SEC Form PREM14A filed by The Duckhorn Portfolio Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

Filed by the Registrant ☒

Filed by a party other than the Registrant ☐

Check the appropriate box:

 

☒	Preliminary Proxy Statement

 

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

☐	Definitive Proxy Statement

 

☐	Definitive Additional Materials

 

☐	Soliciting Material under §240.14a-12

THE DUCKHORN PORTFOLIO, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

☐	No fee required.

 

☐	Fee paid previously with preliminary materials.

 

☒	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED NOVEMBER 21, 2024

The Duckhorn Portfolio, Inc.

1201 Dowdell Lane

St. Helena, CA 94574

Dear Stockholders:

You are cordially invited to attend a virtual special meeting (including any adjournments or postponements thereof, the “Special Meeting”) of stockholders of The Duckhorn Portfolio, Inc. (“Duckhorn” or the “Company”) to be held virtually on [●], 2024, at [●] Pacific Time. Duckhorn stockholders will be able to virtually attend and vote at the Special Meeting via the internet at [●]. You will not be able to attend the Special Meeting physically in person. For purposes of attendance at the Special Meeting, all references in the enclosed proxy statement to “present” shall mean virtually present at the Special Meeting.

At the Special Meeting, you will be asked to consider and vote on (i) a proposal to adopt the Agreement and Plan of Merger, dated October 6, 2024 (the “Merger Agreement”), by and among Duckhorn, Marlee Buyer, Inc. (“Parent”), and Marlee Merger Sub, Inc., a wholly owned subsidiary of Parent (“Merger Sub”), (ii) a proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to Duckhorn’s named executive officers that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”) and (iii) a proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary or appropriate, including to solicit additional proxies to approve the proposal to adopt the Merger Agreement if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting (the “Adjournment Proposal”). Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Duckhorn, and the separate corporate existence of Merger Sub will thereupon cease, with Duckhorn continuing as the surviving corporation (the “Surviving Corporation”) and as a wholly owned subsidiary of Parent (the “Merger”) in accordance with the General Corporation Law of the State of Delaware (the “DGCL”). Parent and Merger Sub are affiliates of investment funds managed by Butterfly Equity LP (collectively referred to herein as “Butterfly”).

If the Merger is completed, you will be entitled to receive an amount in cash equal to $11.10, without interest and subject to any applicable withholding taxes, for each share of Duckhorn’s common stock, par value $0.01 per share (the “Company Common Stock”) that you own as of immediately prior to the effective time of the Merger (unless you have properly and validly exercised and not withdrawn your appraisal rights).

Duckhorn’s Board of Directors (the “Company Board”) has unanimously (i) determined that the Merger Agreement and the transactions contemplated by the Merger Agreement are fair to and in the best interests of the Company and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement, (iii) authorized and approved the execution, delivery and performance by the Company of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement upon the terms and subject to the conditions set forth therein and (iv) recommended, subject to the terms of the Merger Agreement, the adoption of the Merger Agreement by the stockholders of the Company. The Company Board recommends, on behalf of Duckhorn, that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the non-binding, advisory Compensation Proposal; and (3) “FOR” the Adjournment Proposal.

The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement.

The proxy statement also describes the actions and determinations of the Company Board in connection with its evaluation of the Merger Agreement and the Merger. You should carefully read and consider the entire enclosed proxy statement and its annexes, including, but not limited to, the Merger Agreement, as they contain important information about, among other things, the Merger and how it affects you.

Whether or not you plan to attend the Special Meeting virtually, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically

over the internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote at the meeting, your vote will revoke any proxy that you have previously submitted.

If you hold your shares of Company Common Stock in “street name,” you should instruct your commercial bank, dealer, broker, trust company or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your commercial bank, dealer, broker, trust company or other nominee. Your commercial bank, dealer, broker, trust company or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

Your vote is very important, regardless of the number of shares of Company Common Stock that you own. We cannot complete the Merger unless the proposal to adopt the Merger Agreement is approved by the affirmative vote of the stockholders holding a majority of the outstanding shares of Company Common Stock as of the close of business on [●], 2024, which is the record date for the Special Meeting.

If you have any questions or need assistance voting your shares of Company Common Stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, New York 10018

(212) 929-5500 (Call Collect)

or

Call Toll-Free (800) 322-2885

Email: [email protected]

On behalf of the Company Board, I thank you for your support and appreciate your consideration of this matter.

 

Sincerely,

Deidre Mahlan

Chairperson of the Company Board, President and Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the Merger, passed upon the merits or fairness of the Merger Agreement or the transactions contemplated thereby, including the proposed Merger, or passed upon the adequacy or accuracy of the information contained in the accompanying proxy statement. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated [●], 2024 and, together with the enclosed form of proxy card, is first being mailed on or about [●], 2024.

PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED NOVEMBER 21, 2024

The Duckhorn Portfolio, Inc.

1201 Dowdell Lane

St. Helena, CA 94574

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [●], 2024

Notice is hereby given that a virtual special meeting of stockholders (including any adjournments or postponements thereof, the “Special Meeting”) of The Duckhorn Portfolio, Inc., a Delaware corporation (“Duckhorn”) to be held virtually on [●], 2024, at [●] Pacific Time at [●], Duckhorn stockholders will be able to virtually attend and vote at the Special Meeting via the internet at [●]. You will not be able to attend the Special Meeting physically in person. For purposes of attendance at the Special Meeting, all references in the enclosed proxy statement to “present” shall mean virtually present at the Special Meeting. The Special Meeting is being held for the following purposes:

1. To consider and vote on the proposal to adopt the Agreement and Plan of Merger, dated October 6, 2024 (the “Merger Agreement”), by and among Duckhorn, Marlee Buyer, Inc. (“Parent”), and Marlee Merger Sub, Inc., a wholly owned subsidiary of Parent (“Merger Sub”). Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Duckhorn, with Duckhorn continuing as the surviving corporation (the “Surviving Corporation”) and a wholly owned subsidiary of Parent (the “Merger”);

2. To consider and vote on the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to Duckhorn’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”); and

3. To consider and vote on any proposal to adjourn the Special Meeting to a later date or dates, if necessary or appropriate, including to solicit additional proxies to approve the proposal to adopt the Merger Agreement if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting (the “Adjournment Proposal”).

The foregoing matters are more fully described in the accompanying proxy statement. The accompanying proxy statement, as well as the Merger Agreement attached thereto and all other exhibits and appendices attached thereto, are hereby incorporated by reference in this Notice.

Only stockholders of record as of the close of business on [●], 2024, are entitled to notice of the Special Meeting and to vote at the Special Meeting or any adjournment, postponement or other delay thereof.

Duckhorn’s Board of Directors (the “Company Board”) recommends, on behalf of Duckhorn, that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the non-binding, advisory Compensation Proposal; and (3) “FOR” the Adjournment Proposal.

All Duckhorn stockholders are invited to attend the Special Meeting virtually. Whether or not you plan to attend the Special Meeting virtually, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote virtually, your vote will revoke any proxy that you have previously submitted. If you hold your shares of Duckhorn common stock in “street name,” you should instruct your commercial bank, dealer, broker, trust company or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your commercial bank, dealer, broker, trust company or other nominee. Your commercial bank,

dealer, broker, trust company or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

 

Deidre Mahlan

Chairperson of the Company Board, President and Chief Executive Officer

Dated: [●], 2024

PRELIMINARY PROXY STATEMENT-SUBJECT TO COMPLETION, DATED NOVEMBER 21, 2024

The Duckhorn Portfolio, Inc.

1201 Dowdell Lane,

St. Helena, CA 94574

PROXY STATEMENT

FOR THE SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [●], 2024

IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY

MATERIALS FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON [●], 2024

This proxy statement is available through the “Financials” section of our website at https://ir.duckhorn.com/financials/sec-filings. We intend to mail these proxy materials on or about [●], 2024 to all holders of record of shares of common stock, par value $0.01 per share (the “Company Common Stock”), of The Duckhorn Portfolio, Inc., a Delaware corporation (“Duckhorn” or the “Company”), entitled to vote at the Special Meeting.

A complete list of the stockholders entitled to vote at the Special Meeting will be available for examination during regular business hours for the ten (10) days prior to the Special Meeting at our principal executive offices, located at 1201 Dowdell Lane, St. Helena, CA 94574. Stockholders may examine the list for any legally valid purpose related to the Special Meeting. If you would like to examine the list, please contact our Corporate Secretary to schedule an appointment by calling (707) 302-2658 or writing to the Corporate Secretary at the address above. The list of holders of shares of Company Common Stock entitled to notice of the Special Meeting will also be available for inspection by Duckhorn stockholders during the Special Meeting via the virtual meeting website at www.proxydocs.com/NAPA.

YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING VIRTUALLY, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE: (1) BY TELEPHONE; (2) THROUGH THE INTERNET; OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before it is voted at the Special Meeting.

If you hold your shares of Company Common Stock in “street name,” you should instruct your commercial bank, dealer, broker, trust company or other nominee how to vote your shares of Company Common Stock in accordance with the voting instruction form that you will receive from your commercial bank, dealer, broker, trust company or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

If you are a stockholder of record, voting virtually at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares of Company Common Stock through a commercial bank, dealer, broker, trust company or other nominee, you must obtain a “legal proxy” in order to vote virtually at the Special Meeting.

If you fail to (1) return your proxy card, (2) grant your proxy electronically over the internet or by telephone or (3) vote virtually at the Special Meeting, your shares of Company Common Stock will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement, but will have no effect on the Compensation Proposal or the Adjournment Proposal (each term as defined in this proxy statement).

You should carefully read and consider the entire accompanying proxy statement and its annexes, including, but not limited to, the Merger Agreement, along with all of the documents incorporated by reference into the

accompanying proxy statement, as they contain important information about, among other things, the Merger and how it affects you. If you have any questions concerning the Merger Agreement, the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Company Common Stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, New York 10018

(212) 929-5500 (Call Collect)

or

Call Toll-Free (800) 322-2885

Email: [email protected]

TABLE OF CONTENTS

 

SUMMARY			1
The Special Meeting			1
The Merger			3
Recommendation of the Company Board			7
Opinion of J.P. Morgan Securities LLC			7
Interests of Duckhorn’s Directors and Executive Officers in the Merger			8
Voting and Support Agreements			9
Financing of the Merger			9
Appraisal Rights			10
Certain Material U.S. Federal Income Tax Consequences of the Merger			11
Regulatory Approvals Required for the Merger			11
Alternative Acquisition Proposals			12
Conditions to the Closing of the Merger			13
Termination of the Merger Agreement			13
QUESTIONS AND ANSWERS			15
FORWARD-LOOKING STATEMENTS			24
THE SPECIAL MEETING			24
Date, Time and Place			24
Purpose of the Special Meeting			24
Record Date; Shares Entitled to Vote; Quorum			25
Vote Required; Abstentions and Broker Non-Votes			25
Stock Ownership and Interests of Certain Persons			26
Voting of Proxies			26
Revocability of Proxies			27
Adjournments			27
Company Board’s Recommendation			28
Expenses of Proxy Solicitor			28
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting to be Held on [●], 2024			28
Questions and Additional Information			28
THE MERGER			29
Parties Involved in the Merger			29
Effect of the Merger			29
Effect on Duckhorn if the Merger is Not Completed			30
Merger Consideration			30
Background of the Merger			32
Recommendation of the Company Board and Reasons for the Merger			39
Opinion of J.P. Morgan Securities LLC			42
Certain Unaudited Prospective Financial Information			47
Interests of Duckhorn’s Directors and Executive Officers in the Merger			52
Financing of the Merger			63
Voting and Support Agreements			64
Appraisal Rights			65
Accounting Treatment			71
Certain Material U.S. Federal Income Tax Consequences of the Merger			72
Regulatory Approvals Required for the Merger			75
PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT			77
PROPOSAL 2: THE DUCKHORN COMPENSATION PROPOSAL			105
PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING			106
MARKET PRICES AND DIVIDEND DATA			107

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			108
FUTURE STOCKHOLDER PROPOSALS			110
OTHER MATTERS			111
WHERE YOU CAN FIND MORE INFORMATION			112
MISCELLANEOUS			113
Annex A AGREEMENT AND PLAN OF MERGER			A-1
Annex B OPINION OF J.P. MORGAN SECURITIES LLC			B-1
Annex C VOTING AGREEMENTS			C-1

 

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QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. You should carefully read and consider the more detailed information contained elsewhere in this proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption, “Where You Can Find More Information.”

