Delaware
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2080
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46-1561499
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(State or Other Jurisdiction of
Incorporation or Organization)
|
(Primary Standard Industrial
Classification Code Number)
|
(I.R.S. Employer
Identification Number)
|
Anna T. Pinedo, Esq.
James R. Tanenbaum, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Tel: (212) 468-8000
|
Michael A. Hedge, Esq.
Gary J. Kocher, Esq.
K&L Gates LLP
925 Fourth Avenue, Suite 2900
Seattle, Washington 98104
Tel: (206) 623-7580
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Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
Title of Each Class of
Securities to be Registered
|
Amount to be
Registered |
Proposed Maximum
Aggregate
Offering Price (1)
|
Amount of
Registration Fee
|
Class A Common Stock, par value $0.001 per share
|
2,902,557
|
$43,538,355.00
|
$5,939.00 |
(1)
|
Estimated solely for the purposes of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
|
Investing in our Class A common stock involves a high degree of risk. See “Risk Factors” beginning on page 12. |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. |
Sidoti & Company, LLC | CSCA |
|
·
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Steady growth in the U.S. wine market:
The U.S. wine market has grown at an average annual rate of 5% over the past decade and is now the largest in the world (although per capita consumption remains relatively low).
In the recent past, growth in wine sales has been focused in domestic brands; from 2007 to 2011, wine imports have only grown by 1.6% per year.
According to the 2011 Gomberg-Fredrikson & Associates Annual Wine Industry Review for the twelve months ended December 2011, two of the three fastest growing price points are the $7-$14 (“Super-premium”) and over-$14 (“Ultra-premium”) segments. We have focused on the higher end of the Super-premium segment and also have a significant presence in the Ultra-premium segment, which together accounted for 66% of industry-wide revenue in 2011.
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·
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Market ripe for disruption:
Food retailers account for roughly 65% of wine sales, with a high concentration of market share among only a handful of major wine producers and distributors. The top four wine producers in California control approximately 65% of unit shipments of California wine. In order to compete with powerful producers and suppliers for this growing profit pool, food and grocery retailers have turned to private label programs as a way of gaining margin, customer loyalty, category growth and differentiation.
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|
·
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Retailer focus on innovation:
Increased market competition has heightened for retailers the emphasis on increasing consumer traffic to grow same store sales year over year. In order to create excitement in their stores, major global retail chains and top wine retailers in the United States have made wine and packaging innovations, including “earth-friendly” elements, a key strategic initiative for 2013 and beyond. Our core values are aligned with our retail partners’ initiatives and consumer consciousness as we strive to make our products in a way that minimizes waste and fossil fuel usage and increases recyclability.
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·
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Private label model remains in its infancy:
Nielsen estimates that, in the United States, only 3.7% of wines, by dollar value, were sold through private labels in the year to date, as of August 2010, which was a 20% increase compared to the prior year. Other mature wine markets have experienced considerably higher penetration; for example, private label wine sales make up 19% and 16% of total wine sales in the U.K. and Australia, respectively. The U.S. market appears poised for growth in this segment.
|
|
·
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Declining brand loyalty
: Along with robust growth, the U.S. wine market has also witnessed a proliferation of new brands. In 2010 alone, the United States approved 120,000 new wine labels.
Consumers have shown an increasing appetite to sample new labels and varietals, which can be promoted cost-effectively on an in-store basis. For example, relatively new brands like Cupcake,
Ménage à Trois
and E.&J. Gallo Winery’s Apothic grew by 55%, 18% and 258%, respectively, in 2011. Food retailers are well-positioned to manage this promotion as they control the shelf space and brand positioning in their stores. In an ever more crowded market, this advantage has become increasingly valuable.
|
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·
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Rapid growth of internet retailing:
Small but rapidly growing, we expect the internet segment to continue to outpace brick and mortar retailer sales, and we believe it is poised to surpass winery direct sales.
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·
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“Premiumization” of the market
: Following years of explosive growth in the late 1980s and early 1990s, the U.S. market experienced a supply glut which resulted in severe pricing pressure from so-called “value brands.” Due to significant consumption growth of California wines and the reduction of imported wines, as well as changes in exchange rates and taste preferences, this trend has reversed in the current cycle, with the Super-premium and Ultra-premium segments among those experiencing the highest growth.
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·
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Significant direct to consumer sales growth
:
Tasting room and wine club sales are typically the highest gross margin sales for a winery. Our direct to consumer net sales increased 54% for the fiscal year ended June 30, 2012 as compared to the prior fiscal year and 55% for the six months ended December 31, 2012 as compared to the prior-year period, with gross margins
averaging approximately 60%, which we believe is generally consistent with industry averages.
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·
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Model scalability will drive growth
: We combine the best of deep experience in the wine industry and the speed and agility of a start-up to work with both retailers and distributors to develop and market new brands. Because we are smaller, more agile and less prone to layers of decision making and because we have a world-class brand development/creative team in house, we are able to launch innovative new brands faster and more cost-effectively. This allows us and our partners to respond rapidly to market opportunities.
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·
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Highly collaborative channel partnerships:
Our management believes that it is critical to support multiple players in the distribution system in order for a young company to defend a sustainable market position. This includes a strong collaboration with well-known and reputable retailers who are looking for innovative, higher-margin brands to market. Our reputation has been enhanced by our success with these channel partners, leading to new opportunities in brand development, including selling some of our brands via traditional three-tier distribution at a reduced cost.
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·
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Collaborative and rapid brand development:
Our development process with our partners is highly collaborative and our products are developed based on our partners’ market data and understanding of what their customers want. Instead of developing a brand and bringing it to market based on consultants’ input and wine maker reputation, we exploit our retail partners’ quantitative data about brands, price points, packaging and varietals that its customers are buying. When we initiate a partnership, we approach a retailer with numerous concepts; an agreement to move forward typically includes multiple brands, varietals and price points that are launched in tandem. This allows the retailer to test various concepts, with the expectation that about half of the brands will be successful and further developed, while the other half will be scaled back or discontinued. Typically, it takes six months from the initial conversations with a retailer until the product is on their shelves.
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·
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Quality focused on the robust premium sector:
The private label business has historically focused on the generic, Sub-premium category (below $7 per bottle retail price), with wine quality consistent with the price points. However, recognizing the opportunity for growth, we have positioned ourselves in the Super-premium and Ultra-premium segments. In order to support our premium strategy, we have identified and contracted premium grape sources from Paso Robles, Sonoma and Mendocino Counties. Our founders’ diverse and extensive experience in the industry allows us to leverage longstanding relationships with California growers, an increasingly important asset as grape supplies tighten globally. We are also able to source grapes on a priority basis from our founders and members of our management team, who collectively control 500 acres of vineyards in Sonoma and Mendocino Counties. In addition, we have hired a top-quality winemaking staff and invested in state of the art systems and equipment.
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·
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Innovative packaging and label design:
Given the proliferation of brands and the need to “rise above the noise” in wine displays, innovative labeling and packaging is increasingly important to success in launching new wine brands. Our founders
and Kevin Shaw, an independent contractor who serves as our creative director,
have world-class experience in this area and are establishing a reputation as market leaders with novel packaging, such as evocative paper-wrapping, unique bottle shapes and the world’s first paper-based bottles.
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o
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Evocative wine wraps:
We have developed, produced and sold one of the world’s first “wine wrap” packaging concepts to Safeway, one of the country’s largest wine retailers. We have applied for trademarks on the wine wrap brands and a patent on the unique packaging.
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|
o
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The world’s first paper bottle:
I
n 2013, we entered into
a seven-year exclusive agreement with the producer of what we believe to be the first ever paper wine bottle.
We intend to begin selling wine in the paper bottle in the second half of
2013 and are in discussions with several of the top U.S. retailers and distributors, including Safeway, The Kroger Company, Young’s Market Company and Southern Wines and Spirits, to sell the product.
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o
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Proprietary square bottle:
We have designed a unique square-shaped glass bottle and created a brand that will “own” this concept. We have applied for a trademark on the brand and a patent on the design. Five of the top U.S. wine retailers are vying for the product, and we anticipate establishing a partnership for launch in spring 2013.
We have partnered with one of the country’s fastest growing and most important wine retail chains, Total Wine & More, to produce and sell 40,000 cases (generating approximately $3.5 million in sales) in the first 12-month period beginning spring 2013.
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·
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Management team and key personnel
: The founding team of Phil Hurst and Paul Dolan represents decades of experience in the wine industry and success at building businesses to scale, typically only seen in much larger, global players in the wine and spirits industry.
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o
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Phillip L. Hurst, Co-Founder, President and Chief Executive Officer: co-founded and helped build Winery Exchange Inc. into a global private label beer, spirits and wine company with more than $100 million in sales.
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o
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Paul E. Dolan, III, Co-Founder: worked at Fetzer Vineyards for 27 years, initially as wine maker and later as President, and scaled the business from 30,000 cases to over 4 million cases sold per year.
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o
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Virginia Marie Lambrix, Director of Winemaking: experience making wine for such leading producers as De Loach Vineyards, La Follette and Hendry Ranch.
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o
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Heath E. Dolan, Co-Founder, Director of Vineyard Operations: has 16 years of experience in the wine business, including managing cellar operations for Fetzer Vineyards.
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o
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Kevin Shaw, Independent Contractor/Creative Director: has nearly 20 years of experience as a designer. As proprietor and founder of Stranger and Stranger design agency, he received the 2012 Harpers Wine & Spirits Magazine Design Award for “Best Design Agency.” Kevin designs over 100 beverage brands every year in markets all around the world, including Jack Daniels, Avion Tequila, Lillet and The Kraken Spiced Rum. Collectively, his brands sell over a billion bottles a year.
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o
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James D. Bielenberg, Chief Financial Officer: has more than 30 years of public and private accounting experience. After gaining public accounting experience with Arthur Young (now Ernst & Young), he has spent the last 25 years working in wine-making operations with such well known firms as Kendall-Jackson Wine Estates, Francis Ford Coppola Winery, Ascentia Wine Estates, LLC and Rodney Strong Vineyards.
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o
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Daniel A. Carroll, Director: retired partner of TPG Capital, where he was a founder of the firm's Asian operations (formerly Newbridge Capital). Prior to 1995, he spent nine years with Hambrecht & Quist Group.
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o
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William R. Hambrecht, Director: after selling Hambrecht & Quist Group in 1998, Bill founded WR Hambrecht + Co, LLC (“WR Hambrecht + Co”) where he is now Chairman and Co-CEO. He has been actively involved in the wine business for 40 years as an owner and operator of vineyards and wineries.
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·
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The investors in this offering will collectively own 2,902,557 shares of our Class A common stock and Truett-Hurst, Inc. will hold 2,902,557 LLC Units;
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·
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Our existing owners will hold 3,450,087 LLC Units;
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·
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The investors in this offering will collectively have approximately 43.9% of the voting power in Truett-Hurst, Inc.;
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·
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Our existing owners, through their holdings of our Class B common stock, will have 52.2% of the voting power in Truett-Hurst, Inc.; and
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·
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Truett-Hurst, Inc. will own approximately 45.7% of the economic interest in the LLC and
will exercise exclusive control over the LLC, as its sole managing member
.
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·
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A reduction in the supply of grapes and bulk wine available to us from the independent grape growers and bulk wine suppliers could reduce our annual production of wine.
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·
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We face significant competition which could adversely affect our profitability.
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·
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Because a significant amount of our business is made through our direct to retailer partnerships, any change in our relationships with them could harm our business.
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The loss of Mr. Hurst, Mr. Bielenberg, Ms. Lambrix, Mr. Dolan or other key employees would damage our reputation and business.
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A reduction in our access to, or an increase in the cost of, the third-party services we use to produce our wine could harm our business.
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·
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Because our existing owners will retain significant control over Truett-Hurst after this offering, new investors will not have as much influence on corporate decisions as they would if control were less concentrated.
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Many of our transactions are with related parties, including our founders, executive officers, principal stockholders and other related parties, and present conflicts of interest.
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Several of our executive officers and key team members have outside business interests which may create conflicts of interest.
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We depend upon our trademarks and proprietary rights, and any failure to protect our intellectual property rights or any claims that we are infringing upon the rights of others may adversely affect our competitive position and brand equity.
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We are controlled by our existing owners, whose interests may differ from those of our public stockholders.
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We are a “controlled company” within the meaning of the corporate governance standards of the Nasdaq Capital Market (“Nasdaq”) and, as a result, expect to qualify for, and rely on, exemptions from certain corporate governance requirements.
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·
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the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;
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·
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the last day of the fiscal year following the fifth anniversary of the completion of this offering;
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·
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the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; and
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·
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the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the
“
Exchange Act
”
) (we will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months; the value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter).
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Class A common stock offered
by us
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2,250,000 shares.
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Class A common stock
offered by the selling stockholders
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652,557 shares.
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Class A common stock to be
outstanding after the offering
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2,902,557 shares
(or 6,352,644 shares if all outstanding LLC Units held by our existing owners were exchanged for newly-issued shares of Class A common stock on a one-for-one basis).
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Class B common stock
outstanding after the offering
|
Nine shares, or one share for every holder of LLC Units.
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Price per share
|
$
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Use of proceeds
|
We intend to use the net proceeds from this offering
to purchase LLC Units from the LLC, and we will cause the LLC to use these proceeds
to pay down amounts owed on our credit facility and for working capital, capital expenditures, hiring additional personnel and other general corporate purposes.
We will not receive any proceeds from the sale of shares by the selling stockholders.
See “Use of Proceeds.”
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Voting rights
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Each share of our Class A common stock,
including any share of restricted Class A common stock granted pursuant to our 2012 Stock Incentive Plan (the “2012 Plan”),
entitles its holder to one vote on all matters to be voted on by stockholders generally.
After the offering, each existing owner of the LLC will hold one share of Class B common stock. The shares of Class B common stock have no economic rights but entitle the holder, without regard to the number of shares of Class B common stock held, to a number of votes on matters presented to stockholders of Truett-Hurst, Inc. that is equal to the aggregate number of LLC Units held by such holder. See "Description of Capital Stock—Common Stock—Voting Rights."
Holders of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law.
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Exchange rights of holders of
LLC Units
|
Prior to the closing of this offering,
we will enter into an exchange agreement with our existing owners so that they may (subject to the terms of the exchange agreement) exchange their LLC Units for shares of Class A common stock of Truett-Hurst, Inc. on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications, or for cash, at our election.
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·
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3,450,087 shares of Class A common stock issuable upon exchange of 3,450,087 LLC Units;
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·
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42,000 shares of restricted Class A common stock granted to James D. Bielenberg, our Chief Financial Officer, and 210,000 shares of restricted Class A common stock granted to Kevin Shaw, an independent contractor who acts as our creative director, in each case pursuant to the 2012 Plan; these shares of restricted Class A common stock were granted in December 2012 and February 2013, respectively, and vest over a three-year period;
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·
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shares available for future grant under the 2012 Plan; and
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·
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shares available for grant under the automatic increase provisions of the 2012 Plan (see “Executive Compensation—
Employee Benefit and Stock Plans
—2012 Stock Incentive Plan”).
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Fiscal Year Ended
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Six Months Ended
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|||||||||||||||
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June 30,
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December 31,
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||||||||||||||
(unaudited) | ||||||||||||||||
2011
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2012
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2011
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2012
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|||||||||||||
Net sales
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$ | 5,402,045 | $ | 12,693,395 | $ |
8,378,109
|
$ |
8,570,316
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||||||||
Cost of sales
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3,900,942 | 9,618,065 |
6,573,563
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5,850,463
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||||||||||||
Gross profit
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1,501,103 | 3,075,330 |
1,804,546
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2,719,853
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||||||||||||
Operating expenses:
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||||||||||||||||
Sales and marketing
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595,226 | 1,387,321 |
782,142
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1,146,316
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||||||||||||
Gain on sale of assets
|
(111,150 | ) | (6,945 | ) | - | - | ||||||||||
General and administrative
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1,435,908 | 1,194,353 |
428,318
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1,581,239
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||||||||||||
Total operating expenses
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1,919,984 | 2,574,729 |
1,210,460
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2,727,555
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||||||||||||
Income (loss) from operations
|
(418,881 | ) | 500,601 |
594,086
|
(7,702
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) | ||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense
|
(401,134 | ) | (463,339 | ) |
(198,618
|
) |
(179,762
|
) | ||||||||
Warrant re-valuation
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- | (10,000 | ) | - |
(4,000
|
) | ||||||||||
Unrealized loss on interest rate swap
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- | - | - | (70,830 | ) | |||||||||||
Total other expense
|
(401,134 | ) | (473,339 | ) |
(198,618
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) |
(254,592
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) | ||||||||
Income (loss) before provision for
income taxes |
(820,015 | ) | 27,262 |
395,468
|
(262,294
|
) | ||||||||||
Provision for income taxes
|
800 | 800 |
800
|
1,600
|
||||||||||||
Net income (loss) before
noncontrolling interest |
(820,815 | ) | 26,462 |
394,668
|
(263,894
|
) | ||||||||||
Loss attributable to noncontrolling
interest |
- | - | - |
(47,877
|
) | |||||||||||
Net income (loss) attributable to
H.D.D. LLC members |
$ | (820,815 | ) | $ | 26,462 | $ |
394,668
|
$ |
(216,017
|
) |
Consolidated Balance
|
At June 30,
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At December 31, 2012
|
||||||||||
Sheet Data:
|
2011
|
2012
|
(unaudited)
|
|||||||||
Cash and cash equivalents
|
$ | 274,422 | $ | 167,309 | $ |
116,472
|
||||||
Total assets
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10,099,873 | 14,082,617 |
18,008,377
|
|||||||||
Total liabilities
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7,394,347 | 8,823,364 |
12,652,532
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|||||||||
Total members’ equity (deficit)
|
(3,540,625 | ) | (626,898 | ) |
5,355,845
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·
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Hambrecht Vineyards, which is owned by the Hambrecht 1980 Revocable Trust (the “Hambrecht Trust”), of which William R. Hambrecht, a director of the LLC and Truett-Hurst, Inc., serves as trustee. The manager of Hambrecht Vineyards is Forrester R. Hambrecht, a member of the LLC and the grandson of William R. Hambrecht.
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Ghianda Rose Vineyard, which is owned by Diana Fetzer, wife of Paul E. Dolan
, III a member of our board of directors.
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Gobbi Street Vineyards, which is partly owned by Diana Fetzer, and Paul E. Dolan, III’s daughter, Nya Kusakabe.
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Mendo Farming Company, which is managed by Heath E. Dolan and owned by the following members: (i) Phillip L. Hurst and Sylvia M. Hurst as trustees of The Hurst Family Revocable Trust Dated August 1, 2004 (the “Hurst Trust”) (33.333% interest); (ii) Paul E. Dolan III, as trustee of The Dolan 2003 Family Trust Dated June 5, 2003 (the “Dolan 2003 Trust”) (30.334% interest); (iii) Peter E. Dolan (17.333% interest); (iv) Heath E. Dolan and Robin A. Dolan, as trustees of The Dolan 2005 Family Trust Dated August 24, 2005 (the “Dolan 2005 Trust”) (9.500% interest); and (v) Zachary Y. Schat and Melissa Schat, as trustees of The Zachary Schat Trust U/D/T Dated September 1, 2004 (the “Schat Trust”) (9.500% interest). Peter E. Dolan is the brother of Paul E. Dolan, III.
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·
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limitation on incurring senior indebtedness;
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·
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limitation on making loans and advances;
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limitation on investments, acquisitions and capital expenditures;
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limitation on liens, mergers and sales of assets; and
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·
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limitations on activities of Truett-Hurst.
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Excise taxes;
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Licensing requirements;
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Trade and pricing practices;
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Permitted distribution channels;
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Permitted and required labeling;
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Advertising;
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Relationships with distributors and retailers; and
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Air quality, storm water and irrigation use.
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exemption from the auditor attestation requirements under Section 404 of the Sarbanes-Oxley Act of 2002;
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reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements;
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exemption from the requirements of holding non-binding stockholder votes on executive compensation arrangements; and
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exemption from any rules requiring mandatory audit firm rotation and auditor discussion and analysis and, unless the Securities and Exchange Commission (the “SEC”) otherwise determines, any future audit rules that may be adopted by the Public Company Accounting Oversight Board.
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more than 15 business days have elapsed since the bidder submitted its bid in the offering;
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there is a material change in the prospectus that requires that WR Hambrecht + Co and we convey the material change to bidders in the offering and file an amended registration statement;
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there has been a decrease in the price range below the previously disclosed price range or an increase in the price range of more than 20% above the previously disclosed price range; or
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if it is determined, after the auction is closed, that the initial public offering price will be below the stated price range or that there will be an increase in the price of more than 20% above the stated price range.
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provide notice on the WR Hambrecht + Co website of the revised price range or the reduced number of shares to be sold in this offering, as the case may be;
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if appropriate, issue a press release announcing the revised price range or the reduced number of shares to be sold in this offering, as the case may be; and
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send an electronic notice (or communicate in an alternative manner as requested by a bidder) to everyone who has submitted a bid notifying them of the revised price range or the reduced number of shares to be sold in this offering, as the case may be.
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WR Hambrecht + Co will provide notice on the WR Hambrecht + Co OpenIPO website that the auction has re-opened with a revised price range or a reduced offering size, as the case may be;
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WR Hambrecht + Co and participating dealers will issue a press release announcing the new auction terms;
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WR Hambrecht + Co and participating dealers will send an electronic notice (or communicate in an alternative manner as requested by a bidder) to everyone who has submitted a bid notifying them that the auction has re-opened with a revised price range or a reduced offering size, as the case may be;
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WR Hambrecht + Co and participating dealers will reconfirm all bids in the auction; and
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we will file a post-effective amendment to the registration statement containing the new auction terms and have the post-effective amendment declared effective prior to the acceptance of any offers by WR Hambrecht + Co or participating dealers.
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Bid Information
Initial Public Offering of Company X
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Auction Results
|
||||||||||||||||||||||||
Shares
Requested
|
Cumulative
Shares
Requested
|
Bid
Price
|
Shares
Allocated
|
Approximate
Allocated
Requested
Shares
|
Clearing
Price
|
Amount
Raised
|
|||||||||||||||||||
1,000
|
1,000
|
$
|
10.00
|
700
|
75.0
|
%
|
$
|
8.00
|
$
|
5,600
|
|||||||||||||||
100
|
1,100
|
$
|
9.00
|
100
|
75.0
|
%
|
$
|
8.00
|
$
|
800
|
|||||||||||||||
Clearing Price
|
900
|
2,000
|
$
|
8.00
|
700
|
75.0
|
%
|
$
|
8.00
|
$
|
5,600
|
||||||||||||||
400
|
2,400
|
$
|
7.00
|
0
|
0
|
%
|
—
|
—
|
|||||||||||||||||
800
|
3,200
|
$
|
6.00
|
0
|
0
|
%
|
—
|
—
|
|||||||||||||||||
Total
|
1,500
|
$
|
12,000
|
|
·
|
Any bid with a price below the public offering price is allocated no shares.
|
|
·
|
The pro rata percentage is determined by dividing the number of shares offered by the total number of shares bid at or above the public offering price. In our example, if there are 2,000 shares bid for at or above the public offering price, and 1,500 shares offered in the offering, then the pro rata percentage is 75%.
|
|
·
|
All of the successful bids are then multiplied by the pro rata percentage to determine the allocations before rounding. For example, the three winning bids for 1,000 shares (Bid 1), 100 shares (Bid 2) and 900 shares (Bid 3) would initially be allocated 750 shares, 75 shares and 675 shares, respectively, based on the pro rata percentage.
|
|
·
|
The bids are then rounded down to the nearest 100 share round lot, so the bids would be rounded to 700, 0 and 600 shares respectively. This creates a stub of 200 unallocated shares.
|
|
·
|
The 200 stub shares are then allocated to the bids. Continuing the example above, because Bid 2 for 100 shares was rounded down to 0 shares, 100 of the stub shares would be allocated to Bid 2. If there were not sufficient stub shares to allocate at least 100 shares to Bid 2, Bid 2 would not receive any shares in the offering. After allocation of these shares, 100 unallocated stub shares would remain.
|
|
·
|
Because Bid 3 for 900 shares was reduced, as a result of rounding, by more total shares than Bid 1 for 1,000 shares, Bid 3 would then be allocated the remaining 100 stub shares up to the nearest 100 round lot (from 600 shares to 700 shares).
|
Initial
Bid
|
Pro-Rata
Allocation (75%
of Initial Bid)
|
Initial
Rounding
|
Allocation
of
Stub
Shares
|
Final
Allocation
|
||||||||||||||||
Bid 1
|
1,000
|
750
|
700
|
0
|
700
|
|||||||||||||||
Bid 2
|
100
|
75
|
0
|
100
|
100
|
|||||||||||||||
Bid 3
|
900
|
675
|
600
|
100
|
700
|
|||||||||||||||
Total
|
2,000
|
1,500
|
1,300
|
200
|
1,500
|
As of December 31, 2012
|
||||||||
Actual
|
As Adjusted
(2)
|
|||||||
(unaudited)
|
||||||||
(in thousands, except share data)
|
||||||||
Cash and cash equivalents
|
$
|
116
|
$
|
26,671 | ||||
Capital leases, including current portion
|
-
|
- | ||||||
Total debt, including current portion
|
12,652
|
17,076 | ||||||
Total members’ equity (deficit)
|
||||||||
Class A common stock, par value $0.001 per share, 7,000,000 shares authorized on an as adjusted basis; 2,902,557 shares issued and outstanding on an as adjusted basis
|
-
|
3 | ||||||
Class B common stock, par value $0.001 per share, 1,000 shares authorized on an as adjusted basis; 9 shares issued and outstanding on an as adjusted basis
|
-
|
- | ||||||
Additional paid-in capital
(1)
|
8,166
|
15,902 | ||||||
Accumulated deficit
|
(3,087
|
) | (3,087 | ) | ||||
Total members’/stockholders’ equity attributable to the Company
|
5,079
|
21,301 | ||||||
Non-controlling interest
|
277
|
19,107 | ||||||
Total Equity
|
5,356
|
31,925 | ||||||
Total capitalization
|
$
|
18,008
|
$
|
49,001 |
(1)
|
Includes redeemable contributed capital, which will be treated as equity for all financial statements effective as of December 31, 2012.
|
(2)
|
A $1.00 increase or decrease in the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover of this prospectus would increase or decrease, as applicable, cash and cash equivalents, additional paid-in capital, t
otal members’/stockholders’ equity attributable to us,
total equity and total capitalization by $2.1 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting
estimated placement agents’ fees
and the estimated offering expenses payable by us. An increase or decrease of 100,000 shares in the number of shares sold in this offering by us would increase or decrease, as applicable, cash and cash equivalents, additional paid-in capital, t
otal members’/stockholders’ equity attributable to us,
total equity and total capitalization by $1.2 million, assuming an initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover of this prospectus, and after deducting
estimated placement agents’ fees
and the estimated offering expenses payable by us.
|
Assumed initial public offering price per share of Class A common stock
|
$ | 13.00 | ||||||
Pro forma net tangible book value per share as of December 31, 2012,
before giving effect to this offering |
$ | 1.08 | ||||||
Increase in pro forma net tangible book value per share attributable to
investors purchasing shares in this offering |
$ | 3.80 | ||||||
Pro forma net tangible book value per share after giving effect to this offering
|
$ | 4.88 | ||||||
Dilution in pro forma net tangible book value per share to investors
purchasing shares in this offering |
$ | 8.12 |
Shares Purchased
|
Total Consideration
|
Average Price
|
||||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Per Share | ||||||||||||||||
Existing stockholders
|
3,450,087 | 54.3 | % | $ | 3,726,094 | 9.0 | % | $ | 1.08 | |||||||||||
New investors
|
2,902,557 | 45.7 | 37,733,241 | 91.0 | $ | 13.00 | ||||||||||||||
Total
|
6,352,644 | 100.0 | % | $ | 41,459,335 | 100.0 | % | $ | 6.53 |
|
·
|
42,000 shares of restricted Class A common stock granted to James D. Bielenberg, our Chief Financial Officer, and 210,000 shares of restricted Class A common stock granted to Kevin Shaw, an independent contractor who acts as our creative director, in each case pursuant to the 2012 Plan; these shares of restricted Class A common stock were granted in December 2012 and February 2013, respectively, and vest over a three-year period;
|
|
·
|
shares available for future grant under the 2012 Plan; and
|
|
·
|
shares available for grant under the automatic increase provisions of the 2012 Plan (see “Executive Compensation—Employee Benefit and Stock Plans—2012 Stock Incentive Plan”).
|
·
|
the purchase by Truett-Hurst, Inc. of LLC Units with the proceeds of this offering and the related effects of the tax receivable agreement. See "Certain Relationships and Related Party Transactions—Tax Receivable Agreement”; and
|
·
|
in the case of the unaudited pro forma consolidated statements of operations, a provision for corporate income taxes on the income attributable to Truett-Hurst, Inc. at an effective rate of 39.8%, which includes a provision for U.S. federal income taxes and assumes the highest statutory California rate.
|
H.D.D. LLC
Actual
|
Pro Forma
Adjustments
|
Truett-Hurst, Inc.
