Exhibit 10.1
CAPITAL STOCK CONTRIBUTION AGREEMENT
by and among
KIRKLAND RANCH, LLC,
a California limited liability company,
KIRKLAND KNIGHTSBRIDGE, LLC,
a California limited liability company,
KNIGHTSBRIDGE FINE WINES, INC.,
a Nevada corporation
and
MR. LARRY KIRKLAND,
Equityholder
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TABLE OF CONTENTS
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1.
Certain
Definitions......................................................................................1
2.
Contribution of Kirkland Assets; Assumption of Certain Liabilities;
Contribution of
Knightsbridge Common Stock.
.............................................................................2
2.1
Contribution of Kirkland
Assets.................................................................2
2.2 Excluded
Assets.................................................................................4
2.3 Assumption
of Certain
Liabilities...............................................................4
2.4 Excluded
Liabilities............................................................................4
2.5
Contribution of Knightsbridge Common
Stock......................................................4
2.6 Transfer
of Assets;
Attorney-in-fact............................................................5
3. The
Closing..............................................................................................6
4.
Closing
Deliveries.......................................................................................6
4.1 Deliveries
of Kirkland and the
Equityholder.....................................................6
4.2 Deliveries
of
Newco.............................................................................7
4.3 Deliveries
of
Knightsbridge.....................................................................8
5.
Further
Assurances.......................................................................................8
6.
Representations and Warranties of
Kirkland...............................................................8
6.1
Organization; Good
Standing.....................................................................8
6.2 Authority;
Enforceability.......................................................................9
6.3
Investments.....................................................................................9
6.4 No
Conflict.....................................................................................9
6.5
Litigation; Compliance with
Law.................................................................9
6.6 Financial
Statements...........................................................................10
6.7 Absence of
Undisclosed
Liabilities.............................................................10
6.8
Taxes..........................................................................................10
6.9 Title to
Assets................................................................................11
6.10
Fixed
Assets...................................................................................11
6.11
Intellectual Property
Matters..................................................................11
6.12
Material
Agreements............................................................................12
6.13
Customers and
Suppliers........................................................................13
6.14
Inventory......................................................................................13
6.15 Accounts
Receivable............................................................................13
6.16
Authorizations.................................................................................13
6.17
Environmental
Matters..........................................................................14
6.18
Related
Parties................................................................................14
6.19
Improper or Unlawful
Payments..................................................................15
6.20
No
Brokers.....................................................................................15
6.21
Product Warranties;
Returns....................................................................15
6.22
Conditions Affecting the
Business..............................................................15
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6.23
Conduct of
Business............................................................................15
6.24
Insurance......................................................................................15
6.25
Products.......................................................................................16
6.26
Real
Property..................................................................................16
6.27
Employee
Benefits..............................................................................17
6.28
Consents/Bulk
Sales............................................................................17
6.29
Intentionally
Deleted..........................................................................18
6.30
Disclosure.....................................................................................18
6.31
Investment
Undertaking.........................................................................18
6.32
No
Representation..............................................................................18
7.
Representations and Warranties of
Knightsbridge.........................................................18
7.1
Organization; Good
Standing....................................................................18
7.2 Authority;
Enforceability......................................................................19
7.3 No
Conflict....................................................................................19
7.4
Capitalization.................................................................................20
7.5
Knightsbridge Common
Stock.....................................................................20
7.6 SEC
Filings....................................................................................20
7.7
Litigation.....................................................................................20
7.8
Brokers........................................................................................21
7.9
No Prior
Activities............................................................................21
7.10
Disclosure.....................................................................................21
7.11
Compliance With
Laws...........................................................................21
7.12
Consents.......................................................................................22
7.13
Non-contravention..............................................................................22
7.14
Taxes..........................................................................................22
7.15
Knightsbridge's Due Diligence
.................................................................22
8.
Covenants...............................................................................................22
8.1 Transfer
and Retention of
Records..............................................................22
8.2 Employee
Matters; Use of Premises by
Knightsbridge.............................................22
8.3 Tax
Matters....................................................................................23
8.4 Use of
Kirkland Name in Competing
Business.....................................................23
8.5 Bulk
Sales.....................................................................................23
8.6 Repayment
of Institutional
Indebtedness........................................................23
8.7 Public
Statements..............................................................................23
9.
Conditions to the Obligations to
Close..................................................................24
9.1
Representations and
Warranties.................................................................24
9.2
Performance of
Obligations.....................................................................24
9.3 No
Material Adverse
Change.....................................................................24
9.4 Closing
Deliveries.............................................................................24
9.5
Financing......................................................................................24
10.