 

Q:	Why am I receiving this proxy statement and proxy card or voting instruction form?

 

A:

You are receiving this proxy statement and proxy card or voting instruction form in connection with the solicitation of proxies by the Company Board for use at the Special Meeting because you have been identified as a holder of Company Common Stock as of the close of business on the Record Date for the Special Meeting. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding how to vote your shares of Company Common Stock with respect to such matters.

 

Q:	When and where is the Special Meeting?

 

A:	The Special Meeting will be held virtually on [●], 2024 at [●] Pacific Time at [●].

 

Q:	What am I being asked to vote on at the Special Meeting?

 

A:	You are being asked to consider and vote on:

 

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a proposal to adopt the Merger Agreement pursuant to which Merger Sub will merge with and into Duckhorn, and Duckhorn will become a wholly owned subsidiary of Parent;

 

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a proposal to approve, on a non-binding, advisory basis, the Compensation Proposal; and

 

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a proposal to approve the Adjournment Proposal.

 

Q:	Who is entitled to vote at the Special Meeting?

 

A:

Duckhorn Stockholders as of the Record Date are entitled to receive notice of, and to vote at, the Special Meeting. Each holder of Company Common Stock is entitled to cast one (1) vote on each matter properly brought before the Special Meeting for each share of Company Common Stock that such holder owned as of the close of business on the Record Date. If you are a beneficial owner, you will need to contact the broker, dealer, commercial bank, trust company or other nominee who is the Duckhorn Stockholder of record with respect to your shares of Company Common Stock to obtain your control number (as described below) prior to the Special Meeting.

 

Q:	May I attend the Special Meeting virtually and vote at the Special Meeting?

 

A:

Duckhorn Stockholders as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. If you are a Duckhorn Stockholder of record, you do not need to do anything in advance to attend and/or vote your shares of Company Common Stock at the Special Meeting. However, to attend the Special Meeting, Duckhorn Stockholders of record will need to use their control number on their Notice of Internet Availability of Proxy Materials or proxy card to log into [●]. Beneficial owners of Company Common Stock who do not have a control number may gain access to the meeting by logging into their brokerage firm’s website and selecting the stockholder communications mailbox to link through to the Special Meeting; instructions should also be provided on the voting instruction card provided by their

 

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commercial bank, dealer, broker, trust company or other nominee. We encourage you to access the Special Meeting before it begins. Online check-in will start approximately fifteen (15) minutes before the Special Meeting is scheduled to begin at [●] Pacific Time on [●], 2024.

Each holder of record of Company Common Stock will be entitled to cast one (1) vote on each matter properly brought before the Special Meeting for each such share owned at the close of business on the Record Date.

Guests may enter the Special Meeting in “listen-only” mode by entering the Special Meeting at [●] and entering the information requested in the “Guest Login” section. Guests will not have the ability to vote or ask questions at the Special Meeting.

 

Q:	What will I receive if the Merger is completed?

 

A:

Upon completion of the Merger, you will be entitled to receive an amount in cash equal to $11.10, without interest thereon and subject to any applicable withholding taxes, for each share of Company Common Stock that you own immediately prior to the Effective Time, unless you are entitled to and have properly exercised and not withdrawn, failed to perfect or otherwise lost your appraisal rights under Section 262. For example, if you own one hundred (100) shares of Company Common Stock, you would receive $1,100 in cash in exchange for your shares of Company Common Stock, without interest and subject to deduction for any required withholding taxes. You will not receive any shares of the capital stock in the Surviving Corporation. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration.”

 

Q:	What will holders of Company awards receive if the Merger is consummated?

 

A:	Pursuant to the Merger Agreement:

 

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Acceleration. Each Company Stock Option and Company RSU (other than the Company Stock Options and Company RSUs granted in September 2024 and October 2024), or portion thereof, that is unvested and outstanding at the Effective Time will accelerate vesting by six (6) months, such that (A) the portion of any Company Stock Option and/or Company RSU ordinarily scheduled to vest within six (6) months following the Effective Time will vest at the Effective Time and (B) the vesting schedule applicable to the portion of any Company Stock Option and Company RSU ordinarily scheduled to vest more than six (6) months following the Effective Time will be accelerated by six (6) months.

 

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Vested Company Options. The portion of each Company Stock Option that is vested, outstanding and unexercised immediately prior to the Effective Time, including Company Stock Options accelerated at the Effective Time pursuant to their terms or pursuant to the terms of the Merger Agreement, will be cancelled, and, in exchange therefor, the holder of such cancelled Company Stock Option will be entitled to receive (without interest), in consideration of the cancellation of such Company Stock Option, an amount in cash (less applicable tax withholdings) equal to the product of (x) the total number of shares of Company Common Stock underlying the vested portion of the Company Stock Option immediately prior to the Effective Time multiplied by (y) the excess, if any, of the Merger Consideration over the applicable exercise price per share of Company Common Stock underlying the vested portion of such Company Stock Option.

 

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Unvested Company Options. The portion of each Company Stock Option that is unvested, outstanding and unexercised immediately prior to the Effective Time will, at the Effective Time, be cancelled, and, in exchange therefor, converted into the contingent right of the holder of such cancelled Company Stock Option to receive (without interest), in consideration of the cancellation of such portion of such Company Stock Option, an amount in cash (less applicable tax withholdings) equal to the Converted Option Cash Award. The Converted Option Cash Award shall remain subject to the same vesting schedule applicable to the related Company Stock Option (after taking into account the acceleration

 

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described herein), but excluding any terms rendered inoperative by reason of this paragraph or the transactions contemplated by the Merger Agreement and for such other administrative or ministerial changes as in the reasonable and good faith determination of Parent are appropriate to conform the Converted Option Cash Award. The vesting of the Converted Option Cash Award will accelerate in full in the event the holder’s employment is terminated by the Company without cause.

 

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Vested Company RSUs and Company PSUs. The portion of each Company Equity Award, other than a Company Stock Option, that is vested and outstanding immediately prior to the Effective Time but not yet settled immediately prior to the Effective Time, including Company Equity Awards accelerated at the Effective Time pursuant to their terms or pursuant to the Merger Agreement, will, at the Effective Time, be cancelled and, in exchange therefor, the holder of such cancelled Company Equity Award will be entitled to receive (without interest) an amount in cash (less applicable tax withholdings) equal to the product of (x) the total number of shares of Company Common Stock subject to (or deliverable under) the vested portion of such Company Equity Award immediately prior to the Effective Time, multiplied by (y) the Merger Consideration.

 

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Unvested Company RSUs. The portion of each Company RSU that is unvested and outstanding immediately prior to the Effective Time will, at the Effective Time, be cancelled, and, in exchange therefor, converted into the contingent right of the holder of such cancelled Company RSU to receive (without interest) an amount in cash (less applicable tax withholdings) equal to the Converted Stock Unit Cash Award. The Converted Stock Unit Cash Award shall remain subject to the same vesting schedule applicable to the related Company RSU (after taking into account the acceleration described herein), but excluding any terms rendered inoperative by reason of this paragraph or the transactions contemplated by the Merger Agreement and for such other administrative or ministerial changes as in the reasonable and good faith determination of Parent are appropriate to conform the Converted Stock Unit Cash Award, and the vesting of the Converted Stock Unit Cash Award will accelerate in the event the holder’s employment is terminated by the Company without cause.

For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Treatment of Company Awards.”

 

Q:	When do you expect the Merger to be completed?

 

A:

In order to complete the Merger, Duckhorn is required to obtain the Company Requisite Vote described in this proxy statement, and the other closing conditions under the Merger Agreement must be satisfied or waived. Assuming timely satisfaction of necessary closing conditions, including obtaining the Company Requisite Vote, Duckhorn is currently targeting to consummate the Merger in the second quarter of its current fiscal year. Since the Merger is subject to a number of conditions, the exact timing of the Merger cannot be determined at this time.

 

Q:	What happens if the Merger is not completed?

 

A:

If the Merger Agreement is not adopted by Duckhorn Stockholders or if the Merger is not completed for any other reason, Duckhorn Stockholders will not receive any payment for their shares of Company Common Stock. Instead, Duckhorn will remain an independent public company, the Company Common Stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and Duckhorn will continue to file periodic reports with the SEC. Under specified circumstances, Duckhorn will be required to pay Parent the Company Termination Fee or may receive the Parent Termination Fee upon the termination of the Merger Agreement, as described in the sections of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Effect of Termination” and “Proposal 1: Adoption of the Merger Agreement—Termination Fees.”

 

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Q:	What vote is required to adopt the Merger Agreement?

 

A:	The affirmative vote of Duckhorn Stockholders holding a majority of the outstanding shares of Company Common Stock that are issued and outstanding as of the Record Date is required to adopt the Merger Agreement.

If a quorum is present at the Special Meeting, the failure of any Duckhorn Stockholder of record to (i) submit a signed proxy card, (ii) grant a proxy over the internet or by telephone (using the instructions provided in the enclosed proxy card), or (iii) vote virtually at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If you hold your shares of Company Common Stock in “street name” and a quorum is present at the Special Meeting, the failure to instruct your commercial bank, dealer, broker, trust company or other nominee how to vote your shares of Company Common Stock will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If a quorum is present at the Special Meeting, abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.

Our directors and executive officers have informed us that they currently intend to vote all of their respective shares of Company Common Stock (i) “FOR” the adoption of the Merger Agreement, (ii) “FOR” the non-binding, advisory Compensation Proposal, and (iii) “FOR” the Adjournment Proposal.

Each of the Specified Stockholders has entered into a Voting Agreement that obligates such Voting Agreement Stockholder to vote certain of its shares of Company Common Stock for the adoption of the Merger Agreement and approval of the Merger on the terms and conditions set forth in the applicable Voting Agreement. As of the Record Date, the Specified Stockholders agreed to vote, in the aggregate, approximately at least [●]% of the outstanding shares of Company Common Stock as of the Record Date in favor of the adoption of the Merger Agreement.

For more information, please see the sections of this proxy statement captioned “The Merger – Voting and Support Agreements” and “Security Ownership of Certain Beneficial Owners and Management.”

 

Q:	What is a “broker non-vote”?