Pro Forma
|
||||||||||
Sales
|
$ | 13,148,953 | $ | — | $ | 13,148,953 | ||||||
Less excise taxes
|
(455,558 | ) | — | (455,558 | ) | |||||||
Net Sales
|
12,693,395 | — | 12,693,395 | |||||||||
Cost of Sales
|
9,618,065 | — | 9,618,065 | |||||||||
Gross Profit
|
3,075,330 | — | 3,075,330 | |||||||||
Operating Expenses:
|
||||||||||||
Sales and marketing
|
1,387,321 | — | 1,387,321 | |||||||||
General and administrative
|
1,194,353 | — | 1,194,353 | |||||||||
Gain on sale of assets
|
(6,945 | ) | — | (6,945 | ) | |||||||
Total operating expenses
|
2,574,729 | — | 2,574,729 | |||||||||
Income (loss) from operations
|
500,601 | — | 500,601 | |||||||||
Other expenses:
|
||||||||||||
Interest expense
|
(463,339 | ) | — | (463,339 | ) | |||||||
Warrant re-valuation
|
(10,000 | ) | — | (10,000 | ) | |||||||
Total other expense
|
(473,339 | ) | — | (473,339 | ) | |||||||
Income (loss) before income taxes
|
27,262 | — | 27,262 | |||||||||
Income tax expense
|
800 | 4,959 | (1) | 5,759 | ||||||||
Net income (loss) before noncontrolling interest
|
26,462 | (4,959 | ) | 21,503 | ||||||||
Net income (loss) attributable to noncontrolling interest
|
— | 14,803 | (2) | 14,803 | ||||||||
Net income (loss) attributable to Truett-Hurst, Inc.
|
$ | 26,462 | (19,762 | ) | 6,700 | |||||||
Weighted average shares of Class A common stock
outstanding (3)(4) |
||||||||||||
Basic
|
— | 2,902,557 | ||||||||||
Diluted
|
— | 2,902,557 | ||||||||||
Net income available to Class A common stock per share
(3)(4)
|
||||||||||||
Basic
|
— | $ | .002 | |||||||||
Diluted
|
— | $ | .002 | |||||||||
Pro forma net income available to Class A common stock per
share (5) |
||||||||||||
Basic
|
$ | .002 | ||||||||||
Diluted
|
$ | .002 |
(1)
|
Following the Recapitalization and the Offering Transactions, we will be subject to U.S. federal income taxes, in addition to state taxes, with respect to our allocable share of any net taxable income of the LLC, which will result in higher income taxes. As a result, the pro forma statements of operations reflect an adjustment to our provision for corporate income taxes to reflect an effective rate of 39.8%, which includes provision for U.S. federal income taxes and California statutory rates.
|
(2)
|
As described in "History and Formation Transactions," Truett-Hurst, Inc. will become the sole managing member of the LLC. Truett-Hurst, Inc. will initially own less than 100% of the economic interest in the LLC, but will have 100% of the voting power and control the management of the LLC. Immediately following this offering, the non-controlling interest will be 54.3%. Net income attributable to the non-controlling interest represents approximately 54.3% ($14,803) of income before income taxes ($27,262).
|
(3)
|
The shares of Class B common stock do not share in our earnings and are therefore not included in the weighted average shares outstanding or net income (loss) available per share.
|
(4)
|
The assumed exchange of LLC Units for Class A common stock is expected to have an anti-dilutive effect as a result of the allocation of income associated with the exchange of LLC Units for Class A common stock, and, accordingly, the effect of such exchange has been excluded from pro forma net income available to Class A common stock per share. Giving effect to the exchange of all LLC Units for shares of Class A common stock, adjusted pro forma net income available to Class A common stock per share would be computed as follows:
|
Pro forma income before income taxes
|
$
|
27,262
|
||
Adjusted pro forma income taxes
|
10,850
|
(a)
|
||
Adjusted pro forma net income
|
$
|
16,412
|
(b)
|
|
Weighted average shares of Class A common stock outstanding
(assuming the exchange of all LLC Units for shares of Class A common stock) |
6,352,644
|
|||
Adjusted pro forma net income available to Class A common stock per share
|
$
|
0.00
|
H.D.D. LLC
Actual
|
Pro Forma
Adjustments
|
Truett-Hurst, Inc.
Pro Forma
|
||||||||||
Sales
|
$ | 8,820,255 | $ | — | $ | 8,820,255 | ||||||
Less excise taxes
|
(249,939 | ) | — | (249,939 | ) | |||||||
Net Sales
|
8,570,316 | — | 8,570,316 | |||||||||
Cost of Sales
|
5,850,463 | — | 5,850,463 | |||||||||
Gross Profit
|
2,719,853 | — | 2,719,853 | |||||||||
Operating Expenses:
|
||||||||||||
Sales and marketing
|
1,146,316 | — | 1,146,316 | |||||||||
General and administrative
|
1,581,239 | — | 1,581,239 | |||||||||
Gain on sale of assets
|
— | — | — | |||||||||
Total operating expenses
|
2,727,555 | — | 2,727,555 | |||||||||
Income (loss) from operations
|
(7,702 | ) | — | (7,702 | ) | |||||||
Other expenses:
|
||||||||||||
Interest expense
|
(179,762 | ) | — | (179,762 | ) | |||||||
Warrant re-valuation
|
(4,000 | ) | — | (4,000 | ) | |||||||
Unrealized loss on interest rate swap
|
(70,830 | ) | — | (70,830 | ) | |||||||
Total other expense
|
(254,592 | ) | — | (254,592 | ) | |||||||
Income (loss) before income taxes
|
(262,294 | ) | — | (262,294 | ) | |||||||
Income tax expense
|
1,600 | (28,653 | ) (1) | (27,053 | ) | |||||||
Net income (loss) before noncontrolling interest
|
(263,894 | ) | 28,653 | (235,241 | ) | |||||||
Net income (loss) attributable to noncontrolling interest
|
(47,877 | ) | (142,425 | ) (2) | (190,302 | ) | ||||||
Net income (loss) attributable to Truett-Hurst, Inc.
|
$ | (216,017 | ) | 171,078 | (44,939 | ) | ||||||
Weighted average shares of Class A common stock
outstanding (3)(4) |
||||||||||||
Basic
|
— | 2,902,557 | ||||||||||
Diluted
|
— | 2,902,557 | ||||||||||
Net income available to Class A common stock per share
(3)(4)
|
||||||||||||
Basic
|
— | $ | 0.02 | |||||||||
Diluted
|
— | $ | 0.02 | |||||||||
Pro forma net income available to Class A common stock per share
(5)
|
||||||||||||
Basic
|
$ | 0.02 | ||||||||||
Diluted
|
$ | 0.02 |
(1)
|
Following the Recapitalization and the Offering Transactions, we will be subject to U.S. federal income taxes, in addition to state taxes, with respect to our allocable share of any net taxable income of the LLC, which will result in higher income taxes. As a result, the pro forma statements of income reflect an adjustment to our provision for corporate income taxes to reflect an effective rate of 39.8 %, which includes provision for U.S. federal income taxes and California statutory income tax rates.
|
(2)
|
As described in "History and Formation Transactions—Organizational Structure," Truett-Hurst, Inc. will become the sole managing member of the LLC. Truett-Hurst, Inc. will initially own less than 100% of the economic interest in the LLC, but will have 100% of the voting power and control the management of the LLC. Immediately following this offering, the non-controlling interest will be 54.3%. Net loss attributable to the non-controlling interest represents approximately 54.3% ($142,425) of loss before income taxes ($262,294).
|
(3)
|
The shares of Class B common stock do not share in our earnings and are therefore not included in the weighted average shares outstanding or net income (loss) available per share.
|
(4)
|
The assumed exchange of LLC Units for Class A common stock is expected to have an anti-dilutive effect as a result of the allocation of income or loss associated with the exchange of LLC Units for Class A common stock, and, accordingly, the effect of such exchange has been excluded from pro forma net income (loss) available to Class A common stock per share. Giving effect to the exchange of all LLC Units for shares of Class A common stock, adjusted pro forma net income (loss) available to Class A common stock per share would be computed as follows:
|
Pro forma income before income taxes
|
$
|
(262,294)
|
||
Adjusted pro forma income tax benefit
|
104,393
|
(a)
|
||
Adjusted pro forma net income
|
$
|
(157,901)
|
(b)
|
|
Weighted average shares of Class A common stock outstanding (assuming the exchange of all LLC Units for shares of Class A common stock)
|
6,352,644
|
|||
Adjusted pro forma net income (loss) available to Class A common stock per share
|
$
|
(0.03)
|
(1)
|
Reflects the net effect on cash and cash equivalents of the receipt of offering proceeds of $26,514,000 described in "History and Formation Transactions," and the uses of proceeds described in "Use of Proceeds."
|
(2)
|
Reflects adjustments to give effect to the tax receivable agreement (as described in "Certain Relationships and Related Party Transactions—Tax Receivable Agreement") based on the following assumptions:
|
•
|
we will record an increase of $4,915,159 in deferred tax assets for estimated income tax effects of the increase in the tax basis of the purchased interests, based on an effective income tax rate of 39.8% (which includes a provision for U.S. federal, state, local and/or foreign income taxes);
|
•
|
we will record $4,423,643, representing 90% of the estimated realizable tax benefit resulting from (i) the increase in the tax basis of the purchased interests as noted above and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement as an increase to the liability due to existing owners under the tax receivable agreement;
|
•
|
we will record an increase to additional paid-in capital of $491,516, which is an amount equal to the difference between the increase in deferred tax assets and the increase in liability due to existing owners under the tax receivable agreement; and
|
•
|
there are no material changes in the relevant tax law and that we earn sufficient taxable income in each year to realize the full tax benefit of the amortization of our assets.
|
(3)
|
As described in "History and Formation Transactions," Truett-Hurst, Inc. will become the sole managing member of the LLC. Truett-Hurst, Inc. will initially have a less than 100% economic interest in the LLC, but will have 100% of the voting power and control the management of the LLC. As a result, we will consolidate the financial results of the LLC and will record non-controlling interest on our balance sheet. Immediately following the Offering Transactions, the non-controlling interest, based on the assumptions to the pro forma financial information, will be $15,613,948. Pro forma non-controlling interest represents approximately 54.3% of the pro forma equity of the LLC of $28,809,570, which differs from the pro forma equity of Truett-Hurst, Inc. as the former is not affected by the adjustments relating to the tax receivable agreement described above in note (2).
|
(4)
|
Represents an adjustment to stockholders' equity reflecting (i) par value for Class A common stock and Class B common stock to be outstanding following this offering, (ii) an increase of $26,514,000 of additional paid-in capital as a result of estimated net proceeds from this offering (iii) a decrease of $15,613,948 to allocate a portion of Truett-Hurst, Inc.'s equity to the non-controlling interest and (iv) the elimination of members' capital of $ 2,243,872 upon consolidation.
|
(5)
|
Represents the following adjustments to additional paid-in capital:
|
•
|
an increase of $10,951,750, which consists of an increase of $ 26,514,000 from the estimated net proceeds from the Offering Transactions, less the par value of the shares of Class A common stock sold in the Offering Transactions of $2,903, less the portion of the equity of Truett-Hurst, Inc. allocated to the non-controlling interest of $15,613,948, and the elimination of members' capital of $2,243,872 upon consolidation, each as described under footnote 5 above;
|
•
|
an increase of $491,456 due to the tax receivable agreement, as described under footnote 2 above; and
|
•
|
a decrease of $436,915 due to the establishment of deferred tax liabilities relating to newly-issued LLC Units.
|
(1)
|
Reflects the net effect on cash and cash equivalents of the receipt of offering proceeds of $26.6 million described in "History and Formation Transactions," and the uses of proceeds described in "Use of Proceeds."
|
(2)
|
Reflects adjustments to give effect to the tax receivable agreement (as described in "Certain Relationships and Related Party Transactions—Tax Receivable Agreement") based on the following assumptions:
|
•
|
we will record an increase of $4,915,159 in deferred tax assets for estimated income tax effects of the increase in the tax basis of the purchased interests, based on an effective income tax rate of 39.8% (which includes a provision for U.S. federal, state, local and/or foreign income taxes);
|
•
|
we will record $4,423,643, representing 90% of the estimated realizable tax benefit resulting from (i) the increase in the tax basis of the purchased interests as noted above and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement as an increase to the liability due to existing owners under the tax receivable agreement;
|
•
|
we will record an increase to additional paid-in capital of $491,516, which is an amount equal to the difference between the increase in deferred tax assets and the increase in liability due to existing owners under the tax receivable agreement; and
|
•
|
there are no material changes in the relevant tax law and that we earn sufficient taxable income in each year to realize the full tax benefit of the amortization of our assets.
|
(3)
|
As described in "History and Formation Transactions," Truett-Hurst, Inc. will become the sole managing member of the LLC. Truett-Hurst, Inc. will initially have a less than 100% economic interest in the LLC, but will have 100% of the voting power and control the management of the LLC. As a result, we will consolidate the financial results of the LLC and will record non-controlling interest on our balance sheet. Immediately following the Offering Transactions, the non-controlling interest, based on the assumptions to the pro forma financial information, will be $ 18,829,420. Pro forma non-controlling interest represents approximately 54.3% of the pro forma equity of the LLC of $34,731,248, which differs from the pro forma equity of Truett-Hurst, Inc. as the former is not affected by the adjustments relating to the tax receivable agreement described above in note (2).
|
(4)
|
Represents the investment of the existing holders of LLC Units. See the unaudited condensed consolidated balance sheet of the LLC as of June 30, 2012 included elsewhere in this prospectus.
|
5)
|
Represents an adjustment to stockholders' equity reflecting (i) par value for Class A common stock and Class B common stock to be outstanding following this offering, (ii) an increase of $26,555,000 of additional paid-in capital as a result of estimated net proceeds from this offering (iii) a decrease of $18,829,420 to allocate a portion of Truett-Hurst, Inc.'s equity to the non-controlling interest and (iv) the elimination of members' capital of $8,165,550 upon consolidation.
|
(6)
|
Represents the following adjustments to additional paid-in capital:
|
•
|
an increase of $7,736,279, which consists of an increase of $26,555,000 from the estimated net proceeds from the Offering Transactions, less the par value of the shares Class A common stock sold in the Offering Transactions of $2,903, less the portion of the equity of Truett-Hurst, Inc. allocated to the non-controlling interest of $18,829,420, and the elimination of members' capital of $8,165,550 upon consolidation, each as described under footnote 5 above;
|
•
|
an increase of $491,516 due to the tax receivable agreement, as described under footnote 2 above; and
|
•
|
a decrease of $436,915 due to the establishment of deferred tax liabilities relating to newly issued LLC Units.
|
Fiscal Year Ended | Six Months Ended | |||||||||||||||
June 30, | December 31, | |||||||||||||||
(unaudited) | ||||||||||||||||
2011
|
2012
|
2011
|
2012
|
|||||||||||||
Net sales
|
$ | 5,402,045 | $ | 12,693,395 | $ |
8,378,109
|
$ |
8,570,316
|
||||||||
Cost of sales
|
3,900,942 | 9,618,065 |
6,573,563
|
5,850,463
|
||||||||||||
Gross profit
|
1,501,103 | 3,075,330 |
1,804,546
|
2,719,853
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Sales and marketing
|
595,226 | 1,387,321 |
782,142
|
1,146,316
|
||||||||||||
Gain on sale of assets
|
(111,150 | ) | (6,945 | ) |
-
|
-
|
||||||||||
General and administrative
|
1,435,908 | 1,194,353 |
428,318
|
1,581,239
|
||||||||||||
Total operating expenses
|
1,919,984 | 2,574,729 |
1,210,460
|
2,727,555
|
||||||||||||
Income (loss) from operations
|
(418,881 | ) | 500,601 |
594,086
|
(7,702
|
) | ||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense
|
(401,134 | ) | (463,339 | ) |
(198,618
|
) |
(179,762
|
) | ||||||||
Warrant re-valuation
|
- | (10,000 | ) |
-
|
(4,000
|
) | ||||||||||
Unrealized loss on interest rate swap
|
- | - | - | (70,830 | ) | |||||||||||
Total other expense
|
(401,134 | ) | (473,339 | ) |
(198,618
|
) |
(254,592
|
) | ||||||||
Income (loss) before provision for income taxes
|
(820,015 | ) | 27,262 |
395,468
|
(262,294
|
) | ||||||||||
Provision for income taxes
|
800 | 800 |
800
|
1,600
|
||||||||||||
Net income (loss) before noncontrolling interest
|
(820,815 | ) | 26,462 |
394,668
|
(263,894
|
) | ||||||||||
Loss attributable to noncontrolling interest
|
- | - |
-
|
(47,877
|
) | |||||||||||
Net income (loss) attributable to H.D.D. LLC members
|
$ | (820,815 | ) | $ | 26,462 | $ |
394,668
|
$ |
(216,017
|
) |
|
At June 30,
|
At December 31, 2012
|
||||||||||
|
2011
|
2012
|
(unaudited)
|
|||||||||
Cash and cash equivalents
|
$ | 274,422 | $ | 167,309 | $ |
116,472
|
||||||
Total assets
|
10,099,873 | 14,082,617 |
18,008,377
|
|||||||||
Total liabilities
|
7,394,347 | 8,823,364 |
12,652,532
|
|||||||||
Total members’ equity (deficit)
|
(3,540,625 | ) | (626,898 | ) |
5,355,845
|
|
·
|
the one-time sale of wines totaling $397,000 (4,623 cases) contributed by a member as their capital contribution;
|
|
·
|
the discontinuance of certain of our brands by Trader Joe’s (The County Fair and TJ Grand Reserve) and Total Wine & More (Simply Pure) totaling $2,259,000 (27,292 cases);
|
|
·
|
the phased reduction or repositioning of our Stonegate brand totaling $826,000 (12,714 cases); and
|
|
·
|
offset by an increase in existing brand sales in the three-tier channel of $668,000 and the introduction of new wine brands launched in our first quarter fiscal year 2013 to:
|
|
·
|
Safeway (Bewitched, Curious Beasts, Fuchsia, Schuck’s and Candell’s) of $1,446,000 (17,762 cases);
|
|
·
|
Total Wine & More (Eden Ridge and The Fugitive) of $272,000 (3,090 cases); and
|
|
·
|
the Cliffside brand, which we produce but is owned by a third party, of $97,000 (2,307 cases).
|
·
|
the one-time sale of C. Donatiello brand wines totaling $397,000 (4,623 cases) contributed by a member as their capital contribution;
|
·
|
year-over-year existing brand sales growth of $4,586,000, or 137% (74,000 cases or 121%);
|
·
|
the introduction of three new brands: Dearly Beloved ($1,456,000 or 27,757 cases), TJ Grand Reserve ($1,051,000 or 9,569 cases) and The Fugitive ($42,000 or 350 cases);
|
|
·
|
sales of Cliffside brand wines totaling $37,632 (896 cases); and
|
·
|
offset by the discontinuance of the two brands: Canard ($439,000 or 5,445 cases) and Varietals ($226,000 or 2,830 cases).
|
At June 30,
|
At December 31, 2012
|
|||||||||||
2011
|
2012
|
(unaudited)
|
||||||||||
Cash and cash equivalents
|
$ | 274,422 | $ | 167,309 | $ | 116,472 | ||||||
Revolving loan availability
|
$ | 1,046 | $ | 236,046 | $ | 2,021,848 |
At June 30,
|
At December 31, 2012
|
|||||||||||
2011
|
2012
|
(unaudited)
|
||||||||||
Cash flow summary
|
||||||||||||
Used in operating activities
|
$ | (1,740,521 | ) | $ | (2,310,848 | ) | $ | (2,673,810 | ) | |||
Used in investing activities
|
(278,956 | ) | (300,901 | ) | (892,003 | ) | ||||||
Provided by financing activities
|
2,243,024 | 2,504,636 | 3,514,976 | |||||||||
Increase (decrease) in cash and cash equivalents
|
$ | 223,547 | $ | (107,113 | ) | $ | (50,837 | ) |
·
|
$9,000,000 Line of Credit Note
: We received a line of credit
from Bank of the West in the principal amount of up to $9,000,000 due on or before May 31, 2014. The aggregate principal balance outstanding bears interest at 1.75% above LIBOR
.
|
·
|
$3,381,000 Term Note
: We received a term note from Bank of the
West
in the principal amount of $3,381,000 due on or before May 31, 2022. The aggregate principal balance outstanding bears interest at 2.25% above the One-Month LIBOR Rate or 2.25% above LIBOR. Effective October 31, 2012, we entered into a swap arrangement with Bank of the West fixing the interest rate at 4.00% for the term of the note.
|
·
|
$357,000 Equipment Purchase Line of Credit Note
: We received an equipment purchase line of credit note in the principal amount of $300,000 from Bank of the West due on or before May 31, 2013. The aggregate principal balance outstanding bears interest at 2.25% above the One-Month LIBOR Rate. The equipment purchase line of credit was increased to $357,000 pursuant to a modification agreement we entered into as of October 3, 2012 with Bank of the West and funded on January 28, 2013. The aggregate principal outstanding bears 3.75% fixed interest and will be repaid in 60 monthly payments. The first monthly payment was made on February 15, 2013.
|
·
|
$143,684 Master Equipment Financing Agreement
: We entered into an agreement with Bank of the West to finance the purchase of certain equipment on October 2, 2012 in the amount of $143,684. The aggregate principal outstanding bears 3.75% fixed interest and will be repaid in 36 monthly payments. The first monthly payment was made on November 1, 2012.
|
·
|
$100,000 Foreign Exchange Note
: We received a foreign exchange note in the principal amount of $100,000 from Bank of the West due on or before May 31, 2014 that carries a 10% credit percentage and permits us to enter into any spot or forward transaction to purchase from or sell to Bank of the West a foreign currency of an agreed amount.
|
|
·
|
limitation on incurring senior indebtedness;
|
|
·
|
limitation on making loans and advances;
|
|
·
|
limitation on investments, acquisitions, and capital expenditures;
|
|
·
|
limitation on liens, mergers and sales of assets; and
|
|
·
|
limitations on activities of Truett-Hurst.
|
|
·
|
The Carroll-Obremskey Family Revocable Trust D
ated April 15, 1996 (the “Carroll-Obremskey Trust”)
exercised a warrant to purchase a 3% interest in the LLC for $500,000. See “History and Formation Transactions;”
|
|
·
|
$650,000 in payments due on grape supply contracts to farms controlled by certain of our affiliates was subordinated to Bank of the West;
|
|
·
|
we executed convertible subordinated notes payable to Daniel A. Carroll and Stasia Obremskey, as trustees of the Carroll-Obremskey Trust, Phillip L. Hurst and Sylvia M. Hurst, as trustees of the Hurst Trust, Heath E. Dolan and Robin A. Dolan, as trustees of the Dolan 2005 Trust, and Paul E. Dolan, III, as trustee of the Dolan 2003 Trust, in exchange for their contributions of $150,000, $150,000, $25,000 and $25,000, respectively, bearing interest at 10% per annum with interest and principal due on the earlier of March 1, 2014 or the completion of this offering; should the offering not be completed by March 1, 2014, the debt will be converted into Class A Membership Interests computed by dividing each note balance by $16,666,667; and
|
|
·
|
the LLC agreed to raise $2 million of equity by May 1, 2013, if this offering is not successful, in order to be in compliance with applicable covenants at March 31, 2013 (measured at May 15, 2013).
|
Payments Due by Period
|
||||||||||||||||||||
Total
|
Less than
1 year
|
1-3 Years
|
3-5 Years
|
More than
5 years
|
||||||||||||||||
Long-term debt obligations
|
$ | 3,690,313 | $ | 304,557 | $ | 466,826 | $ | 270,480 | $ | 2,648,450 | ||||||||||
Interest payments on long-term debt obligations(
1
)
|
2,123,878 | 141,270 | 251,837 | 223,146 | 1,507,625 | |||||||||||||||
Supply agreements
|
16,491,984 | 6,844,653 | 9,284,259 | 363,072 | - | |||||||||||||||
Operating lease obligations
|
888,196 | 271,518 | 567,718 | 48,960 | - | |||||||||||||||
Deferred compensation
|
103,000 | 34,333 | 68,667 | - | - | |||||||||||||||
Total
|
$ | 23,297,371 | $ | 7,596,331 | $ | 10,639,307 | $ | 905,658 | $ | 4,156,075 |
Net Sales
for the Years
Ended June 30
|
Accounts
Receivable
as of June 30,
|
Net Sales
for the Six Months
Ended December 31,
|
Accounts Receivable as of December 31,
|
||||||||||
2011
|
2012
|
2011
|
2012
|
2011
|
2012
|
2012
|
|||||||
(Unaudited)
|
(Unaudited)
|
||||||||||||
Customer A
|
23%
|
33%
|
28%
|
-
|
39%
|
21%
|
4%
|
||||||
Customer B
|
20%
|
18%
|
-
|
48%
|
19%
|
10%
|
-
|
||||||
Customer C
|
14%
|
10%
|
22%
|
11%
|
10%
|
8%
|
12%
|
||||||
Customer D
|
10%
|
6%
|
10%
|
6%
|
4%
|
9%
|
21%
|
||||||
Customer E
|
-
|
1%
|
-
|
4%
|
5%
|
12%
|
9%
|
||||||
Customer F
|
5%
|
6%
|
6%
|
-
|
4%
|
7%
|
3%
|
||||||
Customer G
|
-
|
-
|
-
|
-
|
-
|
2%
|
15%
|
|
·
|
Steady growth in the U.S. wine market:
The U.S. wine market has grown at an average annual rate of 5% over the past decade and is now the largest in the world (although per capita consumption remains relatively low).
In the recent past, growth in wine sales has been focused in domestic brands; from 2007 to 2011, wine imports have only grown by 1.6% per year.
According to the 2011 Gomberg-Fredrikson & Associates Annual Wine Industry Review for the twelve months ended December 2011, two of the three fastest growing price points are the Super-premium and Ultra-premium segments. We have focused on the higher end of the Super-premium segment and also have a significant presence in the Ultra-premium segment, which together accounted for 66% of industry-wide revenue in 2011.
|
|
·
|
Market ripe for disruption:
Food retailers account for roughly 65% of wine sales, with a high concentration of market share among only a handful of major wine producers and distributors. The top four wine producers in California control approximately 65% of unit shipments of California wine. In order to compete with powerful producers and suppliers for this growing profit pool, food and grocery retailers have turned to private label programs as a way of gaining margin, customer loyalty, category growth and differentiation.
|
|
·
|
Retailer focus on innovation:
Increased market competition has heightened for retailers the emphasis on increasing consumer traffic to grow same store sales year over year. In order to create excitement in their stores, major global retail chains and top wine retailers in the United States have made wine and packaging innovations, including “earth-friendly” elements, a key strategic initiative for 2013 and beyond. Our core values are aligned with our retail partners’ initiatives and consumer consciousness as we strive to make our products in a way that minimizes waste and fossil fuel usage and increases recyclability.
|
|
·
|
Private label model remains in its infancy:
Nielsen estimates that, in the United States, only 3.7% of wines, by dollar value, were sold through private labels in the year to date, as of August 2010, which was a 20% increase compared to the prior year. Other mature wine markets have experienced considerably higher penetration; for example, private label wine sales make up 19% and 16% of total wine sales in the U.K. and Australia, respectively. The U.S. market appears poised for growth in this segment.
|
|
·
|
Declining brand loyalty
: Along with robust growth, the U.S. wine market has also witnessed a proliferation of new brands. In 2010 alone, the United States approved 120,000 new wine labels.
Consumers have shown an increasing appetite to sample new labels and varietals, which can be promoted cost-effectively on an in-store basis. For example, relatively new brands like Cupcake, Ménage à Trois and E.&J. Gallo Winery’s Apothic grew by 55%, 18% and 258%, respectively, in 2011. Food retailers are well-positioned to manage this promotion as they control the shelf space and brand positioning in their stores. In an ever more crowded market, this advantage has become increasingly valuable.
|
|
·
|
Rapid growth of internet retailing:
Small but rapidly growing, we expect the internet segment to continue to outpace brick and mortar retailer sales, and we believe it is poised to surpass winery direct sales.
|
·
|
“Premiumization” of the market
: Following years of explosive growth in the late 1980s and early 1990s, the U.S. market experienced a supply glut which resulted in severe pricing pressure from so-called “value brands.” Due to significant consumption growth of California wines and the reduction of imported wines, as well as changes in exchange rates and taste preferences, this trend has reversed in the current cycle, with the Super-premium and Ultra-premium segments among those experiencing the highest growth.
|
|
·
|
Significant direct to consumer sales growth
:
Tasting room and wine club sales are typically the highest gross margin sales for a winery. Our direct to consumer net sales increased 54% for the fiscal year ended June 30, 2012 as compared to the prior fiscal year and 55% for the six months ended December 31, 2012 as compared to the prior-year period, with gross margins
averaging approximately 60%, which we believe is generally consistent with industry averages.
|
|
·
|
Model scalability will drive growth
: We combine the best of deep experience in the wine industry and the speed and agility of a start-up to work with both retailers and distributors to develop and market new brands. Because we are smaller, more agile and less prone to layers of decision making and because we have a world-class brand development/creative team in house, we are able to launch innovative new brands faster and more cost-effectively. This allows us and our partners to respond rapidly to market opportunities.
|
|
·
|
Highly collaborative channel partnerships:
Our management believes that it is critical to support multiple players in the distribution system in order for a young company to defend a sustainable market position. This includes a strong collaboration with well-known and reputable retailers who are looking for innovative, higher-margin brands to market. Our reputation has been enhanced by our success with these channel partners, leading to new opportunities in brand development, including selling some of our brands via traditional three-tier distribution at a reduced cost.
Currently, we have a small share of this sizeable market. For example, for the first six months of fiscal year 2013, our sales to Safeway were less than $5 million, which is less than 1% of Safeway’s 2012 annual wine sales. Our goal is to expand our sales with existing retailer partnerships, including large businesses such as Trader Joe’s, Safeway and Total Wine & More, as well as increase the number of new major retailers that we partner with, including The Kroger Company, Publix and Wal-Mart.
|
|
·
|
Collaborative and rapid brand development.
Our development process with our partners is highly collaborative and our products are developed based on our partners’ market data and understanding of what their customers want. Instead of developing a brand and bringing it to market based on consultants’ input and wine maker reputation, we exploit our retail partners’ quantitative data about brands, price points, packaging and varietals that their customers are buying. When we initiate a partnership, we approach a retailer with numerous concepts; an agreement to move forward typically includes multiple brands, varietals and price points that are launched in tandem. This allows the retailer to test various concepts, with the expectation that about half of the brands will be successful and further developed, while the other half will be scaled back or discontinued. Typically, it takes six months from the initial conversations with a retailer until the product is on the retailer’s shelves.
|
|
·
|
Quality focused on the robust premium sector:
The private label business has historically focused on the generic, Sub-premium category (below $7 per bottle retail price), with wine quality consistent with the price points. Recognizing growth in this sector, we have positioned ourselves in the Super-premium and Ultra-premium segments. In order to support our premium strategy, we have identified and contracted premium grape sources from Paso Robles, Sonoma and Mendocino Counties. Our founders’ diverse and extensive experience in the industry allows us to leverage longstanding relationships with California growers, an increasingly important asset as grape supplies tighten globally. We are also able to source grapes on a priority basis from our founders and members of our management team, who collectively control 500 acres of vineyards in Sonoma and Mendocino Counties. In addition, we have hired a top-quality winemaking staff and invested in state of the art systems and equipment.