Indemnification.........................................................................................24
10.1
Indemnification by
Kirkland....................................................................24
10.2
Indemnification by
Knightsbridge...............................................................25
10.3
Right to Indemnification Not Affected by Knowledge or
Waiver...................................26
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10.4
Indemnification
Amount.........................................................................26
10.5
Time
Limitations...............................................................................26
11.
Miscellaneous...........................................................................................26
11.1
Attorneys Fees and Costs and Transaction
Taxes.................................................26
11.2
Expenses.......................................................................................27
11.3
Amendment......................................................................................27
11.4
Entire
Agreement...............................................................................27
11.5
Waiver.........................................................................................27
11.6
Notices........................................................................................27
11.7
Governing Law;
Jurisdiction....................................................................28
11.8
Severability...................................................................................29
11.9
Binding Effect;
Assignment.....................................................................29
11.10
Headings.......................................................................................29
11.11
Third
Parties..................................................................................29
11.12
Counterparts...................................................................................29
11.13
Confidentiality................................................................................30
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Index of Schedules
[To be supplied]
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CAPITAL STOCK CONTRIBUTION AGREEMENT
CAPITAL STOCK CONTRIBUTION AGREEMENT (this "Agreement"), dated
as of April 21, 2004, by and among KIRKLAND
RANCH, LLC, a California limited
liability company ("Kirkland"), KIRKLAND
KNIGHTSBRIDGE, LLC, a California
limited liability company ("Newco"),
KNIGHTSBRIDGE FINE WINES, INC., a Nevada
corporation ("Knightsbridge"), and Mr.
Larry Kirkland ("Equityholder").
RECITALS
WHEREAS, Kirkland has previously contributed (the "Kirkland
Contribution") to Newco all of the tangible
and intangible assets, properties
and rights of Kirkland used or held for use
in connection with the ownership and
operation of a vineyard and winery by which
the cultivation of grape varieties,
manufacture and production of wine, and the
distribution of wine products for
retail consumption occurs (the "Business"),
and Newco has assumed certain
liabilities of Kirkland.
WHEREAS, in consideration of the Kirkland Contribution, Newco
issued a 100% membership interest to
Kirkland pursuant to the terms, conditions
and provisions contained in that certain
original Limited Liability Company
Agreement of Newco (the "Original LLC
Agreement");
WHEREAS, at the Closing (as defined below), Knightsbridge
desires to contribute (the "Knightsbridge
Contribution") to Newco shares of its
Common Stock, par value $.001 per share
(the "Common Stock");
WHEREAS, at the Closing (as defined below), in consideration
of the Knightsbridge Contribution, Newco
will transfer to Knightsbridge a 50%
membership interest pursuant to the terms,
conditions and provisions contained
in this Agreement and that certain Amended
and Restated Limited Liability
Company Agreement dated as of the Closing
Date (the "LLC Agreement");
WHEREAS, at the Closing, Knightsbridge shall also fund the
balance of the loan in the original amount
of $2,400,000
to Newco;
WHEREAS, following the Knightsbridge Contribution and transfer
by Newco, Knightsbridge and Kirkland shall
each own a 50% membership interest in
Newco pursuant to the terms, conditions and
provisions contained in the LLC
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and
for other good and valuable
consideration, the receipt and sufficiency
of which are hereby acknowledged, the
parties hereto agree as follows:
1. Certain
Definitions. The terms defined in Appendix I attached hereto,
whenever used in this Agreement (including,
without limitation, the exhibits and
schedules attached hereto), shall have the
meanings given to them in Appendix I.
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2. Contribution
of Kirkland Assets; Assumption of Certain Liabilities;
Contribution of Knightsbridge Common
Stock.