 

A:

A “broker non-vote” results when the banks, brokers, or other nominees return a valid proxy voting upon a matter or matters for which the applicable rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. Duckhorn does not expect any broker non-votes at the Special Meeting because each of the proposals to be presented at the Special Meeting is expected to be considered “non-routine.” As a result, no broker would be permitted to vote your shares of Company Common Stock at the Special Meeting without receiving instructions. Failure to instruct your broker on how to vote your shares of Company Common Stock will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and will have no effect on the Compensation Proposal, assuming a quorum is present, or the Adjournment Proposal.

 

Q:	Why are Duckhorn Stockholders being asked to cast a non-binding advisory vote to approve the Compensation Proposal?

 

A:	The Exchange Act and applicable SEC rules thereunder require Duckhorn to seek a non-binding, advisory vote with respect to certain payments that could become payable to its named executive officers in connection with the Merger.

 

Q:	What vote is required to approve the Compensation Proposal?

 

A:	The affirmative vote of a majority of the shares of Company Common Stock properly cast on the Compensation Proposal at the Special Meeting is required for approval of the Compensation Proposal, on a non-binding, advisory basis.

 

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Q:	What will happen if Duckhorn Stockholders do not approve the Compensation Proposal at the Special Meeting?

 

A:

Approval of the Compensation Proposal is not a condition to the completion of the Merger. The vote with respect to the Compensation Proposal is an advisory vote and will not be binding on Duckhorn. Therefore, if the other requisite stockholder approvals are obtained and the Merger is completed, the amounts payable under the Compensation Proposal will continue to be payable to Duckhorn’s named executive officers in accordance with the terms and conditions of the applicable agreements.

 

Q:	What do I need to do now?

 

A:

You should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents that we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy electronically over the internet or by telephone (using the instructions provided in the enclosed proxy card), so that your shares of Company Common Stock can be voted at the Special Meeting, unless you wish to seek appraisal pursuant to Section 262. If you hold your shares of Company Common Stock in “street name,” please refer to the voting instruction forms provided by your commercial bank, broker, dealer, trust company or other nominee to vote your shares of Company Common Stock.

 

Q:	May I exercise dissenters’ rights or rights of appraisal in connection with the Merger?

 

A:

Yes. In order to exercise your appraisal rights, you must follow the requirements set forth in Section 262. Under the DGCL, Duckhorn Stockholders of record who continuously hold shares of Company Common Stock through the Effective Time and do not vote in favor of adopting the Merger Agreement, and beneficial owners of shares of Company Common Stock held either in voting trust or by a nominee on behalf of such person who beneficially own shares of Company Common Stock through the Effective Time that are not voted in favor of the adoption of the Merger Agreement will have the right to seek appraisal of the “fair value” of their shares of Company Common Stock as determined by the Delaware Court of Chancery if the Merger is completed. Appraisal rights will only be available to Duckhorn Stockholders and beneficial owners of shares of Company Common Stock, as the case may be, who properly deliver a written demand for an appraisal to Duckhorn prior to the vote on the proposal to adopt the Merger Agreement at the Special Meeting and do not withdraw their demands, and who otherwise comply with the procedures and requirements set forth in Section 262, which are summarized in this proxy statement. The appraisal amount could be more than, the same as or less than the amount a Duckhorn Stockholder will be entitled to receive under the terms of the Merger Agreement. Holders and beneficial owners of Company Common Stock who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. A copy of Section 262 is accessible at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262 and incorporated by reference herein. Failure to comply with the provisions of Section 262 in a timely and proper manner may result in the loss of appraisal rights. For additional information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”

 

Q:	Should I surrender my book-entry shares now?

 

A:

No. The Paying Agent (as defined in this proxy statement) will send each holder of shares of Company Common Stock of record a letter of transmittal prior to the Closing and written instructions that explain how to exchange shares of Company Common Stock represented by such holder’s book-entry shares for the Merger Consideration. For additional information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Payment of Merger Consideration; Surrender of Shares.”

 

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Q:	What happens if I sell or otherwise transfer my shares of Company Common Stock after the Record Date but before the Special Meeting?

 

A:

The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of Company Common Stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares of Company Common Stock and each of you notifies Duckhorn in writing of such special arrangements, you will transfer the right to receive the Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares of Company Common Stock, but you will retain your right to vote those shares of Company Common Stock at the Special Meeting. You will also lose the ability to exercise appraisal rights in connection with the Merger with respect to the transferred shares of Company Common Stock. Even if you sell or otherwise transfer your shares of Company Common Stock after the Record Date, absent special arrangements, you will retain the right to vote those shares of Company Common Stock, and, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the internet or by telephone (using the instructions provided in the enclosed proxy card).

 

Q:	What is the difference between holding shares as a Duckhorn Stockholder of record and as a beneficial owner?

 

A:

If your shares of Company Common Stock are registered directly in your name with our transfer agent, Equiniti Trust Company, LLC, you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by Duckhorn.

If your shares of Company Common Stock are held through a commercial bank, broker, dealer, trust company or other nominee, you are considered the “beneficial owner” of shares of Company Common Stock held in “street name.” In that case, this proxy statement has been forwarded to you by your commercial bank, dealer, broker, trust company or other nominee who is considered, with respect to those shares of Company Common Stock, to be the stockholder of record. As the beneficial owner, you have the right to direct your commercial bank, dealer, broker, trust company or other nominee how to vote your shares of Company Common Stock by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares of Company Common Stock virtually at the Special Meeting.

 

Q:	If my broker holds my shares in “street name,” will my broker vote my shares for me?

 

A:

No. Your commercial bank, dealer, broker, trust company or other nominee is permitted to vote your shares of Company Common Stock on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your commercial bank, dealer, broker, trust company or other nominee how to vote. You should follow the procedures provided by your commercial bank, dealer, broker, trust company or other nominee to vote your shares of Company Common Stock. Without instructions, your shares of Company Common Stock will not be voted on such proposals, which will have the same effect as if you voted against adoption of the Merger Agreement, and which will have no effect on the Compensation Proposal or the Adjournment Proposal.

 

Q:	How may I vote?

 

A:	If you are a Duckhorn Stockholder of record (that is, if your shares of Company Common Stock are registered in your name with Equiniti Trust Company, LLC, our transfer agent), there are four (4) ways to vote:

 

•

by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope;

 

•

by visiting the internet at the address on your proxy card;

 

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•

by calling toll-free (within the U.S. or Canada) at the phone number on your proxy card; or

 

•

by attending the Special Meeting virtually and voting at the meeting.

A control number, located on your proxy card, is designed to verify your identity and allow you to vote your shares of Company Common Stock, and to confirm that your voting instructions have been properly recorded when voting electronically over the internet or by telephone (using the instructions provided in the enclosed proxy card). Please be aware that, although there is no charge for voting your shares of Company Common Stock, if you vote electronically over the internet or by telephone, you may incur costs such as internet access and telephone charges for which you will be responsible.

Even if you plan to attend the Special Meeting virtually, you are strongly encouraged to vote your shares of Company Common Stock by proxy. If you are a record holder or if you obtain a “legal proxy” to vote shares of Company Common Stock that you beneficially own, you may still vote your shares of Company Common Stock virtually at the Special Meeting even if you have previously voted by proxy. If you are present at the Special Meeting and vote virtually, your previous vote by proxy will not be counted.

If your shares of Company Common Stock are held in “street name” through a commercial bank, dealer, broker, trust company or other nominee, you may vote through your commercial bank, dealer broker, trust company or other nominee by completing and returning the voting form provided by your commercial bank, dealer, broker, trust company or other nominee, or, if such a service is provided by your commercial bank, dealer, broker, trust company or other nominee, electronically over the internet or by telephone. To vote over the internet or by telephone through your commercial bank, dealer, broker, trust company or other nominee, you should follow the instructions on the voting form provided by your commercial bank, dealer, broker, trust company or other nominee.

 

Q:	May I change my vote after I have mailed my signed and dated proxy card?

 

A:

Stockholder of Record: Shares Registered in Your Name

Yes. You can revoke or change your proxy at any time before the Special Meeting. If you are the record holder of your shares of Company Common Stock, you may revoke or change your proxy in any one of the following ways:

 

•

Attending the Special Meeting online and voting electronically during the meeting. However, your attendance online at the Special Meeting will not automatically revoke your proxy unless you properly vote electronically during the Special Meeting;

 

•

Specifically request that your prior proxy be revoked by delivering a written notice of revocation prior to the Special Meeting to the Corporate Secretary at the Company’s Corporate headquarters at 1201 Dowdell Lane, St. Helena, CA 94574;

 

•

Properly casting a new vote via the Internet or by telephone at any time before the closure of the Internet or telephone voting facilities; or

 

•

Duly completing a later-dated proxy card relating to the same shares of Company Common Stock and delivering it to the Corporate Secretary before the taking of the vote at the Special Meeting.

At the time the Special Meeting occurs, your most current proxy card or telephone or internet proxy is the one that is counted.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If your shares of Company Common Stock are held by your broker, dealer, trust company or commercial bank as a nominee or agent, you should follow the instructions provided by your broker, dealer, trust company, or commercial bank.

 

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Q:	How does Duckhorn’s board recommend that I vote?

 

A:	Duckhorn’s Board of Directors recommends, on behalf of Duckhorn, that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the non-binding, advisory Compensation Proposal; and (3) “FOR” the Adjournment Proposal.

 

Q:	What is a proxy?

 

A:

A proxy is your legal designation of another person to vote your shares of Company Common Stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Company Common Stock is called a “proxy card.”

 

Q:	If a Duckhorn Stockholder gives a proxy, how are the shares voted?

 

A:

The individuals named on the enclosed proxy card, or your proxies, will vote your shares of Company Common Stock in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares of Company Common Stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares of Company Common Stock should be voted on a matter, the shares represented by your properly signed proxy will be voted: (i) “FOR” the adoption of the Merger Agreement; (ii) “FOR” the non-binding, advisory Compensation Proposal; and (iii) “FOR” the Adjournment Proposal.

 

Q:	What should I do if I receive more than one set of voting materials?

 

A:	Please sign, date and return (or grant your proxy electronically over the Internet or by telephone using the instructions provided in the enclosed proxy card) each proxy card and voting instruction card that you receive.

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares of Company Common Stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares of Company Common Stock. If you are a Duckhorn Stockholder of record and your shares of Company Common Stock are registered in more than one name, you will receive more than one proxy card.

 

Q:	Where can I find the voting results of the Special Meeting?

 

A:

If available, Duckhorn may announce preliminary voting results at the conclusion of the Special Meeting. Duckhorn intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the Special Meeting. All reports that Duckhorn files with the SEC are publicly available when filed. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.”

 

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Q:	Who can help answer my questions?