While we have focused primarily on the higher end of the Super-premium segment, we also have a significant presence in the Ultra-premium segment of the industry.
|
|
·
|
Innovative, world-class packaging and label design:
Given the proliferation of brands and the need to “rise above the noise” in wine displays, innovative labeling and packaging is increasingly important to success in launching new wine brands. Our founders
and Kevin Shaw, an independent contractor who serves as our creative director,
have world-class experience in this area and are establishing a reputation as market leaders with novel packaging, such as evocative paper-wrapping, unique bottle shapes and the world’s first paper-based bottles.
|
|
o
|
Evocative wine wraps:
We have developed, produced and sold one of the world’s first “wine wrap” packaging concepts to Safeway, one of the country’s largest wine retailers. We have applied for trademarks on the wine wrap brands and a patent on the unique packaging.
|
o
|
The world’s first paper bottle
: In February 2013, we entered into a seven-year exclusive agreement with the producer of what we believe to be the first ever paper wine bottle. We intend to begin selling wine in the paper bottle in the second half of 2013 and are in discussions with several of the top U.S. retailers and distributors, including Safeway, The Kroger Company, Young’s Market Company and Southern Wines and Spirits, to sell the product.
|
|
o
|
Proprietary square bottle:
We have designed a unique square-shaped glass bottle and created a brand that will “own” this concept. We have applied for a trademark on the brand and a patent on the design. We have partnered with one of the country’s fastest growing and most important wine retail chains, Total Wine & More, to produce and sell 40,000 cases (generating approximately $3.5 million in sales) in the first 12-month period beginning spring 2013.
|
|
·
|
Management team
: The founding team of Phil Hurst and Paul Dolan represents decades of experience in the wine industry and success at building businesses to scale, typically only seen in much larger, global players in the wine and spirits industry.
|
|
o
|
Phillip L. Hurst, Co-Founder, President and Chief Executive Officer: co-founded and helped build Winery Exchange Inc. into a global private label beer, spirits and wine company with more than $100 million in sales.
|
|
o
|
Paul E. Dolan, III, Co-Founder: worked at Fetzer Vineyards for 27 years, initially as wine maker and later as President, and scaled the business from 30,000 cases to over 4 million cases sold per year.
|
|
o
|
Virginia Marie Lambrix, Director of Winemaking: experience making wine for such leading producers as De Loach Vineyards, La Follette and Hendry Ranch.
|
|
o
|
Heath E. Dolan, Co-Founder, Director of Vineyard Operations: has 16 years of experience in the wine business, including managing cellar operations for Fetzer Vineyards.
|
|
o
|
Kevin Shaw, Independent Contractor/Creative Director: has nearly 20 years of experience as a designer. As proprietor and founder of Stranger and Stranger design agency, he received the 2012 Harpers Wine & Spirits Magazine Design Award for “Best Design Agency.” Kevin designs over 100 beverage brands every year in markets all around the world, including Jack Daniels, Avion Tequila, Lillet and The Kraken Spiced Rum. Collectively, his brands sell over a billion bottles a year.
|
|
o
|
James D. Bielenberg, Chief Financial Officer: has more than 30 years of public and private accounting experience. After gaining public accounting experience with Arthur Young (now Ernst & Young), he has spent the last 25 years working in wine-making operations with such well known firms as Kendall-Jackson Wine Estates, Francis Ford Coppola Winery, Ascentia Wine Estates, LLC and Rodney Strong Vineyards.
|
|
o
|
Daniel A. Carroll, Director: retired partner of TPG Capital, where he was a founder of the firm's Asian operations (formerly Newbridge Capital). Prior to 1995, he spent nine years with Hambrecht & Quist Group.
|
|
o
|
William R. Hambrecht, Director: after selling Hambrecht & Quist Group in 1998, Bill founded WR Hambrecht + Co where he is now Chairman and Co-CEO. He has been actively involved in the wine business for 40 years as an owner and operator of vineyards and wineries.
|
|
·
|
Presence in internet channel:
We recently acquired a 50% controlling stake in The Wine Spies. The Wine Spies offers daily sales of premium wines that are sourced directly from wine producer/wineries. This relationship allows us to participate in the emerging internet channel.
|
|
·
|
International Expansion:
We have partnered with Trialto, Canada’s premium wine agency specializing in wines of People, Place and Time, and Vittoria Coffee, Australia’s most popular coffee blend and suppliers of food products to over 5,000 individual customers. In addition, we are launching the Bradford Mountain brand in China where there are currently only two major California Zinfandel brands in existence, Seghesio and Ridge Vineyards.
|
|
·
|
Continuing to develop innovative products that meet the needs of wine retailers.
We have developed a reputation for developing innovative new brands and working closely with our retail partners to develop brands that cater to customer demands and that permit our retail partners to increase their consumer traffic and grow their same store sales. We intend to continue to develop brands with our retail partners by relying on our branding expertise. We also intend to continue our innovations, such as our evocative “wine wraps,” the paper bottle, and the square bottle, and exploit these in order to build our brands and market share with wine retailers.
|
|
·
|
Growing our retailer base to include the top ten U.S. and global retail chains.
We intend to pursue relationships with the largest retail chains in the United States and around the world. This will allow us to become less dependent on our existing retail relationships and reduce the risk associated with losing any particular retailer relationship.
|
|
·
|
Expanding our direct to consumer business.
We intend to build our wine clubs via targeted public relations and advertising, expand our tasting rooms and create exciting new events at our wineries. The direct to consumer distribution channel allows us to respond rapidly to consumers and anticipate and establish new market trends. The direct to consumer business generates attractive margins, so we intend to expand this distribution channel in order to achieve our growth objectives.
|
|
·
|
Building our internet customer base.
We intend to build our internet presence. We recently acquired a controlling interest in The Wine Spies, and we intend to develop The Wine Spies distribution channel. With strong margins and a solid business platform, we believe our internet e-tailer is poised for strong growth.
|
|
·
|
Expanding into key international markets.
With our recent launch of our wrapped bottle project, we are beginning to experience demand in Canada, Europe and Australia. In late 2012, our distributor in Canada, Trialto, met with all of the large regional Liquor Control Boards and obtained listings for our brand Dearly Beloved, some of our wrapped wines, including Curious Beasts, and commitments for both the paper bottle and square bottle projects to be launched in spring 2013. Several retailers in the United Kingdom are requesting information and gathering samples. In Australia, the nation’s largest coffee company and “total café solution,” Vittoria Coffee, has decided to enter the wine distribution market after spotting our Dearly Beloved on a research trip the United States. Samples have been sent, pricing has been agreed and we anticipate our first orders in the late 2013. In addition, Vittoria is also interested in launching our wrapped wines in mid-2013.
|
|
·
|
Continuing to develop new ways to engage customers and to distribute our products.
By aggressively tackling the market in nontraditional ways — direct to the trade and consumer, rather than through layers of sales entities and employees — we can respond quickly to the needs of consumers, retailers and restaurateurs. We also are able to anticipate and even establish new trends. We are constantly challenging the status quo and always on the lookout for new innovations and approaches to the market. Simply said, we are discovery-oriented in our approach. This is somewhat counterintuitive especially when you consider that wine has been with us for about 7,000 years. We believe that tradition, to some degree, has stymied creativity.
|
|
·
|
Building our national brands.
We have built strong “traditional three-tier” brands, including Truett-Hurst, Healdsburg Ranches and Bradford Mountain. We plan to continue to market and promote these products with our partners.
|
Product
|
Price Range
|
Key Varietals
|
Distribution Chanel
|
Gross Margin Benefit
|
Truett Hurst
|
$20-$50
|
Zinfandel
|
Direct to Consumer/Three-Tier
|
High
|
VML
|
$20-$50
|
Pinot
Noir/Chardonnay |
Direct to Consumer/Three-Tier
|
High
|
Bradford Mountain
|
$20-$40
|
Zinfandel/Syrah
|
Direct to Consumer/Three-Tier
|
Medium/High
|
Healdsburg Ranches
|
$10-$20
|
Chardonnay/Pinot
Noir/Zinfandel |
Three-Tier
|
Medium
|
Evocative Wraps
|
$12-$50
|
Various
|
Private Label
|
Medium
|
The Fugitive
|
$25
|
Red Blend
|
Private Label
|
Medium
|
Dearly Beloved
|
$8
|
Red Blend
|
Private Label
|
Low
|
Sauvignon Republic
|
$8
|
Sauvignon Blanc
|
Private Label
|
Low
|
Harbor Front
|
$10-$15
|
Chardonnay/
Cabernet Sauvignon/Merlot/ Pinot Noir |
Private Label
|
Low
|
Kiarna
|
$10-$20
|
Chardonnay/
Cabernet Sauvignon/Merlot/ |
Private Label
|
Low
|
Hobson Estate
|
$10-$20
|
Chardonnay/
Cabernet
Sauvignon/Merlot/
|
Private Label
|
Low
|
Bewitched
|
$20-$40
|
Chardonnay/Pinot Noir
|
Private Label
|
High
|
Curious Beasts
|
$15
|
Red Blend
|
Private Label
|
Medium
|
Fuchsia
|
$13
|
Rose/White Blend
|
Private Label
|
Medium
|
Schuck’s
|
$14
|
Sauvignon Blanc/Chardonnay/Pinot Noir
|
Private Label
|
Medium
|
Candell’s
|
$50-$60
|
Sparkling
|
Private Label
|
High
|
Eden Ridge
|
$11
|
Chardonnay
|
Private Label
|
Low
|
Chateau Crisp
|
$12-$15
|
Sauvignon Blanc
|
Private Label
|
Medium
|
The Supper Club
|
$13-$14
|
Chardonnay/Cabernet Sauvignon
|
Private Label
|
Medium
|
The Wine with No Name
|
$15
|
Red Blend
|
Private Label
|
Medium
|
The Criminal
|
$20
|
Red Blend
|
Private Label
|
Medium
|
|
·
|
Sauvignon Republic
|
|
·
|
Dearly Beloved
|
|
·
|
The Fugitive
|
|
·
|
Harbor Front
|
|
·
|
Eden Ridge
|
|
·
|
Bewitched
|
|
·
|
Fuchsia
|
|
·
|
Chateau Crisp
|
|
·
|
The Supper Club
|
|
·
|
The Wine with No Name
|
|
·
|
Curious Beasts
|
|
·
|
Candell’s
|
|
·
|
Schuck’s
|
|
·
|
The Criminal
|
|
·
|
Hobson Estate
|
|
·
|
Kiarna
|
|
·
|
Ghianda Rose Vineyards, owned by the Dolan family, approximately 40 acres of Mendocino County Chardonnay, organic and biodynamic certified.
|
|
·
|
Gobbi Vineyards, owned by the Dolan family, approximately 40 acres of Mendocino Country Chardonnay, organic certified.
|
|
·
|
Lovers Lane Vineyard, owned by Phil Hurst and the Dolan family, approximately 140 acres of Zinfandel, Cabernet Sauvignon and Petite Syrah.
|
|
·
|
Floodgate Vineyard, owned by the Hambrecht family, approximately 100 acres of Russian River Valley Pinot Noir and Chardonnay.
|
|
·
|
Grist Vineyards, owned by the Hambrecht family, approximately 100 acres of organically farmed Dry Creek Valley Zinfandel, Petite Syrah and Syrah on the historic Bradford Mountain.
|
|
·
|
Dark Horse Vineyard, owned by the Dolan family, approximately 120 acres of biodynamically farmed Zinfandel, Cabernet Sauvignon, Syrah and Petite Syrah located in Mendocino County.
|
|
·
|
Direct to consumer:
in the direct to consumer channel, we rely on our tasting room sales and wine clubs. We view our tasting rooms as excellent venues in which to build a strong brand and generate customer loyalty. While the tasting rooms at Truett-Hurst and VML initially have represented mostly brand and customer loyalty building tools, and as fun ways for us and our friends and fans to enjoy some excellent wines, they are now significant revenue and profit centers representing our highest gross margin business and provide important credibility with our private label customers further differentiating us from our competitors. We have also discovered that there is no stronger way to build relationships with a consumer than the experience of visiting the winery. Our fast growing wine clubs further build and maintain this bond, along with the many winery hosted events, bringing the customer back, time and time again.
In this channel, we ship via UPS directly to our customers around the country that live in states that permit direct shipping. We have negotiated favorable shipping rates based on the volume of wines selling from our two tasting rooms and our partnership with internet retailer The Wine Spies.
Our tasting rooms and wine clubs produced revenues of $1,503,449 in the first six months of fiscal year 2013 and $966,899 in the first six months of fiscal year 2012, showing a significant increase of 55%.
|
|
·
|
Traditional three-tiered distribution:
we sell our brands through traditional distributor channels. Currently, we produce and sell wine under four fully owned labels: Truett-Hurst, VML, Healdsburg Ranches and Bradford Mountain. We plan to develop or purchase other labels over time to add to this channel. We sell our wine directly to California distributors that operate state-wide or regionally. In this channel we sell wine to the distributor at a wholesale price, and the distributor marks it up and sells it on to various wine stores and restaurants that ultimately sell to retail customers.
|
|
o
|
Young’s Market Company – California, Washington, Oregon
|
|
o
|
Republic National Distributing Company – Texas, Midwest region
|
|
o
|
Wirtz – Illinois
|
|
o
|
Winebow – Eastern region
|
|
·
|
Private label/direct to retailer:
W
e create and sell brands to the nation’s largest wine retailers, such as Trader Joe’s, Total Wine & More and Safeway that work with us directly to promote and advertise our wines. While many other wine makers sell into this channel, we have sought to bring our novel approach to the direct to retail channel. Whereas most wine makers assign the trademarks to the retailers when they either create private label wines or develop brands for them, we will custom-develop brands for a retailer and retain ownership of the brand. This gives us the ability to move our private label brands into broad market distribution after the exclusivity period or if a brand becomes very successful, further building brand equity.
We acknowledge that the retailer has a unique relationship with its customer. We also recognize that the retailer has developed a particular position or standing in the minds and heart of its consumers. We want to honor that relationship by developing and providing products that support and reinforce that dynamic. We also recognize that it is ever-changing and developing, and we are prepared to adapt to their needs. Therefore, we work hand in hand with the retail buyers to create and design products and packaging that meets retailer needs.
Many retailers have established distributor relationships across the country that allow them to leverage their regular branded business and their private label business. In most of these cases they have negotiated below market rates in order to achieve higher margins and provide better value to their customers. In cases where retailers have not established such distribution relationships, we employ our regular three-tier distributors.
Retailers to whom we sell through this channel include:
|
|
o
|
Trader Joe’s
|
|
o
|
Total Wine & More
|
|
o
|
BevMo!
|
|
o
|
Safeway
|
|
o
|
Costco
|
Registered
|
Published
|
Pending
|
Bewitched
|
Candells
|
California Square
|
Bradford Mountain
|
Cense
|
Curious Beasts
|
By Locals. For Locals
|
Center Street
|
Fuchsia
|
Dearly Beloved
|
Chateau Crisp
|
Juice Brothers
|
Dearly Beloved Forever Red
|
Eden Ridge
|
Paso Ranches
|
Fugitive
|
Inconspicuous
|
Sweet Evil
|
Harbor Front
|
Mad Duck
|
The Criminal
|
Healdsburg Ranches
|
Nature’s Gate
|
Unique Style, Unique Flavor, Anything But Square
|
One Man Band
|
Paper Boy
|
West Coast Original
|
Sauvignon Republic
|
Pinot Republic
|
|
Simply Pure
|
Shuck’s
|
|
Stonegate
|
Sonoma Ranches
|
|
The County Fair
|
Sustainable Farm
|
|
Truett Hurst
|
Svengali
|
|
Va·ri’e·tals
|
Wonderland
|
|
VML
|
||
|
·
|
the investors in this offering will collectively own 2,902,557 shares of our Class A common stock and Truett-Hurst, Inc. will hold 2,902,557 LLC Units;
|
|
·
|
our existing owners will hold 3,450,087 LLC Units;
|
|
·
|
the investors in this offering will collectively have 43.9% of the voting power in Truett-Hurst, Inc.; and
|
|
·
|
our existing owners, through their holdings of our Class B common stock, will have 52.2% of the voting power in Truett-Hurst, Inc.
|
Name
|
Age
|
Principal Position
|
||
Phillip L. Hurst
|
49
|
President, Chief Executive Officer and Director
|
||
Virginia Marie Lambrix
|
39
|
Director of Winemaking
|
||
Heath E. Dolan
|
39
|
Director of Vineyard Operations and Director
|
||
James D. Bielenberg
|
54
|
Chief Financial Officer
|
||
Paul E. Dolan, III
|
62
|
Director
|
||
Barrie Graham
|
65
|
Director
|
||
William R. Hambrecht
|
77
|
Director
|
||
Daniel A. Carroll
|
52
|
Director
|
||
John D. Fruth
|
69 |
Director
|
||
James F. Verhey
|
66 |
Director
|
|
·
|
The Class I directors will be William R. Hambrecht, Barrie Graham and Heath E. Dolan, and their terms will expire at the annual general meeting of stockholders to be held in 2013;
|
|
·
|
The Class II directors will be Phillip L. Hurst, Paul E. Dolan, III and Daniel A. Carroll, and their terms will expire at the annual general meeting of stockholders to be held in 2014; and
|
|
·
|
The Class III directors will be John D. Fruth and James F. Verhey, and their terms will expire at the annual general meeting of stockholders to be held in 2015.
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)(1) |
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compen-
sation ($)
|
All Other
Compen-
sation
($)
|
Total ($)
|
|||||||||
Phillip L. Hurst, Co-Founder,
Chief Executive Officer |
2012
|
137,111
|
13,598
|
— |
—
|
—
|
10,800 (2)
|
150,709
|
|||||||||
Virginia Marie Lambrix,
Director of Winemaking |
2012
|
111,462
|
10,171
|
— |
—
|
—
|
—
|
121,633
|
|||||||||
Heath E. Dolan, Co-Founder,
Director of Vineyard Operations |
2012
|
19,000
|
—
|
— |
—
|
—
|
—
|
19,000
|
|||||||||
James D. Bielenberg,
Chief Financial Officer
|
2013 | 200,000 (3) | 8,333 (3) | 103,000 (4) |
—
|
— | 68,667 (5) | 311,333 |
|
(1)
|
This column reflects the grant date fair value of share based awards as determined in accordance with FASB ASC Topic 718.
|
|
(2)
|
Mr. Hurst began receiving a $900.00 per month automobile allowance on June 1, 2012. The amount presented here represents Mr. Hurst’s expected automobile allowance for fiscal year 2013.
|
(3) |
Expected fiscal year 2013 compensation.
|
(4)
|
On December 28, 2012, Truett-Hurst, Inc. awarded Mr. Bielenberg a restricted stock grant of 42,000 shares of our Class A common stock. Pursuant to the terms of the grant, the award vests equally over three years.
|
|
(5)
|
Compensation in connection with reimbursement by the LLC for tax liability incurred by Mr. Bielenberg arising from our restricted stock grant of 42,000 shares of our Class A common stock to Mr. Bielenberg.
|
|
·
|
the amounts involved exceeded or will exceed $120,000 or 1% of our total assets averaged for the last two fiscal years; and
|
|
·
|
any of our directors, executive officers, holders of more than 5% of our capital stock (which we refer to as 5% stockholders) or any member of their immediate family had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described where required under the section titled “Executive Compensation.”
|
|
·
|
the timing of exchanges—for instance, the increase in any tax deductions will vary depending on the fair value, which may fluctuate over time, of the depreciable or amortizable assets of the LLC at the time of each exchange;
|
|
·
|
the price of shares of our Class A common stock at the time of the exchange—the increase in any tax deductions, as well as the tax basis increase in other assets, of the LLC is directly proportional to the price of shares of our Class A common stock at the time of the exchange;
|
|
·
|
the extent to which such exchanges are taxable—if an exchange is not taxable for any reason, increased deductions will not be available; and
|
|
·
|
the amount and timing of our income—the corporate taxpayer will be required to pay 90% of the deemed benefits as and when deemed realized. If the corporate taxpayer does not have taxable income, the corporate taxpayer generally will not be required (absent a change of control or other circumstances requiring an early termination payment) to make payments under the tax receivable agreement for that taxable year because no benefit will have been actually realized. However, any tax benefits that do not result in realized benefits in a given tax year will likely generate tax attributes that may be utilized to generate benefits in previous or future tax years. The utilization of such tax attributes will result in payments under the tax receivable agreement.
|
|
·
|
we will record an increase of $4.478 million in deferred tax assets for the estimated income tax effects of the increase in the tax basis of the assets owned by Truett-Hurst, Inc. based on enacted federal and state tax rates at the date of the transaction. To the extent we estimate that we will not realize the full benefit represented by the deferred tax asset, based on an analysis of expected future earnings, we will reduce the deferred tax asset with a valuation allowance;
|
|
·
|
we will record 100% of the estimated realizable tax benefit resulting from (i) the increase in the tax basis of the purchased interests as noted above and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement as an increase of $4.424 million payable to related parties pursuant to tax receivable agreement; and
|
|
·
|
we will record an increase to additional paid-in capital in an amount equal to the difference between the increase in deferred tax assets and the increase in liability due to existing owners under the tax receivable agreement.
|
(1)
|
Following this offering, our existing owners will also hold one share of our Class B common stock. Each holder of Class B common stock shall be entitled, without regard to the number of shares of Class B common stock held by such holder, to one vote for each LLC Unit held by such holder.
|
(2)
|
Mr. Shaw was granted 210,000 shares of restricted stock under the 2012 Plan, which vest over three years and are subject to our right of repurchase or forfeiture. Holders of our restricted stock are entitled to one vote for each share of restricted stock held by such holder.
|
(3)
|
The voting power and shares of Class A common stock presented in the foregoing tables as beneficially owned by Mr. Hurst are held by a trust for the benefit of Mr. Hurst and his family members as to which Mr. Hurst is a co-trustee.
|
(4)
|
The voting power and shares of Class A common stock presented in the foregoing tables as beneficially owned by Mr. Hambrecht include those by Hambrecht Wine Group, L.P., of which 83.6955% is beneficially owned by a trust for the benefit of Mr. Hambrecht and his family members as to which Mr. Hambrecht is the trustee, and by Forrester Hambrecht, Mr. Hambrecht’s grandson.
|
(5)
|
The voting power and shares of Class A common stock presented in the foregoing tables as beneficially owned by Mr. Heath Dolan are held by a trust for the benefit of Mr. Heath Dolan and his family members as to which Mr. Heath Dolan is a co-trustee.
|
(6)
|
The voting power and shares of Class A common stock presented in the foregoing tables as beneficially owned by Mr. Paul Dolan are held by a trust for the benefit of Mr. Paul Dolan and his family members as to which Mr. Paul Dolan is the trustee.
|
(7)
|
The voting power and shares of Class A common stock presented in the foregoing tables as beneficially owned by Mr. Carroll are held by a trust for the benefit of Mr. Carroll and his family members as to which Mr. Carroll is a co-trustee.
|
(8)
|
Mr. Bielenberg was granted 42,000 shares of restricted stock under the 2012 Plan, which vest over three years and are subject to our right of repurchase or forfeiture. Holders of our restricted stock are entitled to one vote for each share of restricted stock held by such holder. |
|
·
|
7,000,000 shares are designated as Class A common stock;
|
|
·
|
1,000 shares are designated as Class B common stock; and
|
|
·
|
5,000,000 shares are designated as preferred stock.
|
|
·
|
diluting the voting power of the holders of common stock;
|
|
·
|
reducing the likelihood that holders of common stock will receive dividend payments;
|
|
·
|
reducing the likelihood that holders of common stock will receive payments in the event of our liquidation, dissolution, or winding up; and
|
|
·
|
delaying, deterring or preventing a change-in-control or other corporate takeover.
|
|
·
|
indemnify officers and directors against certain liabilities that may arise because of their status as officers and directors;
|
|
·
|
advance expenses, as incurred, to officers and directors in connection with a legal proceeding subject to limited exceptions; and
|
|
·
|
cover officers and directors under any general or directors’ and officers’ liability insurance policy maintained by us.
|
|
·
|
one percent of the number of shares of Class A common stock then outstanding, which will equal approximately 290,000 shares immediately after the completion of this offering; or
|
|
·
|
the average weekly trading volume of our Class A common stock on Nasdaq during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
|
|
·
|
offer, pledge, sell, contract to sell, grant any option to purchase, make any short sale or otherwise dispose of any shares of Class A common stock, options or warrants to purchase shares of our Class A common stock or any securities convertible into or exercisable or exchangeable for shares of our Class A common stock; or
|
|
·
|
in our case, file any registration statement with the SEC relating to the offering of any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock; or
|
|
·
|
in the case of our directors, officers and other holders of our securities, make any demand for exercise of any rights with respect to the registration of any securities.
|
|
·
|
banks, insurance companies or other financial institutions;
|
|
·
|
partnerships or other pass-through entities;
|
|
·
|
tax-exempt organizations;
|
|
·
|
tax-qualified retirement plans;
|
|
·
|
dealers in securities or currencies;
|
|
·
|
traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;
|
|
·
|
U.S. expatriates and certain former citizens or long-term residents of the United States;
|
|
·
|
controlled foreign corporations;
|
|
·
|
passive foreign investment companies;
|
|
·
|
persons that own, or have owned, actually or constructively, more than 5% of our Class A common stock; and
|
|
·
|
persons that will hold Class A common stock as a position in a hedging transaction, “straddle” or “conversion transaction” for tax purposes.
|
|
·
|
an individual citizen or resident of the United States;
|
|
·
|
a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia (or entity treated as such for U.S. federal income tax purposes);
|
|
·
|
an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
|
|
·
|
a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) it has a valid election in effect under applicable United States Department of the Treasury regulations to be treated as a U.S. person.
|
|
·
|
the gain is effectively connected with a trade or business carried on by the non-U.S. holder in the United States and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment of the non-U.S. holder maintained in the United States;
|
|
·
|
the non-U.S. holder is an individual present in the United States for 183 days or more in the taxable year of disposition and certain other requirements are met; or
|
|
·
|
we are or have been a U.S. real property holding corporation, or a USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition and the non-U.S. holder’s holding period for our Class A common stock, and our Class A common stock has ceased to be traded on an established securities market prior to the beginning of the calendar year in which the sale or other disposition occurs. The determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our other trade or business assets and our foreign real property interests.