2.1 Contribution of Kirkland Assets. Subject to the terms and
provisions contained herein, and in
consideration of the issuance of the 100%
membership interest in Newco to Kirkland,
Kirkland has sold, assigned, conveyed,
transferred and delivered, as a capital
contribution to Newco, all of its right,
title and interest in and to, free and
clear of all Liens (except for Permitted
Liens), all of the assets, rights,
properties and contracts related to, or
utilized in connection with, the Business
(collectively, the "Assets") other
than those specific Excluded Assets
described in Section 2.2 hereof, wherever
located and however situated. The Assets
include, without limitation, the
following:
(i) full title and ownership to the sixty-nine (69) acre parcel
of land on which the Business is conducted (the "Parcel"), a
description of which is set forth on Schedule 2.1(i);
(ii) the winery located on the Parcel, including, without
limitation, full title and ownership to the building located on
the
Parcel consisting of approximately fifty-seven thousand
(57,000)
square feet where wine is manufactured, produced and stored
(the
"Building");
(iii) all of the Inventory, including, without limitation,
cased
wines and in bulk wines, and goods in-transit; all of which
Inventory
is set forth on Schedule 6.14 attached hereto;
(iv) all of the Accounts Receivable, notes and other amounts
receivable and the proceeds of any of the foregoing (including,
without limitation, all rebates or vendor reimbursements due from
any
supplier or vendor or buying association with respect to the
period
prior to the Closing); all of which Accounts Receivable is set
forth
on Schedule 6.15 attached hereto;
(v) all of the Intellectual Property Rights (and all goodwill
associated therewith, if any) related to or used in the
Business
including, without limitation, the Internet domain name
www.kirklandranchwinery.com, the label names "Kirkland Ranch",
"Jamieson Canyon", and "Soscol Ridge" and any and all other
labels,
approvals, trademarks, trademark applications, service marks,
service
mark applications and all goodwill associated therewith set forth
on
Schedule 6.11 attached hereto, and any derivatives or
combinations
thereof;
(vi) all right, title and interest of Kirkland in and to the
Intangibles;
(vii) all of the books and records relating to the Business,
the
Assets and the Assumed Liabilities (excluding the equity
ownership
records, tax returns, general ledger and minute books of
Kirkland)
including, without limitation: quality control records; records
relating to the Authorizations; records relating to the adoption
and
use of any of the Intellectual Property Rights; specifications;
sales;
purchasing; rebates; customers; vendors; suppliers; product
registrations;
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mailing lists; advertising materials; catalogs (digital and
print);
market research data; promotional and marketing materials (digital
and
print); print, radio and television commercials; label and
shipping
carton dies; designs; films; artwork; photography; mechanical
art;
color separations; prints, plates and graphic material; and all
files
and correspondence related to any of the foregoing;
(viii) all transferable governmental approvals, authorizations,
consents, licenses, orders, franchises, alcoholic beverage permits
and
licenses and other permits of any Governmental Entity owned, held,
or
utilized by Kirkland in connection with the Business, including
the
Authorizations;
(ix) all raw materials, work in process, wine casks and
barrels,
supplies, spare parts, tooling and shipping and packaging
materials;
(x) the exclusive right of Kirkland to represent itself as
carrying on the Business in continuation thereof, including,
without
limitation, all telephone, facsimile, and customer service or
800
phone numbers of Kirkland;
(xi) all manufacturer warranties provided to Kirkland with
respect to any items which are part of the Assets;
(xii) the Fixed Assets owned or leased by Kirkland for use in
the
Business as set forth on Schedule 6.10 attached hereto;
(xiii) all Material Agreements to which Kirkland is a party or
by
which Kirkland is bound as set forth on Schedule 6.12 attached
hereto;
(xiv) all cash, cash equivalents, and marketable securities
including, without limitation, bank deposits, investments in
"money
market" funds, commercial paper funds, certificates of deposit,
and
Treasury bills, together with any accrued interest thereon;
(xv) all prepaid items (or portions thereof) relating
exclusively
to the Business;
(xvi) all deposits paid to Kirkland by any customers in respect
of any future product orders;
(xvii) all computer software used in connection with the
Business;
(xviii) any contracts of insurance with respect to the
Business,
and any reimbursement for, or other benefit associated with,
prepaid
insurance, including without limitation, any insurance proceeds
with
respect to events occurring prior to the date hereof;
(xix) all goodwill and all other rights, properties, and assets
of any kind or character whatsoever directly or indirectly relating
to
the conduct of the Business, whether tangible or intangible,
owned,
licensed, or held by Kirkland,
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including, without limitation, the full benefit of all third
party
representations, warranties, guarantees, indemnities,
undertakings,
certificates, covenants, agreements and the like and all
security
received by Kirkland for the purchase or other acquisition of any
part
of the Assets, except to the extent such rights, properties, or
assets
comprise a part of an Excluded Asset or are expressly excluded by
the
terms of this Agreement.
2.2 Excluded Assets. Notwithstanding any other provision contained
in
this Agreement, it is expressly agreed that
Newco did not acquire and does not
and will not own any of those personal
family items or memorabilia and
decorations of the Equityholder and his
family members used in the Business
(collectively, the "Excluded Assets").
2.3 Assumption of Certain Liabilities. Subject to the terms and
conditions of this Agreement, as of the
Closing Date, Newco hereby agrees to
assume and pay, perform and discharge, when
due, the following liabilities and
obligations of Kirkland, which shall not
include any Excluded Liabilities
(collectively, the "Assumed
Liabilities"):
(i) all liabilities under the Material Agreements and the
Authorizations arising from and after the date hereof;
(ii) all liabilities of Kirkland relating to the Business due
to
unaffiliated third parties for the purchase and sale of goods made
in
the ordinary course of business consistent with the past practices
of
Kirkland;
(iii) all accrued expenses as set forth on Schedule 2.3 (iii)
attached
hereto;
(iv) the liabilities of Kirkland payable to the Equityholder
and
to Kirkland Cattle Company, a California general partnership, as
set
forth on Schedule 2.3(iv) attached hereto; and
(v) the liabilities of Kirkland payable to Knightsbridge as set
forth on Schedule 2.3(v) attached hereto.