 

A:	If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Company Common Stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, New York 10018

(212) 929-5500 (Call Collect)

or

Call Toll-Free (800) 322-2885

Email: [email protected]

 

23

FORWARD-LOOKING STATEMENTS

This proxy statement and any documents referred to in this proxy statement contains certain “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding Duckhorn’s pending acquisition by Butterfly, including the value of, timing and prospects of the Merger and Duckhorn’s strategy, goals and future focus areas. These forward-looking statements involve risk and uncertainties that are based on Duckhorn management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “will,” “expects,” “believes,” “plans,” or similar expressions and the negatives of those terms. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements, expressed or implied by the forward-looking statements, including: (a) risks related to the satisfaction of the conditions to closing of the Merger (including the failure to obtain necessary regulatory approvals and the requisite approval of the stockholders) in the anticipated timeframe or at all; (b) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; (c) risks related to disruption of management’s attention from Duckhorn’s ongoing business operations due to the Merger; (d) disruption from the Merger making it difficult to maintain business and operational relationships, including retaining and hiring key personnel and maintaining relationships with Duckhorn’s customers, distributors, suppliers and others with whom it does business; (e) significant transaction costs; (f) the risk of litigation and/or regulatory actions related to the Merger; (g) the possibility that competing offers or acquisition proposals for Duckhorn will be made; (h) restrictions imposed on our business during the pendency of the Merger; and (i) such other risks and uncertainties described more fully in documents filed with or furnished to the SEC by Duckhorn, including under the heading “Risk Factors” in Duckhorn’s Annual Report on Form 10-K  filed with the SEC on October 7, 2024, in any Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K and other filings that Duckhorn may file from time to time, copies of which are available free of charge on the SEC website at www.sec.gov. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. All forward-looking statements are based on information currently available to the Company and the Company does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, whether as a result of new information, future developments or otherwise, except as may be required by applicable law. The information set forth herein speaks only as of the date hereof.

No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements. Duckhorn Stockholders are advised to consult any future disclosures that we make on related subjects as may be detailed in our other filings made from time to time with the SEC.

THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of the Company Board for use at the Special Meeting.

Date, Time and Place

We will hold the Special Meeting virtually on [●], 2024 at [●] Pacific Time at [●] and, if applicable, at any adjournment or postponement thereof.

Purpose of the Special Meeting

At the Special Meeting, we will ask Duckhorn Stockholders to vote on proposals to: (i) adopt the Merger Agreement; (ii) approve, on a non-binding advisory basis, the Compensation Proposal; and (iii) approve the Adjournment Proposal.

 

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We do not expect that any matters other than the proposals set forth above will be brought before the Special Meeting, and only matters specified in the notice of the meeting may be acted upon at the Special Meeting.

Duckhorn Stockholders must approve the proposal to adopt the Merger Agreement in order for the Merger to be consummated. If the Duckhorn Stockholders fail to approve the proposal to adopt the Merger Agreement, the Merger will not be consummated. A copy of the Merger Agreement is attached as Annex A to this proxy statement, which we urge you to read carefully in its entirety.

Record Date; Shares Entitled to Vote; Quorum

Only Duckhorn Stockholders of record as of the Record Date are entitled to notice of the Special Meeting, and to vote at the Special Meeting. A list of Duckhorn Stockholders entitled to vote at the Special Meeting will be available at our principal executive offices located at 1201 Dowdell Lane, St. Helena, CA 94574, during regular business hours for a period of no less than ten (10) days before the Special Meeting. The list of holders of shares of Company Common Stock entitled to notice of the Special Meeting will also be available for inspection by Duckhorn stockholders during the Special Meeting via the virtual meeting website at www.proxydocs.com/NAPA.

The holders of a majority of the outstanding shares of Company Common Stock entitled to vote at the Special Meeting, present virtually or represented by proxy, shall constitute a quorum at the Special Meeting. On the Record Date, there were [●] shares of Company Common Stock outstanding and entitled to vote at the Special Meeting, meaning that [●] shares of Company Common Stock must be represented virtually or by proxy at the Special Meeting to have a quorum. In the event that a quorum is not present at the Special Meeting, it is expected that the meeting will be adjourned to solicit additional proxies to approve the proposal to adopt the Merger Agreement.

Vote Required; Abstentions and Broker Non-Votes

The affirmative vote of the Duckhorn Stockholders holding a majority of the outstanding shares of Company Common Stock as of the Record Date is required to adopt the Merger Agreement. As of the Record Date, [●] shares constitute a majority of the outstanding shares of Company Common Stock. Adoption of the Merger Agreement by Duckhorn Stockholders is a condition to the Closing.

Approval of the Compensation Proposal, on a non-binding, advisory basis, requires, assuming a quorum is present, the affirmative vote of a majority of the shares of Company Common Stock properly cast at the Special Meeting on the proposal. The approval of the Compensation Proposal is on a non-binding, advisory basis and is not a condition to the completion of the Merger.

Approval of the Adjournment Proposal to adjourn the Special Meeting (a) when a quorum is present, requires the affirmative vote of Duckhorn Stockholders holding a majority of the shares of Company Common Stock properly cast at the Special Meeting on the proposal and (b) when a quorum is not present, the meeting’s chairperson or holders of a majority in voting interest of the Duckhorn Stockholders represented at the Special Meeting (present virtually or represented by proxy) may adjourn the Special Meeting to another place, if any, date and time.

If a Duckhorn Stockholder abstains from voting, that abstention will be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as if the Duckhorn Stockholder voted “AGAINST” the proposal to adopt the Merger Agreement. Assuming a quorum is present, abstentions will have no effect on the outcomes of the Compensation Proposal or the Adjournment Proposal, other than reducing the number of affirmative votes required to achieve a majority of such matters by reducing the total number of shares of Company Common Stock from which the majority is calculated. If a quorum is not present, abstentions will have no effect on the Compensation Proposal or the Adjournment Proposal.

 

25

If no instructions as to how to vote is given in a validly executed, duly returned, and not revoked proxy, the proxy will be voted “FOR” (i) the proposal to adopt the Merger Agreement; (ii) the non-binding, advisory Compensation Proposal; and (iii) Adjournment Proposal.

Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement. A “broker non-vote” results when banks, brokers and other nominees return a valid proxy voting upon a matter or matters for which the applicable rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares of Company Common Stock. Duckhorn does not expect any broker non-votes at the Special Meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered “routine,” whereas each of the proposals to be presented at the Special Meeting is considered “non-routine.” As a result, no broker would be permitted to vote your shares of Company Common Stock at the Special Meeting without receiving instructions. Failure to instruct your broker on how to vote your shares of Company Common Stock will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement, and will have no effect on the Compensation Proposal or the Adjournment Proposal, other than reducing the number of affirmative votes required to achieve a majority of such matters by reducing the total number of shares of Company Common Stock from which the majority is calculated.

Stock Ownership and Interests of Certain Persons

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [●] shares of Company Common Stock, representing approximately [●]% of the shares of Company Common Stock outstanding on the Record Date.

Our directors and executive officers have informed us that they currently intend to vote all of their respective shares of Company Common Stock (i) “FOR” the adoption of the Merger Agreement, (ii) “FOR” the non-binding, advisory Compensation Proposal, and (iii) “FOR” the Adjournment Proposal.

Each of the Specified Stockholders has entered into a Voting Agreement that obligates such holder to vote certain of its shares of Company Common Stock for the adoption of the Merger Agreement and approval of the Merger on the terms and conditions set forth in the Voting Agreement. The Specified Stockholders have agreed to vote, in the aggregate, approximately [●]% of the outstanding shares of the Company Common Stock as of the Record Date in favor of the adoption of the Merger Agreement. For more information, please see the sections of this proxy statement captioned “The Merger – Voting and Support Agreements” and “Security Ownership of Certain Beneficial Owners and Management.”

Voting of Proxies

If, at the close of business on the Record Date, your shares of Company Common Stock are registered in your name with our transfer agent, Equiniti Trust Company, LLC, you may cause your shares of Company Common Stock to be voted by returning a signed and dated proxy card in the accompanying prepaid envelope, or you may vote virtually at the Special Meeting. Additionally, you may grant a proxy electronically over the internet or by telephone (using the instructions provided in the enclosed proxy card). You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to grant a proxy electronically over the internet or by telephone. Based on your proxy card or internet and telephone proxies, the proxy holders will vote your shares of Company Common Stock according to your directions.

If you plan to attend the Special Meeting and wish to vote virtually, you will need to enter the sixteen (16)-digit Control Number found next to the label “Control Number” on your proxy card voting instruction form, or in the email sending you the proxy statement. If you attend the Special Meeting, and vote virtually, your vote will revoke any previously submitted proxy. If your shares of Company Common Stock are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting virtually.

 

26

Voting instructions are included on your proxy card. All shares of Company Common Stock represented by properly signed and dated proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the Duckhorn Stockholders. Properly signed and dated proxies that do not contain voting instructions will be voted: (i) “FOR” the adoption of the Merger Agreement; (ii) “FOR” the non-binding, advisory Compensation Proposal and (iii) “FOR” the Adjournment Proposal.

If, at the close of business on the Record Date, your shares of Company Common Stock are held in “street name” through a commercial bank, dealer, broker, trust company or other nominee, you may vote through your commercial bank, dealer, broker, trust company or other nominee by completing and returning the voting form provided by your commercial bank, dealer, broker, trust company or other nominee or attending the Special Meeting and voting virtually with a “legal proxy” from your commercial bank, dealer, broker, trust company or other nominee. If such a service is provided, you may vote over the internet or telephone through your commercial bank, dealer, broker, trust company or other nominee by following the instructions on the voting form provided by your commercial bank, dealer, broker, trust company or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form, do not vote via the internet or telephone through your commercial bank, dealer, broker, trust company or other nominee, if possible, or do not attend the Special Meeting and vote virtually with a “legal proxy” from your commercial bank, dealer, broker, trust company or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the Merger Agreement, but will have no effect on the Compensation Proposal and the Adjournment Proposal.

Revocability of Proxies

Stockholder of Record: Shares Registered in Your Name

If you are a Duckhorn Stockholder of record entitled to vote at the Special Meeting, you can revoke or change your proxy at any time before the Special Meeting is held. If you are the record holder of your shares of Company Common Stock, you may revoke or change your proxy in any one of the following ways:

 

•

Attending the Special Meeting online and voting electronically during the meeting. However, your attendance online at the Special Meeting will not automatically revoke your proxy unless you properly vote electronically during the Special Meeting;

 

•

Specifically request that your prior proxy be revoked by delivering a written notice of revocation prior to the Special Meeting to the Corporate Secretary at the Company’s Corporate headquarters at 1201 Dowdell Lane, St. Helena, CA 94574;

 

•

Properly casting a new vote via the Internet or by telephone at any time before the closure of the Internet or telephone voting facilities; or

 

•

Duly completing a later-dated proxy card relating to the same shares of Company Common Stock and delivering it to the Corporate Secretary before the taking of the vote at the Special Meeting.

At the time the Special Meeting occurs, the most current proxy card or telephone or internet proxy is the one that is counted.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If your shares of Company Common Stock are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.

Adjournments

Although it is not currently expected, the Special Meeting may be adjourned to any other time and to any other place (whether virtual or not) by the Duckhorn Stockholders present or represented at the Special Meeting,

 

27

although less than a quorum, or by the chairperson of the Special Meeting, including for the purpose of soliciting additional proxies, if there are insufficient votes at the time of the Special Meeting to approve the proposal to adopt the Merger Agreement or if a quorum is not present at the Special Meeting. Other than an announcement to be made at the Special Meeting of the time, date and place (whether virtual or not) of an adjourned meeting, an adjournment generally may be made without notice. Any adjournment of the Special Meeting for the purpose of soliciting additional proxies will allow the Duckhorn Stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned.

Company Board’s Recommendation

After careful consideration, the Company Board has unanimously (i) determined that the Merger Agreement and the transactions contemplated by the Merger Agreement are fair to and in the best interests of the Company and Duckhorn Stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement, (iii) authorized and approved the execution, delivery and performance by the Company of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement upon the terms and subject to the conditions set forth therein and (iv) resolved, subject to the terms of the Merger Agreement, to recommend the adoption of the Merger Agreement by Duckhorn Stockholders.