|
Underwriters
|
Number of Shares
|
WR Hambrecht + Co
|
|
Sidoti & Company, LLC | |
CSCA Capital Advisors, LLC
|
|
|
|
Total
|
|
Paid by Us
|
Paid by Selling Stockholders
|
|||||||
Per Share
|
$ | $ | ||||||
Total
|
$ | $ |
F-1
|
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6 - F-27
|
C
ONSOLIDATED
B
ALANCE
S
HEETS
|
||||||||||||
____________
|
||||||||||||
|
||||||||||||
June 30,
|
December 31,
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
(Unaudited)
|
||||||||||||
A
SSETS
|
||||||||||||
Current assets:
|
||||||||||||
Cash and cash equivalents
|
$ | 274,422 | $ | 167,309 | $ | 116,472 | ||||||
Accounts receivable
|
939,086 | 1,257,697 | 1,041,354 | |||||||||
Inventories
|
3,567,140 | 6,852,391 | 10,275,867 | |||||||||
Bulk wine deposit
|
- | 332,623 | - | |||||||||
Other current assets
|
5,350 | 11,884 | 59,096 | |||||||||
Total current assets
|
4,785,998 | 8,621,904 | 11,492,789 | |||||||||
Property and equipment, net
|
5,055,783 | 5,083,109 | 5,509,504 | |||||||||
Goodwill
|
- | - | 134,327 | |||||||||
Intangible assets, net
|
212,000 | 235,313 | 745,639 | |||||||||
Other assets, net
|
46,092 | 142,291 | 126,118 | |||||||||
Total assets
|
$ | 10,099,873 | $ | 14,082,617 | $ | 18,008,377 | ||||||
L
IABILITIES,
R
EDEEMABLE
C
ONTRIBUTED
C
APITAL
|
||||||||||||
AND
M
EMBERS’
E
QUITY
(D
EFICIT
)
|
||||||||||||
Current liabilities:
|
||||||||||||
Line of credit
|
$ | 1,998,954 | $ | 1,763,954 | $ | 5,713,205 | ||||||
Accounts payable
|
904,568 | 1,512,308 | 1,456,269 | |||||||||
Accrued expenses
|
96,964 | 302,667 | 297,211 | |||||||||
Grapes payable
|
- | - | 253,362 | |||||||||
Amount due factor
|
- | 869,400 | - | |||||||||
Due to related parties
|
253,298 | 77,194 | 905,646 | |||||||||
Current maturities of related party notes
|
500,107 | 467,392 | 68,656 | |||||||||
Current maturities of long-term debt
|
804,052 | 792,248 | 235,901 | |||||||||
Warrant obligation
|
- | 206,000 | 210,000 | |||||||||
Interest rate swap
|
- | - | 70,830 | |||||||||
Total current liabilities
|
4,557,943 | 5,991,163 | 9,211,080 | |||||||||
Deferred rent liability
|
37,236 | 57,572 | 55,696 | |||||||||
Related party notes, net of current maturities
|
50,261 | 137,409 | 102,696 | |||||||||
Long-term debt, net of current maturities
|
2,748,907 | 2,637,220 | 3,283,060 | |||||||||
Total liabilities
|
7,394,347 | 8,823,364 | 12,652,532 | |||||||||
Commitments and contingencies (Note 9)
|
||||||||||||
Redeemable contributed capital
|
6,246,151 | 5,886,151 | - | |||||||||
Members’ equity (deficit):
|
||||||||||||
Contributed capital
|
- | 2,279,399 | 8,165,550 | |||||||||
Due from member
|
(643,393 | ) | (35,527 | ) | - | |||||||
Accumulated deficit
|
(2,897,232 | ) | (2,870,770 | ) | (3,086,787 | ) | ||||||
H.D.D. LLC members’ equity (deficit)
|
(3,540,625 | ) | (626,898 | ) | 5,078,763 | |||||||
Noncontrolling interest in The Wine Spies, LLC
|
- | - | 277,082 | |||||||||
Total members’ equity (deficit)
|
(3,540,625 | ) | (626,898 | ) | 5,355,845 | |||||||
Total liabilities, redeemable contributed capital
|
||||||||||||
and members’ equity
|
$ | 10,099,873 | $ | 14,082,617 | $ | 18,008,377 |
C
ONSOLIDATED
S
TATEMENTS OF
O
PERATIONS
|
||||||||||||||||
___________
|
||||||||||||||||
|
||||||||||||||||
Six Months
|
||||||||||||||||
Years Ended June 30,
|
Ended December 31,
|
|||||||||||||||
2011
|
2012
|
2011
|
2012
|
|||||||||||||
(Unaudited) | ||||||||||||||||
Sales
|
$ | 5,475,643 | $ | 13,148,953 | $ | 8,699,229 | $ | 8,820,255 | ||||||||
Less excise taxes
|
(73,598 | ) | (455,558 | ) | (321,120 | ) | (249,939 | ) | ||||||||
Net sales
|
5,402,045 | 12,693,395 | 8,378,109 | 8,570,316 | ||||||||||||
Cost of sales
|
3,900,942 | 9,618,065 | 6,573,563 | 5,850,463 | ||||||||||||
Gross profit
|
1,501,103 | 3,075,330 | 1,804,546 | 2,719,853 | ||||||||||||
Operating expenses:
|
||||||||||||||||
Sales and marketing
|
595,226 | 1,387,321 | 782,142 | 1,146,316 | ||||||||||||
General and administrative
|
1,435,908 | 1,194,353 | 428,318 | 1,581,239 | ||||||||||||
Gain on sale of assets
|
(111,150 | ) | (6,945 | ) | - | - | ||||||||||
Total operating expenses
|
1,919,984 | 2,574,729 | 1,210,460 | 2,727,555 | ||||||||||||
Income (loss) from operations
|
(418,881 | ) | 500,601 | 594,086 | (7,702 | ) | ||||||||||
Other expense:
|
||||||||||||||||
Interest expense and other
|
(401,134 | ) | (463,339 | ) | (198,618 | ) | (179,762 | ) | ||||||||
Warrant re-valuation
|
- | (10,000 | ) | - | (4,000 | ) | ||||||||||
Unrealized loss on interest rate swap
|
- | - | - | (70,830 | ) | |||||||||||
Total other expense
|
(401,134 | ) | (473,339 | ) | (198,618 | ) | (254,592 | ) | ||||||||
Income (loss) before income taxes
|
(820,015 | ) | 27,262 | 395,468 | (262,294 | ) | ||||||||||
Income tax expense
|
800 | 800 | 800 | 1,600 | ||||||||||||
Net income (loss) before noncontrolling
|
||||||||||||||||
interest
|
(820,815 | ) | 26,462 | 394,668 | (263,894 | ) | ||||||||||
Loss attributable to noncontrolling interest
|
- | - | - | (47,877 | ) | |||||||||||
Net income (loss) attributable to H.D.D. LLC
|
||||||||||||||||
members
|
$ | (820,815 | ) | $ | 26,462 | $ | 394,668 | $ | (216,017 | ) |
C
onsolidated
S
tatements of
C
hanges in
R
edeemable
C
ontributed
C
apital and
M
embers’ Equity
(Deficit
)
|
||||||||||||||||||||||||||||
____________
|
Total
|
||||||||||||||||||||||||||||
Redeemable
|
H.D.D. LLC
|
Members’
|
||||||||||||||||||||||||||
Contributed
|
Contributed
|
Due from
|
Accumulated
|
Members’
|
Noncontrolling
|
Equity
|
||||||||||||||||||||||
Capital
|
Capital
|
Member
|
Deficit
|
Equity (Deficit)
|
Interest
|
(Deficit)
|
||||||||||||||||||||||
Balances at July 1, 2010
|
$
|
750,000
|
$
|
-
|
$
|
-
|
$
|
(2,076,417
|
)
|
$
|
(2,076,417
|
)
|
$
|
-
|
$
|
(2,076,417
|
)
|
|||||||||||
Transfer of member loans to capital
|
2,696,151
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Capital contributions
|
700,000
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Capital contributions in exchange for due from
|
||||||||||||||||||||||||||||
member
|
773,085
|
-
|
(773,085
|
)
|
-
|
(773,085
|
)
|
-
|
(773,085
|
)
|
||||||||||||||||||
Capital contributions in exchange of inventory
|
1,114,915
|
-
|
87,192
|
-
|
87,192
|
-
|
87,192
|
|||||||||||||||||||||
Capital contributions in exchange of trademark
|
212,000
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Capital contributions in exchange for rent owed
|
-
|
-
|
42,500
|
-
|
42,500
|
-
|
42,500
|
|||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
(820,815
|
)
|
(820,815
|
)
|
-
|
(820,815
|
)
|
||||||||||||||||||
Balances at June 30, 2011
|
6,246,151
|
-
|
(643,393
|
)
|
(2,897,232
|
)
|
(3,540,625
|
)
|
-
|
(3,540,625
|
)
|
|||||||||||||||||
Capital contributions
|
-
|
2,279,399
|
-
|
-
|
2,279,399
|
-
|
2,279,399
|
|||||||||||||||||||||
Member exercise of put right for cash
|
(150,000
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
Member exercise of put right for note to
|
||||||||||||||||||||||||||||
related party
|
(210,000
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
Capital contributions in exchange for accounts
|
||||||||||||||||||||||||||||
receivable
|
-
|
-
|
8,100
|
-
|
8,100
|
-
|
8,100
|
|||||||||||||||||||||
Capital contributions in exchange of inventory
|
-
|
-
|
357,266
|
-
|
357,266
|
-
|
357,266
|
|||||||||||||||||||||
Capital contributions in exchange for rent owed
|
-
|
-
|
242,500
|
-
|
242,500
|
-
|
242,500
|
|||||||||||||||||||||
Net income
|
-
|
-
|
-
|
26,462
|
26,462
|
-
|
26,462
|
|||||||||||||||||||||
Balances at June 30, 2012
|
5,886,151
|
2,279,399
|
(35,527
|
)
|
(2,870,770
|
)
|
(626,898
|
)
|
-
|
(626,898
|
)
|
|||||||||||||||||
Capital contributions in exchange for rent
|
||||||||||||||||||||||||||||
owed (unaudited)
|
-
|
-
|
35,527
|
-
|
35,527
|
-
|
35,527
|
|||||||||||||||||||||
Noncontrolling interest in The Wine Spies, LLC
|
||||||||||||||||||||||||||||
(unaudited)
|
-
|
-
|
-
|
-
|
-
|
324,959
|
324,959
|
|||||||||||||||||||||
Recharacterization of contributed capital resulting
|
||||||||||||||||||||||||||||
from termination of Buy-Sell Agreement
|
||||||||||||||||||||||||||||
(unaudited)
|
(5,886,151
|
)
|
5,886,151
|
-
|
-
|
5,886,151
|
-
|
5,886,151
|
||||||||||||||||||||
Net loss (unaudited)
|
-
|
-
|
-
|
(216,017
|
)
|
(216,017
|
)
|
(47,877
|
)
|
(263,894
|
)
|
|||||||||||||||||
Balances at December 31, 2012 (unaudited)
|
$
|
-
|
$
|
8,165,550
|
$
|
-
|
$
|
(3,086,787
|
)
|
$
|
5,078,763
|
$
|
277,082
|
$
|
5,355,845
|
C
ONSOLIDATED
S
TATEMENTS OF
C
ASH
F
LOWS
|
||||||||||||||||
____________
|
||||||||||||||||
|
||||||||||||||||
Six Months
|
||||||||||||||||
Years Ended June 30,
|
Ended December 31,
|
|||||||||||||||
2011
|
2012
|
2011
|
2012
|
|||||||||||||
(Unaudited) | ||||||||||||||||
Operating activities:
|
||||||||||||||||
Net income (loss)
|
$ | (820,815 | ) | $ | 26,462 | $ | 394,668 | $ | (263,894 | ) | ||||||
Adjustments to reconcile net income (loss) to net cash (used in)
|
||||||||||||||||
provided by operating activities:
|
||||||||||||||||
Depreciation and amortization
|
86,092 | 108,492 | 56,653 | 76,259 | ||||||||||||
Note payable to member for reimbursement of right to market expense
|
300,000 | - | - | - | ||||||||||||
Gain on sale of assets
|
(111,150 | ) | (6,945 | ) | - | - | ||||||||||
Deferred rent
|
37,236 | 20,336 | - | (1,876 | ) | |||||||||||
Warrant re-valuation
|
- | 10,000 | - | 4,000 | ||||||||||||
Unrealized loss on interest rate swap
|
- | - | - | 70,830 | ||||||||||||
Contributed rent
|
42,500 | 242,500 | 130,000 | 35,527 | ||||||||||||
Changes in operating assets and liabilities:
|
||||||||||||||||
Accounts receivable
|
(829,206 | ) | (310,511 | ) | (886,771 | ) | 216,343 | |||||||||
Inventories
|
(1,216,967 | ) | (2,779,269 | ) | (612,507 | ) | (3,308,142 | ) | ||||||||
Bulk wine deposit
|
- | (332,623 | ) | - | 332,623 | |||||||||||
Other assets
|
(30,455 | ) | (102,733 | ) | (7,891 | ) | (27,349 | ) | ||||||||
Accounts payable
|
765,877 | 607,740 | 1,010,014 | 197,323 | ||||||||||||
Accrued expenses
|
36,367 | 205,703 | 219,644 | (5,456 | ) | |||||||||||
Net cash (used in) provided by operating activities
|
(1,740,521 | ) | (2,310,848 | ) | 303,810 | (2,673,812 | ) | |||||||||
Investing activities:
|
||||||||||||||||
Acquisition of property and equipment
|
(390,106 | ) | (265,780 | ) | (364,433 | ) | (582,511 | ) | ||||||||
Acquisition of intangible assets
|
- | (42,066 | ) | (122,146 | ) | (34,492 | ) | |||||||||
Acquisition of The Wine Spies, LLC
|
- | - | - | (275,000 | ) | |||||||||||
Proceeds from sale of assets
|
111,150 | 6,945 | - | - | ||||||||||||
Net cash used in investing activities
|
(278,956 | ) | (300,901 | ) | (486,579 | ) | (892,003 | ) | ||||||||
Financing activities:
|
||||||||||||||||
Net proceeds from (repayments on) line of credit
|
1,034,000 | (235,000 | ) | - | 3,949,251 | |||||||||||
Advances from related parties
|
115,622 | - | - | 828,452 | ||||||||||||
Payments to related parties
|
- | (176,104 | ) | (221,647 | ) | - | ||||||||||
Proceeds from related party notes
|
1,786,563 | 150,000 | - | - | ||||||||||||
Payments on related party notes
|
(99,632 | ) | (305,567 | ) | (66,873 | ) | (433,449 | ) | ||||||||
Proceeds from long-term debt
|
- | 100,000 | - | 3,526,015 | ||||||||||||
Payments on long-term debt
|
(1,293,529 | ) | (223,492 | ) | (20,561 | ) | (3,485,891 | ) | ||||||||
Proceeds from amount due factor
|
- | 2,579,400 | 861,737 | - | ||||||||||||
Payments on amount due factor
|
- | (1,710,000 | ) | - | (869,400 | ) | ||||||||||
Member exercise of put right
|
- | (150,000 | ) | - | - | |||||||||||
Member contributions for members' equity and warrant
|
700,000 | 2,475,399 | - | - | ||||||||||||
Net cash provided by financing activities
|
2,243,024 | 2,504,636 | 552,656 | 3,514,978 | ||||||||||||
Net increase (decrease) in cash and cash equivalents
|
223,547 | (107,113 | ) | 369,887 | (50,837 | ) | ||||||||||
Cash and cash equivalents at beginning of period
|
50,875 | 274,422 | 274,422 | 167,309 | ||||||||||||
Cash and cash equivalents at end of period
|
$ | 274,422 | $ | 167,309 | $ | 644,309 | $ | 116,472 | ||||||||
Supplemental disclosures of cash flow information:
|
||||||||||||||||
Interest paid
|
$ | 382,182 | $ | 546,139 | $ | 196,781 | $ | 195,016 | ||||||||
Income taxes paid
|
$ | 800 | $ | 800 | $ | 800 | $ | 1,600 | ||||||||
Noncash investing and financing activities:
|
||||||||||||||||
Contributed inventory for membership interest
|
$ | 1,202,107 | $ | 357,266 | $ | 357,266 | $ | - | ||||||||
Contributed trademarks for membership interest
|
$ | 212,000 | $ | - | $ | - | $ | - | ||||||||
Contributed rent for membership interest
|
$ | 42,500 | $ | 242,500 | $ | 130,000 | $ | 35,527 | ||||||||
Contributed net operating receivables for membership interest
|
$ | - | $ | 8,100 | $ | 8,100 | $ | - | ||||||||
Note issued to member for exercise of put right
|
$ | - | $ | 210,000 | $ | - | $ | - | ||||||||
Due from member for membership interest
|
$ | 773,085 | $ | - | $ | 625,059 | $ | - | ||||||||
Transfer of member loans into equity interest
|
$ | 2,696,151 | $ | - | $ | - | $ | - | ||||||||
Fair value of warrant
|
$ | - | $ | 196,000 | $ | - | $ | - | ||||||||
Recharacterization of contributed capital
|
- | - | - | 5,886,151 |
2.
|
Summary of Significant Accounting Policies
|
2.
|
Summary of Significant Accounting Policies
, continued
|
2.
|
Summary of Significant Accounting Policies
, continued
|
2.
|
Summary of Significant Accounting Policies
, continued
|
2.
|
Summary of Significant Accounting Policies
, continued
|
Accounts
|
||||||||||||||||||||||||||||
Receivable
|
||||||||||||||||||||||||||||
Net Sales for the Years
|
Accounts Receivable
|
Net Sales for the Six Months |
as of
|
|||||||||||||||||||||||||
Ended June 30,
|
as of June 30,
|
Ended December 31, |
December 31,
|
|||||||||||||||||||||||||
2011
|
2012
|
2011
|
2012
|
2011
|
2012
|
2012
|
||||||||||||||||||||||
(Unaudited) |
(Unaudited)
|
|||||||||||||||||||||||||||
Customer A
|
23% | 33% | 28% | - | 39% | 21% | 4% | |||||||||||||||||||||
Customer B
|
20% | 18% | - | 48% | 19% | 10% | - | |||||||||||||||||||||
Customer C
|
14% | 10% | 22% | 11% | 10% | 8% | 12% | |||||||||||||||||||||
Customer D
|
10% | 6% | 10% | 6% | 4% | 9% | 21% | |||||||||||||||||||||
Customer E
|
- | 1% | - | 4% | 5% | 12% | 9% | |||||||||||||||||||||
Customer F
|
5% | 6% | 6% | - | 4% | 7% | 3% | |||||||||||||||||||||
Customer G
|
- | - | - | - | - | 2% | 15% |
2.
|
Summary of Significant Accounting Policies
, continued
|
3.
|
Liquidity and Capital Resources
|
4.
|
Accounts Receivable Pledged Under Factoring Agreement
|
5.
|
Inventories
|
June 30,
|
December 31,
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
(Unaudited)
|
||||||||||||
Bulk wine
|
$ | 1,816,528 | $ | 3,180,865 | $ | 4,437,741 | ||||||
Bottled wine
|
1,585,371 | 3,342,650 | 5,715,399 | |||||||||
Merchandise and other
|
165,241 | 244,189 | 103,248 | |||||||||
Capitalized cultural costs
|
- | 84,687 | 19,479 | |||||||||
$ | 3,567,140 | $ | 6,852,391 | $ | 10,275,867 |
6.
|
Property and Equipment, net
|
June 30,
|
December 31,
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
(Unaudited)
|
||||||||||||
Land and land improvements
|
$ | 2,742,482 | $ | 2,804,198 | $ | 2,804,198 | ||||||
Building and improvements
|
1,675,713 | 1,635,601 | 1,691,265 | |||||||||
Machinery and equipment
|
320,377 | 474,832 | 960,602 | |||||||||
Vineyard development
|
337,798 | 352,794 | 353,374 | |||||||||
Vineyard equipment
|
329,525 | 329,525 | 329,525 | |||||||||
Furniture and fixtures
|
116,125 | 131,054 | 149,674 | |||||||||
Leasehold improvements
|
4,129 | 65,208 | 67,085 | |||||||||
Vehicles
|
49,450 | 49,450 | 69,450 | |||||||||
5,575,599 | 5,842,662 | 6,425,173 | ||||||||||
Less accumulated depreciation
|
||||||||||||
and amortization
|
(519,816 | ) | (759,553 | ) | (915,669 | ) | ||||||
$ | 5,055,783 | $ | 5,083,109 | $ | 5,509,504 |
7.
|
Goodwill and Intangible Assets, net
|
June 30, |
December 31,
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
(Unaudited)
|
||||||||||||
Finite lives:
|
||||||||||||
Customer lists
|
$ | - | $ | - | $ | 213,000 | ||||||
Trademarks
|
169,000 | |||||||||||
Proprietary technology
|
- | - | 95,000 | |||||||||
Non-compete agreement
|
- | - | 38,000 | |||||||||
Patent
|
- | - | 19,195 | |||||||||
- | - | 534,195 | ||||||||||
Less accumulated amortization
|
- | - | (39,167 | ) | ||||||||
- | - | 495,028 | ||||||||||
Indefinite lives:
|
||||||||||||
Trademarks
|
212,000 | 235,313 | 250,611 | |||||||||
$ | 212,000 | $ | 235,313 | $ | 745,639 |
Years ending June 30:
|
||||
2013
|
$ | 31,206 | ||
2014
|
16,040 | |||
2015
|
16,040 | |||
2016
|
14,762 | |||
2017
|
5,344 | |||
Thereafter
|
48,727 | |||
$ | 132,119 |
8.
|
Other Assets, net
|
June 30, |
December 31,
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
(Unaudited)
|
||||||||||||
Label design costs
|
$ | 2,911 | $ | 80,908 | $ | 67,375 | ||||||
Loan fees
|
28,000 | 28,000 | 17,807 | |||||||||
Lease costs - related party
|
22,750 | 22,750 | 22,750 | |||||||||
Website design costs
|
- | 30,000 | 30,000 | |||||||||
Other
|
4,500 | 10,172 | 14,035 | |||||||||
58,161 | 171,830 | 151,967 | ||||||||||
Less accumulated amortization
|
(12,069 | ) | (29,539 | ) | (25,849 | ) | ||||||
$ | 46,092 | $ | 142,291 | $ | 126,118 |
9.
|
Commitments and Contingencies
|
9.
|
Commitments and Contingencies
, continued
|
June 30,
|
December 31,
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
(Unaudited)
|
||||||||||||
Note payable to a bank; collateralized by a deed of trust on
|
||||||||||||
property, payable monthly in principal and interest payments
|
||||||||||||
of $19,765 through December 31, 2012 at a 7% fixed rate of
|
||||||||||||
interest; variable interest rate thereafter at prime plus 3.25%;
|
||||||||||||
maturing December 2017 (see Note 16).
|
$ | 2,735,074 | $ | 2,687,856 | $ | - | ||||||
Note payable to a bank; collateralized by a deed of trust on
|
||||||||||||
property; payable monthly in principal and interest payments of
|
||||||||||||
$5,000; matures June 2012; variable interest rate of prime plus
|
||||||||||||
1% with a floor of 6.5%; 6.5% at June 30, 2011 and 2012; bank
|
||||||||||||
extended maturity date until financing secured with new bank
|
||||||||||||
(see Note 16).
|
695,000 | 600,000 | - | |||||||||
Auto loan; collateralized by vehicle; payable monthly in principal
|
||||||||||||
payments of $741; matures May 2013; interest free (0% at
|
||||||||||||
June 30, 2011 and 2012 and December 31, 2012).
|
17,039 | 8,149 | 4,445 | |||||||||
Note payable to a bank; collateralized by a deed of trust on
|
||||||||||||
property and equipment; payable monthly in principal payments
|
||||||||||||
of $1,944 plus interest; matures December 2013; variable interest
|
||||||||||||
rate of prime plus 1% with a floor of 6.5%; 6.5% at June 30,
|
||||||||||||
2011 and 2012 (see Note 16).
|
60,505 | 40,576 | - | |||||||||
Note payable to a bank; collateralized by a deed of trust on
|
||||||||||||
property and equipment; payable monthly in principal payments
|
||||||||||||
of $1,662 plus interest; matures February 2013; variable interest
|
||||||||||||
rate of prime plus 1% with a floor of 6.5%; 6.5% at June 30,
|
||||||||||||
2011 and 2012 (see Note 16).
|
30,816 | 12,326 | - | |||||||||
Note payable to a bank; collateralized by a deed of trust on
|
||||||||||||
property and equipment; payable monthly in principal of $2,430
|
||||||||||||
plus interest, and one final principal payment of $2,375 plus
|
||||||||||||
interest in December 2011; variable interest rate of prime plus
|
||||||||||||
.875% with a floor of 6.5%; 6.5% at June 30, 2011.
|
14,525 | - | - | |||||||||
Note payable to a bank; collateralized by a deed of trust on
|
||||||||||||
property; payable in four principal and interest payments of
|
||||||||||||
$2,777 and one final principal and interest payment of $89,390;
|
||||||||||||
matures June 2012; variable interest rate of prime plus 1% with
|
||||||||||||
a floor of 6.5%; 6.5% at June 30, 2012; bank extended maturity
|
||||||||||||
date until financing secured with new bank (see Note 16).
|
- | 80,561 | - |
9.
|
Commitments and Contingencies
, continued
|
9.
|
Commitments and Contingencies
, continued
|
Third
|
Related
|
|||||||||||
Parties
|
Parties
|
Total
|
||||||||||
Years ending June 30:
|
||||||||||||
2013
|
$ | 4,399,815 | $ | 1,347,365 | $ | 5,747,180 | ||||||
2014
|
4,845,707 | 1,086,015 | 5,931,722 | |||||||||
2015
|
4,571,522 | 1,086,015 | 5,657,537 | |||||||||
2016
|
2,726,322 | 230,400 | 2,956,722 | |||||||||
2017
|
357,072 | 6,000 | 363,072 | |||||||||
$ | 16,900,438 | $ | 3,755,795 | $ | 20,656,233 |
9.
|
Commitments and Contingencies
, continued
|
10.
|
Warrant Obligation
|
11.
|
First Right of Refusal, Co-Sale and Buy-Sell
|
12.
|
Members’ Equity (Deficit)
|
13.
|
Fair Value of Financial Instruments
|
Fair Value
|
||||
Balance as of July 1, 2011
|
$ | - | ||
Fair value of warrant obligation at acquisition date
|
196,000 | |||
Adjustment to fair value
|
10,000 | |||
Balance as of June 30, 2012
|
$ | 206,000 |
13.
|
Fair Value of Financial Instruments
, continued
|
Fair Value
|
||||
Balance as of June 30, 2012
|
$ | 206,000 | ||
Adjustment to fair value
|
4,000 | |||
Balance as of December 31, 2012
|
$ | 210,000 |
Weighted average
variables used in
|
||||||||||||
-10% change in
|
valuation as of
|
+10% change in
|
||||||||||
Common Stock Warrant
|
stock price
|
December 31, 2012
|
stock price
|
|||||||||
Effect of a 10% change in stock price
|
|
|||||||||||
Condition changed
|
|
|||||||||||
Stock price
|
$ | 0.206 | $ | 0.229 | $ | 0.252 | ||||||
Assumptions and conditions held constant
|
||||||||||||
Exercise price
|
$ | 0.20 | $ | 0.20 | $ | 0.20 | ||||||
Exercise life in years
|
2.34 | 2.34 | 2.34 | |||||||||
Expected dividend yield
|
0% | 0% | 0% | |||||||||
Risk free rate
|
0.31% | 0.31% | 0.31% | |||||||||
Expected stock volatility
|
60.00% | 60.00% | 60.00% | |||||||||
Estimated fair value of warrant obligation
|
$ | 172,000 | $ | 210,000 | $ | 249,000 |
13.
|
Fair Value of Financial Instruments
, continued
|
Weighted average
variables used in
|
||||||||||||
-10% change in
|
valuation as of
|
+10% change in
|
||||||||||
Common Stock Warrant
|
volatility
|
December 31, 2012
|
volatility
|
|||||||||
Effect of a 10% change in volatility
|
|
|||||||||||
Condition changed
|
50% | 60% | 70% | |||||||||
Expected stock volatility
|
||||||||||||
Assumptions and conditions held constant
|
||||||||||||
Stock Price
|
$ | 0.23 | $ | 0.23 | $ | 0.23 | ||||||
Exercise price
|
$ | 0.20 | $ | 0.20 | $ | 0.20 | ||||||
Exercise life in years
|
2.34 | 2.34 | 2.34 | |||||||||
Expected dividend yield
|
0% | 0% | 0% | |||||||||
Risk free rate
|
0.31% | 0.31% | 0.31% | |||||||||
Estimated fair value of warrant obligation
|
$ | 183,000 | $ | 210,000 | $ | 236,000 |
14.
|
Taxes
|
15.
|
Segment and Other Information
|
Year ended June 30, | ||||||||||||
2011
|
||||||||||||
Wholesale
|
Direct
|
|||||||||||
Sales
|
Sales
|
Total
|
||||||||||
Net sales
|
$ | 4,050,246 | $ | 1,351,799 | $ | 5,402,045 | ||||||
Cost of sales
|
3,355,829 | 545,113 | 3,900,942 | |||||||||
Gross profit
|
$ | 694,417 | $ | 806,686 | $ | 1,501,103 |
Year ended June 30, | ||||||||||||
2012
|
||||||||||||
Wholesale
|
Direct
|
|||||||||||
Sales
|
Sales
|
Total
|
||||||||||
Net sales
|
$ | 10,613,505 | $ | 2,079,890 | $ | 12,693,395 | ||||||
Cost of sales
|
8,810,129 | 807,936 | 9,618,065 | |||||||||
Gross profit
|
$ | 1,803,376 | $ | 1,271,954 | $ | 3,075,330 |
15.
|
Segment and Other Information
, continued
|
16.
|
Subsequent Events
|
16.
|
Subsequent Events
, continued
|
16.
|
Subsequent Events
, continued
|
SEC registration fee
|
$ | 5,939 | ||
FINRA filing fee
|
6,531 | |||
Nasdaq listing fees
|
50,000 | |||
Printer fees and expenses
|
55,000 | |||
Legal fees and expenses
|
400,000 | |||
Accounting fees and expenses
|
65,000 | |||
Transfer agent and registrar fees
|
9,500 | |||
Miscellaneous fees and expenses
|
50,000 | |||
Total
|
$ | 641,970 |
1.1
|
Form of Placement Agency Agreement*
|
3.1
|
Restated Certificate of Incorporation of Truett-Hurst, Inc.*
|
3.2
|
Bylaws of Truett-Hurst, Inc.*
|
3.3
|
Articles of Organization of H.D.D. LLC
|
3.4
|
Third Amended and Restated Operating Agreement of H.D.D. LLC
|
4.1
|
Form of Class A common stock certificate*
|
5.1
|
Opinion of Morrison & Foerster LLP*
|
10.1
|
Wine Supply Agreement by and between H.D.D. LLC and Robert Hall Winery, dated March 10, 2012
|
10.2
|
Member Interest Purchase Agreement by and between Brandon Stauber and H.D.D. LLC, dated August 1, 2012
|
10.3
|
Loan and Security Agreement by and between H.D.D. LLC and Bank of the West, dated July 16, 2012
|
10.4
|
Security Agreement (Trademark) by and between H.D.D. LLC and Bank of the West, dated July 16, 2012
|
10.5
|
Deed of Trust, Security Agreement, Assignment of Leases, Rents, and Profits, and Fixture Filing by and between H.D.D. LLC and First Santa Clara Corporation for the use and benefit of Bank of the West, dated July 16, 2012
|
TRUETT-HURST, INC. | |||
|
|
/s/ Phillip L. Hurst
|
|
Phillip L. Hurst
Chief Executive Officer
|
|||
Signature
|
Title
|
Date
|
||
/s/ Phillip L. Hurst
|
Chief Executive Officer and Chairman
|
March 11, 2013
|
||
Phillip L. Hurst | (Principal Executive Officer) | |||
/s/ James D. Bielenberg
|
Chief Financial Officer |
March 11, 2013
|
||
James D. Bielenberg | (Principal Financial Officer and | |||
|
Principal Accounting Officer)
|
|||
/s/ Paul E. Dolan, III
|
Director
|
March 11, 2013
|
||
Paul E. Dolan, III | ||||
/s/ Barrie Graham
|
Director
|
March 11, 2013
|
||
Barrie Graham | ||||
/s/ William R. Hambrecht
|
Director
|
March 11, 2013
|
||
William R. Hambrecht | ||||
/s/ Daniel A. Carroll
|
Director
|
March 11, 2013
|
||
Daniel A. Carroll | ||||
/s/ Heath E. Dolan
|
Director
|
March 11, 2013
|
||
Heath E. Dolan | ||||
/s/
John D. Fruth
|
Director
|
March 11, 2013
|
||
John D. Fruth
|
||||
/s/
James F. Verhey
|
Director
|
March 11, 2013
|
||
James F. Verhey
|
State of California
Secretary of State
|
ENTITY NAME (End the name with the words "Limited Liability Company," or the abbreviations "LLC' or "L.LC." The words "Limited" and "Company"
may be abbreviated to "Ltd." and "Co.," respectively.)
|
||||
1. NAME OF LIMITED LIABILITY COMPANY | ||||
H.D.D LLC | ||||
PURPOSE
(The following statement is required by statute and should not be altered.)
|
||||
2. THE PURPOSE OF THE LIMITED LIABILITY COMPANY IS TO ENGAGE IN ANY LAWFUL ACT OR ACTIVITY FOR WHICH A LIMITED LIABILITY
COMPANY MAY BE ORGANIZED UNDER THE BEVERLY-KILLEA LIMITED LIABILITY COMPANY ACT.
|
||||
INITIAL AGENT FOR SERVICE OF PROCESS
(if the agent is an Individual, the agent must reside in California and both Items 3 and 4 must be completed. If the agent is a corporation, the agent must have on
file
with
the California Secretary of State a certificate pursuant to Corporations Code section 1505 and Item 3 must be completed (leave Item 4 blank).