2.4 Excluded Liabilities. It is expressly agreed that Kirkland
shall
retain and Newco shall not assume or have
any liability, responsibility or
obligation, directly or indirectly, for any
liabilities of Kirkland or the
Equityholder or which in any way relate to
or arise from the Business, or Assets
or otherwise (whether known or unknown,
fixed or contingent, material or
immaterial, mature or unmatured) other than
the Assumed Liabilities, including,
without limitation (i) subject to 11.1
below, any professional, attorney or
accounting fees; and (ii) federal and state
income taxes of Kirkland.
2.5 Contribution of Knightsbridge Common Stock. At the Closing,
subject to the capital adjustments set
forth in Section 2.6, and in
consideration of the transfer by Kirkland
of 50% of its membership interest in
Newco to Knightsbridge, Knightsbridge shall
issue and deliver to Newco, as a
capital contribution, shares of Common
Stock. The number of shares of Common
Stock initially issued to Newco (the
"Initial Shares") shall be equal to the
quotient of
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the amount of ten million dollars
($10,000,000) divided by $2.35 per share. The
Common Stock shall be held by Newco for a
period of not less than two (2) years
prior to any distribution under the terms
and conditions of the LLC Agreement.
The Initial Shares issued to Newco pursuant
to this Agreement shall, upon
issuance, be duly authorized, validly
issued, fully paid and nonassessable.
2.6 Transfer of
Assets; Attorney-in-fact.
(a) Kirkland has put Newco into full physical possession and
enjoyment of the Assets by delivery of the
Assets to Newco at Kirkland's place
of business in Napa, California. With
respect to the Assets that could not be
physically delivered to Newco because they
were in the possession of third
parties or otherwise, Kirkland has provided
irrevocable instructions to the
party in possession thereof, with copies to
Newco, that all right, title, and
interest therein have been vested in Newco
and that the same are to be held for
Newco's exclusive use and benefit.
(b) To the extent that the assignment by Kirkland to Newco of
any
Material Agreement or other contract,
agreement, instrument, license,
understanding, or arrangement to be
assigned to Newco hereunder shall require
the consent of a party other than Kirkland,
which has not been obtained prior to
the Closing and if Kirkland and
Knightsbridge shall nevertheless elect to
consummate the transactions contemplated by
this Agreement, this Agreement shall
not constitute an agreement to assign the
same if an attempted assignment
without such consent would constitute a
breach thereof unless Knightsbridge
before, at, or after the Closing elects in
a writing delivered to Kirkland,
specifically identifying such absent
consent, to waive such consent.
(c) For a period of twelve months after the Closing Date,
Kirkland hereby constitutes and appoints
Newco, and its successors and permitted
assigns, as the true and lawful
attorneys-in-fact of Kirkland with full power of
substitution, in the name of Newco or the
name of Kirkland, on behalf of and for
the benefit of Newco, to collect all
accounts receivable included within the
Assets and other items being transferred,
conveyed and assigned to Newco as
provided herein, to endorse, without
recourse, checks, notes and other
instruments included with the Assets in the
name of Kirkland for the purpose of
collection, to institute and prosecute, in
the name of Kirkland or otherwise,
all proceedings which Newco may deem proper
in order to collect, assert or
enforce any claim, right or title of any
kind in or to the Assets being
transferred, conveyed and assigned as
provided herein and to defend and
compromise or settle any and all actions,
suits or proceedings in respect of any
of such Assets and Assumed Liabilities and
to do all such acts and things in
relation thereto as Newco may deem
advisable in its sole discretion. Kirkland
acknowledges and agrees that the foregoing
powers are coupled with an interest
and shall be irrevocable. Kirkland further
agrees that Newco shall retain for
its own account any amounts collected
pursuant to the foregoing powers, and
Kirkland, the Equityholder, and their
Affiliates shall pay to Newco, if and when
received, any amounts which shall be
received by Kirkland, the Equityholder, or
their Affiliates after the Closing in
respect of the Assets to be transferred,
conveyed and assigned to Newco as provided
herein.
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3. The Closing.
The closing of this Agreement and the other transactions
contemplated hereby (the "Closing") shall
take place at 10:00 a.m., local time,
within two (2) business days following the
satisfaction of all closing
conditions contained herein, but in no
event later than April 30, 2004, unless
otherwise agreed to by the parties in
writing (the "Closing Date"). The Closing
shall take place at the offices of Newco,
or at such other location as the
parties shall agree.
4. Closing
Deliveries.