Accordingly, the Company Board recommends, on behalf of Duckhorn, that you vote: (i) “FOR” the adoption of the Merger Agreement; (ii) “FOR” the non-binding, advisory Compensation Proposal; and (iii) “FOR” the Adjournment Proposal.

Expenses of Proxy Solicitor

The expense of preparing, printing and mailing materials related to the Special Meeting is being borne by Duckhorn. Duckhorn has retained MacKenzie Partners, Inc. as proxy solicitor at a cost of approximately $12,500 plus expenses.

Important Notice Regarding the Availability of Proxy Materials for the Special Meeting to be Held on [●], 2024

The proxy statement is available through the “Financials” section of our website at https://ir.duckhorn.com/financials/sec-filings.

Questions and Additional Information

If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Company Common Stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, New York 10018

(212) 929-5500 (Call Collect)

or

Call Toll-Free (800) 322-2885

Email: [email protected]

 

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THE MERGER

This description of the proposed Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this document contains important information about the Merger and how it affects you.

Parties Involved in the Merger

The Duckhorn Portfolio, Inc.

Duckhorn is a premier luxury wine company, with eleven (11) wineries, ten (10) winemaking facilities, eight (8) tasting rooms and over two thousand and two hundred (2,200) acres of vineyards spanning thirty-eight (38) Estate properties. Established in 1976, when vintners Dan and Margaret Duckhorn founded Napa Valley’s Duckhorn Vineyards, today, Duckhorn’s portfolio features respected wineries, including Duckhorn Vineyards, Decoy, Sonoma-Cutrer, Kosta Browne, Goldeneye, Paraduxx, Calera, Migration, Postmark, Canvasback and Greenwing. Sourcing grapes from Duckhorn’s own Estate vineyards and fine growers in Napa Valley, Sonoma County, Anderson Valley, California’s North and Central coasts, Oregon and Washington State, Duckhorn offers a portfolio of wines with price points ranging from $20 to $230 across more than fifteen (15) varietals. Duckhorn’s wines are available throughout the United States, on five (5) continents, and in more than fifty (50) countries around the world. Duckhorn’s common stock, par value $0.01 per share, is listed on the NYSE under the symbol “NAPA”. Duckhorn’s principal executive offices are located at 1201 Dowdell Lane Saint Helena, CA 94574 and its telephone number is (707) 302-2658.

Marlee Buyer, Inc.

Parent is a Delaware corporation and was formed on September 24, 2024 by Butterfly, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and other documents or agreements executed and delivered in connection with the Merger Agreement. Parent has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement. Upon the completion of the Merger, Duckhorn will be a wholly owned subsidiary of Parent. The principal executive offices of Parent are located at 9595 Wilshire Blvd, Suite 510, Beverly Hills, CA 90212, and its telephone number is (310) 409-4994.

Marlee Merger Sub, Inc.

Merger Sub is a Delaware corporation and a wholly owned subsidiary of Parent and was formed on September 24, 2024, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and other documents or agreements executed and delivered in connection with the Merger Agreement. Merger Sub has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement. Upon the completion of the Merger, Merger Sub will cease to exist with Duckhorn continuing as the Surviving Corporation and a wholly owned subsidiary of Parent. The principal executive offices of Merger Sub are located at 9595 Wilshire Blvd, Suite 510, Beverly Hills, CA 90212, and its telephone number is (310) 409-4994.

Effect of the Merger

On the terms and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, and in accordance with the DGCL, Merger Sub will merge with and into Duckhorn, with Duckhorn continuing as the Surviving Corporation. As a result of the Merger, the Company Common Stock will no longer be publicly traded, and will be delisted from the NYSE. In addition, the Company Common Stock will be deregistered under the Exchange Act, and Duckhorn will no longer file periodic reports with the SEC with respect to the Company Common Stock. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.

 

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The Effective Time will occur upon the filing of a duly executed certificate of merger with the Secretary of State of the State of Delaware (or at such later time as may be specified in the certificate of merger and agreed to by the parties to the Merger Agreement).

Effect on Duckhorn if the Merger is Not Completed

If the Merger Agreement is not adopted by Duckhorn Stockholders, or if the Merger is not completed for any other reason:

 

(i)

the Duckhorn Stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Company Common Stock pursuant to the Merger Agreement;

 

(ii)

(A) Duckhorn will remain an independent public company, (B) the Company Common Stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and (C) Duckhorn will continue to file periodic reports with the SEC;

 

(iii)

Duckhorn anticipates that (A) management will operate the business in a manner similar to that in which it is being operated today and (B) Duckhorn Stockholders will be subject to similar types of risks and uncertainties as those to which they are currently subject, including, but not limited to, risks and uncertainties with respect Duckhorn’s business, prospects and results of operations, as such may be affected by, among other things, the industry in which Duckhorn operates and economic conditions;

 

(iv)

the price of the Company Common Stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of the Company Common Stock would return to the price at which it trades as of the date of this proxy statement;

 

(v)

the Company Board will continue to evaluate and review Duckhorn’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate (irrespective of these efforts, it is possible that no other transaction acceptable to the Company Board would be offered or that Duckhorn’s business, prospects and results of operations would be adversely impacted); and

 

(vi)

under certain specified circumstances, Duckhorn may be required to pay Parent the Company Termination Fee, or Parent may be required to pay Duckhorn the Parent Termination Fee in certain circumstances. For more information, please see the sections of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Effect of Termination,” and “Proposal 1: Adoption of the Merger Agreement—Termination Fees.”

Merger Consideration

Company Common Stock

As a result of the Merger, at the Effective Time, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than (i) shares of Company Common Stock held in the treasury of the Company or owned by the Company or any direct or indirect wholly owned subsidiary of the Company immediately prior to the Effective Time, (ii) shares of Company Common Stock owned by Parent, Merger Sub or any direct or indirect wholly owned subsidiary of Parent or Merger Sub immediately prior to the Effective Time or (iii) Dissenting Shares) will be converted into the right to receive the Merger Consideration, and as of the Effective Time, all such shares will no longer be outstanding and will automatically be canceled and will cease to exist. For more information, please see the section of this proxy statement captioned “The Merger—Merger Consideration.”

After the Merger is completed, you will have the right to receive the Merger Consideration in respect of each share of Company Common Stock that you own (less any applicable withholding taxes), but you will no longer have any rights as a Duckhorn Stockholder (except that Duckhorn Stockholders who properly exercise,

 

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and do not withdraw, their appraisal rights will have a right to receive payment of the “fair value” of their shares of Company Common Stock as determined pursuant to an appraisal proceeding, as contemplated by the DGCL). For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”

Treatment of Company Equity Awards

Pursuant to the Merger Agreement:

The Company Board (or, if appropriate, a committee administering the Company’s 2021 Equity Inventive Plan (the “Company Equity Plan”)) has adopted or will adopt resolutions and has taken or will take all other actions as may be required to provide the following treatment, subject to the consummation of the Merger and except as otherwise explicitly agreed in writing by the parties to the Merger Agreement or between Parent and the holder of a Company Stock Option, a Company RSU, or a Company PSU, other than awards under the Company ESPP:

 

•

Acceleration. Each Company Stock Option and Company RSU (other than the Company Stock Options and Company RSUs granted in September 2024 and October 2024), or portion thereof, that is unvested and outstanding at the Effective Time will accelerate vesting by six (6) months, such that (A) the portion of any Company Stock Option and/or Company RSU ordinarily scheduled to vest within six (6) months following the Effective Time will vest at the Effective Time and (B) the vesting schedule applicable to the portion of any Company Stock Option and Company RSU ordinarily scheduled to vest more than six (6) months following the Effective Time will be accelerated by six (6) months.

 

•

Vested Company Options. The portion of each Company Stock Option that is vested, outstanding and unexercised immediately prior to the Effective Time, including Company Stock Options accelerated at the Effective Time pursuant to their terms or pursuant to the terms of the Merger Agreement, will be cancelled, and, in exchange therefor, the holder of such cancelled Company Stock Option will be entitled to receive (without interest), in consideration of the cancellation of such Company Stock Option, an amount in cash (less applicable tax withholdings) equal to the product of (x) the total number of shares of Company Common Stock underlying the vested portion of the Company Stock Option immediately prior to the Effective Time multiplied by (y) the excess, if any, of the Merger Consideration over the applicable exercise price per share of Company Common Stock underlying the vested portion of such Company Stock Option.

 

•

Unvested Company Options. The portion of each Company Stock Option that is unvested, outstanding and unexercised immediately prior to the Effective Time will, at the Effective Time, be cancelled, and, in exchange therefor, converted into the contingent right of the holder of such cancelled Company Stock Option to receive (without interest), in consideration of the cancellation of such portion of such Company Stock Option, an amount in cash (less applicable tax withholdings) equal to the Converted Option Cash Award. The Converted Option Cash Award shall remain subject to the same vesting schedule applicable to the related Company Stock Option (after taking into account the acceleration described herein), but excluding any terms rendered inoperative by reason of this paragraph or the transactions contemplated by the Merger Agreement and for such other administrative or ministerial changes as in the reasonable and good faith determination of Parent are appropriate to conform the Converted Option Cash Award. The vesting of the Converted Option Cash Award will accelerate in full in the event the holder’s employment is terminated by the Company without cause.

 

•

Vested Company RSUs and Company PSUs. The portion of each Company Equity Award, other than a Company Stock Option, that is vested and outstanding immediately prior to the Effective Time but not yet settled immediately prior to the Effective Time, including Company Equity Awards accelerated at the Effective Time pursuant to their terms or pursuant to the Merger Agreement, will, at the Effective Time, be cancelled and, in exchange therefor, the holder of such cancelled Company Equity Award will be entitled to receive (without interest) an amount in cash (less applicable tax withholdings) equal to the product of (x) the total number of shares of Company Common Stock

 

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subject to (or deliverable under) the vested portion of such Company Equity Award immediately prior to the Effective Time, multiplied by (y) the Merger Consideration.

 

•

Unvested Company RSUs. The portion of each Company RSU that is unvested and outstanding immediately prior to the Effective Time will, at the Effective Time, be cancelled, and, in exchange therefor, converted into the contingent right of the holder of such cancelled Company RSU to receive (without interest) an amount in cash (less applicable tax withholdings) equal to the Converted Stock Unit Cash Award. The Converted Stock Unit Cash Award shall remain subject to the same vesting schedule applicable to the related Company RSU (after taking into account the acceleration described herein), but excluding any terms rendered inoperative by reason of this paragraph or the transactions contemplated by the Merger Agreement and for such other administrative or ministerial changes as in the reasonable and good faith determination of Parent are appropriate to conform the Converted Stock Unit Cash Award, and the vesting of the Converted Stock Unit Cash Award will accelerate in the event the holder’s employment is terminated by the Company without cause.

For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Treatment of Company Equity Awards.”

Background of the Merger

The following chronology summarizes the key meetings and events that led to the signing of the merger agreement. This chronology does not purport to catalogue every conversation of or among the Company Board, Company’s management, the Company’s financial advisor or legal advisor, Butterfly, Parent, Merger Sub or their respective financial advisors, legal advisors or representatives or any other person.

The Company Board and the Company’s senior management have periodically reviewed and evaluated the Company’s operations, financial performance, long-term strategies and strategic opportunities to increase stockholder value, including acquisitions and dispositions of assets, businesses and product lines, in light of developments in the industries in which the Company operates, the economy generally and financial markets. As part of this review and evaluation, representatives of Company management have, from time to time, conducted introductory meetings with various parties who have expressed interest in meeting with the Company.