|
||||
3. NAME OF INITIAL AGENT FOR SERVICE OF PROCESS
|
||||
MARK DE MEULENAERE | ||||
4. IF AN INDIVIDUAL, ADDRESS OF INITIAL AGENT FOR SERVICE OF PROCESS IN CALIFORNIA CITY
STATE ZIP CODE
|
||||
6 HIGHLAND DR. UKIAH CA 95482 | ||||
MANAGEMENT
(Check only one)
|
||||
5. THE LIMITED LIABILITY COMPANY WILL BE MANAGED
BY:
|
||||
o
ONE MANAGER
|
||||
o
MORE THAN ONE MANAGER
|
||||
x
ALL LIMITED LIABILITY COMPANY MEMBER(S)
|
||||
ADDITIONAL INFORMATION
|
||||
6. ADDITIONAL INFORMATION SET FORTH ON THE ATTACHED PAGES, IF ANY, IS INCORPORATED HEREIN BY THIS REFERENCE AND MADE A PART OF THIS
CERTIFICATE
|
||||
EXECUTION
|
||||
7. I DECLARE I AM THE PERSON WHO EXECUTED THIS INSTRUMENT, WHICH EXECUTION IS MY ACT AND DEED.
|
||||
10/23/07 | /s/ Mark De Meulenaere | |||
Date |
SIGNATURE OF ORGANIZER
|
|||
MARK DE MEULENAERE | ||||
TYPE OR PRINT NAME OF ORGANIZER
|
||||
LLC-1 (REV 04/2007) |
APPROVED BY SECRETARY OF STATE
|
Page
|
|||
ARTICLE I DEFINITIONS |
1
|
||
Section 1.1
|
Definitions
|
1
|
|
Section 1.2
|
Terms Generally
|
9
|
|
ARTICLE II GENERAL PROVISIONS |
10
|
||
Section 2.1
|
Formation
|
10
|
|
Section 2.2
|
Name
|
11
|
|
Section 2.3
|
Term
|
11
|
|
Section 2.4
|
Purpose; Powers
|
11
|
|
Section 2.5
|
Existence and Good Standing; Foreign Qualification
|
11
|
|
Section 2.6
|
Registered Office; Registered Agent; Principal Office; Other Offices
|
12
|
|
Section 2.7
|
No State Law Partnership
|
12
|
|
Section 2.8
|
Admission
|
12
|
|
ARTICLE III CAPITALIZATION |
13
|
||
Section 3.1
|
Units; Initial Capitalization; Schedules
|
13
|
|
Section 3.2
|
Authorization and Issuance of Additional Units
|
13
|
|
Section 3.3
|
Capital Accounts
|
14
|
|
Section 3.4
|
No Withdrawal
|
17
|
|
Section 3.5
|
Loans From Members
|
17
|
|
Section 3.6
|
No Right of Partition
|
17
|
|
Section 3.7
|
Non-Certification of Units; Legend; Units are Securities
|
17
|
|
ARTICLE IV DISTRIBUTIONS |
19
|
||
Section 4.1
|
Distributions
|
19
|
|
Section 4.2
|
Successors
|
19
|
|
Section 4.3
|
Tax Distributions
|
20
|
|
Section 4.4
|
Withholding
|
20
|
|
Section 4.5
|
Security Interest and Right of Set Off; Indemnification
|
20
|
|
Section 4.6
|
Certain Distributions
|
21
|
|
Section 4.7
|
Limitation
|
21
|
|
ARTICLE V ALLOCATIONS |
21
|
||
Section 5.1
|
Allocations for Capital Account Purposes
|
21
|
|
Section 5.2
|
Allocations for Tax Purposes
|
24
|
Page
|
|||
Section 5.3
|
Members’ Tax Reporting
|
26
|
|
Section 5.4
|
Certain Costs and Expenses
|
26
|
|
ARTICLE VI MANAGEMENT |
26
|
||
Section 6.1
|
Managing Member; Delegation of Authority and Duties
|
26
|
|
Section 6.2
|
Officers
|
27
|
|
Section 6.3
|
Liability of Members
|
28
|
|
Section 6.4
|
Indemnification by the Company
|
29
|
|
Section 6.5
|
Investment Representations of Members
|
30
|
|
ARTICLE VII WITHDRAWAL; DISSOLUTION; TRANSFER OF MEMBERSHIP INTERESTS; ADMISSION OF NEW MEMBERS |
30
|
||
Section 7.1
|
Member Withdrawal
|
30
|
|
Section 7.2
|
Dissolution
|
30
|
|
Section 7.3
|
Transfer by Members
|
31
|
|
Section 7.4
|
Admission or Substitution of New Members
|
32
|
|
Section 7.5
|
Additional Requirements
|
33
|
|
Section 7.6
|
Mandatory Exchange
|
34
|
|
Section 7.7
|
Bankruptcy
|
34
|
|
ARTICLE VIII BOOKS AND RECORDS; FINANCIAL STATEMENTS AND OTHER INFORMATION; TAX MATTERS |
34
|
||
Section 8.1
|
Books and Records
|
34
|
|
Section 8.2
|
Information
|
34
|
|
Section 8.3
|
Fiscal Year
|
34
|
|
Section 8.4
|
Certain Tax Matters
|
35
|
|
ARTICLE IX MISCELLANEOUS |
36
|
||
Section 9.1
|
Separate Agreements; Schedules
|
36
|
|
Section 9.2
|
Governing Law
|
36
|
|
Section 9.3
|
Successors and Assigns
|
37
|
|
Section 9.4
|
Amendments and Waivers
|
37
|
|
Section 9.5
|
Notices
|
38
|
|
Section 9.6
|
Counterparts
|
38
|
|
Section 9.7
|
Power of Attorney
|
38
|
|
Section 9.8
|
Entire Agreement
|
39
|
Page
|
|||
Section 9.9
|
Remedies
|
39
|
|
Section 9.10
|
Severability
|
39
|
|
Section 9.11
|
Creditors
|
39
|
|
Section 9.12
|
Waiver
|
39
|
|
Section 9.13
|
Further Action
|
39
|
|
Section 9.14
|
Delivery by Facsimile or Email
|
40
|
MANAGING MEMBER:
|
|||
TRUETT-HURST, INC. | |||
|
By:
|
||
Name: | |||
Title: | |||
OTHER MEMBERS:
|
|||
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
|
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
|
Seller
|
Robert Hall Winery
2975 Mitchell Ranch Way
Paso Robles CA
Contact:
Don Br
a
dy
Phone: 805-239-1616
Fax:
805-239-2464
|
Buyer |
TRUETT & HURST
P.O. Box 1532
5610 Dry Creek Road
Healdsburg CA 95448
Contact: Ginny Lambrix
530- 270-9373; Phil Hurst
707-318-7480
|
DESCRIPTION & APPROXIMATE QUANTTTY:
Central Coast Cabernet Sauvignon wine (52,
0
00 gallons)
Central
Coast
Zinfandel wine
(32,500
gallons)
Central
Coast
Petite
Sirah
wine (13,000 gallons)
Central
Coast Cabernet
Franc
wine
(6,500 gallons)
Central Coast Merlot wine (58,500 gallons)
Central Coast
Syrah wine
(32,500 gal1ons)
All
wine: 100%
Varietal,
1
00
% Vintage,
100%
Central Coast
|
||
UNIT PRICES, DOLLARS/GALLON BY VARIETY BY VINTAGE:
|
||
Cabernet Sauvignon, Zinfandel, Petite Sirah, Cabernet Franc;
|
||
2012, $11.00/Gallon, 2013, $11.50/Gallon, 2014, $12.00/Gallon, 2015, $12.50/Gallon | ||
Merlot, Syrah
|
||
2012, $9.50/Gallon, 2013, $10.00/Gallon, 2014, $10.50/Gallon, 2015, $11.00/Gallon
|
||
All FOB
Robert
Hall Winery, Paso Robles, CA
All based on approval of samples
TERMS
:
33%
due at approval of samples (~1/15 of the year following harvest); balance due in 2 increments of 33% paid at 30 day intervals from the initial due date, or 30 days from delivery if this occurs first.
DATE OF TRANSFER:
Prior to 3/31 of the year following harvest, any balance will be billed at a rate of $0.12/gallon per month of storage
.
|
For: Robert Hall Winery
|
For: Truett & Hurst
|
|||
BW CA 6278
|
||||
3/12/2012 | 3/12/2012 | |||
Signature
|
Date
|
Signature
|
Date
|
|
A.
|
Seller owns fifty percent (50%) of the outstanding membership interests in Wine Spies, LLC, a California limited liability company (the "
Company
").
|
|
B.
|
Buyer desires to purchase from Seller, and the Seller desires to sell to Buyer, all of the membership interests in the Company held by Seller (the "
Purchased Interest
"), on the terms and conditions set forth herein.
|
2.1.
|
Purchase Price
. The aggregate purchase price to be paid by Buyer to Seller for the Purchased Interest shall be Three Hundred Twenty-Five Thousand Dollars ($325,000) (the "
Purchase Price
").
|
2.2.
|
Payment of the Purchase Price
. At the Closing, Buyer shall deliver to Seller (i) Two Hundred Seventy-Five Thousand Dollars ($275,000) by check or wire transfer, and (ii) a non-interest bearing promissory note payable to Seller in the principal amount of Fifty Thousand Dollars ($50,000) in the form attached hereto as
Exhibit A
(the "
Note
"). The Note shall be due and payable on or before March 1, 2013.
|
2.3.
|
Purchase Price Adjustment
.
|
8.
|
Survival and Indemnification
.
|
|
8.2.
|
Indemnification
.
|
|
If to Seller:
|
|
Brandon Stauber
|
|
150 Front Street #24
|
|
Exeter, NH 03833
|
|
With a copy, which shall not constitute notice, to:
|
|
Ronald J. Stauber, Inc.
|
|
1880 Century Park East Suite 315
|
|
Los Angeles, CA 90067
|
|
Attn: Ronald J. Stauber
|
|
If to Buyer
|
|
H.D.D. LLC
|
|
P.O. Box 1532
|
|
Healdsburg, CA 95448
|
|
Attn: Managers
|
|
With a copy, which shall not constitute notice, to:
|
|
Spaulding McCullough & Tansil LLP
|
|
90 South E Street, Suite 200
|
|
Santa Rosa, CA 95404
|
|
Attn: Kevin J. McCullough
|
11.
|
Miscellaneous Provisions
.
|
SELLER:
|
||
/s/ Brandon Stauber | ||
Brandon Stauber
|
||
BUYER:
|
||
H.D.D. LLC.
|
||
a California limited liability company
|
||
By:
|
/s/
Phillip L. Hurst, Manager
|
|
Phillip L. Hurst, Manager
|
|
(a)
|
"Code" shall mean the Uniform Commercial Code of California as amended from time to time.
|
|
(b)
|
"Collateral" shall mean all of Borrower's present and future right, title and interest in and to any and all of the personal property of Borrower whether such property is now existing or hereafter created, acquired or arising and wherever located from time to time, including without limitation:
|
|
(i)
|
accounts;
|
|
(ii)
|
chattel paper;
|
|
(iii)
|
goods;
|
|
(iv)
|
inventory;
|
|
(v)
|
equipment;
|
|
(vi)
|
fixtures;
|
|
(vii)
|
farm products;
|
|
(viii)
|
water rights;
|
|
(ix)
|
instruments;
|
|
(x)
|
investment property;
|
|
(xi)
|
documents;
|
|
(xii)
|
commercial tort claims;
|
|
(xiii)
|
deposit accounts;
|
|
(xiv)
|
letter-of-credit rights;
|
|
(xv)
|
general intangibles;
|
|
(xvi)
|
Real Property;
|
|
(xvii)
|
supporting obligations; and
|
|
(xviii)
|
records of, accession to and proceeds and products of the foregoing.
|
|
(c)
|
"Debtors" shalt mean Borrower's customers who are indebted to Borrower.
|
|
(d)
|
"Obligation(s)" shall mean, without limitation, all loans, advances, indebtedness, notes, liabilities, rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity options, equity or equity index swaps, equity or equity index options, bond options, interest rate options, foreign exchange transactions, cap transactions, floor transactions, collar transactions, forward transactions, currency swap transactions, cross-currency rate swap transactions, currency options and amounts, liquidated or unliquidated, owing by Borrower to the Lender at any time, of each and every kind, nature and description, whether arising under this Agreement or otherwise, and whether secured or unsecured, direct or indirect (that is, whether the same are due directly by Borrower to the Lender; or are due indirectly by Borrower to the Lender as endorser, guarantor or other surety, or as borrower of obligations due third Persons which have been endorsed or assigned to the Lender, or otherwise), absolute or contingent, due or to become due, now existing or hereafter arising or contracted, including, without limitation, payment when due of all amounts outstanding respecting any of the Loan Documents. Said term shall also include all interest and other charges chargeable to Borrower or due from Borrower to the Lender from time to time and all costs and expenses referred to in this Agreement.
|
|
(e)
|
"Person" or "party" shall mean individuals, partnerships, corporations, limited liability companies and all other entities.
|
|
(f)
|
"Real Property" shall mean the real estate legally described in that certain
Deed of Trust
dated
July 16, 2012
in the original aggregate amount of
$3,381,000.00
to be recorded in the Official Records of the County of
Sonoma
, State of
California
, and all improvements located thereon.
|
Trade Name | State of Use | ||
Truett-Hurst Winery | California | ||
VML Russian River Winery | California |
|
(a)
|
Not later than 120 days after the end of H.D.D. LLC's fiscal year, a copy of the annual financial report of H.D.D. LLC for such year, reviewed by a firm of certified public accountants acceptable to Lender.
|
|
(b)
|
Not later than 45 days after the end of each quarter, a copy of H.D.D. LLC's financial statement as of the end of such period.
|
|
(c)
|
Not later than 45 days after the end of each quarter, a copy of the Borrower's collateral position report for such period, which report shall include an aging of accounts receivable and accounts payable and a schedule of inventory specifying the value, cost and quantity thereof and such other information as the Lender may reasonably request.
|
|
(a)
|
Not later than 90 days after the end of Daniel A. Carroll's calendar year, a copy of the annual financial report of Daniel A. Carroll for such year, or if an individual, Daniel A. Carroll's personal financial statement.
|
|
(b)
|
Not later than 30 days after filing with the appropriate Federal agency but in any event no later than October 31
st
of each year, a copy of Daniel A. Carroll's federal tax returns filed for such year.
|
|
(a)
|
Not later than 90 days after the end of Phillip L. Hurst's calendar year, a copy of the annual financial report of Phillip L. Hurst for such year, or if an individual, Phillip L. Hurst's personal financial statement.
|
|
(b)
|
Not later than 30 days after filing with the appropriate Federal agency but in any event no later than October 31
st
of each year, a copy of Phillip L. Hurst's federal tax returns filed for such year.
|
|
(a)
|
Not later than 90 days after the end of Paul E. Dolan, III's calendar year, a copy of the annual financial report of Paul E. Dolan, III for such year, or if an individual, Paul E. Dolan, III's personal financial statement.
|
|
(b)
|
Not later than 30 days after filing with the appropriate Federal agency but in any event no later than October 31
st
of each year, a copy of Paul E. Dolan, III's federal tax returns filed for such year.
|
|
(a)
|
Not later than 90 days after the end of Heath E. Dolan's calendar year, a copy of the annual financial report of Heath E. Dolan for such year, or if an individual, Heath E. Dolan's personal financial statement.
|
|
(b)
|
Not later than 30 days after filing with the appropriate Federal agency but in any event no later than October 31
st
of each year, a copy of Heath E. Dolan's federal tax returns filed for such year.
|
|
(a)
|
Not later than 90 days after the end of The Hambrecht 1980 Revocable Trust's calendar year, a copy of the annual financial report of The Hambrecht 1980 Revocable Trust for such year, or if an individual, The Hambrecht 1980 Revocable Trust's personal financial statement.
|
|
(b)
|
Not later than 30 days after filing with the appropriate Federal agency but in any event no later than October 31
st
of each year, a copy of The Hambrecht 1980 Revocable Trust's federal tax returns filed for such year.
|
|
(a)
|
Not later than 90 days after the end of William R. Hambrecht's calendar year, a copy of the annual financial report of William R. Hambrecht for such year, or if an individual, William R. Hambrecht's personal financial statement.
|
|
(b)
|
Not later than 30 days after filing with the appropriate Federal agency but in any event no later than October 31 st of each year, a copy of William R. Hambrecht's federal tax returns filed for such year. |
|
(a)
|
Not later than 90 days after the end of Hambrecht Wine Group L.P.'s calendar year, a copy of the annual financial report of Hambrecht Wine Group L.P. for such year, or if an individual, Hambrecht Wine Group L.P.'s personal financial statement.
|
|
(b)
|
Not later than 30 days after filing with the appropriate Federal agency but in any event no later than October 31st of each year, a copy of Hambrecht Wine Group L,P.'s federal tax returns filed for such year.
|
|
(a)
|
from time to time, such financial data and information about Borrower as Lender may reasonably request; and
|
|
(b)
|
any financial data and information about any guarantors of the Obligations as Lender may reasonably request.
|
|
(a)
|
Definitions.
|
|
(b)
|
Current Ratio
. Borrower shall maintain a ratio of Current Assets to Current Liabilities of not less than
1.50
to 1.0, to be measured on a quarterly basis.
|
|
(c)
|
Debt to Effective Tangible Net Worth
. Borrower shall maintain a ratio of Debt to Effective Tangible Net Worth of not more than
2.00
to 1.0, to be measured on a quarterly basis.
|
|
(d)
|
Debt Service
Coverage
Ratio
. Borrower shall maintain a ratio of EBITDA minus distributions plus contributions to the sum of interest Expense and the Current Portion of Long-Term Debt of not less than
1.25
to 1.0 at each fiscal year-end.
|
|
(i)
|
Attend to and care for the crops and do or cause to be done any and all acts that may at any time be appropriate or necessary to grow, farm, cultivate, irrigate, fertilize, fumigate, prune, harvest, pick, clean, preserve and protect the crops.
|
|
(ii)
|
Not commit or suffer to be committed any waste of or damage to the crops.
|
|
(iii)
|
Permit the Lender and any of its agents, employees or representatives to enter upon Borrower's premises at any reasonable time and from time to time for the purpose of examining and inspecting the crops.
|
|
(iv)
|
Harvest and prepare the crops for market and promptly notify the Lender when any of the crops are ready for market.
|
|
(vi)
|
Comply with any requirements or instructions of the Lender with respect to hauling, shipping, storing, marketing and otherwise preparing, handling and disposing of the crops.
|
|
(i)
|
Except as provided herein below, Borrower's inventory shall, at all times, be in Borrower's physical possession, or other location(s) acceptable to Lender, and shall not be held by others on consignment, sale on approval, or sale or return.
|
|
(ii)
|
Borrower shall keep correct and accurate records.
|
|
(iii)
|
All inventory shall be of good and merchantable quality, free from defects.
|
|
(iv)
|
The inventory shall not at any time or times hereafter be stored with a bailee, warehouseman or similar party without the Lender's prior written consent and, in such event, Borrower will concurrently therewith cause any such bailee, warehouseman or similar party to issue and deliver to the Lender, in form acceptable to the Lender, warehouse receipts in the Lender's name evidencing the storage of inventory.
|
|
(v)
|
Borrower shall, at any reasonable time and from time to time, allow Lender to have the right, upon demand, to inspect and examine inventory and to check and test the same as to quality, quantity, value and condition and Borrower agrees to reimburse the Lender for the Lender's reasonable costs and expenses in so doing.
|
|
(i)
|
Borrower's equipment (the "Equipment") shall at all times be in Borrower's physical possession or other location(s) acceptable to Lender and shall not be held for sale or lease.
|
|
(ii)
|
Borrower shall not secrete, abandon or remove, or permit the removal of, the Equipment, or any part thereof, from Borrower's physical possession or other location(s) acceptable to Lender or remove or permit to be removed any accessories now or hereafter placed upon the Equipment.
|
|
(iii)
|
Upon the Lender's demand, Borrower shall immediately provide the Lender with a complete and accurate description of the Equipment including, as applicable, the make, model, identification number and serial number of each item of Equipment. In addition, Borrower shall immediately notify the Lender of the acquisition of any new or additional Equipment or the replacement of any existing Equipment and shall supply the Lender with a complete description of any such additional or replacement Equipment.
|
|
(iv)
|
Borrower shall, at Borrower's sole cost and expense, keep and maintain the Equipment in a good state of repair and shall not destroy, misuse, abuse, illegally use or be negligent in the care of the Equipment or any part thereof. Borrower shall not remove, destroy, obliterate, change, cover, paint, deface or alter the name plates, serial numbers, labels or other distinguishing numbers or identification marks placed upon the Equipment or any part thereof by or on behalf of the manufacturer, any dealer or rebuilder thereof, or the Lender. Borrower shall not be released from any liability to the Lender hereunder because of any injury to or loss or destruction of the Equipment. Borrower shall allow the Lender and its representatives free access to and the right to inspect the Equipment at all times and shall comply with the terms and conditions of any leases covering the real property on which the Equipment is located and any orders, ordinances, laws, regulations or rules of any federal, state or municipal agency or authority having jurisdiction of such real property or the conduct of the business of the Persons having control or possession of the Equipment.
|
|
(v)
|
The Equipment is not now and shall not at any time hereafter be so affixed to the real property on which it is located as to become a fixture or a part thereof. The Equipment is now and shall at all times hereafter be and remain personal property of Borrower.
|
|
(a)
|
default of any liability, obligation, covenant or undertaking of Borrower or any guarantor of the Obligations to the Lender, hereunder or otherwise, including, without limitation, failure to pay in full and when due any installment of principal or default of Borrower or any guarantor of the Obligations under any other Loan Document or any other agreement with the Lender continuing for 5 days with respect to the payment of interest, or continuing for 30 days with respect to any other default;
|
|
(b)
|
failure of Borrower or any guarantor of the Obligations to maintain or cause to maintain aggregate collateral security value satisfactory to the Lender;
|
|
(c)
|
default of any material liability, obligation or undertaking of Borrower or any guarantor of the Obligations to any other party;
|
|
(d)
|
if any statement, representation or warranty heretofore, now or hereafter made by Borrower or any guarantor of the Obligations in connection with this Agreement or in any supporting financial statement of Borrower or any guarantor of the Obligations shall be determined by the Lender to have been false or misleading in any material respect when made;
|
|
(e)
|
if Borrower or any guarantor of the Obligations is a corporation, trust, partnership or limited liability company, the liquidation, termination or dissolution of any such organization, or the merger or consolidation of such organization into another entity, or Borrower ceasing to carry on actively its present business or the appointment of a receiver for its property;
|
|
(f)
|
the death of Borrower or any guarantor of the Obligations and, if Borrower or any guarantor of the Obligations is a partnership or limited liability company, the death of any partner or member;
|
(g)
|
for a corporation, there shall occur a sale, transfer, disposition or encumbrance (whether voluntary or involuntary), or an agreement shall be entered into to do so, with respect to more than 10% of the issued and outstanding capital stock of Borrower; |
|
(h)
|
for a general, partnership, limited partnership, or limited liability partnership, there shall occur a change in any general partner or a change affecting the control of Borrower; or for a limited liability company, there shall occur a change in any manager or member or a change affecting the control of Borrower;
|
|
(i)
|
Borrower or any guarantor shall: (i) become insolvent or be unable to pay its debts as they mature; (ii) make an assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its properties and assets; (iii) file a voluntary petition in bankruptcy or seeking reorganization or to effect a plan or other arrangement with creditors; (iv) file an answer admitting the material allegations of an involuntary petition relating to bankruptcy or reorganization or join in any such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or consent to the appointment of, or consent that an order be made, appointing any receiver, custodian or trustee, for itself or any of its properties, assets or businesses; or (vii) in an involuntary proceeding, any receiver, custodian or trustee shall have been appointed for all or substantial part of Borrower's or guarantor's properties, assets or businesses and shall not be discharged within 30 days after the date of such appointment;
|
|
(j)
|
the service upon the Lender of a writ in which the Lender is named as trustee of Borrower or any guarantor of the Obligations;
|
|
(k)
|
a judgment or judgments for the payment of money shall be rendered against Borrower or any guarantor of the Obligations, and any such judgment shall remain unsatisfied and in effect for any period of 30 consecutive days without a stay of execution;
|
|
(l)
|
any levy, lien (including mechanics lien), seizure, attachment, execution or similar process shall be issued or levied on any of the property of Borrower or any guarantor of the Obligations;
|
|
(m)
|
any subordination agreement or any other Loan Document shall be revoked or limited or its enforceability or validity shall be contested by any signatory thereto, by operation of law, legal proceeding or otherwise;
|
|
(n)
|
the termination or revocation of any guaranty of the Obligations;
|
|
(o)
|
water is or is projected to be insufficient in amount or unsuitable in quality, as determined by the Lender in either case, to conduct operations as described in the most recent budget provided by Borrower to Lender if required or in projections or by information provided by Borrower to the Lender; or
|
|
(p)
|
the occurrence of such a change in the condition or affairs (financial or otherwise) of Borrower or any guarantor of the Obligations, or the occurrence of any other event or circumstance, such that the Lender, in its sole discretion, deems that it is insecure or that the prospects for timely or full payment or performance of any obligation of Borrower or any guarantor of the Obligations to the Lender has been or may be impaired.
|
|
(i)
|
Close-Out Date
shall mean the Business Day on which the Lender closes out and liquidates an FX Transaction.
|
|
(ii)
|
Closing Value
. The Lender shall calculate value of such canceled FX Transaction by converting (1) in the case of a FX Transaction whose Settlement Date is the same as or later than the Close-Out Date, the amount of Foreign Currency into US dollars at a rate of exchange at which the Lender can buy or sell US dollars with or against the Foreign Currency for delivery on the Settlement Date of the relevant FX Transaction; or (2) in the case of a FX Transaction whose Settlement Date precedes the Close-Out Date, the amount of the Foreign Currency adjusted by adding interest with respect thereto at the rate then in effect from the Settlement Date to the Close-Out Date, into US Dollars at a rate of exchange at which the Lender can buy or sell US dollars with or against the Foreign Currency for delivery on the Close-Out Date.
|
|
(iii)
|
Closing Gain or Loss
. (1) For a FX Transaction for which the Lender agreed to purchase a Foreign Currency, the amount by which the Closing Value exceeds the Notional Value shall be a Closing Loss and the amount by which the Closing Value is less than the Notional Value shall be a Closing Gain; and (2) For a FX Transaction for which the Lender agreed to sell a Foreign Currency, the amount by which the Closing Value exceeds the Notional Value shall be a Closing Gain and the amount by which the Closing Value is less than the Notional Value shall be a Closing Loss.
|
|
|
(iv)
|
Net Present Value
. The Closing Gain or Closing Loss for each Settlement Date falling after the Close-out Date will be discounted by the Lender to it net present value.
|
|
(v)
|
Payment
. To the extent that the net amount of the aggregate Closing Gains exceeds the Closing Losses, such amount shall be payable by the Lender to Borrower. To the extent that the aggregate net amount of the Closing Losses exceeds the Closing Gains, such amount shall be payable by Borrower to the Lender.
|
|
(i)
|
If the crops or any portion or portions thereof become infected by disease or are destroyed by order of any local, state or federal authority, and, by reason thereof, Borrower is entitled to be indemnified by such authority, Borrower hereby assigns to the Lender any and all such sums due from such authority, and the Lender is hereby authorized to receive, collect and sue for the same, and Borrower hereby orders and directs that any such sums be paid directly to the Lender.
|
|
(ii)
|
In addition, Borrower hereby assigns and transfers to the Lender all of Borrower's rights and interests in and to any monies now or hereafter placed in any funds of any marketing association, corporation, cooperative, partnership, firm or individual now, heretofore or hereafter handling or having to do with any of the crops now growing or heretofore or hereafter grown in Borrower's farming operations or connected with the growing, marketing, farming or other handling of such crops and except to the extent Borrower is prohibited from doing so under any applicable agreement, Borrower hereby assigns and transfers to the Lender all stock and all other interests, benefits and rights of Borrower in any such marketing association, corporation, cooperative, partnership, firm or individual having anything to do with such crops and all monies due or becoming due to Borrower from any one or more of them.
|
Borrower:
H.D.D LLC
|
||
By:
|
/s/ Phillip L. Hurst | |
Phillip L. Hurst, Manager
|
||
By:
|
/s/ William R. Hambrecht | |
William R. Hambrecht, Manager
|
||
By:
|
/s/ Paul E. Dolan, III | |
Paul E. Dolan, III, Manager
|
||
By: | /s/ Heath E. Dolan | |
Heath E. Dolan, Manager
|
||
By: | /s/ J. Barrie Graham | |
J. Barrie Graham, Manager
|
||
By:
|
/s/ Daniel A. Carroll | |
Daniel A. Carroll, Manager
|
Accepted: Bank of the West | ||
|
||
By: | /s/ Jeff Clark | |
Name: Jeff Clark | ||
Title: Vice President |
Borrower:
H.D.D LLC
|
||
By:
|
/s/ Phillip L. Hurst | |
Phillip L. Hurst, Manager
|
||
By:
|
/s/ William R. Hambrecht | |
William R. Hambrecht, Manager
|
||
By:
|
/s/ Paul E. Dolan, III | |
Paul E. Dolan, III, Manager
|
||
By: | /s/ Heath E. Dolan | |
Heath E. Dolan, Manager
|
||
By: | /s/ J. Barrie Graham | |
J. Barrie Graham, Manager
|
||
By:
|
/s/ Daniel A. Carroll | |
Daniel A. Carroll, Manager
|
Accepted: Bank of the West | ||
|
||
By: | /s/ Jeff Clark | |
Name: Jeff Clark | ||
Title: Vice President |
WORD/MARK
|
SERIAL NUMBER
|
FILING DATE
|
REGISTRATION DATE
|
REGISTRATION NUMBER
|
TRUETT HURST
|
77374759
|
January 17, 2008
|
April 21, 2009
|
3609857
|
(a)
|
This Deed of Trust has been duly executed and delivered by the Trustor and is the legal, valid and binding obligation of the Trustor enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally;
|
(b)
|
The Trustor is the sole legal owner of the Property, holding good and marketable fee simple title to the Property, subject to no liens, encumbrances, leases, security interests or rights of others, other than as set forth in detail in Exhibit B hereto (the "Permitted Encumbrances");
|
(c)
|
The Trustor is the sole legal owner of the entire lessor's interest in Leases, if any, with full power of attorney to encumber the Property in the manner set forth herein, and the Trustor has not executed any other assignment of Leases or any of the rights or rents arising thereunder;
|
(d)
|
As of the date hereof, there are no Hazardous Substances (as hereinafter defined) in, on or under the Property, except as disclosed in writing to and acknowledged by the Beneficiary; and
|
(e)
|
Each Obligation is a commercial obligation and does not represent a loan used for personal, family or household purposes and is not a consumer transaction.