4.1 Deliveries of Kirkland and the Equityholder. At the Closing
and
subject to the terms, provisions and
conditions contained herein, Kirkland and
the Equityholder shall take all actions and
do all things necessary to sell,
transfer, assign, convey and deliver the
Assets to Newco, free and clear of any
and all Liens (except for Permitted Liens)
and to consummate the transactions
contemplated hereby, including, without
limitation, delivery or causing to be
delivered to Newco and/or Knightsbridge, as
applicable, the following:
(a) Bill of Sale, Assignment and Assumption Agreement (the
"Bill
of Sale"), with full covenants of warranty
as to the good and indefeasible title
of Kirkland in the Assets, necessary to
sell, transfer and assign all of
Kirkland's right, title and interest in and
to the Assets, free and clear of any
and all Liens (except for Permitted
Liens);
(b) such instruments of sale, assignment, transfer and
conveyance
as Newco may request in order to record the
sale, assignment, transfer and
conveyance of any of the Intellectual
Property Rights with the United States
Patent and Trademark Office, the United
States Copyright Office and any other
Governmental Entity, domestic or
foreign;
(c) a copy of the Grant Deed (the "Grant Deed"), with full
covenants and warranties as to the good and
indefeasible title of Newco in the
Parcel and the Building located
thereon;
(d) a certificate of good standing of Kirkland, dated as of a
recent date, from the Secretary of State of
the State of California;
(e) a certificate dated as of the Closing Date, executed by the
Manager of Kirkland, certifying that
attached thereto are (i) true, correct and
complete copies of the Certificate of
Formation and the Limited Liability
Company Agreement of Kirkland; (ii) true,
correct and complete copy of the
resolutions adopted by the Board of
Managers and the members of Kirkland
authorizing the execution, delivery and
performance of this Agreement and the
Kirkland Documents and the consummation of
the transactions contemplated hereby
and thereby; and (iii) the incumbency of
the officers of Kirkland executing this
Agreement and the Kirkland Documents;
(f) all Authorizations necessary or required to be obtained in
order to consummate the transactions
contemplated hereby;
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(g) evidence of filing of such financing statements and
termination and release agreements,
including without limitation, termination of
the loan and mortgage to Prudential, as are
required in order to sell, transfer,
assign, convey and deliver to Newco all
rights, title and interest of Kirkland
in and to the Assets, free and clear of all
Liens (except for Permitted Liens);
(h) the LLC Agreement and exhibits attached, all duly executed
by
Kirkland;
(i) a policy of title insurance, dated as of the date of the
Closing and issued by Newco's title
insurance company, insuring Newco with
respect to all Owned Real Property (in
amounts acceptable to Newco), subject
only to the Permitted Liens, together with
(i) surveys acceptable to Newco of
all Owned Real Property, which surveys
shall be certified to Newco, Newco's
lender and Newco's title insurance company,
showing the locations of all
buildings, all other improvements and the
Permitted Liens, (ii) insurance that
the Permitted Liens have not been violated
and that a violation shall not cause
a forfeiture or right of reentry and (iii)
such other title insurance as Newco
shall reasonably require;
(j) satisfactory evidence of payment of all applicable real
property transfer, documentary stamp and
similar taxes (and all forms and
returns required in connection therewith)
in connection with transactions
contemplated hereby;
(k) an affidavit pursuant to the Foreign Investment in Real
Property Tax Act;
(l) such other certificates, documents, receipts and
instruments
as Newco or its legal counsel may
reasonably request.
4.2 Deliveries of Newco. At the Closing and subject to the
terms,
provisions and conditions contained herein,
Newco shall deliver to Kirkland
and/or Knightsbridge, as applicable, the
following:
(a) a certificate of good standing of Newco, dated as of a
recent
date, from the Secretary of State of the
State of California;
(b) a certificate dated as of the Closing Date, executed by the
Secretary of Newco certifying that attached
thereto is: (i) a true, correct and
complete copy of the Certificate of
Formation of Newco; (ii) a true, correct and
complete copy of the resolutions adopted by
the Board of Managers of Newco
authorizing the execution, delivery and
performance of this Agreement and the
consummation of the transactions
contemplated hereby; and (iii) the incumbency
of the officers of Newco executing this
Agreement;
(c) the LLC Agreement and exhibits attached, all duly executed
by
Newco;
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(d) such other certificates, documents and instruments as
Kirkland or its legal counsel may
reasonably request.
