has elected to satisfy the Exchange in cash in lieu of Class A Common Stock. 

 

	
 Legal Name of LLC Unitholder: 

	   
	   	   
	
 Number of LLC Units to be Exchanged: 

	    
	   	   
	
 Market Value per LLC Unit: 

	
 $ 

	   	   
	
 Aggregate Market Value: 

	
 $ 

 

 [Remainder of page left blank] 

 

 B-1 

    

    

 

 IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Cash Election Notice to be executed and delivered by the undersigned or by its duly authorized attorney. 

 

	   	
 TRUETT-HURST, INC. 

	   
	   	   	   
	   	   	   
	   	 By: 	   	   	   
	   	   	
 Name: 

	   	   
	   	   	
 Title: 

	   	   
	   	   	   	   	   
	   	
 Dated: 

	   	   	   

 

 

 

 

 

 

 B-2   

    

    

 

 EXHIBIT C 

 

 FORM OF 

 JOINDER AGREEMENT 

 

 This Joinder Agreement (“Joinder Agreement”) is a joinder to the Exchange Agreement, dated as of [  ], 2013 (the “Agreement”), by and between Truett-Hurst, Inc., a Delaware corporation (the “Corporation”), and each of the LLC Unitholders from time to time party thereto. Capitalized terms used but not defined in this Joinder Agreement shall have their meanings given to them in the Agreement. This Joinder Agreement shall be governed by, and construed in accordance with, the law of the State of New York. In the event of any conflict between this Joinder Agreement and the Agreement, the terms of this Joinder Agreement shall control. 

 

 The undersigned hereby joins and enters into the Agreement having acquired LLC Units in HDD. By signing and returning this Joinder Agreement to the Corporation, the undersigned (i) accepts and agrees to be bound by and subject to all of the terms and conditions of and agreements of an LLC Unitholder contained in the Agreement, with all attendant rights, duties and obligations of an LLC Unitholder thereunder and (ii) makes each of the representations and warranties of an LLC Unitholder set forth in Section 3.2 of the Agreement as fully as if such representations and warranties were set forth herein. The parties to the Agreement shall treat the execution and delivery hereof by the undersigned as the execution and delivery of the Agreement by the undersigned and, upon receipt of this Joinder Agreement by the Corporation, the signature of the undersigned set forth below shall constitute a counterpart signature to the signature page of the Agreement. 

 

	
 Name: 

	   	   
	   	   	   
	
 Dated:  

	   	   

 

	
 Address for Notices: 

	   	
 With copies to: 

	   	   	   
	   	   	   
	    	   	    
	    	   	    
	    	   	    
	   	   	   
	   	   	   
	
 Attention:  

	   	   	    

 

 

 C-1

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