|
(a)
|
Sell, convey, assign, transfer, mortgage, pledge, hypothecate, lease or dispose of all or any part of any legal or beneficial interest in the Trustor or the Property or any part thereof or permit any of the foregoing, except as expressly permitted by the terms of this Deed of Trust;
|
(b)
|
Permit the use, generation, treatment, storage, release or disposition of any oil or other material or substance constituting hazardous waste or hazardous materials or substances under any applicable Federal or state law, regulation or rule ("Hazardous Substances"); or
|
(c)
|
Permit to be created or suffer to exist any mortgage, lien, security interest, attachment or other encumbrance or charge on the Property or any part thereof or interest therein (except for the Permitted Encumbrances), including, without limitation, (i) any lien arising under any Federal, state or local statute, rule, regulation or law pertaining to the release or cleanup of Hazardous Substances and (ii) any mechanics' or materialmen's lien. The Trustor further agrees to give the Beneficiary prompt written notice of the imposition, or notice, of any lien referred to in this Section and to take any action necessary to secure the prompt discharge or release of the same. The Trustor agrees to defend its title to the Property and the Beneficiary’s interest therein against the claims of all persons and, unless the Beneficiary requests otherwise, to appear in and diligently contest, at the Trustor's sole cost and expense, any action or proceeding that purports to affect the Trustor's title to the Property or the priority or validity of this Deed of Trust or the Beneficiary's interest hereunder.
|
(a)
|
The Trustor will not permit the Property to be used for any unlawful or improper purpose, will at all times comply with all Federal, state and local laws, ordinances and regulations, and the provisions of any Lease, easement or other agreement affecting all or any part of the Property, and will obtain and maintain all governmental or other approvals relating to the Trustor, the Property or the use thereof, including without limitation, any applicable zoning or building codes or regulations and any laws or regulations relating to the handling, storage, release or cleanup of Hazardous Substances, and will give prompt written notice to the Beneficiary of (i) any violation of any such law, ordinance or regulation by the Trustor or relating to the Property, (ii) receipt of notice from any Federal, state or local authority alleging any such violation and (iii) the presence or release on the Property of any Hazardous Substances;
|
(c)
|
Trustor will not enter into or modify the Leases in any material respect without the prior written consent of the Beneficiary, execute any assignment of the Leases except in favor of the Beneficiary, or accept any rentals under any Lease for more than one month in advance and will at all times perform and fulfill every term and condition of the Leases;
|
(d)
|
Trustor will at all times (i) maintain complete and accurate records and books regarding the Property in accordance with generally accepted accounting principles and (ii) permit the Beneficiary and the Beneficiary's agents, employees and representatives, at such reasonable times as the Beneficiary may request, to enter and inspect the Property and such books and records; and
|
(e)
|
Trustor will at all times keep the Property in good and first-rate repair and condition (damage from casualty not excepted) and will not commit or permit any strip, waste, impairment, deterioration or alteration of the Property or any part thereof.
|
(a)
|
Declare the Obligations due and payable, and the Obligations shall thereupon become immediately due and payable, without presentment, protest, demand or notice of any kind, all of which are hereby expressly waived by the Trustor except for Obligations due and payable on demand, which shall be due and payable on demand whether or not an event of default has occurred hereunder;
|
(b)
|
Direct the Trustee to, or enter, take possession of, manage and operate the Property (including all personal property and all records and documents pertaining thereto) and any part thereof and exclude the Trustor therefrom, take all actions it deems necessary or proper to preserve the Property and operate the Property as a mortgagee in possession with all the powers as could be exercised by a receiver or as otherwise provided herein or by applicable law; provided, however, the entry by the Beneficiary upon the Property for any reason shall not cause the Trustee or the Beneficiary to be a mortgagee in possession, except upon the express written declaration of the Beneficiary;
|
(c)
|
With or without taking possession, by itself or through a receiver, receive and collect all rents, income, issues and profits ("Rents") from the Property (including all real estate and personal property and whether past due or thereafter accruing), including as may arise under the Leases, and the Trustor appoints the Beneficiary as its true and lawful attorney with the power for the Beneficiary in its own name and capacity to demand and collect Rents and take any action that the Trustor is authorized to take under the Leases. The Beneficiary shall (after payment of all costs and expenses incurred) apply any Rents received by it to the Obligations in such order as the Beneficiary determines, or in accordance with any applicable statute, and the Trustor agrees that exercise of such rights and disposition of such funds shall not be deemed to cure any default or constitute a waiver of any foreclosure once commenced nor preclude the later commencement of foreclosure for breach thereof. The Beneficiary shall be liable to account only for such Rents actually received by the Beneficiary. Lessees under the Leases are hereby authorized and directed, following notice from the Beneficiary, to pay all amounts due the Trustor under the Leases to the Beneficiary, whereupon such lessees shall be relieved of any and all duty and obligation to the Trustor with respect to such payments so made
|
(d)
|
In addition to any other remedies, to sell the Property or any part thereof or interest therein pursuant to exercise of its power of sale or otherwise at public auction on terms and conditions as the Beneficiary may determine, or otherwise foreclose this Deed of Trust in any manner permitted by law, and upon such sale the Trustor shall execute and deliver such instruments as the Beneficiary may request in order to convey and transfer all of the Trustor's interest in the Property, and the same shall operate to divest all rights, title and interest of the Trustor in and to the Property. In the event this Deed of Trust shall include more than one parcel of property or subdivision (each hereinafter called a "portion"), the Beneficiary shall, in its sole and exclusive discretion and to the extent permitted by applicable law, be empowered to foreclose upon any such portion without impairing its right to foreclose subsequently upon any other portion or the entirety of the Property from time to time thereafter. In addition, the Beneficiary may in its sole and exclusive discretion subordinate this Deed of Trust to one or more Leases for the sole purpose of preserving any such Lease in the event of a foreclosure;
|
(e)
|
Choose to dispose of some or all of the Property in any combination consisting of both real and personal property, together in one sale, public or private, to held in accordance with law and procedures applicable to real property, as permitted by Section 9604 of the Uniform Commercial Code. Trustor agrees that such a sale of personal property together with real property constitutes a commercially reasonable sale of the personal property. Before any sale, Beneficiary or Trustee shall give such notice of default and election to sell as may then be required by law. When all time periods then legally mandated have expired, and after such notice of sate as may then be legally required has been given, Trustee may sell the property being sold at a public auction to be held at the time and place specified in the notice of sale. Neither Trustee nor Beneficiary shall have any obligation to make demand on Trustor before any sale, From time to time in accordance with then applicable law, Trustee may, and in any event at Beneficiary's request shall, postpone any sale by public announcement at the time and place noticed for that sale. Notwithstanding the foregoing, Beneficiary shall be under no obligation to consummate a sale if, in its judgment, none of the offers received by it equals the fair value of the property offered for sale. At any sale, any person including Beneficiary may bid for and acquire the property or any part thereof to the extent permitted by then applicable law. Instead of paying cash for such property, Beneficiary may settle for the purchase price by crediting the sales price of the property against the expenses of sale, costs of any action and any other sums for which Trustor is obligated to pay or reimburse Beneficiary or Trustee under this Deed of Trust and all other Obligations in any order and proportion as Beneficiary in its sole discretion may choose. The foregoing procedures do not constitute the only procedures that may be commercially reasonable and, Beneficiary and Trustee may choose, for example, if the Property consists of more than one parcel, to sell and dispose of such parcels in separate or combined sales in such order as Beneficia
ry
may elect. The proceeds of any such disposition of Property shall not cure any Event of Default or reinstate any Obligations for purposes of Section 2924c of the California Civil Code. For purposes of this power of sale, either a sale of real prope
rt
y alone, or a sale of both real and personal prope
rt
y together in accordance with Uniform Commercial Code Section 9604, will sometimes be referred to as a "Trustee's Sale";
|
(f)
|
In accordance with Section 736 of the California Code of Civil Procedure, Beneficiary may bring an action for breach of contract against Trustor for breach of any "environmental provision" (as such term is defined in such Section) made by Trustor herein or in any other Loan Document for the recovery of damages and/or the enforcement of the environmental provision. In accordance with the California Code of Civil Procedure, Section 726.5, Beneficiary may waive the security under this Deed of Trust with respect to any parcel of the Property that is "environmentally impaired" or is an "affected property" (as such terms are defined in such Section), and as to any personal property which is attached to such parcel, and thereafter exercise against Trustor, to the extent permitted by such Section, the rights and remedies of an unsecured creditor, including reduction of Beneficiary's claim against Trustor to judgment, and any other rights and remedies permitted by law. In the event Beneficiary elects, in accordance with the California Code of Civil Procedure, Section 726.5, to waive all or part of the security under this Deed of Trust and proceed against Trustor on an unsecured basis, the valuation of the real property, the determination of the environmentally impaired status of such security and any cause of action for money judgment shall, at the request of Beneficiary, be referred to a referee in accordance with the California Code of Civil Procedure, Section 638 et seq. Such referee shall be an M.A.I. appraiser selected by Beneficiary and approved by Trustor, which approval shall not be unreasonably withheld or delayed. The decision of such referee shall be binding upon both Beneficiary and Trustor and judgment upon the award rendered by such referee shall be entered in the court in which such proceeding was commenced in accordance with the California Code of Civil Procedure, Sections 644 and 645. Trustor shall pay all costs and expenses incurred by Beneficiary in connection with any proceeding under the California Code of Civil Procedure, Section 726.5;
|
(g)
|
Cause one or more environmental assessments to be taken, arrange for the cleanup of any Hazardous Substances or otherwise cure the Truste's failure to comply with any statute, regulation or ordinance relating to the presence or cleanup of Hazardous Substances, and the Trustor shall provide the Beneficiary or its agents with access to the Property for such purposes; provided that the exercise of any of such remedies shall not be deemed to have relieved the Trustor from any responsibility therefor or given the Beneficiary "control" over the Property or cause the Beneficiary to be considered to be a mortgagee in possession, "owner" or "operator" of the Property for purposes of any applicable law, rule or regulation pertaining to Hazardous Substances; and
|
(h)
|
Take such other actions or proceedings as the Beneficiary deems necessary or advisable to protect its interest in the Property and ensure payment and performance of the Obligations, including, without limitation, appointment of a receiver (and the Trustor hereby waives any right to object to such appointment) and exercise of any of the Beneficiary's remedies provided herein or in any other document evidencing, securing or relating to any of the Obligations or available to a secured party under the Uniform Commercial Code or under other applicable law.
|
Trustor:
H.D.D. LLC
|
||
By:
|
/s/ Phillip L. Hurst | |
Phillip L. Hurst, Manager
|
||
By:
|
/s/ William R. Hambrecht | |
William R. Hambrecht, Manager
|
||
By:
|
/s/ Paul E. Dolan, III | |
Paul E. Dolan, III, Manager
|
||
By:
|
/s/ Heath E. Dolan | |
Heath E. Dolan, Manager
|
||
By:
|
/s/ J. Barrie Graham | |
J. Barrie Graham, Manager
|
||
By:
|
/s/ Daniel A. Carroll | |
Daniel A. Carroll, Manager
|
||
|
WITNESS my hand and official seal.
|
[Notary Seal] |
Signature /s/ Morgan Merritt (Seal) |
WITNESS my hand and official seal.
|
[Notary Seal] |
Signature /s/ Rachael Manning (Seal) |
WITNESS my hand and official seal.
|
[Notary Seal] |
Signature /s/ Rachael Manning (Seal) |
WITNESS my hand and official seal.
|
|
Signature _______________________ (Seal) |
WITNESS my hand and official seal.
|
|
Signature _______________________ (Seal) |
WITNESS my hand and official seal.
|
[Notary Seal] |
Signature /s/ Allison Corado (Seal) |
WITNESS my hand and official seal.
|
[Notary Seal] |
Signature /s/ Rachael Manning (Seal) |
WITNESS my hand and official seal.
|
[Notary Seal] |
Signature /s/ Rachael Manning (Seal) |
Borrower:
|
|||||
H.D.D LLC
|
|||||
|
By:
|
/s/ Phillip L. Hurst | |||
Phillip L. Hurst, Manager | |||||
By:
|
/s/ William R. Hambrecht | ||||
William R. Hambrecht, Manager
|
|||||
By:
|
/s/ Paul E. Dolan, III | ||||
Paul E. Dolan, III, Manager
|
|||||
By:
|
/s/ Heath E. Dolan | ||||
Heath E. Dolan, Manager
|
|||||
By:
|
/s/ J. Barrie Graham | ||||
J. Barrie Graham, Manager
|
|||||
By:
|
/s/ Daniel A. Carroll | ||||
Daniel A. Carroll, Manager
|
Borrower:
|
|||||
H.D.D LLC
|
|||||
|
By:
|
/s/ Phillip L. Hurst | |||
Phillip L. Hurst, Manager | |||||
By:
|
/s/ William R. Hambrecht | ||||
William R. Hambrecht, Manager
|
|||||
By:
|
/s/ Paul E. Dolan, III | ||||
Paul E. Dolan, III, Manager
|
|||||
By:
|
/s/ Heath E. Dolan | ||||
Heath E. Dolan, Manager
|
|||||
By:
|
/s/ J. Barrie Graham | ||||
J. Barrie Graham, Manager
|
|||||
By:
|
/s/ Daniel A. Carroll | ||||
Daniel A. Carroll, Manager
|
Borrower:
H.D.D LLC
|
||
By:
|
/s/ Phillip L. Hurst | |
Phillip L. Hurst, Manager
|
||
By:
|
/s/ William R. Hambrecht | |
William R. Hambrecht, Manager
|
||
By:
|
/s/ Paul E. Dolan, III | |
Paul E. Dolan, III, Manager
|
||
By: | /s/ Heath E. Dolan | |
Heath E. Dolan, Manager
|
||
By: | /s/ J. Barrie Graham | |
J. Barrie Graham, Manager
|
||
By:
|
/s/ Daniel A. Carroll | |
Daniel A. Carroll, Manager
|
||
5610 Dry Creek Road
Healdsburg, California
95448
|
Borrower:
H.D.D LLC
|
||
By:
|
/s/ Phillip L. Hurst | |
Phillip L. Hurst, Manager
|
||
By:
|
/s/ William R. Hambrecht | |
William R. Hambrecht, Manager
|
||
By:
|
/s/ Paul E. Dolan, III | |
Paul E. Dolan, III, Manager
|
||
By: | /s/ Heath E. Dolan | |
Heath E. Dolan, Manager
|
||
By: | /s/ J. Barrie Graham | |
J. Barrie Graham, Manager
|
||
By:
|
/s/ Daniel A. Carroll | |
Daniel A. Carroll, Manager
|
a)
|
"Interest Period" shall mean,
|
i)
|
with respect to any LIBOR Rate Balance, one month.
|
b)
|
"LIBOR Rate" shall mean the rate determined by the Lender as being the U.S. dollar London Interbank Offered Rate for such periods appearing on the Bloomberg British Bankers Association LIBOR page BBAM - Official BBA LIBOR Fixing at approximately 11:00 a.m. (London time) on the second Business Day prior to requesting a LIBOR Rate Balance, or on the second Business Day prior to the initial draw, or on the second Business Day prior to the next Interest Period.
|
c)
|
"One-Month LIBOR Rate" shall mean, on any day, the rate determined by the Lender as being the U. S. dollar London Interbank Offered Rate for an interest period of one month appearing on the Bloomberg British Bankers Association LIBOR page BBAM - Official BBA LIBOR Fixing at approximately 11:00 a.m. (London time).
|
Borrower: | |
H.D.D LLC
|
|
By:
|
/s/ Phillip L. Hurst |
Phillip L. Hurst, Manager
|
|
By:
|
/s/ William R. Hambrecht |
William R. Hambrecht, Manager
|
|
By:
|
/s/ Paul E. Dolan, III |
Paul E. Dolan, III, Manager
|
|
By:
|
/s/ Heath E. Dolan |
Heath E. Dolan, Manager
|
|
By:
|
/s/ J. Barrie Graham |
J. Barrie Graham, Manager
|
|
By:
|
/s/ Daniel A. Carroll |
Daniel A. Carroll, Manager
|
|
5610 Dry Creek Road
Healdsburg, California
95448
|
|
(a)
|
The person executing this Agreement is duly authorized to do so and to bind the Borrower to the terms hereof;
|
|
(b)
|
Each of the Loan Documents is a valid and legal binding obligation of the Borrower, enforceable in accordance with its terms, and is not subject to any defenses, counterclaims, or offsets of any kind;
|
|
(c)
|
All financial statements delivered to the Lender were true, accurate and complete, in all material respects, as of the date of delivery to the Lender;
|
|
(d)
|
Since the date of the Loan Documents there has been no material adverse change in the condition, financial or otherwise, of the Borrower, except as disclosed to the Lender in writing;
|
|
(e)
|
There exists no action, suit, proceeding or investigation, at law or in equity, before any court, board, administrative body or other entity, pending or threatened, affecting the Borrower or its property, wherein an unfavorable decision, ruling or finding would materially adversely affect the business operations, property or financial condition of the Borrower; and
|
|
(f)
|
There exists no event of default, or other circumstance that with the passage of time or giving of notice or both will become an event of default, under any of the Loan Documents.
|
Borrower:
|
|||
|
|||
|
|||
H.D.D. LLC
|
|||
|
|||
|
|||
|
By:
|
/s/ Phillip L. Hurst | |
|
|
Phillip L. Hurst, Manager
|
|
|
|||
|
|||
|
By:
|
/s/ William R. Hambrecht | |
|
|
William R. Hambrecht, Manager
|
|
|
|||
|
|||
|
By:
|
/s/ Paul E. Dolan | |
|
|
Paul E. Dolan, III, Manager
|
|
|
|||
|
|||
|
By:
|
/s/ Heath E. Dolan | |
|
|
Heath E. Dolan, Manager
|
|
|
|||
|
|||
|
By:
|
/s/ J. Barrie Graham | |
|
|
J. Barrie Graham, Manager
|
|
|
|||
|
|||
|
By:
|
/s/ Daniel A. Carroll | |
|
|
Daniel A. Carroll, Manager
|
By:
|
/s/ Jeffrey Clark | |
Name:
|
Jeffrey Clark
|
|
Title:
|
Vice President
|
Borrower:
|
|||||
H.D.D LLC
|
|||||
|
By:
|
/s/ Phillip L. Hurst | |||
Phillip L. Hurst, Manager | |||||
By:
|
/s/ William R. Hambrecht | ||||
William R. Hambrecht, Manager
|
|||||
By:
|
/s/ Paul E. Dolan, III | ||||
Paul E. Dolan, III, Manager
|
|||||
By:
|
/s/ Heath E. Dolan | ||||
Heath E. Dolan, Manager
|
|||||
By:
|
/s/ J. Barrie Graham | ||||
J. Barrie Graham, Manager
|
|||||
By:
|
/s/ Daniel A. Carroll, | ||||
Daniel A. Carroll, Manager
|
|
1.
|
Master Equipment Financing Agreement
|
|
2.
|
Schedule No. 100-0022757-001
|
|
3.
|
Schedule A - Equipment Description
|
|
4.
|
Insurance Authorization
|
|
5.
|
Automatic Transfer and Authorization Control Agreement – please complete this form if you would like to establish an automatic debit for the loan payments.
|
|
6.
|
Closing Invoice
|
Please overnight the executed documents and your check to:
|
Bank of the West / DEF 951
|
Direct Equipment Finance - Attn: Lynn Mifune
|
|
2527 Camino Ramon, NC-B07-3F-V
|
|
San Ramon, CA 94583
|
1.
|
EQUIPMENT; SECURITY INTEREST.
Under this agreement Creditor will provide Debtor financing as to each item of machinery, equipment and other property (individually with all accessions, additions and replacements an "Item" and collectively the "Equipment") described in a schedule referencing this Agreement and incorporated herein executed by Creditor and Debtor (individually a "Schedule"). Debtor shall acquire and maintain title or, in the case of software, alternatively a license, to each Item subject only to Creditor's lien described below and the lien of current property taxes not in default. Debtor hereby grants Creditor a security interest in and to all Debtor's right, title and interest in and to the Equipment under the Uniform Commercial Code, such grant with respect to an Item to be as of the later of Debtor's execution of a related proposal or Schedule or Debtor acquiring an interest in the Item. Such security interest is granted to secure performance by Debtor of Debtor's obligations hereunder and under any other agreements under which Debtor now or hereafter has obligations to Creditor.
|
2.
|
DEBTOR'S OBLIGATIONS.
Debtor's obligations respecting an Item, except the related installment payment obligation which is governed by paragraph 3 below, commence upon the grant to Creditor of a security interest in the Item. Debtor's obligations with respect to an Item and Creditor's security interest will continue until full performance of all related obligations hereunder; provided, however, that if this Agreement is then in default, said obligations and security interest will continue during the continuance of said default. Upon termination of Creditor's security interest in an Item, Creditor will provide such release of interest with respect thereto as Debtor reasonably requests.
|
3.
|
INSTALLMENT AND OTHER PAYMENTS.
Debtor will repay Creditor's advance as to an Item in installments of principal and interest in the amounts and at the times set forth in the applicable Schedule at the office of Creditor set forth at the foot hereof or as Creditor may from time to time otherwise designate on notice to Debtor. Other amounts required to be paid by Debtor hereunder are due upon Debtor's receipt of an invoice therefor and will be payable as directed in the invoice. Payments under this Agreement may be applied to Debtor's then accrued obligations to Creditor in such order as Creditor may choose.
|
4.
|
DEPOSIT.
Debtor will have deposited or will deposit with Creditor any "Deposit" amount set forth in a Schedule. Creditor may, at its option, apply a Deposit amount toward any of Debtor's past due obligations to Creditor in which event Debtor will promptly restore the Deposit amount to the full amount originally deposited. Upon termination of Creditor's security interest as to all Items covered by a Schedule, Creditor will return to Debtor the remaining balance of any related Deposit amount without interest.
|
5.
|
NO OFFSET; SURVIVAL.
Debtor will not be entitled to any abatement of installment or other payments due hereunder or any reduction thereof under any circumstances. Debtor waives any and all existing and future claims, as offsets, against any payments due hereunder and agrees to pay all amounts when due regardless of any claim which may be asserted by Debtor. Debtor has not waived any rights Debtor may have to prosecute any claim against Creditor in an action unrelated to this Agreement. This Agreement is not terminable by Debtor for any reason and will otherwise terminate only as provided herein. In no event will Creditor, if liable to Debtor with respect to this Agreement, be liable for punitive, consequential or similar damages. The obligations and liabilities of Debtor hereunder will survive the termination of Creditor's security interest in the Equipment and Debtor's covenants under any credit agreement with Creditor or an affiliate shall survive payment of all amounts due thereunder until payment of all amounts due hereunder
|
6.
|
FINANCING AGREEMENT.
THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT. DEBTOR ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED AND ACQUIRED SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT CREDITOR IS NOT AND WILL NOT BE THE VENDOR OF ANY EQUIPMENT AND THAT CREDITOR HAS NOT MADE AND WILL NOT MAKE ANY
AGREEMENT, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY, CONDITION, QUALITY OR FITNESS FOR A PARTICULAR PURPOSE OR VALUE OF THE EQUIPMENT OR ANY OTHER MATTER WITH RESPECT THERETO IN ANY RESPECT WHATSOEVER.
|
7.
|
NO AGENCY.
NO AGENT OF THE MANUFACTURER OR OTHER SUPPLIER OF ANY ITEM OR OF ANY FINANCIAL INTERMEDIARY IS AN AGENT OF CREDITOR. CREDITOR IS NOT BOUND BY A REPRESENTATION OF ANY SUCH PARTY, AND, AS CONTEMPLATED IN PARAGRAPH 28 BELOW, THE PARTIES' ENTIRE AGREEMENT AS TO THE EQUIPMENT IS CONTAINED IN THIS AGREEMENT.
|
8.
|
ACCEPTANCE.
Upon receipt from Creditor of a Schedule covering the Equipment or any Items, Debtor will either (a) execute and deliver the Schedule or (b) give Creditor notice specifying any objection to the Equipment covered thereby. Debtor's execution of a Schedule will conclusively establish as between Creditor and Debtor that the Equipment covered thereby is acceptable to, and has been accepted by, Debtor for all purposes of this Agreement.
|
9.
|
LOCATION; INSPECTION; USE.
Except as otherwise consented to in writing by Creditor, Debtor will keep, or permanently garage and not remove from the United States, as appropriate, each Item in Debtor's possession and control at the Equipment Location designated in the applicable Schedule, or at such other location to which such Item may have been moved or at which such Item is permanently garaged with the prior written consent of Creditor. Upon request by Creditor, Debtor will advise Creditor as to the exact location of an Item. Creditor may inspect an Item and observe its use during normal business hours, and Debtor will ensure Creditor's ability to enter into and upon the premises where the Item may be located for such purpose. The Equipment will at all times be used solely for commercial or business purposes and operated in a careful and proper manner and in compliance with all applicable laws, ordinances, rules and regulations, all requirements of the required insurance and all manufacturer's instructions and warranty requirements. Any modifications or additions to an Item required by any such governmental edict or insurance policy, will be promptly made by Debtor at its own expense.
|
10.
|
ALTERATIONS.
Without the prior written consent of Creditor, Debtor will not make any alterations, additions or improvements to an Item which detract from its economic value or functional utility, except as may be required under paragraph 9 above. All additions and improvements made to an Item which cannot be removed without detracting from its economic value or functional utility will be deemed accessions thereto and thus subject to the security interest of Creditor.
|
11.
|
MAINTENANCE.
Debtor will maintain the Equipment in good repair, condition and working order, will furnish all parts, mechanisms, devices and labor required to keep the Equipment in such condition and will pay all costs of the Equipment's operation. Debtor will cause each Item for which a service contract is generally available to be covered by such a contract which provides coverages typical as to property of the type involved and is issued by a competent servicing entity or alternatively maintain such Equipment to the same standards.
|
12.
|
LOSS AND DAMAGE; CASUALTY VALUE.
Upon the occurrence of the loss of, theft of, requisition of, damage to or destruction of an Item from any cause ("Casualty Occurrence") Debtor will give Creditor notice thereof within 24 hours and will thereafter place the affected Item in good repair, condition and working order; provided, however, that if the Item is determined by Creditor to be lost, stolen, destroyed or damaged beyond repair or is requisitioned or suffers a constructive total loss as defined in any insurance policy carried hereunder, Debtor, at Creditor's option, will (a) replace the Item with like, new equipment in good repair, condition and working order and obtain clear title to such replacement equipment whereupon such replacement equipment will be deemed such Item for all purposes hereof, including Creditor's security interest therein, or (b) pay Creditor the "Stipulated Loss Value" of such Item which will equal the total of (A) all installment payments and other amounts, if any, due from Debtor to Creditor hereunder at the time of such payment, plus (B) the remaining balance of the advance made as to the Item calculated by applying payments received as to the Item as of receipt first to accrued interest at the rate implicit in this agreement assuming timely payments and a year of twelve (12) months of thirty (30) days each and then to reduce the outstanding advance as to the Item. For these purposes each installment will be allocated to an individual Item based on the relationship that the advance as to the Item has to the total advance for the Equipment. Upon such replacement or payment, as appropriate, this Agreement will terminate with, and only with, respect to the Item so replaced or paid for, and Debtor will become entitled thereto
"AS-IS, WHERE-IS."
|
13.
|
TITLING; REGISTRATION.
Each Item subject to title registration laws will at all times be titled and/or registered by Debtor at its own expense in such manner and in such jurisdiction or jurisdictions as Creditor directs. Debtor will promptly notify Creditor of any necessary or advisable retitling and/or re-registration of an Item. Whenever a title document is issuable to Creditor, Debtor will use reasonable efforts to cause any and all documents of title to be issued by the applicable state authority to Creditor within 60 days of the date of filing the titling application.
|
14.
|
TAXES.
Debtor will make all filings as to and pay when due all personal property and other ad valorem taxes and all other taxes, fees, charges and assessments based on the ownership or use of the Equipment and will pay as directed by Creditor or reimburse Creditor for all other taxes, including, but not limited to, gross receipts taxes (exclusive of federal and state taxes based on Creditor's net income, unless such taxes are in substitution for or relieve Debtor from any taxes which Debtor would otherwise be obligated to pay under the terms of this paragraph 14), fees, charges and assessments whatsoever, however designated, whether based on the installment payments or other amounts due hereunder, levied, assessed or imposed upon the Equipment or otherwise related hereto or to the Equipment, now or hereafter levied, assessed or imposed under the authority of a federal, state or local taxing jurisdiction, regardless of when and by whom payable. Filings with respect to such other assessments will, at Creditor's option, be made by Creditor or by Debtor as directed by Creditor.
|
15.
|
INSURANCE.
Debtor will continuously maintain and pay for all risk insurance against loss of or damage to the Equipment from any cause whatsoever for not less than the full replacement value thereof naming Creditor as Loss Payee. If requested by Creditor, Debtor will similarly carry related combined public liability and property damage insurance with a single limit of not less than $1,000,000 per occurrence, or such greater or lesser amount as Creditor may from time to time require on notice to Debtor, naming Creditor as an Additional Insured. All such insurance must be in a form and with companies approved by Creditor, must designate Debtor as a Named Insured, must provide at least 30 days advance written notice to Debtor of cancellation, change or modification in any term, condition or amount of protection provided therein, must provide breach of warranty protection to Creditor, if applicable, and must provide that the coverage does not require contribution from Creditor's or any other applicable coverage. Debtor will keep Creditor provided with a current policy or certificate evidencing such insurance. Debtor will promptly notify any appropriate insurer and Creditor of any occurrence which may become the basis of a claim or cause of action against the insureds and provide Creditor with all data pertinent to such occurrence. The proceeds of such insurance, at the option of Creditor, will be applied toward (a) the repair or replacement of the appropriate Item or Items, (b) payment of the Stipulated Loss Value thereof or (c) payment of, or as a provision for, satisfaction of any other accrued obligations of Debtor hereunder. Any excess of such proceeds remaining will belong to Debtor. Debtor appoints Creditor as Debtor's attorney-in-fact to do all things, including, but not limited to, making claims, receiving payments and endorsing documents, checks or drafts, necessary or advisable to secure payments due on account of a Casualty Occurrence under any such policy.
|
16.
|
CREDITOR'S PAYMENT.
If Debtor fails to pay an amount hereunder or to perform any of its other obligations, Creditor may, at its option, pay such amount or perform such obligation, and Debtor will reimburse Creditor the payment amount or cost of performance.
|
17.
|
INDEMNITY.