On November 21, 2023, a representative of Butterfly had a telephone conversation with Charles Esserman, a member of the Company Board, to inquire if the Company may be interested in pursuing a potential transaction with Butterfly. The representative of Butterfly did not make any specific proposal with respect to an acquisition or other transaction involving the Company or discuss any specific potential acquisition terms. Mr. Esserman referred such representative of Butterfly to Deirdre Mahlan, President, Chief Executive Officer and Chairperson of the Company. The representative of Butterfly then reached out to Ms. Mahlan and they set up a meeting for December 7, 2023.

On December 7, 2023, Ms. Mahlan and Sean Sullivan, Executive Vice President, Chief Strategy and Legal Officer of the Company, held a meeting by videoconference with representatives of Butterfly, during which such representatives of Butterfly discussed in general terms Butterfly’s interest in potentially exploring a strategic transaction in the wine industry, including with the Company. Ms. Mahlan informed the representatives of Butterfly that the Company was focused on completing its recently announced acquisition of the Sonoma-Cutrer Vineyards brand (“Sonoma-Cutrer”) from the Brown-Forman Corporation, and that as such, it would make sense to consider any potential transaction with Butterfly at a later date. No material non-public information was shared with Butterfly in this meeting, and the representatives of Butterfly did not make any specific proposal with respect to an acquisition or other transaction involving the Company or discuss any specific potential acquisition terms.

On January 18, 2024, Mr. Sullivan held an in-person meeting with representatives of Butterfly, during which the representatives of Butterfly reiterated Butterfly’s interest in the wine industry, and the parties

 

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discussed the Company’s business generally. Mr. Sullivan reiterated that the Company was focused on completing its acquisition of Sonoma-Cutrer and that the Company would only be interested in discussing a potential transaction after the completion of such acquisition. No material non-public information was shared with Butterfly in this meeting, and the representatives of Butterfly did not make any specific proposal with respect to an acquisition or other transaction involving the Company or discuss any specific potential acquisition terms.

On May 1, 2024, the Company closed its acquisition of Sonoma-Cutrer from Brown-Forman Corporation.

On May 29, 2024, a representative of Butterfly transmitted by email to Ms. Mahlan and Mr. Sullivan a joint, non-binding indication of interest for Butterfly and a private equity firm which we refer to as “Party A” to acquire the Company (the “May 29 IoI”). The May 29 IoI stated that (i) Butterfly and Party A proposed to acquire the Company for an all-cash offer price of $10.50 per share of Company Common Stock, (ii) the proposed transaction would be subject to securing committed debt financing at the signing of the proposed transaction and (iii) Butterfly and Party A had completed their initial due diligence on the Company’s business based on publicly available information and were prepared to begin the next phase of their due diligence immediately. The proposed price per share of Company Common Stock represented a premium of approximately 34% to the trading price of the Company Common Stock on May 29, 2024 and a premium of approximately 30% to the thirty (30)-day volume-weighted average price for the Company Common Stock for the preceding thirty (30) days. Mr. Sullivan acknowledged receipt of the May 29 IoI on behalf of the Company on May 30, 2024.

On May 31, 2024, at the Company Board’s regularly scheduled meeting, Ms. Mahlan and Mr. Sullivan disclosed to the Company Board that they had received the May 29 IoI. The Company Board discussed the May 29 IoI and which financial advisor to approach to advise the Company Board with respect to any consideration of the proposal and any engagement with Butterfly and Party A. Ms. Mahlan recommended that the Company Board retain J.P. Morgan, given its expertise and experience with, and understanding, of the Company’s business, having served as lead managing underwriter on the Company’s initial public offering and on a subsequent public offering of the Company’s shares by TSG, the Company’s largest stockholder, and certain management stockholders. After discussion, the Company Board directed Ms. Mahlan to contact J.P. Morgan to engage them as financial advisor to advise the Company Board with respect to the proposal and any resulting potential transaction, assuming acceptable terms for the engagement could be negotiated.

On June 14, 2024, the Company Board convened a meeting by videoconference, with members of Company’s management and representatives of Ropes & Gray LLP (“Ropes & Gray”), outside legal counsel to the Company, in attendance to discuss the potential engagement of J.P. Morgan as financial advisor and to discuss the May 29 IoI. During the meeting, a representative from Ropes & Gray reviewed with the Company Board the directors’ fiduciary duties in the context of considering a proposal to sell the Company. Members of Company’s management then provided a summary of negotiations with J.P. Morgan regarding the terms of its potential engagement. Following the discussion, representatives of J.P. Morgan joined the meeting and reviewed its preliminary financial analyses of the Company using two sets of preliminary projections provided by the Company’s management referred to as Case A and Case B (See “—Certain Unaudited Prospective Financial Information”) and provided their perspectives on the May 29 IoI and potential process timeline and response options. The Company Board directed J.P. Morgan to convey to Butterfly and Party A that the Company had considered the May 29 IoI and was not prepared to provide due diligence materials or enter into discussions with them based upon the terms proposed.

On June 17, 2024, at the instruction of the Company Board, representatives of J.P. Morgan held a video conference with representatives of Butterfly and representatives of Party A, during which representatives of J.P. Morgan informed them that the Company had considered the May 29 IoI and was not prepared to move forward with them under the terms.

On June 26, 2024, a representative of Butterfly and a representative of Party A sent Ms. Mahlan and Mr. Sullivan a revised non-binding indication of interest by email to acquire the Company for an all-cash offer

 

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price of $11.50 per share of Company Common Stock, subject to further due diligence and definitive agreements (the “June 26 Proposal”). The June 26 Proposal stated that the proposed transaction would be subject to securing committed debt financing at the signing of the transaction and that Butterfly and Party A were ready to begin the next phase of their due diligence immediately. The proposed price per share represented a premium of approximately 65% to the trading price of shares of Company Common Stock on June 26, 2024 and a premium of approximately 49% to the 30-day volume-weighted average price for shares of Company Common Stock for the immediately preceding 30 days.

On July 13, 2024, the Company Board convened a meeting by videoconference, with members of Company’s management and representatives of Ropes & Gray in attendance. Mr. Sullivan provided an overview of the proposed engagement letter with J.P. Morgan, including, among other terms, the fees that would be payable to J.P. Morgan in connection with the potential transaction. The Company Board approved the engagement of J.P. Morgan. Representatives of J.P. Morgan then joined the meeting and provided an overview of the Company’s operating outlook and broader industry trends and summarized the June 26 Proposal. Representatives of J.P. Morgan further advised the Company Board that representatives of Butterfly and Party A had orally indicated an interest in having one or both of the Company’s two largest shareholders, TSG and Brown-Forman Corporation, participate in the proposed transaction by “rolling” their equity but further indicated they were prepared to complete the transaction without the involvement from either shareholder. Representatives of J.P. Morgan updated its preliminary financial analyses of the Company using three sets of preliminary projections provided by the Company’s management referred to as Case A, Case C and Case D (See “—Certain Unaudited Prospective Financial Information”). The Company Board then approved granting Butterfly and Party A access to due diligence materials, subject to Butterfly’s and Party A’s execution of a non-disclosure agreement, and directed J.P. Morgan to convey to Butterfly and Party A that although the Company Board believed that the June 26 Proposal undervalued the Company, the Company was willing to provide them with access to due diligence materials for purposes of making a revised proposal.

Representatives of J.P. Morgan further discussed with the Company Board at the July 13, 2024 meeting potential strategies for conducting a market check, including considerations with respect to potential premature disclosure of the potential transaction, the likelihood that one of the potential strategic buyers in the wine industry would be willing to engage on a potential acquisition of the Company at the present time, the likelihood that another private equity buyer would be willing to pay more than Butterfly and the potential benefits of conducting a post-signing market check in a “go shop” period. At this meeting, the Company Board did not make any final decisions regarding a market check.

On July 14, 2024, at the instruction of the Company Board, representatives of J.P. Morgan held a meeting by videoconference with representatives of Butterfly and representatives of Party A, during which representatives of J.P. Morgan informed them that the Company Board believed that the Company was worth more than their offer from the June 26 Proposal, but that the Company Board was willing to provide Butterfly and Party A with four weeks of access to the Company’s confidential information and the Company’s management team to complete its business due diligence and reach the point where they may be able to provide an improved firm offer price.

Between July 15, 2024 and July 22, 2024, representatives of Ropes & Gray, on behalf of the Company, and representatives of Kirkland & Ellis LLP (“Kirkland & Ellis”), outside legal counsel to Butterfly, on behalf of Butterfly, negotiated the terms of the non-disclosure agreement, which included a prohibition on the bidders from speaking with any stockholder without the Company’s consent among other terms. On July 22, 2024, the Company executed the non-disclosure agreement with each of Butterfly and Party A, each containing a twelve (12) month standstill with customary fall-away provisions. Following the execution of the agreements, the Company provided Butterfly and Party A access to a virtual data room containing non-public confidential information regarding the Company.

On July 25, 2024, the Company entered into an engagement letter with J.P. Morgan, retaining J.P. Morgan as financial advisor to the Company in connection with the potential strategic transaction.

 

34

Between July 30, 2024 and August 25, 2024, representatives of J.P. Morgan held various process-related calls and videoconferences with representatives of each of Butterfly and Party A. In addition, between August 7, 2024 and September 3, 2024, representatives of the Company participated in various virtual and in-person due diligence sessions with representatives of each of Butterfly and Party A addressing topics including strategy, sales and distribution, operations and finance.

On August 12, 2024, a representative of an investment bank contacted Ms. Mahlan on behalf of a private equity firm, that we refer to as “Party B”, to express Party B’s interest in an introductory meeting with the Company. The Company scheduled a meeting with Party B, but ultimately postponed the meeting until after the Company’s earnings call. In August 2024, representatives of another company operating in the wine industry that we refer to as “Party C” requested a meeting with Mr. Esserman. The representatives of Party C did not provide an agenda. At the meeting, upon learning that the representatives of Party C wished to discuss pursuing a transaction with the Company, Mr. Esserman directed the representatives of Party C to contact Ms. Mahlan or J.P. Morgan regarding their interest. The Company and its representatives did not hear further from Party C prior to entry into the Merger Agreement. At the instruction of the Company Board, J.P. Morgan contacted both Party B and Party C as part of the “go shop” process, but neither signed a confidentiality agreement or submitted a proposal to acquire the Company.

On August 23, 2024, in a videoconference with representatives of J.P. Morgan, representatives of each of Butterfly and Party A verbally reaffirmed their offer to acquire the Company for an all-cash offer price of $11.50 per share of Company Common Stock, subject to several outstanding business due diligence items, including further due diligence of the Company’s recent financial performance and long-term financial projections. Later that day, a representative of Butterfly and a representative of Party A sent Ms. Mahlan and Mr. Sullivan, by email, a letter confirming their continued interest in a potential acquisition of the Company for an all-cash offer price of $11.50 per share of Company Common Stock, subject to the completion of further due diligence (the “August 23 Proposal”). The August 23 Proposal also requested clarity as to whether, TSG and Brown-Forman Corporation, would be interested in remaining shareholders of the Company following the transaction.