4.3 Deliveries of Knightsbridge. At the Closing, and subject to
the
terms, provisions and conditions contained
herein, Knightsbridge shall deliver
to Newco or the Equityholder, as
applicable, the following:
(a) a certificate of good standing of Knightsbridge, dated as
of
a recent date, from the Secretary of State
of the State of Nevada;
(b) a certificate dated as of the Closing Date, executed by the
Secretary of Knightsbridge certifying that
attached thereto is: (i) a true,
correct and complete copy of the
Certificate of Incorporation of Knightsbridge;
(ii) a true, correct and complete copy of
the resolutions adopted by the Board
of Directors of Knightsbridge authorizing
the execution, delivery and
performance of this Agreement and the
consummation of the transactions
contemplated hereby; and (iii) the
incumbency of the officers of Knightsbridge
executing this Agreement;
(c) a stock certificate issued to Newco representing the
Initial
Shares;
(d) the LLC Agreement and exhibits attached, all duly executed
by
Knightsbridge;
(e) such other certificates, documents and instruments as
Kirkland or its legal counsel may
reasonably request.
(f) the balance of the loan proceeds in the amount of
$2,400,000,
less the amount of documented loan advances
previously made to Kirkland.
5. Further
Assurances. Each of Kirkland, Knightsbridge, Newco and the
Equityholder covenants and agrees to
execute, deliver, file and record, or cause
to be executed, delivered, filed and
recorded, such further agreements,
instruments and other documents and take,
or cause to be taken, such further
actions, as any party hereto may reasonably
request as being necessary or
advisable to effect or evidence the
transactions contemplated by this Agreement.
6.
Representations and Warranties of Kirkland. Unless otherwise
specified,
to its best knowledge and subject to the
disclosures provided herein, Kirkland
hereby represents and warrants to each of
Newco and Knightsbridge as follows:
6.1 Organization; Good Standing. Kirkland is a limited
liability
company duly organized, validly existing
and in good standing under the laws of
the State of California and has the power
and authority to own and lease its
assets and properties and to conduct the
Business as it is now being conducted.
Kirkland is qualified to do business as a
foreign company in all jurisdictions
where it is required to be qualified,
except those jurisdictions whereby the
failure to qualify would not have a
Material Adverse Effect.
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6.2 Authority; Enforceability.
(a) Kirkland has the corporate power and authority to execute,
deliver and perform this Agreement and all
other agreements, certificates and
documents executed or delivered, or to be
executed or delivered, by Kirkland in
connection herewith (collectively, the
"Kirkland Documents"), and to consummate
the transactions contemplated hereby and
thereby. The execution, delivery and
performance of this Agreement and the
Kirkland Documents by Kirkland has been
duly authorized by all necessary company
action on the part of Kirkland. This
Agreement and each of the Kirkland
Documents have been duly executed and
delivered by Kirkland and this Agreement
and each of the Kirkland Documents
constitute (or, in the case of certain of
the Kirkland Documents, when executed
and delivered will constitute) the legal,
valid and binding obligations of
Kirkland, enforceable against Kirkland in
accordance with their respective
terms.
(b) The Equityholder has the legal capacity to execute, deliver
and perform this Agreement. This Agreement
and the Kirkland Employment Agreement
have been duly executed and delivered by
the Equityholder and constitutes the
legal, valid and binding obligations of the
Equityholder enforceable against the
Equityholder in accordance with its
respective terms.
6.3 Investments. Kirkland has no subsidiaries, joint ventures or
other
equity interests
or investments.
6.4 No Conflict. Except as set forth on Schedule 6.4, the
execution,
delivery and performance of this Agreement
and the Kirkland Documents by
Kirkland and the consummation of the
transactions contemplated hereby and
thereby do not and will not (i) violate or
conflict with any provision of the
Articles of Organization or the Limited
Liability Company Agreement of Kirkland;
(ii) violate, conflict with, result in a
material breach of or constitute (with
or without notice or lapse of time or both)
a default under, give rise to a
right of termination, amendment or
cancellation of, accelerate the performance
required by, or result in any payment
under, any Material Agreement, instrument
or other writing of any nature whatsoever
to or by which Kirkland is a party or
is bound, or by which any of the Assets or
the Business is subject; (iii)
violate, conflict with or result in a
material breach of any Legal Requirement
applicable to Kirkland; (iv) result in the
creation of any Lien on any of the
Assets; or (v) render void or create a
right of amendment, termination or
rescission under any Material Agreement or
other arrangement with a customer of
or vendor to the Business, except to the
extent such right would not have a
Material Adverse Effect.
6.5 Litigation; Compliance with Law.
(a) Litigation. There are no suits or actions, or, pending or
threatened, against or relating to
Kirkland. There are no judgments, orders,
stipulations, injunctions, decrees or
awards in effect which relate to Kirkland
or the operation of Kirkland, which if
decided against Kirkland would materially
affect the ability of Kirkland to
consummate the transactions contemplated
hereby, except for any suits or actions
that would not, have a Material Adverse
Effect.