Debtor will indemnify, defend, protect and keep harmless Creditor from any and all liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements, including court costs and legal expenses, of whatsoever nature and whenever arising or asserted, imposed on, incurred by or asserted against Creditor (whether or not also indemnified against by any other person) in any way relating to or arising out of this Agreement or the Equipment, including Creditor's lawful acts in the administration and enforcement hereof, including, without limitation, any claim alleging latent and other defects, whether or not discoverable by Creditor or Debtor, any other claim arising out of strict or vicarious liability in tort and any claim for environmental remediation or patent, trademark or copyright infringement. Each party shall give the other notice of any claim or liability hereby indemnified against promptly following learning thereof.
|
18.
|
DEFAULT.
Any of the following will constitute an event of default hereunder: (a) Debtor's failure to pay when due any installment payment or other amount due hereunder, which failure continues for 10 days; (b) Debtor's default in performing any other obligation, term or condition of this Agreement or any other agreement between Creditor and Debtor or default under any other agreement providing security for the performance by Debtor of its obligations hereunder, provided such default will have continued for more than 20 days after notice of default, except as provided in (c) and (d) below, or default under any lease or any mortgage or other instrument contemplating the provision of financial accommodation applicable to the real estate where an Item is located; (c) a writ or order of attachment or execution or other legal process being levied on or charged against any Item and not released or satisfied within 10 days; (d) Debtor's failure to comply with its obligations under paragraph 15 above or any attempted assignment of Debtor's interest in an Item in violation of paragraph 22 below; (e) a final judgment for the payment of money in excess of $250,000 is rendered by a court against Debtor which Debtor does not discharge or make provision for discharge in accordance with the terms thereof within 90 days from the date of entry thereof; (f) death or incompetency of Debtor, if an individual; (g) the filing by Debtor of a petition under the Bankruptcy Act or under any other insolvency law or law providing for the relief of debtors, including, without limitation, a petition for reorganization, arrangement or extension, or commission by Debtor of an act of bankruptcy;(h) the filing against Debtor of any such petition not dismissed or permanently stayed within 30 days of the filing thereof; (i) the voluntary or involuntary making of an assignment of a substantial portion of its assets by Debtor for the benefit of creditors, appointment of a receiver or trustee for Debtor or for any of Debtor's assets, institution by or against Debtor of any other type of insolvency proceeding (under the Bankruptcy Act or otherwise) or of any formal or informal proceeding for dissolution, liquidation, settlement of claims against or winding up of the affairs of Debtor, Debtor's cessation of business activities, Debtor's failure to pay its debts generally as due or the making by Debtor of a transfer of all or a material portion of Debtor's assets or inventory not in the ordinary course of business; (j) the occurrence of any event described in parts (e), (f), (g), (h) or (i) hereinabove with respect to a guarantor or other party liable respecting this Agreement; or (k) any certificate, statement, representation, warranty or audit heretofore or hereafter furnished with respect thereto by or on behalf of Debtor or any guarantor or other party liable respecting this Agreement proving to have been false in any material respect at the time as of which the facts therein set forth were stated or certified or having omitted any substantial contingent or unliquidated liability or claim against Debtor or any such guarantor or other party, (l) a change in control of Debtor not consented to by Creditor; (m) an event of default occurs under any other agreement providing leasing services or financial accommodation to Debtor where the maximum commitment amount or aggregate rentals exceed $250,000, without regard to any waiver thereof or decision not to pursue remedies on account thereof by the lessor or creditor, or (n) Debtor's lending relationship with Creditor unrelated to this Agreement ceases.
|
19.
|
REMEDIES.
Upon the occurrence of an event of default, Creditor will have the rights, options, duties and remedies of a secured party, and Debtor will have the rights and duties of a debtor, under the Uniform Commercial Code (regardless of whether such Code or a law similar thereto has been enacted in a jurisdiction wherein the rights or remedies are asserted) and, without limiting the foregoing, Creditor may exercise any one or more of the following remedies: (a) declare the Stipulated Loss Value or such lesser amount as may be set by law immediately due and payable with respect to any or all Items without notice or demand to Debtor; (b) sue from time to time for and recover all installment payments and other amounts then accrued and which accrue during the pendency of such action with respect to any or all Items; (c) take possession of and, if deemed appropriate, render unusable any or all Items, without demand or notice, wherever same may be located, without any court order or other process of law and without liability for any damages occasioned by such taking of possession and remove, keep and store the same or use and operate or lease the same until sold; (d) require Debtor to assemble any or all Items at the Equipment Location therefor, such location to which such Equipment may have been moved with the written consent of Creditor or such other location in reasonable proximity to either of the foregoing as Creditor designates; (e) upon 10 days notice to Debtor or such other notice as may be required by law, sell or otherwise dispose of any Item, whether or not in Creditor's possession, in a commercially reasonable manner at public or private sale at any place deemed appropriate and apply the net proceeds of such sale, after deducting all costs of such sale, including, but not limited to, costs of transportation, repossession, storage, refurbishing, advertising and broker's fees, to the obligations of Debtor to Creditor hereunder or otherwise, with Debtor remaining liable for any deficiency and with any excess being returned to Debtor; or (f) utilize any other remedy available to Creditor under the Uniform Commercial Code or similar provision of law or otherwise at law or in equity. Amounts past due under this paragraph 19 will bear interest at 18% per annum or at such lesser maximum rate as may be set by law until paid. No right or remedy conferred herein is exclusive of any other right or remedy conferred herein or by law; but all such remedies are cumulative of every other right or remedy conferred hereunder or at law or in equity, by statute or otherwise, and may be exercised concurrently or separately from time to time. Any sale contemplated by subparagraph (e) of this paragraph 19 may be adjourned from time to time by announcement at the time and place appointed for such sale, or for any such adjourned sale, without further published notice, and Creditor may bid and become the purchaser at any such sale. Any sale of an Item, whether under said subparagraph or by virtue of judicial proceedings, will operate to divest all right, title, interest, claim and demand whatsoever, either at law or in equity, of Debtor in and to said Item and will be a perpetual bar to any claim against such Item, both at law and in equity, against Debtor and all persons claiming by, through or under Debtor.
|
20.
|
DISCONTINUANCE OF REMEDIES.
If Creditor proceeds to enforce any right under this Agreement and such proceedings are discontinued or abandoned for any reason or are determined adversely, then and in every such case Debtor and Creditor will be restored to their former positions and rights thereunder.
|
21.
|
CREDITOR'S EXPENSES.
Debtor will pay Creditor all costs and expenses, including repossession, Equipment disposition and court costs and attorney's fees (including a reasonable fee for services of salaried counsel employed by Creditor), not offset against sales proceeds under paragraph 19 above, incurred by Creditor in exercising any remedies hereunder. This obligation includes the payment or reimbursement of all such amounts, including those incurred on appeal or in a bankruptcy proceeding, whether an action is ultimately filed or concluded.
|
22.
|
ASSIGNMENT.
Without the prior written consent of Creditor, Debtor will not sell, lease, pledge or hypothecate, except as provided in this Agreement, an Item or any interest therein or assign, transfer, pledge or hypothecate this Agreement or any interest in this Agreement or permit the Equipment to be subject to any lien, charge or encumbrance of any nature except the security interest of Creditor contemplated hereby and property tax liens contemplated in paragraph 1. Debtor's interest herein is not assignable and will not be assigned or transferred by operation of law. Consent to any of the foregoing prohibited acts applies only in the given instance and is not a consent to any subsequent like act by Debtor or any other person. Debtor further acknowledges the Creditor's consent to any lease will be on the basis, among other considerations, that the lessee's rights are subordinate to the rights of Creditor under this Agreement. All rights of Creditor hereunder may be assigned, pledged, mortgaged, transferred or otherwise disposed of, either in whole or in part, without notice to Debtor but always, however, subject to the rights of Debtor under this Agreement. If Debtor is given notice of any such assignment, Debtor will acknowledge receipt thereof in writing and will thereafter pay any amounts due hereunder specified in said notice as directed therein. If Creditor assigns this Agreement or the installment payments due or to become due hereunder or any other interest herein, no breach or default by Creditor hereunder or pursuant to any other agreement between Creditor and Debtor will excuse performance by Debtor of any provision hereof, it being understood that in the event of default or breach by Creditor that Debtor will pursue any rights on account thereof solely against Creditor No such assignee, unless such assignee agrees in writing, will be obligated to perform any duty, covenant or condition required to be performed by Creditor in connection with this Agreement.
|
23.
|
MARKINGS; PERSONAL PROPERTY.
If Creditor supplies Debtor with labels, plates, decals or other markings stating that the Equipment is subject to Creditor's lien, Debtor will affix and keep the same prominently displayed on the Equipment or will otherwise mark the Equipment, any Equipment Location or any other location where an Item may be located with the prior written consent of Creditor, at Creditor's request, to indicate Creditor's security interest in the applicable Equipment. As between the parties, the Equipment is, and at all times will remain, personal property notwithstanding that the Equipment or any Item may now be, or hereafter become, affixed to realty. If requested by Creditor, Debtor will obtain and deliver to Creditor waivers of interest or liens in recordable form satisfactory to Creditor from all persons claiming any interest in the real property on which an Item is or is to be installed or located.
|
24.
|
LATE CHARGE.
If Debtor fails to pay any installment or any other payment to be paid by Debtor hereunder within 10 days after the due date thereof, Debtor will pay Creditor (a) a late charge of 5% of the amount, (b) Creditor's collection costs paid third parties relevant to the collection thereof and (c) Creditor's standard returned check charge, if relevant.
|
25.
|
NON-WAIVER.
No covenant or condition of this Agreement can be waived except by the written consent of Creditor. Forbearance or indulgence by Creditor in regarding to any breach will not constitute a waiver of the related covenant or condition.
|
26.
|
ADDITIONAL DOCUMENTS.
Debtor will procure and/or execute, have executed, acknowledge, have acknowledged, deliver to Creditor, record and file such requested documents and showings as Creditor may deem necessary or desirable to protect its interest in this Agreement and the Equipment. Debtor will pay as directed by Creditor or reimburse Creditor for all search, filing, attorney's services and other charges incurred by Creditor in connection with such documents and showings, any similar documents and showings Creditor may procure and any real property waivers provided under paragraph 23 above. Debtor acknowledges that Creditor will file financing statements with respect to the Equipment under the Uniform Commercial Code, authorizes Creditor to make such filings and ratifies Creditor's authority to make any such filings previously made. Debtor will furnish Creditor (a) an audited fiscal year end financial statement including balance sheet and profit and loss statement within 120 days of the close of each fiscal year prepared in accordance with Generally Accepted Accounting Principles ("GAAP") or if not audited, in a form acceptable to Creditor, (b) quarterly Debtor-prepared financial statements complying with GAAP, (c) any other information normally provided by Debtor to the public, (d) upon request of Creditor, a compliance certificate respecting Debtor's covenants to Creditor in form and substance satisfactory to Creditor and (e) such other data or financial information relative to this Agreement and the Equipment as Creditor may reasonably request. Subject to the foregoing, this Agreement inures to the benefit of, and is binding upon, the heirs, legatees, personal representatives, successors and assigns of the parties hereto.
|
27.
|
DEBTOR'S WARRANTIES.
Debtor warrants that the financial data and other information Debtor has submitted, or will submit, to Creditor in connection with this Agreement is, or will be, as appropriate, a true and complete statement of the matters therein contained. Debtor further warrants that (a) this Agreement has been duly authorized, executed and delivered by Debtor and constitutes the legal, valid and binding obligation, contract and agreement of Debtor enforceable against Debtor in accordance with its terms except as enforcement may be affected by bankruptcy and similar laws affecting creditors' rights generally and (b) this Agreement and each and every showing provided by or on behalf of Debtor in connection herewith may be relied upon by Creditor in accordance with the terms thereof. The person executing this Agreement on behalf of Debtor warrants that he or she has been fully authorized to do so.
|
28.
|
ENTIRE AGREEMENT; FACSIMILE SIGNATURES.
This Agreement constitutes the entire agreement between Creditor and Debtor relative to the Equipment and may be amended only by a writing signed by the party to be charged. If any provision hereof is declared invalid, such provision will be deemed severable from the remaining provisions of this Agreement which will remain in full force and effect. If a signed copy of this Agreement or a Schedule is delivered to Creditor by facsimile transmission, a copy of the transmitted copy shall, notwithstanding any rule of evidence to the contrary, be deemed an original signed document.
|
29.
|
NOTICES.
Notices under this Agreement must be in writing and must be sent via courier or sent certified or registered mail with return receipt requested, duly addressed, with postage prepaid, or delivered to the party involved at its respective address set forth at the foot hereof or at such other address as such party may provide on notice to the other from time to time. Notices will be effective upon the earlier of three (3) business days after deposited or delivery. Each party will promptly notify the other of any change in the first party's address. Notices may also be emailed provided that each party will follow up with a written notice as outlined above.
|
30.
|
GENDER; NUMBER; JOINT AND SEVERAL LIABILITY.
Where the context of this Agreement requires, the neuter gender includes the masculine or feminine and the singular number includes the plural; and whenever the word "Creditor" is used herein, it will include all assignees of Creditor. If there is more than one Debtor named in this Agreement, the liability of each will be joint and several.
|
31.
|
TITLES.
The Agreement paragraph titles are for convenience only and are not an aid in the interpretation of the Agreement.
|
32.
|
GOVERNING LAW; VENUE.
This Agreement will be governed by the law of the State of California. Venue for any action related to this Agreement will be in an appropriate court in Los Angeles County, California selected by Creditor, to which Debtor consents, or in another court selected by Creditor which has jurisdiction over the matter. If a provision hereof is declared invalid, such provision will be deemed severable from the remaining provisions of this Agreement which will remain in full force and effect.
|
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above appearing.
|
Bank of the West
Creditor
Creditor
|
H.D.D. LLC
Debtor
|
|||
By:
|
By:
|
/s/ Philip L. Hurst | ||
Name:
|
Name
|
Philip L. Hurst
|
||
Title:
|
Title:
|
Manager
|
||
Address:
|
By:
|
/s/ William R. Hambrecht | ||
Bank of the West / DEF 951
|
Name:
|
William R. Hambrecht
|
||
2527 Camino Ramon, NC-B07-3F-V
|
Title:
|
Manager
|
||
San Ramon, CA 94583 | ||||
By:
|
/s/ Paul E. Dolan, III | |||
Name:
|
Paul E. Dolan, III
|
|||
Title:
|
Manager
|
|||
By:
|
/s/ Heath E. Dolan | |||
Name:
|
Heath E. Dolan
|
|||
Title:
|
Manager
|
|||
By:
|
/s/ J. Barrie Graham | |||
Name:
|
J. Barrie Graham
|
|||
Title:
|
Manager
|
|||
By:
|
/s/ Daniel A. Carroll | |||
Name:
|
Daniel A. Carroll
|
|||
Title:
|
Manager
|
|||
Address:
|
||||
5610 Dry Creek Road
|
||||
Healdsburg, CA 95448
|
1.
|
Equipment Description
: See Schedule A attached hereto and made a part hereof
|
|
Together with all replacements, parts, repairs, additions, accessions and accessories incorporated therein or affixed or attached thereto and any and all proceeds of the foregoing, including, without limitation, insurance recoveries.
|
2.
|
Equipment Advance
: $ 143,684.40
|
3.
|
Installment Payments:
Creditor's advance shall be repayable as follows: 36 payments in the amount of $4,226.18 each, with the first payment due November 1, 2012 and subsequent payments payable on the 1st day of each succeeding month, together with an interim interest payment of $14.97 per day from the funding date to the commencement of the initial payment period. These payments may be adjusted based on any difference between the "Index" as of the date of this Schedule and the Index as of the date Creditor makes the Equipment Advance. For these purposes the Index is Creditor's internally prepared "Daily Fixed Price Indication Rate" for the Agreement term and structure applicable to this Schedule.
|
4.
|
Deposit: |
Not Applicable
|
5.
|
Equipment Location: |
5610 Dry Creek Road
Healdsburg, CA 95448
|
6.
|
Intentionally left blank.
|
7.
|
Equipment Advance: |
Debtor acknowledges that Creditor will advance the Equipment Advance as follows:
|
$143,434.40
|
H.D.D. LLC
|
|
$250.00
|
Bank of the West – Documentation Fee
|
|
$143,684.40
|
TOTAL DISBURSEMENT
|
8.
|
Other Provisions:
Intentionally left blank.
|
9.
|
Documentation Fee:
$250.00
|
Bank of the West
Creditor
|
H.D.D. LLC dba Truett-Hurst Winery
Debtor
|
|||
By:
|
By:
|
/s/ Philip L. Hurst | ||
Name:
|
Name
|
Philip L. Hurst
|
||
Title:
|
Title:
|
Manager
|
||
By:
|
/s/ William R. Hambrecht | |||
Name:
|
William R. Hambrecht
|
|||
Title:
|
Manager
|
|||
By:
|
/s/ Paul E. Dolan, III | |||
Name:
|
Paul E. Dolan, III
|
|||
Title:
|
Manager
|
|||
By:
|
/s/ Heath E. Dolan | |||
Name:
|
Heath E. Dolan
|
|||
Title:
|
Manager
|
|||
By:
|
/s/ J. Barrie Graham | |||
Name:
|
J. Barrie Graham
|
|||
Title:
|
Manager
|
|||
By:
|
/s/ Daniel A. Carroll | |||
Name:
|
Daniel A. Carroll
|
|||
Title:
|
Manager
|
To WCP:
|
6703 S. 234
th
Street
|
Kent, Washington 98032
|
|
Attention: Teresa Russell, President
|
|
2330 SW 1
st
Street
|
|
Redmond, Oregon 97756
|
|
Attention: Thomas E. Groves, CEO
|
|
To HDD:
|
4035 Westside Road
|
Healdsburg, California 95448
|
|
Attention: Phil Hurst, CEO/Managing Partner
|
West Coast Paper Company
dba WCP Solutions
|
H.D.D. LLC
|
|||
By:
|
/s/ Thomas E. Groves
|
By:
|
/s/ Phil Hurst
|
|
Its:
|
CEO
|
Its:
|
CEO
|
|
Date:
|
9/12/2012
|
Date:
|
9/12/12
|
|
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.
|
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
|
||
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
|
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 |
TRUETT-HURST, INC. | |||
By: | |||
Name: | |||
Title:
|
|||
H.D.D. LLC | |||
By its Managing Member, Truett-Hurst, Inc. | |||
By: | |||
Name:
Title:
|
|||
MEMBERS | |||
Each Member set forth on Annex A hereto | |||
By: | |||
Name:
Title: Attorney-in-fact
|
|||
DATED
|
26 February 2013
|
GREENBOTTLE LIMITED (1)
H.D.D., LLC (2)
|
SUPPLY OF GOODS AGREEMENT
|
Birketts LLP
|
24-26 Museum Street
|
Ipswich
|
Suffolk IP1 1HZ
|
T: +44 (0)1473 232300
|
F: +44 (0) 1473 230524
|
DX: 3206 Ipswich
|
E:mail@birketts.co.uk
|
www.birketts.co.uk
|
Offices also in :
Cambridge, Chelmsford and Norwich
Birketts LLP is registered in England under no. OC317545 and authorised and regulated by the Solicitors Regulation Authority.
Registered office at: 24-26 Museum Street, Ipswich, Suffolk, IP1 1HZ.
A list of members may be inspected at any of our offices. The term ‘Partner’ is used to refer to a Member of Birketts LLP.
|
|
1.
|
INTERPRETATION
|
1
|
2.
|
SUPPLY OF THE PRODUCTS
|
4
|
3.
|
FORECASTS
|
5
|
4.
|
ORDERS
|
5
|
5.
|
MANUFACTURE, QUALITY AND PACKING
|
6
|
6.
|
DELIVERY
|
7
|
7.
|
ACCEPTANCE AND DEFECTIVE PRODUCTS
|
8
|
8.
|
TITLE AND RISK
|
10
|
9.
|
PRODUCT PRICES
|
10
|
10.
|
TERMS OF PAYMENT
|
11
|
11.
|
ONGOING SUPPORT AND CO-OPERATION
|
11
|
12.
|
INDEMNITY
|
13
|
13.
|
LIMITATION OF LIABILITY
|
14
|
14.
|
ASSIGNMENT AND SUB-CONTRACTING
|
15
|
15.
|
CONFIDENTIALITY
|
16
|
16.
|
COMMENCEMENT AND TERM
|
17
|
17.
|
TERMINATION
|
17
|
18.
|
OBLIGATIONS ON TERMINATION
|
18
|
19.
|
SURVIVAL OF OBLIGATIONS
|
19
|
20.
|
FORCE MAJEURE
|
19
|
21.
|
COSTS
|
20
|
22.
|
SEVERANCE
|
20
|
23.
|
FURTHER ASSURANCE
|
20
|
24.
|
VARIATION AND WAIVER
|
20
|
25.
|
NOTICES
|
21
|
26.
|
ENTIRE AGREEMENT
|
22
|
27.
|
RIGHTS OF THIRD PARTIES
|
23
|
28.
|
COUNTERPARTS
|
23
|
29.
|
GOVERNING LAW AND JURISDICTION
|
23
|
SCHEDULE 1 THE PRODUCTS AND PRODUCT PRICES
|
24
|
SCHEDULE 2 LOGO AND SPECIFICATION
|
25
|
(1)
|
GREENBOTTLE LIMITED
, a company incorporated and registered in England and Wales with company number 5756226 whose registered office is at 3B Delph Court, Sherdley Business Park, Sullivan’s Way, St Helens, Merseyside, WA9 5GL, UK (the
“Supplier”
); and
|
(2)
|
H.D.D., LLC
, a California limited liability company, with company number 200729610091 and its principal office at 4035 Westside Road, Healdsburg, CA 95448, USA (the
“Customer”
).
|
The Customer wishes to buy and the Supplier wishes to supply the Products on the terms and conditions set out in this Agreement.
|
1.1
|
The definitions and rules of interpretation in this clause apply in this Agreement.
|
“Business Day”
|
a day (other than a Saturday, Sunday or public holiday) when banks in London are open for business;
|
|
“Commencement Date”
|
March, 1, 2013
|
|
“Confidential Information”
|
has the meaning given in clause 15.1;
|
|
“Delivery”
|
completion of delivery of an Order in accordance with clause 6.2 or clause 6.5.1;
|
|
“Delivery Date”
|
the date specified for delivery of an Order in accordance with clause 4.4;
|
|
“Delivery Location”
|
the location specified for collection of an Order in accordance with clause 6.1;
|
|
“Force Majeure Event”
|
has the meaning given in clause 20;
|
|
“Group”
|
in relation to a company, that company, its subsidiaries, its holding companies and their subsidiaries;
|
“holding company” and “subsidiary:”
|
mean a “holding company” and “subsidiary” as defined in section 1159 of the Companies Act 2006. In the case of a limited liability partnership which is a subsidiary of a company or another limited liability partnership, section 1159 of the Companies Act 2006 shall be amended so that: (a) references in sub sections 1159(1)(a) and (c) to voting rights are to the members’ rights to vote on all or substantially all matters which are decided by a vote of the members of the limited liability partnership; and (b) the reference in section 1159(1)(b) to the right to appoint or remove a majority of its board of directors is to the right to appoint or remove members holding a majority of the voting rights;
|
|
“Intellectual Property
Rights”
|
all patents, rights to inventions, utility models, copyright and related rights, trade marks, service marks, trade, business and domain names, rights in trade dress or get-up, rights in goodwill or to sue for passing off, unfair competition rights, rights in designs, rights in computer software, database right, topography rights, moral rights, rights in confidential information (including know-how and trade secrets) and any other intellectual property rights, in each case whether registered or unregistered and including all applications for and renewals or extensions of such rights, and all similar or equivalent rights or forms of protection in any part of the world and
“Intellectual Property Right”
means any one of the Intellectual Property Rights;
|
|
"Logo"
|
the Supplier's logo set out in Schedule 2 or such other logo as may replace it from time to time;
|
|
“Minimum Purchase
Amount”
|
has the meaning given in clauses 2.2 and 11.4;
|
|
“month”
|
a calendar month;
|
|
“Order”
|
an order for Products submitted by the Customer in accordance with clause 4;
|
1.2
|
Clause, schedule and paragraph headings shall not affect the interpretation of this Agreement.
|
1.3
|
A
person
includes a natural person, corporate or unincorporated body (whether or not having separate legal personality).
|
1.4
|
The schedules form part of this Agreement and shall have effect as if set out in full in the body of this Agreement and any reference to this Agreement includes the schedules.
|
1.5
|
A reference to a
company
shall include any company, corporation or other body corporate, wherever and however incorporated or established.
|
1.6
|
Unless the context otherwise requires, words in the singular shall include the plural and vice versa.
|
1.7
|
Unless the context otherwise requires, a reference to one gender shall include a reference to the other genders.
|
1.8
|
A reference to a statute, statutory provision or any subordinate legislation made under a statute is to such statute, provision or subordinate legislation as amended or re-enacted whether before or after the date of this Agreement and, in the case of a statute, includes any subordinate legislation made under that statute from time to time.
|
1.9
|
A reference to
writing
or
written
includes faxes and e-mail.
|
1.10
|
Any obligation in this Agreement on a person not to do something includes an obligation not to agree or allow that thing to be done.
|
1.11
|
A reference to a document is a reference to that document as varied or novated (in each case, other than in breach of the provisions of this Agreement) at any time.
|
1.12
|
References to clauses and schedules are to the clauses and schedules of this Agreement; references to paragraphs are to paragraphs of the relevant schedule.
|
1.13
|
Any phrase introduced by the terms
including
,
include
,
in particular
or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding those terms.
|
2.1
|
During the Term, the Supplier shall supply and the Customer shall purchase such quantities of Products as the Customer may order under clause 4 in accordance with the terms and conditions of this Agreement.
|
The Customer shall during the first two years following the Production Start Date purchase no fewer than three million units of the Products (
"Minimum Purchase Amount"
) from the Supplier.
For the purposes of this section 2.2, a purchase occurs when the Customer submits a purchase order to the Supplier. Future Minimum Purchase Amounts shall be agreed by the parties pursuant to clause 11.4.
|
2.3
|
It is intended that the date upon which the Customer shall commence selling wine contained in the Products shall be June 2013.
|
2.4
|
The Customer shall purchase the Products only from the Supplier, and shall not for the Term or for the Period of five years from the Commencement Date (whatever shall be the shorter) distribute or manufacture any goods which compete with the Products. In the event the Supplier elects to declare the relationship as non-exclusive as provided in clause 11 below, the Customer's obligation under this clause 2.4 is terminated.
|
3.1
|
During the Term, the Customer shall give the Supplier:
|
|
3.1.1
|
not less than three month's advance notice of the Products it expects to purchase during the three months following the end of that notice period; and
|
|
3.1.2
|
not less than one month before the end of each year, a forecast of the Products it expects to purchase during the following year.
|
3.2
|
Forecasts shall be given in writing or, if given orally, shall be confirmed in writing within two Business Days. The Customer shall act in good faith when forecasting its requirements for Products.
|
3.3
|
Forecasts provided under this clause 3 shall not constitute Orders.
|
3.4
|
If the Supplier anticipates that it will be unable to meet the Customer's forecasted requirements provided in accordance with this clause 3:
|
|
3.4.1
|
the Supplier shall inform the Customer as soon as practicable;
|
|
3.4.2
|
the Customer may at its option agree alternative delivery dates for the relevant Products, or obtain from any other person substitute products for the Products which the Supplier anticipates it will be unable to supply; and
|
|
3.4.3
|
substitute products purchased from a third party supplier as a result of the Supplier anticipating being unable to meet the Customer's forecasted requirements for Products shall for the purposes of clause 2.2 be deemed to have been purchased from the Supplier.
|
4.1
|
Subject to clause 4.2, not less than three months before the beginning of each quarter during the Term (the first such quarter commencing on 1 April 2013), the Customer shall give the Supplier its Order for that quarter.
|
4.2
|
The First Order (for the period 1 April 2013 to 30 June 2013) is agreed as being for 240,000 units of Products (where one bottle is a unit) which the Supplier shall make available for collection by the Customer pursuant to this agreement not later than 90 days after payment of the advance payment in 10.1.
|
4.3
|
Each Order shall be deemed to be a separate offer by the Customer to purchase Products on the terms of this Agreement.
|
|
4.4.1
|
be given in writing or, if given orally, shall be confirmed in writing within two Business Days; and
|
|
4.4.2
|
specify the type and quantity of Products ordered.
|
The Supplier shall assign an Order Number to each Order it accepts and notify such Order Numbers to the Customer together with the date by which the Order will be ready for collection (
"Delivery Date"
). Each party shall use the relevant Order Number in all subsequent correspondence relating to the Order.
|
5.1
|
The Supplier agrees that during the Term it will develop and maintain sufficient manufacturing capacity to supply to the Customer approximately 600,000 units of Product per quarter. The Supplier shall manufacture, pack and supply the Products in accordance with all generally accepted industry standards and practices that are applicable.
|
|
5.2.1
|
conform to the Specification;
|
|
5.2.2
|
be of satisfactory quality (within the meaning of the Sale of Goods Act 1979, as amended) and fit for any purpose held out by the Supplier; and
|
|
5.2.3
|
comply with all applicable statutory and regulatory requirements.
|
5.3
|
The terms implied by sections 13 to 15 of the Sale of Goods Act 1979 are, to the fullest extent permitted by law, excluded from the Contract.
|
5.4
|
The Supplier shall ensure that the Products are properly packed and secured so as to enable them to reach their destination in good and merchantable condition in a manner agreed between the Supplier and the Customer.
|
5.5
|
The Supplier shall obtain and maintain in force for the Term all licences, permissions, authorisations, consents and permits needed to manufacture and supply the Products in accordance with the terms of this Agreement.
|
5.6
|
The Supplier shall comply with all applicable laws, enactments, orders, regulations and other instruments relating to the manufacture, packing, packaging, marking, storage and handling of the Products.
|
5.7
|
On the request of the Customer, the Supplier must document to the Customer, in a form reasonably acceptable to the Customer, that all relevant North American authority approvals related to the supply of packaging in the USA and Canada, as required by law, have been met.
|
5.8
|
The Supplier warrants to the Customer the following:
|
|
5.8.1
|
The Products are merchantable, fit for the intended purpose, and of good commercial quality, material and workmanship including, without limitation, a clean, sanitary, air tight, leak-free container for wine and still alcoholic beverages that does not alter or affect the nature or quality of the wine or alcoholic beverage.
|
|
5.8.2
|
All approvals, as required by law, have been issued in each jurisdiction in the Territory to manufacture, package, market, distribute, sell and use the Products in the Territory.