On August 27, 2024, the Company Board convened a meeting by videoconference to discuss the August 23 Proposal, which had previously been shared with the Company Board, with members of Company management and representatives of each of J.P. Morgan and Ropes & Gray in attendance. Representatives of J.P. Morgan provided an update on the due diligence process with Butterfly and Party A and broader market backdrop and summarized the August 23 Proposal for the Company Board, which reiterated a price per share of Company Common Stock of $11.50. J.P. Morgan further noted that Butterfly and Party A had asked J.P. Morgan whether TSG and/or Brown-Forman Corporation were interested in “rolling” their equity in the proposed transaction but noted that Butterfly and Party A indicated they were prepared to move forward with the proposed transaction if one or both shareholders declined to do so. The Company Board was also provided an update with regards to the outreach of Party B and Party C, including that a meeting had been tentatively scheduled for late September with Party B. Following discussions during the meeting, the Company Board directed the Company’s management to reschedule the meeting with Party B until after the Company’s upcoming earnings call. Ms. Mahlan informed the Company Board that TSG had confirmed to her that they would not be “rolling” their equity in the Company and further noted that Brown-Forman Corporation had indicated it was considering the request but had not yet made a decision.

On September 2, 2024, representatives of Butterfly conveyed to representatives of J.P. Morgan in a telephone conversation that Party A had informed Butterfly that it intended to withdraw from the process, and that Butterfly was prepared to proceed with the proposed transaction without the involvement of Party A. Also on September 2, 2024, representatives of Party A formally conveyed to representatives of J.P. Morgan in a telephone conversation that they were withdrawing from the process.

On September 3, 2024, a representative of Butterfly sent, by email, a letter to Ms. Mahlan and Mr. Sullivan reaffirming Butterfly’s interest in acquiring the Company for an all-cash offer price of $11.50 per share of Company Common Stock, subject to confirmatory due diligence (the “September 3 Proposal”). The September 3 Proposal stated that the potential transaction would be subject to equity financing and committed debt financing

 

35

fully committed at the execution of the transaction and that Butterfly and its third-party advisors were prepared to begin confirmatory due diligence immediately.

On September 6, 2024, the Company Board convened a meeting by videoconference with members of Company’s management and representatives of each of J.P. Morgan and Ropes & Gray in attendance to discuss the September 3 Proposal. Representatives of J.P. Morgan provided a process update since the last meeting of the Company Board and then provided a summary of the status of the proposed transaction. A representative of Ropes & Gray summarized key terms of a proposed draft merger agreement that had been provided to the Company Board prior to the meeting to be transmitted to Butterfly in the event that the Company Board decided to pursue a potential transaction with Butterfly. The draft merger agreement contemplated a one-step merger structure and provided for, among other things, a sixty (60)-day “go-shop” period, the Company’s ability to terminate the merger agreement and pay a termination fee in order to enter into a definitive agreement with respect to a superior proposal with no “match right” for Butterfly, a lower break-fee if the Company elected to enter into an alternative acquisition agreement with a person who submitted an acquisition proposal during the “go-shop” period, and an outside date that is nine (9) months following the execution of the merger agreement. The draft merger agreement proposed a termination fee of 1.25% of the Company’s equity value payable by the Company to Parent in the event the Company terminated the merger agreement to enter into an alternative acquisition agreement with a person who submitted an acquisition proposal during the “go-shop” period and a termination fee of 2.50% of the Company’s equity value payable by the Company to Parent if the Company terminated the merger agreement to enter into an acquisition agreement with a person who submitted an acquisition proposal after the “go-shop” period. The draft merger agreement also contemplated a reverse termination fee of 6% of the Company’s enterprise value payable by Parent to the Company if the Company terminated the merger agreement pursuant to Parent’s breach of the merger agreement or failure to close when required to do so, subject to a cure period.

A representative of J.P. Morgan then summarized the status of the transaction and noted that Butterfly had again sought clarity regarding whether either TSG or Brown-Forman was interested in “rolling.” He noted that representatives of the Company had now informed him that both shareholders had formally confirmed that they were not interested in “rolling,” and that J.P. Morgan would communicate this to Butterfly if the Company Board decided to move forward with the proposed transaction. The Company Board discussed various considerations regarding whether to continue to engage with Butterfly on its proposal and whether to conduct a pre-signing market check or whether to rely on a post-signing go-shop period for a market check. Following the discussion, the Company Board decided to forego a pre-signing market check for the reasons previously discussed, including the low likelihood of strategic interest in the absence of an announced transaction and the low likelihood that another private equity buyer would be willing to pay materially more than the amount offered by the September 3 Proposal. Instead, the Company Board resolved to conduct a post-signing market check and directed the Company’s management team to continue to pursue the proposed transaction and approved the terms of the initial draft of the merger agreement to be provided to Butterfly as presented to the Company Board.

Also on September 6, 2024, representatives of J.P. Morgan confirmed to representatives of Butterfly that both TSG and Brown-Forman Corporation had informed the Company that they would not continue to be shareholders after the transaction. Such representatives of Butterfly conveyed to the representatives of J.P. Morgan that Butterfly was still interested in meeting with Brown-Forman Corporation to introduce themselves and share with Brown-Forman their vision for the Company’s business after the Closing. Between September 10, 2024 and October 4, 2024, representatives of the Company and its third-party advisors conducted several due diligence meetings with representatives of Butterfly and its third-party advisors regarding a variety of topics, including financial, legal, environmental, information technology, human resources, tax and accounting. The Company also continued to provide additional information in the virtual data room for Butterfly and its third party advisors to access.

On September 10, 2024, a representative of Ropes & Gray sent the initial draft of the merger agreement to representatives of Kirkland & Ellis.

 

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On September 12, 2024, representatives of Butterfly held a meeting by videoconference with representatives of Brown-Forman Corporation, with representatives of J.P. Morgan in attendance, during which representatives of Butterfly introduced themselves and shared Butterfly’s strategic vision for the Company. The representatives of Butterfly and representatives of Brown-Forman Corporation did not discuss any potential “roll” by Brown-Forman Corporation in connection with the proposed transaction at such meeting.

On September 18, 2024, Kirkland & Ellis sent Ropes & Gray a revised draft of the merger agreement. Among other changes, the revised merger agreement draft accepted the one-step structure, proposed an inside date or alternatively a marketing period and an outside date that was six (6) months following the execution of the merger agreement, proposed a termination fee payable by the Company of 3.75% of the equity value of the transaction (or 1.75% of the equity value of the transaction if the merger agreement was terminated by the Company to enter into an alternative acquisition agreement during the “go-shop” period), and proposed a reverse termination fee payable by Parent of 5.25% of the equity value of the transaction. The revised draft of the merger agreement also reduced the length of the “go-shop” period from sixty (60)-days to twenty five (25)-days and proposed that Parent enter into a voting and support agreement with each of TSG and Brown-Forman Corporation in connection with the potential transaction, pursuant to which each of TSG and Brown-Forman Corporation would vote its shares of Company Common Stock for the adoption of the merger agreement and the approval of the merger on the terms and conditions set forth in such voting and support agreement.

On September 19, 2024, the Company Board convened a regularly-scheduled meeting by videoconference with members of Company’s management to discuss ordinary-course matters related to the Company’s plans for fiscal year 2025. Representatives of each of J.P. Morgan and Ropes & Gray joined a portion of the meeting to provide an update on the transaction. Mr. Sullivan also provided the Company Board with an overview of the terms of the draft merger agreement received from Kirkland & Ellis.

On September 21, 2024, Kirkland & Ellis furnished an initial draft of the form of voting and support agreement to Ropes & Gray. Over the subsequent weeks and prior to the execution of the merger agreement, members of Company’s management and representatives of Butterfly, Brown-Forman Corporation and TSG exchanged drafts and negotiated the terms of the form of the voting and support agreement. Key terms of the form of the voting and support agreement negotiated between the parties included the circumstances in which the transfer restrictions and voting commitments applicable to the Specified Stockholders would terminate.

On September 24, 2024, Ms. Mahlan, Ms. Fall-Jung and Mr. Sullivan, representatives of Butterfly and representatives of J.P. Morgan held a meeting by videoconference to discuss the Company’s recent operating performance and the Company’s fiscal year 2025 budget, which projected financial results below those included within the forecasts for fiscal year 2025 previously provided to Butterfly. At the meeting, members of Company’s management explained impacts on wholesale demand were a result of the Company’s changes in distributorship arrangements, as former distributors sold down existing inventory and new distributors purchased inventory from former distributors.

Also on September 24, 2024, Ropes & Gray sent Kirkland & Ellis a revised draft of the merger agreement and Kirkland & Ellis sent Ropes & Gray initial drafts of the equity commitment letter and limited guarantee.

On September 26, 2024, at the instruction of the Company Board, representatives of J.P. Morgan shared the Company’s revised fiscal year 2025 budget and financial forecasts with representatives of Butterfly.

On September 27, 2024, Ropes & Gray sent Kirkland & Ellis an initial draft of the Company disclosure letter to the merger agreement and revised drafts of the equity commitment letter and limited guarantee.

Between September 27 and October 6, 2024, representatives of Ropes & Gray and Kirkland & Ellis exchanged various drafts of the merger agreement, limited guarantee, equity commitment letter, debt commitment letter and the Company disclosure letter to the merger agreement and held various discussions regarding terms and conditions for the proposed transaction.

 

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On September 29, 2024, representatives of J.P. Morgan and representatives of Butterfly held a meeting by videoconference, during which representatives of Butterfly conveyed a revised offer of an all-cash offer price of $10.75 per share of Company Common Stock, which Butterfly noted reflected their review of recent due diligence and the Company’s recent performance and the revised fiscal year 2025 budget and financial forecasts.

On September 30, 2024, the Company Board held a regularly scheduled meeting. At the meeting, members of Company’s management presented a proposed operating budget for fiscal year 2025 which reflected the impact of recent business performance that the Company was observing in the first quarter of fiscal year 2025, including lower demand from distributors as a result of inventory shifts due to the Company’s distributor realignment. Following the Company Board’s approval of the fiscal year 2025 budget, representatives of each of J.P. Morgan and Ropes & Gray joined the meeting. Company’s management presented the Company Board with two revised sets of financial projections that reflected the recent performance of the business and the Company’s budget for fiscal year 2025, referred to as Case E and Case F (See “—Certain Unaudited Prospective Financial Information”). After discussion, the Company Board approved the use of Case F by J.P. Morgan to complete its financial analyses in connection with the provision of a fairness opinion. Representatives of J.P. Morgan then provided the Company Board with an update regarding the revised bid from Butterfly of $10.75 per share of Company Common Stock, noting that Butterfly had indicated the revised proposal was the result of their review of recent diligence and the Company’s recent performance and revised projections. After a discussion led by representatives of J.P. Morgan, the Company Board directed J.P. Morgan to inform Butterfly that the Board was not interested in pursuing a transaction at $10.75 per share of Company Common Stock. The Company Board further directed Ms. Mahlan to, along with J.P. Morgan, negotiate with Butterfly to obtain more favorable terms and to present such terms to the Company Board for consideration, assuming Butterfly was willing to continue to engage notwithstanding the Company Board’s rejection of it’s $10.75 proposal.

On September 30, 2024, at the instruction of the Company Board, representatives of J.P. Morgan conveyed to representatives of Butterfly in a telephone conversation that the Company Board was unwilling to proceed with a potential transaction at a per share price of $10.75 per share, and that the Company would not provide any further confidential diligence materials or progress the negotiation of the transaction documents on the terms Butterfly had offered.

Between October 1, 2024 and October 3, 2024, representatives of Butterfly and J.P. Morgan held multiple teleconferences under which the price-per-share and the duration of the “go-shop” period were discussed.