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<PAGE>
(b) The operation, ownership and use of the Assets by Kirkland
are in material compliance with, and
conform to, all law, statute, ordinance,
code, rule, regulation, policy, guidance
document, provision of law, or other
requirement, order, judgment, award and
decree (each, a "Legal Requirement")
applicable to Kirkland, the Business or the
Assets, including, without
limitation, the rules and regulations
concerning operation of a vineyard,
cultivation and manufacture of wine,
utilization of migrant workers, use of
pesticides and other agricultural
chemicals, or as promulgated by the U.S. Food
and Drug Administration, U.S. Department of
Labor, U.S. Immigration and
Naturalization Service, U.S. Environmental
Protection Agency, Federal
Occupational Safety and Health Act of 1970,
and any state laws analogous
thereto. No notice has been served upon
either Kirkland or the Equityholder
(other than a notice subsequently withdrawn
or with regard to a violation
subsequently cured) from any Governmental
Authority or other person claiming,
nor does there currently exist, any
violation of any applicable Legal
Requirement in connection with any of such
activities.
6.6 Financial Statements. Schedule 6.6 attached hereto sets forth
a
true and correct copy of Kirkland's
Unaudited Balance Sheet, Statement of Profit
and Loss and Cash Flows as of and for each
of the fiscal years ending December
31, 2003, December 31, 2002 and December
31, 2001, including the notes thereto
(collectively, the "Financial Statements").
The Financial Statements were
prepared from and are in agreement with the
books and records of Kirkland, and
fairly present the financial position of
Kirkland for the periods set forth in
such Financial Statements.
6.7 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 6.7 attached hereto or as set
forth or adequately reserved against on
the balance sheet dated as of December 31,
2003 (or disclosed in the notes
thereto) (the "December 2003 Balance
Sheet"), Kirkland has no liabilities or
obligations. Except as set forth on
Schedule 6.7 attached hereto, all
liabilities and obligations of Kirkland
incurred since January 1, 2004 have been
incurred in the ordinary course of business
in a manner consistent with past
practice, except for liabilities and
obligations of Kirkland which do not and
will not have a Material Adverse Effect.
For purposes of this Section 6.7, all
references to Kirkland's liabilities shall
include, without limitation, all
liabilities, whether direct or indirect,
absolute, contingent or matured, known
or unknown, asserted or unasserted, and
liquidated or unliquidated.
6.8 Taxes. (a) Except
as set forth on Schedule 6.8(a) attached hereto:
Kirkland has duly and timely filed (in accordance with any
extensions duly granted by the appropriate Governmental Entity)
with
the appropriate Governmental Entity all Tax Returns required to
be
filed by Kirkland for Taxes, and paid the amount of Tax showing
as
payable on such Tax Returns, for all periods ending on or prior to
the
date of the Closing.
There is no pending, proposed or, to the actual knowledge of
Kirkland, threatened any audit, examination, investigation,
dispute,
deficiency assessment, refund litigation, claim, or other
administrative or judicial proceeding relating to any Tax for
which
Kirkland is or may be liable and which could result in a Lien on
any
of the Assets.
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6.9 Title to Assets. Except as set forth on Schedule 6.9
attached
hereto, Kirkland has good, valid and
indefeasible title to or, in the case of
licenses, valid and subsisting licenses in
the Assets, in each case free and
clear of any and all Liens (except for
Permitted Liens). The Assets that are
owned, together with those used under
license, are free from material defects,
are in good operating condition and a good
state of maintenance and repair,
subject only to normal wear and tear in the
ordinary course of business, and are
suitable for the continued conduct of the
Business in a manner consistent with
past practices. The Assets include all
rights and property necessary for the
conduct of the Business by Newco in the
manner it is presently conducted by
Kirkland. At the Closing, Newco will obtain
from Kirkland good and indefeasible
title to all of the Assets, free and clear
of all Liens (except for Permitted
Liens).
6.10 Fixed Assets. Schedule 6.10 attached hereto contains a
true,
complete and correct list, together with
brief description of, the machinery,
equipment, furniture and fixtures (the
"Fixed Assets") and other items of
personal property owned by Kirkland and all
interests therein which are part of
the Assets, including, without limitation,
all wine casks and barrels. Except as
set forth in Schedule 6.10, Kirkland has
good, valid and indefeasible title to
the Fixed Assets and the personal property
owned by Kirkland, in each case free
and clear of any and all Liens (except for
Permitted Liens). All of the Fixed
Assets and, if applicable, the personal
property are in good operating
condition, state of maintenance and repair
and working order, subject to normal
wear and tear.