|
|
5.8.3
|
The Products are free of defects that would render the Products or other materials unsafe in normal usage or in foreseeable misuse, and the Products are fit for use in connection with wine and alcoholic beverages.
|
The Customer shall collect each Order from the Supplier's premises 3B Delph Court, Sullivan’s Way., Sherdley Business Park, St Helens WA9 5GL, UK (
"Delivery Location"
) within three Business Days of the Supplier notifying the Customer that the Order is ready for collection.
|
Orders are supplied on an ex works basis and delivery shall be completed when the Supplier places the Order on the Customer's carrier's vehicle at the Delivery Location.
|
6.3
|
The Supplier may deliver Orders by instalments, which may be invoiced and paid for separately; provided, however, that each instalment must be delivered in multiples of a full shipping container. References in this Agreement to Orders shall, where applicable, be read as references to instalments.
|
6.4
|
The Supplier shall have no liability for any failure or delay in delivering an Order to the extent that such failure or delay is caused by the Customer's failure to comply with its obligations under this Agreement.
|
6.5
|
If the Customer fails to take delivery of an Order within seven Business Days of the Supplier notifying the Customer that the Order is ready for collection, then, except where such failure or delay is caused by the Supplier's failure to comply with its obligations under this Agreement or a Force Majeure Event:
|
|
delivery of the Order shall be deemed to have been completed on the eighth Business Day following the day on which the Supplier notified the Customer that the Order was ready for collection and the Supplier will have the right to issue an invoice as provided in clause 10.2 below; and
|
|
6.5.2
|
the Supplier shall store the Order until delivery takes place, and charge the Customer for all related costs and expenses (including insurance).
|
6.6
|
If the Customer fails to take delivery of an Order within 3 months of the Supplier notifying the Customer that the Order is ready for collection then, except where such failure or delay is caused by the Supplier's failure to comply with its obligations under this Agreement or a Force Majeure Event, notwithstanding clause 6.5, the Supplier shall be entitled to dispose of or resell to third parties such Products without incurring any further liabilities to the Customer.
|
6.7
|
Each Order shall be accompanied by a delivery note from the Supplier showing the Order Number, the date of the Order, the type and quantity of Products included in the Order and, in the case of an Order being delivered by instalments, the outstanding balance of Products remaining to be delivered.
|
6.8
|
The parties agree that if, in respect of an Order, the Supplier delivers up to and including 2% more or less than the quantity of Products ordered, the Customer shall not be entitled to reject the Order, but a pro rata adjustment shall be made to the Order invoice.
|
6.9
|
The Supplier shall provide such reasonable support to the Customer (at the Customer's cost) as is required to enable the customer to ship the Products to Customer's destination (e.g. California) quickly and economically.
|
The Customer may reject any Products delivered to it that do not comply with clause 5, provided that:
|
|
7.1.1
|
notice of rejection is given to the Supplier:
|
|
7.1.1.1
|
in the case of a defect that is apparent on normal visual inspection, within five Business Days of receipt of the Products at the Customer's facility in California; and
|
|
7.1.1.2
|
in the case of a latent defect, within a reasonable time of the latent defect having become apparent; and
|
|
7.1.2
|
none of the events listed in clause 7.3 apply.
|
7.2
|
If the Customer fails to give notice of rejection in accordance with clause 7.1, it shall be deemed to have accepted such Products.
|
7.3
|
The Supplier shall not be liable for Products' failure to comply with the warranty set out in clause 5 in any of the following events:
|
|
7.3.1
|
The defect is caused by the Customer's failure to follow the Supplier's commercially reasonable written instructions as to the storage, commissioning, installation, use and maintenance of the Products or (if there are none) good trade practice regarding the same; or
|
|
7.3.2
|
The defect is caused by the fair wear and tear arising from use and foreseeable misuse by the consumer, wilful damage or Customer's gross negligence; or
|
|
7.3.3
|
The defect is caused by the acts or omissions of the Customer's carrier.
|
7.4
|
If the Customer rejects Products under clause 7.1 then the Customer shall be entitled to:
|
|
7.4.1
|
require the Supplier to repair or replace the rejected Products at the sole expense of the Supplier; or
|
|
7.4.2
|
require the Supplier to repay the price of the rejected Products in full including, without limitation, purchase price and delivery costs.
|
7.5
|
The terms of this Agreement shall apply to any repaired or replacement Products supplied by the Supplier.
|
In the event the Customer (a) has been ordered or encouraged to conduct a recall of any of the filled Products by any relevant government authority, (b) reasonably determines that a recall of any of the filled Products is necessary or appropriate due to (i) reasons relating to the safety of the filled Products, (ii) any material non-conformance of the filled Products with the Specifications, or (iii) any material non-conformance or non-compliance of the filled Products with any applicable law, governmental rule or regulation, or (c) reasonably decides voluntarily to withdraw any of the filled Products from distribution or otherwise cease distribution of any of the filled Products due to a material failure of the filled Products to comply with the warranties contained in clause 5, the Customer has the right to conduct and implement such recall or voluntary withdrawal procedures developed by the Customer in connection with any such recall or withdrawal of the filled Products. The Supplier agrees to bear all costs and expenses incurred by the Customer in connection with or arising out of any such recall or voluntary withdrawal provided it can be proven that the issue giving rise to the recall or voluntary withdrawal was inherent in the Products as originally supplied to the Customer, and not as a result of the beverages being put into the Products by the Customer, its agents or subcontractors.
|
8.
|
TITLE AND RISK
|
8.1
|
Risk in and title to the Products shall pass to the Customer when the Products are delivered to the Customer pursuant to Section 6.2.
|
The Product Prices for the period from the Production Start Date to the first anniversary of the Production Start Date shall be the prices set out in Schedule 1. The Product Prices for subsequent years shall be determined in accordance with clause 9.3.
|
9.2
|
The Product Prices are inclusive of the costs of packaging, but exclusive of the costs of insurance and carriage of the Products, which shall be paid by the Customer.
|
If increases in the input and principal manufacturing costs of raw materials, labour and energy for the Products in any year of this agreement exceed 3%, the Supplier shall have the right to adjust the Product Prices to reflect such increase (
"Product Price Adjustment"
). The Supplier shall give the Customer not less than six month's prior notice in writing of proposed changes (
"Product Price Adjustment Notice"
). In the event that the total of these input and principal manufacturing costs adjusts downward, the Supplier must adjust or eliminate any prior Product Price Adjustment.
|
9.4
|
The Supplier agrees to use commercially reasonable efforts to reduce the Product Prices due to efficiencies and cost savings which arise during the Term such as, but not limited to, increased volume, additional equipment and improved access to raw materials.
|
9.5
|
The Supplier shall provide all such evidence as the Customer may reasonably request in order to verify:
|
|
9.5.1
|
invoices submitted by the Supplier; and
|
|
9.5.2
|
increases in the costs of raw materials or the Consumer Prices Index.
|
10.1
|
The Customer shall make an advance payment of US$750,000 for the Products to be supplied to the Customer pursuant to this agreement, such sum to be set off against the sums payable by the Customer to the Supplier pursuant to this Agreement. The advance payment shall be paid in three equal instalments of US$250,000 payable on or before April 1, 2013, May 15, 2013 and June 1, 2013 respectively.
|
10.2
|
The Supplier shall be entitled to invoice the Customer for each Order at any time after Delivery. Each invoice shall quote the relevant Order Numbers.
|
Save in respect of supplies which have been paid for in advance pursuant to clause 10.1, the Customer shall pay invoices in full and in cleared funds no later than 14 days from the date of the invoice. Payment shall be made to the bank account nominated in writing by the Supplier.
|
If a party fails to make any payment due to the other under this Agreement by the due date for payment (
"due date"
), then, without limiting the other party's remedies under clause 17.2, the defaulting party shall pay interest on the overdue amount at the rate of 4% per annum above the base rate of Barclays Bank Plc from time to time. Such interest shall accrue on a daily basis from the due date until the date of actual payment of the overdue amount, whether before or after judgment. The defaulting party shall pay the interest together with the overdue amount. This clause shall not apply to payments that the party failing to make the payment disputes in good faith.
|
10.5
|
If the Customer disputes any invoice or other statement of monies due, the Customer shall promptly notify the Supplier in writing. The parties shall negotiate in good faith to attempt to resolve the dispute promptly. The Supplier shall provide all such evidence as may be reasonably necessary to verify the disputed invoice or request for payment.
|
10.6
|
Each party may, without limiting any other rights or remedies it may have, set off any amounts owed to it by the other party under this Agreement against any amounts payable by it to the other party under this Agreement.
|
All payments payable to the Supplier or the Customer under this Agreement shall become due immediately on its termination.
|
11.
|
ONGOING SUPPORT AND CO-OPERATION
|
11.1
|
The Supplier shall provide such on-going technical support to any of the Customer's filling programmes in California as the Customer shall reasonably require at the Customer's cost and at such rates as the parties shall give with each other from time to time.
|
11.2
|
Beginning with the Production Start Date, the Customer agrees to an annual marketing spend relating to wine and alcoholic beverages supplied in the Products of approximately 5% of the Customer's total net sales of wine and alcoholic beverages supplied in the Products, or $1 million, whichever is less.
|
11.3
|
Subject to clause 11.4, the Supplier appoints the Customer during the Term as its exclusive customer of the Products in the Sector for sale within the Territory. For the avoidance of doubt, the Supplier shall be entitled to supply Products within the Territory for use outside the Sector. In the event the Customer does not meet the Minimum Purchase Amount, the Supplier's sole remedy is the right to declare the relationship with the Customer as non-exclusive by providing written notice to the Customer. In the event the Supplier elects to declare the relationship as non-exclusive, the Customer obligation to meet the Minimum Purchase Amount is terminated.
|
11.4
|
Beginning on June 1, 2014, the parties shall endeavour to agree on annual Minimum Purchase Amounts for each year during the continuance of this Agreement (save for the first two years of this Agreement whose Minimum Purchase Amount shall be as described in clause 2.2). The Minimum Purchase Amounts will be commercially reasonable amounts based on prior sales of the Product in the Sector and commercially reasonable expectations of sales of the Product during the applicable period including the full consideration of the total market size within the Territory and what is a fair and reasonable projection of the Product’s full market potential. If the parties are unable to agree Minimum Purchase Amounts for any year by the date falling six months prior to the relevant year, then the parties will submit the dispute to binding arbitration. If the parties do not mutually agree on the arbitration process, the dispute will be submitted to JAMS in San Francisco, CA under its then current Streamlined Arbitration Rules & Procedures. The Supplier and the Customer agree to equally divide all costs and fees charged by JAMS; provided, however, the arbitrator may include such costs and fees in the arbitration award. Any award rendered in any such arbitration proceeding will be final and binding on each of the parties, and judgment may be entered thereon in a court of competent jurisdiction.
|
11.5
|
The Supplier gives the Customer, for the duration of this Agreement, a non-exclusive, royalty free licence to use the GREENBOTTLE word mark and the Logo solely for labels it produces for the Products and the marketing, production and sale of wine and alcoholic beverages supplied in the Products. The use of the Logo is mandatory on each of the Products and the manner and style of use is to be according to guidelines issued by the Supplier and is subject to final agreement with the Supplier.
|
11.6
|
The Supplier agrees that the presentation of the Logo will be approximately ¾" in diameter and either embossed or incorporated into the back label artwork of each Product in a manner mutually agreed between the parties.
|
12.1
|
The Supplier shall indemnify the Customer against all liabilities, costs, expenses, damages and losses (including any direct or indirect consequential losses, loss of profit, loss of reputation and all interest, penalties and legal and other reasonable professional costs and expenses) suffered or incurred by the Customer arising out of or in connection with any claim made against the Customer for actual or alleged infringement of a third party's Intellectual Property Rights arising out of or in connection with the supply or use of the Products (including the obligations set forth in clause 5).
|
12.2
|
The Customer shall inform the Supplier in writing of any claim by any third party (
Third Party Claim
) which comes to the notice of the Customer or any other Member of the Customer's Group or any other member of the Buyer's Group, whereby it appears that the Supplier is or is likely to become liable under the indemnity contained in this clause 12 within 15 days from the day on which such Third Party Claim comes to the notice of the Customer or other member of the Customer's Group.
|
12.3
|
Subject to the Customer being indemnified and secured to its reasonable satisfaction in accordance with clause 12.4:
|
|
12.3.1
|
the Customer shall take such action and give such information and assistance as the Supplier may reasonably request in writing to avoid, dispute, resist, mitigate, compromise or defend any Third Party Claim and to appeal against any judgment given in respect thereof; and
|
|
12.3.2
|
on the written request of the Supplier, the sole conduct of any legal proceedings of whatsoever nature arising out of any Third Party Claim (
Proceedings
) shall be delegated to the Supplier. For this purpose, the Customer shall give or procure to be given to the Supplier all such assistance as the Supplier may reasonably require and shall appoint such lawyers and other professional advisers as the Supplier may nominate to act on behalf of the Customer in accordance with the Supplier's instructions.
|
12.4
|
Where Proceedings are delegated to the Supplier in accordance with clause 12.3:
|
|
12.4.1
|
the Supplier shall keep the Customer fully and promptly informed of the Proceedings, shall consult the Customer on any matter which is or is likely to be material in relation to any Proceedings and shall take account of all reasonable requirements of the Customer in relation to such Proceedings; and
|
|
12.4.2
|
the Supplier shall not make any settlement or compromise of the Third Party Claim, nor agree to any matter in the conduct of any Proceedings which may affect the amount of the liability in connection with such Third Party Claim, or create an obligation for the Customer to act or forego any action, without the prior approval of the Customer, such approval not to be unreasonably withheld or delayed, and provided always that, in the event of the Customer refusing approval of such settlement or compromise, the Supplier shall have no liability in respect of any Claim arising therefrom in excess of the figure at which they could have settled or compromised the relevant Third Party Claim and the Customer shall be liable for any costs incurred since the proposed date of settlement or compromise.
|
12.5
|
Nothing in this clause shall restrict or limit the Customer's general obligation at law to mitigate a loss which it may suffer or incur as a result of a matter that may give rise to a claim under this indemnity.
|
13.1
|
This clause sets out the entire financial liability of the parties (including any liability for the acts or omissions of their respective employees, agents and subcontractors) to each other in respect of:
|
|
13.1.1
|
any breach of this Agreement however arising;
|
|
13.1.2
|
any use made or resale of the Products by the Customer, or of any product incorporating any of the Products; and
|
|
13.1.3
|
any representation, statement or tortious act or omission (including negligence) arising under or in connection with this Agreement.
|
|
13.2.1
|
death or personal injury resulting from negligence; or
|
|
13.2.2
|
fraud or fraudulent misrepresentation; or
|
|
13.2.3
|
breach of the terms implied by section 12 of the Sale of Goods Act 1979; or
|
|
13.2.4
|
breach of section 2 of the Consumer Protection Act 1987; or
|
|
13.2.5
|
product recall contained in clause 7.
|
Without limiting the right to damages for liability under clause 13.2, neither party shall be liable to the other, whether in contract, tort (including negligence) or restitution, or for breach of statutory duty or misrepresentation, or otherwise, for any:
|
|
13.3.1
|
loss of profit; or
|
|
13.3.2
|
loss of goodwill; or
|
|
13.3.3
|
loss of business; or
|
|
13.3.4
|
loss of business opportunity; or
|
|
13.3.5
|
loss of anticipated saving; or
|
|
13.3.6
|
loss or corruption of data or information; or
|
|
13.3.7
|
special, indirect or consequential damage
|
13.4
|
Without limiting the right to damages for liability under clause 13.2 and subject to the limitation of liability under clause 13.3, the Supplier's total annual liability arising under this Agreement, whether arising in contract, tort (including negligence) or restitution, or for breach of statutory duty or misrepresentation, or otherwise, shall in all circumstances be limited to US$2.5 million (the "
Limitation Amount
").
|
13.5
|
Beginning on the second anniversary of the Production Start Date, and for each anniversary of the Production Start Date thereafter, the Limitation Amount shall be indexed based on the volume of the Product purchased by the Customer during that year divided by a base nominal figure of 2 million units and multiplied by $2.5 million. For example, if the Customer purchases X million units in the third year, the Limitation Amount in the fourth year will be (X million / 2 million) * $2.5 million). In no event will the Limitation Amount be reduced below US$2.5 million, or exceed US$5million.
|
14.1
|
Neither party may assign or transfer or sub-contract any of its rights, benefits or obligations under this Agreement without the prior written consent of the other party, provided that either party may assign, transfer or sub-contract its rights and obligations under this Agreement to another member of its Group and the Customer has the right to assign or transfer this Agreement to a successor entity in connection with the merger or sale of all or substantially all of the Customer's assets in the Sector
.
If the merger or sale of all or substantially all of the Customer's assets is to a competitor of the Supplier in the packaging industry, the Supplier has the right to terminate this Agreement by providing written notice to the Customer on or before 30 days after the Supplier receives notice that the transfer has been completed.
|
Each party undertakes that it shall not at any time during this Agreement disclose to any person any confidential information disclosed to it by the other party concerning the business or affairs of the other party or of any member of its Group, including but not limited to information relating to a party's operations, processes, plans, product information, know-how, designs, trade secrets, software, market opportunities and customers (
"Confidential Information"
), except as permitted by clause 15.3. This obligation survives the expiration or termination of this Agreement until such Confidential Information enters the public domain.
|
15.2
|
Confidential Information does not include information which (a) at the time of disclosure by the disclosing party was in, or after disclosure by disclosing party became part of, the public domain, through no improper act on the part of the recipient or on the part of any of recipient's employees or consultants; (b) was in the recipient's possession at the time of disclosure by the disclosing party and was not acquired, directly or indirectly, from the disclosing party; (c) the recipient received it from a third party, provided that such Confidential Information was not obtained by such third party, directly or indirectly, from the disclosing party; or (d) the recipient independently developed it without the benefit of any Confidential Information disclosed by the disclosing party hereunder. The recipient has the burden of proof to establish by competent evidence that one or more of these exceptions applies to the applicable information.
|
|
15.3.1
|
to its employees, officers, agents, consultants or sub-contractors (
"Representatives"
) who need to know such information for the purposes of carrying out the party’s obligations under this Agreement, provided that the disclosing party takes all reasonable steps to ensure that its Representatives comply with the confidentiality obligations contained in this clause 15 as though they were a party to this Agreement. The disclosing party shall be responsible for its Representatives’ compliance with the confidentiality obligations set out in this clause; and
|
|
15.3.2
|
as may be required by law, court order or any governmental or regulatory authority.
|
15.4
|
Each party reserves all rights in its Confidential Information. No rights or obligations in respect of a party’s Confidential Information other than those expressly stated in this Agreement are granted to the other party or to be implied from this Agreement. In particular, no licence is hereby granted directly or indirectly under any patent, invention, discovery, copyright or other intellectual property right held, made, obtained or licensable by either party now or in the future.
|
16.1
|
This Agreement shall commence on the Commencement Date and shall remain in effect until terminated in accordance with clause 17 (
"Term"
)
|
Beginning on the seventh anniversary of the Commencement Date, either party may at any time terminate this Agreement by giving to the other party not less than six months' notice in writing (such termination to take effect no sooner than the seventh anniversary of the Commencement Date).
|
Notwithstanding clause 17.1, a party shall be entitled to terminate this Agreement with immediate effect by giving written notice to the other party if:
|
|
17.2.1
|
the other party fails to pay any undisputed amount due under this Agreement on the due date for payment and remains in default not less than 14 days after being notified in writing to make such payment; or
|
|
17.2.2
|
the other party commits a material breach of its obligations under this Agreement and (if such breach is remediable) fails to remedy that breach within a period of 30 days after receipt of notice in writing requiring it to do so; or
|
|
the other party commits a series of persistent minor breaches which when taken together amount to a material breach; or
|
|
the other party suspends, or threatens to suspend, payment of its debts or is unable to pay its debts as they fall due or admits inability to pay its debts or is deemed unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986; or
|
|
17.2.5
|
the other party commences negotiations with all or any class of its creditors with a view to rescheduling any of its debts, or makes a proposal for or enters into any compromise or arrangement with its creditors; or
|
|
17.2.6
|
a petition is filed, a notice is given, a resolution is passed, or an order is made, for or on connection with the winding up of that other party; or
|
|
17.2.7
|
a creditor or encumbrancer of the other party attaches or takes possession of, or a distress, execution, sequestration or other such process is levied or enforced on or sued against, the whole or any part of its assets and such attachment or process is not discharged within 14 days; or
|
|
17.2.8
|
an application is made to court, or an order is made, for the appointment of an administrator or if a notice of intention to appoint an administrator is given or if an administrator is appointed over the other party; or
|
|
17.2.9
|
a floating charge holder over the assets of that other party has become entitled to appoint or has appointed an administrative receiver; or
|
|
a person becomes entitled to appoint a receiver over the assets of the other party or a receiver is appointed over the assets of the other party; or
|
|
17.2.11
|
any event occurs, or proceeding is taken, with respect to the other party in any jurisdiction to which it is subject that has an effect equivalent or similar to any of the events mentioned in clause 17.2.4 to clause 17.2.10 (inclusive); or
|
|
the other party ceases, or threatens to cease, to carry on all or substantially the whole of its business; or
|
|
any Force Majeure Event prevents the other party from performing its obligations under this Agreement for any continuous period of three months.
|
17.3
|
Termination of this Agreement shall not prejudice any of the parties' rights and remedies which have accrued as at termination.
|
18.1
|
On termination of this Agreement each party shall promptly:
|
|
18.1.1
|
return to the other party all equipment, materials and property belonging to the other party that the other party had supplied to it or a member of its Group in connection with the supply and purchase of the Products under this Agreement;
|
|
18.1.2
|
return to the other party all documents and materials (and any copies) containing the other party’s Confidential Information;
|
|
18.1.3
|
erase all the other party’s Confidential Information from its computer systems (to the extent possible); and
|
|
18.1.4
|
on request, certify in writing to the other party that it has complied with the requirements of this clause.
|
Save where the Supplier terminates this agreement pursuant to clause 17.2, the Customer has the right to require the Supplier to deliver the Products for any Order placed by the Customer prior to the expiration or termination of this Agreement.
|
19.
|
SURVIVAL OF OBLIGATIONS
|
19.1
|
On termination of this Agreement the following clauses shall survive and continue in full force and effect:
|
|
19.1.1
|
Indemnity in Clause 5;
|
|
19.1.2
|
Product recall in Clause 7;
|
|
19.1.3
|
Clause 12 (Indemnity);
|
|
19.1.4
|
Clause 13 (Limitation of liability);
|
|
19.1.5
|
Clause 15 (Confidentiality);
|
|
19.1.6
|
Clause 18 (Obligations on termination); and
|
|
19.1.7
|
Clause 29 (Governing law and jurisdiction).
|
20.1
|
Neither party (or any person acting on its behalf) shall have any liability or responsibility for failure to fulfil any obligation under this Agreement so long as and to the extent to which the fulfilment of such obligation is prevented, frustrated, hindered or delayed as a consequence of a Force Majeure Event.
|
20.2
|
A party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of a Force Majeure Event:
|
|
20.2.1
|
notify the other party of the nature and extent of such Force Majeure Event; and
|
|
20.2.2
|
use all reasonable endeavours to remove any such causes and resume performance under this Agreement as soon as feasible.
|
20.3
|
For the purposes of this clause 20, a
"Force Majeure Event"
means an event beyond the control of a party (or any person acting on its behalf), which by its nature could not have been foreseen by such party (or such person), or, if it could have been foreseen, was unavoidable, and includes, without limitation, acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities or other national or international calamity or one or more acts of terrorism or failure of energy sources.
|
21.1
|
Save as otherwise provided in this Agreement, each party shall pay its own costs in connection with the negotiation, preparation, execution and performance of this Agreement, and all ancillary documents to it.
|
22.1
|
If any provision of this Agreement (or part of a provision) is found by any court or administrative body of competent jurisdiction to be invalid, unenforceable or illegal, the other provisions shall remain in force.
|
22.2
|
If any invalid, unenforceable or illegal provision would be valid, enforceable or legal if some part of it were deleted, the provision shall apply with the minimum modification necessary to make it legal, valid and enforceable.
|
23.1
|
Each party shall (at its own expense) promptly execute and deliver all such documents, and do all such things, or procure the execution and delivery of all documents and doing of all such things as are required to give full effect to this Agreement and the transactions contemplated by it.
|
24.1
|
Any variation of this Agreement must be in writing and signed by or on behalf of the parties.
|
24.2
|
Any waiver of any right under this Agreement is only effective if it is in writing and it applies only to the party to whom the waiver is addressed and to the circumstances for which it is given.
|
24.3
|
No failure to exercise or delay in exercising any right or remedy provided under this Agreement or by law constitutes a waiver of such right or remedy nor shall it prevent any future exercise or enforcement of such right or remedy.
|
24.4
|
No single or partial exercise of any right or remedy under this Agreement shall prevent or restrict the further exercise of that or any other right or remedy.
|
25.1
|
A notice served under this Agreement:
|
|
25.1.1
|
shall be signed by or on behalf of the party giving it;
|
|
25.1.2
|
shall be sent for the attention of the person, and to the address or fax number, given in this clause 25 (or such other address, fax number or person as the relevant party may notify to the other parties in accordance with the provisions of this clause 25); and
|
|
25.1.3
|
shall be:
|
|
25.1.3.1
|
delivered personally; or
|
|
25.1.3.2
|
sent by fax; or
|
|
25.1.3.3
|
sent by email; or
|
|
25.1.3.4
|
sent by commercial courier; or
|
|
25.1.3.5
|
sent by pre-paid first-class post or recorded delivery; or
|
|
25.1.3.6
|
(if the notice is to be served by post outside the country from which it is sent) sent by airmail requiring signature on delivery.
|
25.2
|
The addresses for service of notice are:
|
|
25.2.1
|
Greenbottle Limited
|
|
|
Address: 3B Delph Court, Sullivan's Way, St Helens, Merseyside, WA9 5GL, UK.
|
|
|
For the attention of: Mark Eaves
|
|
|
Email address: mark.eaves@greenbottle.com
|
|
25.2.2
|
H.D.D., LLC
|
|
|
Address: 4035 Westside Road, Healdsburg, CA 95448, USA.
|
|
|
For the attention of: Phil Hurst
|
|
|
Email address: phil@truetthurst.com
|
25.3
|
A notice or any other communication given in connection with this Agreement is deemed to have been received:
|
|
25.3.1
|
if delivered personally, at the time of delivery; or
|
|
25.3.2
|
in the case of fax or email, at the time of transmission; or
|
|
25.3.3
|
if sent by commercial courier, at the time of signature of the courier's delivery receipt; or
|
|
25.3.4
|
in the case of pre-paid first class post or recorded delivery, 9.00 am on the second Business Day after posting; or
|
|
25.3.5
|
in the case of airmail, 9.00 am on the fifth Business Day after posting.
|
25.4
|
For the purposes of this clause:
|
|
25.4.1
|
all times are to be read as local time in the place of deemed receipt; and
|
|
25.4.2
|
if deemed receipt under this clause is not within business hours (meaning 9.00 am to 5.30 pm Monday to Friday on any Business Day), the notice shall be deemed to have been received at the opening of business on the next Business Day in the place of receipt.
|
25.5
|
To prove delivery, it is sufficient to prove that the notice was transmitted by fax to the fax number of the party, sent by email to the email address of the party, or in the case of post, that the envelope containing the notice was properly addressed and posted.
|
26.1
|
This Agreement constitutes the whole agreement and understanding of the parties and supersedes any previous arrangement, understanding or agreement between them relating to the subject matter of this Agreement.
|
26.2
|
Each party acknowledges that, in entering into this Agreement, it has not relied on any statement, representation, assurance or warranty (whether made negligently or innocently) other than those expressly set out in this Agreement.
|
26.3
|
Each party agrees that all liability for and remedies in respect of any representations are excluded except as expressly provided in this Agreement.
|
26.4
|
Nothing in this clause shall limit or exclude any liability for fraud.
|
27.1
|
No term of this Agreement shall be enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Agreement, but this does not affect any right or remedy of a third party which exists or is available apart from under that Act.
|
28.1
|
This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall constitute an original of this Agreement but all the counterparts shall together constitute the same agreement.
|
29.1
|
This Agreement and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with English law.
|
29.2
|
The parties irrevocably agree that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim that arises out of or in connection with this Agreement or its subject matter or formation (including non-contractual disputes or claims).
|
PRODUCT NAME
|
PRODUCT PRICE
|
Greenbottles in any format suitable for use with wine or still alcoholic beverages, and where any price differences that may occur for alternative GreenBottle formats to be clearly justified on a cost-related basis.
|
US$0.50 per unit
|
Title
:
|
750ml GB BORDEAUX SPECIFICATION
|
||
Version:
|
G-09JAN13
|
Created:
|
12 APRIL 12
|
Authorized
by:
|
Martin Lowe
|
|
|
Approved
by:
|
|||
Written
by:
|
John-Paul Grogan
|
BOTTLE SPECIFICATION
|
|
MATERIALS
|
|
Colour
|
Natural (Cardboard)
|
Insert
|
DOW HDPE KT 10000 UE (RESINEX)
|
Insert Colourant
|
HCM26417P Beige
|
Bag
|
NYLON/EVOH/PE Film (Code: (VAC HB 85 Bemis)
|
Shell
|
Recycled Pre consumer KLS
(Kraft Liner Shavings)
|
Glue
|
Hot Melt Adhesive
|
WEIGHTS
|
|
Insert Weight
|
7.6g
|
Bag Weight
|
3.5g
|
Fibre weight (target)
|
50-51g
|
Assembled
Bottle Weight (target)
|
64.4g
|
$150,000 |
March 1, 2013
|
H.D.D. LLC,
|
|||
a California limited liability company | |||
By:
|
/s/ Phillip L. Hurst | ||
Phillip L. Hurst, Manager
|
$150,000 |
March 1, 2013
|
H.D.D. LLC,
|
|||
a California limited liability company | |||
By: | /s/ Phillip L. Hurst | ||
Phillip L. Hurst, Manager
|
|||
$25,000
|
March 1, 2013
|
H.D.D. LLC,
|
|||
a California limited liability company
|
|||
By:
|
/s/ Phillip L. Hurst | ||
Phillip L. Hurst, Manager
|
$25,000
|
March 1, 2013
|
H.D.D. LLC,
|
|||
a California limited liability company
|
|||
By:
|
/s/ Phillip L. Hurst | ||
Phillip L. Hurst, Manager
|