6.11 Intellectual Property Matters. Set forth on Schedule 6.11
attached hereto is a list of the
Intellectual Property Rights, specifying as to
each, as applicable: (i) the nature of the
Intellectual Property Right; (ii) all
licenses, sublicenses and other agreements
(true, correct and complete copies of
any such licenses, sublicenses or other
agreements are attached to Schedule
6.11) relating in any manner to any
Intellectual Property Right; and (iii) the
filing and registration information with
respect to each Intellectual Property
Right that is registered with the United
States Patent and Trademark Office, the
United States Copyright Office, any state
or foreign jurisdiction or other
Governmental Authority. There are no
Intangibles that are owned by Kirkland or
the Equityholder or any of their respective
Affiliates or family members which
are used in or in connection with the
Business that are not set forth on
Schedule 6.11 attached hereto. Except as
set forth on Schedule 6.11 attached
hereto, there are no royalties, fees or
other amounts payable by or to Kirkland
with respect to any of the Intellectual
Property Rights. Kirkland nor the
Equityholder has received a notice of a
claim of infringement or knows of any
reasonable basis for a claim that such an
infringement or violation exists.
Kirkland has ownership of (free and clear
of any and all Liens) or rights by
license, lease or other agreement to use
(free and clear of any and all Liens
and without the payment of any fees or the
incurrence of any royalties or other
amounts) the Intellectual Property Rights
that are necessary to permit the use
of the Assets and to conduct the Business.
None of the Equityholder or any of
his Affiliates or family members or any
present or former employee of Kirkland
owns or has a propriety or financial
interest, directly or indirectly, in any of
the Intellectual Property Rights. Neither
Kirkland nor the Equityholder is a
party in any pending action, suit or
proceeding that involves a claim of
infringement or any other claim related to
any Intellectual Property Right or,
to the actual knowledge of Kirkland, there
is no threatened action, suit or
proceeding that involves a claim of
infringement or any other claim relating to
any Intellectual Property Right. None of
the Intellectual Property Rights is
subject to any outstanding Legal
Requirement in order to maintain any federal
registration of such Intellectual Property
Rights. No Intellectual Property
Right is
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<PAGE>
subject to any outstanding order, judgment,
decree, stipulation or agreement
restricting its use by Kirkland or
restricting the licensing thereof to any
Person by Kirkland or which could affect
the transfer of the Intellectual
Property Rights to Newco free and clear of
any and all Liens. Upon the execution
and recording, where applicable, of such
instruments of assignment or conveyance
as may be requested by Newco, all
Intellectual Property Rights will be fully
vested in Newco, free and clear of any and
all Liens.
6.12 Material Agreements.
(a) Schedule 6.12 sets forth a list and a brief description of
all material written and oral contracts or
agreements relating to Kirkland,
including without limitation any: (i)
contract or series of contracts resulting
in a commitment or potential commitment for
expenditure or other obligation or
potential obligation, or which provides for
the receipt or potential receipt,
involving in excess of Five Thousand
Dollars ($5,000.00) in any instance, or
series of related contracts that in the
aggregate give rise to rights or
obligations exceeding such amount; (ii)
agreement which restricts Kirkland from
engaging in any line of business or from
competing with any other Person; (iii)
warranties made with respect to products
manufactured, packaged, distributed or
sold by Kirkland; (iv) partnership,
shareholder, joint venture, or similar
agreement or arrangements to which Kirkland
is a party; (v) contracts with
suppliers and distributors; (vi) any
agreements, contracts, license or
sublicense agreements, assignments, or
understandings with respect to
Intellectual Property owned or used by
Kirkland; or (vii) any other contract,
agreement, instrument, arrangement or
commitment that is material to the
condition (financial or otherwise), results
of operation, assets, properties,
liabilities, Business or prospects of
Kirkland or the Assets (collectively, the
"Material Agreements"). Kirkland has
previously furnished to Newco true,
complete and correct copies of all Material
Agreements required to be listed on
Schedule 6.12.
(b) Except as set forth on Schedule 6.12, none of the Material
Agreements was entered into outside the
ordinary course of business of Kirkland.
(c) The Material Agreements are each in full force and effect
and
are the valid and legally binding
obligations of Kirkland and the other parties
thereto, enforceable in accordance with
their respective terms, subject only to
bankruptcy, insolvency or similar laws
affecting the rights of creditors
generally and to general equitable
principles and foreign laws. Neither Kirkland
nor the Equityholder has received notice of
default by Kirkland under any of the
Material Agreements or any other contract
or agreement relating to borrowed
money to which Kirkland is a party or by or
to which it or its assets are bound
or subject, and, to the actual knowledge of
Kirkland, no event has occurred
which, with the passage of time or the
giving of notice or both, would
constitute a default by Kirkland
thereunder. Neither Kirkland nor the
Equityholder has received notice of the
pending or threatened cancellation,
revocation or termination of any of the
Material Agreements or any other
agreements relating to borrowed money to
which Kirkland is a party or by or to
which it or its assets are bound or
subject, nor are any of them aware of any
facts or circu