On October 3, 2024, representatives of Butterfly conveyed to a representative of J.P. Morgan Butterfly’s revised offer to acquire the Company for an all-cash offer price of $11.10 per share of Company Common Stock (the “October 3 Proposal”) and to include a “go-shop” period of forty-five (45) days. Following the receipt of the October 3 Proposal, the Company resumed providing additional confidential due diligence materials to Butterfly.

Between October 4, 2024 and October 6, 2024, representatives of Ropes & Gray and Kirkland & Ellis exchanged updated versions of the merger agreement, limited guarantee, equity commitment letter, and the Company’s confidential disclosure letter to the merger agreement, and other related transaction documents, and confirmed that the forms of the merger agreement, the voting and support agreement and the related transaction documents were in final form. A representative of Kirkland & Ellis furnished the executed debt commitment letter, base fee letter and agency fee letter to Ropes & Gray, in each case, redacted in customary fashion.

On the evening of October 6, 2024, the Company Board convened a meeting by videoconference, with members of the Company’s management and representatives of J.P. Morgan and Ropes & Gray in attendance. A representative of Ropes & Gray then reviewed the directors’ fiduciary duties in the context of considering the October 3 Proposal and summarized the terms of the proposed merger agreement that had been negotiated with Butterfly. Representatives of J.P. Morgan then reviewed its financial analyses of the Merger Consideration provided for in the merger agreement. Following its presentation, representatives of J.P. Morgan delivered to the Company Board its oral opinion, which was subsequently confirmed by delivery of a written opinion, dated

 

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October 6, 2024, to the effect that, as of such date, and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, the Merger Consideration to be paid to the Duckhorn Stockholders (other than the Specified Stockholders) in the proposed Merger was fair, from a financial point of view, to such holders, as more fully described below in the section “The Merger—Opinion of J.P. Morgan”. Following additional discussion and consideration of the Merger Agreement and the Merger, with respect to the transaction proposed by the October 3 Proposal, the Company Board unanimously: (i) determined that the Merger Agreement and the transactions contemplated by the Merger Agreement are fair to and in the best interests of the Company and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement, (iii) authorized and approved the execution, delivery and performance by the Company of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement upon the terms and subject to the conditions set forth therein and (iv) recommended, subject to the terms of the Merger Agreement, the adoption of the Merger Agreement by the stockholders of the Company. The Company Board further directed J.P. Morgan to solicit alternative acquisition proposals during the 45-day “go-shop” period commencing upon the execution of the Merger Agreement.

On the evening of October 6, 2024, the Company, Parent and Merger Sub executed the Merger Agreement. Parent and the Specified Stockholders entered into the Voting Agreements.

On the morning of October 7, 2024, the Company and Parent issued a joint press release announcing the transaction.

From October 6, 2024 through November 20, 2024, the Company was permitted, subject to the provisions of the Merger Agreement, to solicit alternative acquisition proposals from third parties and to provide information to, and participate in discussions and engage in negotiations with, third parties regarding any alternative acquisition proposals. As previously authorized during the October 6, 2024 meeting of the Company Board, as of the date hereof, representatives of J.P. Morgan contacted 27 potential acquirers, including 10 strategic acquirers and 17 financial sponsors during such go-shop period, which resulted in 23 responses from potential acquirors, and six completed calls. Among the parties contacted were Party B and Party C, both of which confirmed they no longer had interest in pursuing a transaction with the Company. As of the date hereof, no party entered into a confidentiality agreement with the Company. No third party submitted an alternative acquisition proposal to acquire the Company during the go-shop period. At 11:59 p.m. (Pacific time) on November 20, 2024, the go-shop period expired.

Recommendation of the Company Board and Reasons for the Merger

Recommendation of the Company Board

After careful consideration, the Company Board has unanimously (i) determined that the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Duckhorn and the Duckhorn Stockholders, (ii) approved and declared it advisable that Duckhorn enter into the Merger Agreement, (iii) directed that the adoption of the Merger Agreement be submitted to a vote of the Duckhorn Stockholders at a meeting of the Duckhorn Stockholders, and (iv) recommendation, subject to the terms and conditions of the Merger Agreement, that the Duckhorn Stockholders approve the adoption of the Merger Agreement and approve the Merger on the terms and subject to the conditions set forth in the Merger Agreement.

Accordingly, the Company Board recommends, on behalf of Duckhorn, that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the non-binding, advisory Compensation Proposal; and (3) “FOR” the Adjournment Proposal.

Reasons for the Merger

The Company Board considered the following reasons (which are not listed in any relative order of importance), all of which the Company Board viewed as generally supporting its (i) determination that the

 

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Merger Agreement and the transactions contemplated by the Merger Agreement are fair to and in the best interests of the Company and the Duckhorn Stockholders, (ii) approval and declaration that it is advisable to enter into the Merger Agreement and the transactions contemplated by the Merger Agreement, (iii) authorization and approval of the execution, delivery and performance by the Company of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement upon the terms and subject to the conditions set forth therein, and (iv) resolution, subject to the terms of the Merger Agreement to recommend the adoption of the Merger Agreement by the Duckhorn Stockholders:

 

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Attractive Price. The all-cash consideration of $11.10 per share of Company Common Stock, taking into account the Company Board’s familiarity with the business, operations, prospects, strategic and short- and long-term operating plans, assets, liabilities and financial condition of the Company on a historical and prospective basis and the relative certainty and liquidity of the all-cash Merger Consideration, is more favorable to the Duckhorn Stockholders than the potential value that could reasonably be expected to be generated from the Company continuing to operate independently and pursuing its current business and financial plans on a standalone basis;

 

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Substantial Premium. The current and historical market prices of the Company Common Stock, and the fact that the Merger Consideration represents a compelling premium to recent market prices of the Company Common Stock, including the closing price of the Company Common Stock on October 4, 2024 and the volume weighted average price for the Company Common Stock over the thirty (30) trading day period ending on October 4, 2024;

 

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Certainty of Value. The Merger Consideration is all cash, and the transactions contemplated by the Merger Agreement, therefore, provide certain and immediate value and liquidity to the Duckhorn Stockholders for their shares of Company Common Stock, especially when viewed against the internal and external risks and uncertainties associated with macroeconomic conditions, including the current state of the U.S. and global economies, the prospects for the recovery of the Company’s stock price in the public markets, and the potential impact of such risks and uncertainties on a standalone strategy of the Company and the trading price of the shares of Company Common Stock;

 

•

Best Offer. The belief of the Company Board that as a result of an active negotiating process, the Company had obtained Parent’s best offer;

 

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Likelihood of Closing. The belief of the Company Board that the likelihood of completing the Merger is high, particularly in light of the terms of the Merger Agreement, including (i) the conditions to the Merger being specific and limited, (ii) the exceptions contained within the “Company Material Adverse Effect” definition, which generally defines the standard for closing risk, (iii) the likelihood of obtaining required regulatory approvals, including the commitment of Parent to use its reasonable best efforts to obtain the expiration or termination of any applicable waiting period under the HSR Act and (iv) the firm Equity Commitment Letter and Debt Commitment Letter which offer little conditionality aside from the conditions set forth in the Merger Agreement;

 

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Financing. The fact that Parent has obtained committed Debt Financing and Equity Financing, as well as the fact that Parent and its subsidiaries must use their reasonable best efforts to consummate the Debt Financing and that such funding provides an amount sufficient to cover the aggregate Merger Consideration, all fees and expenses required to be paid by Parent, Merger Sub and the Surviving Corporation in connection with the Merger and the financing and all other payment obligations of Parent, Merger Sub and the Surviving Corporation in connection therewith;

 

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Form of Consideration. The fact that the Merger Consideration is all cash, and therefore would provide the Duckhorn Stockholders significant, immediate and certain value and liquidity for their shares of the Company Common Stock, taking into account the effect on the Duckhorn Stockholders of long-term business and execution risk, as well as risks related to the financial markets generally;

 

•

Opinion of J.P. Morgan. The financial analyses presented by J.P. Morgan to the Company Board and the October 6, 2024 oral opinion delivered by J.P. Morgan to the Company Board, which was

 

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subsequently confirmed by delivery of its written opinion dated October 6, 2024, to the effect that, as of such date, and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, the Merger Consideration to be paid to the Duckhorn Stockholders (other than the Specified Stockholders) in the proposed Merger was fair, from a financial point of view, to such holders, as more fully described below in the section entitled “The Merger—Opinion of J.P. Morgan Securities LLC.” The full text of the written opinion of J.P. Morgan, dated October 6, 2024, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion;

 

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Financial Projections. The fact that achieving management’s financial projections entails execution risk, including risks and uncertainties relating to the Company’s ability to achieve its strategies of driving organic growth and realizing margin expansion, market acceptance of the Company’s products, the Company’s ability to successfully compete against current or future competitors, the magnitude of potential liabilities related to existing or future product liability or warranty claims and the Company’s ability to service its debt and secure additional financing;

 

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Go-Shop; Opportunity to Accept a Superior Proposal. The fact that the terms of the Merger Agreement permit the Company to affirmatively solicit Acquisition Proposals from third parties and to provide information to, and participate in discussions and engage in negotiations with, third parties regarding any Acquisition Proposals until the No-Shop Period Start Date and, under certain circumstances after the No-Shop Period Start Date, to furnish information to and conduct negotiations with third parties regarding Acquisition Proposals, and that the provisions of the Merger Agreement permit the Company Board in certain circumstances to terminate the Merger Agreement in order to enter into a definitive agreement with respect to an unsolicited Superior Proposal prior to the later of (A) the No-Shop Period Start Date and (B) one (1) day following the expiration of any Notice Period commenced prior to the No-Shop Period Start Date (or any subsequent Notice Period commenced within three (3) business days of the conclusion of a Notice Period with respect to a Superior Proposal made by a Specified Party, and in each case, to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal made by the Specified Party), subject to the payment of a termination fee of $29,000,000 for a Superior Proposal, and of $53,500,000 for a Superior Proposal after such period, which amounts the directors believe to be reasonable under the circumstances and unlikely to serve as a meaningful deterrent to other Acquisition Proposals;

 

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Reverse Termination Fee. The fact that, in the event the transactions contemplated by the Merger Agreement are not consummated in certain circumstances relating to the failure of Parent to close the Merger, Parent will be required to pay the Company a reverse termination fee of $95,000,000, which the Company Board believes creates a substantial incentive for Parent to consummate the transactions contemplated by the Merger Agreement; and

 

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Appraisal Rights. That stockholders who do not believe that the Merger Consideration represents fair consideration for their shares of Company Common Stock will have an opportunity to pursue appraisal rights under Section 262.

The Company Board also considered a number of reasons concerning Duckhorn’s business and the Merger that it generally viewed as weighing against approving the Merger, including the following (which are not listed in any relative order of importance):

 

•

Opportunity Costs. The fact that the Company will no longer exist as an independent public company and the Duckhorn Stockholders will forego any increase in its value in excess of the price per share offered in the Merger as an independent public company that might result from its possible growth;

 

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•

No-Shop Restrictions. The restrictions in the Merger Agreement that the Company is unable to solicit other Acquisition Proposals after the No-Shop Period Start Date until the consummation of the Merger;

 

•

Potential Negative Impact on the Company’s Business. The possible negative effect of the Merger and public announcement of the Merger on the Company’s financial performance, operating results and stock price and the Company’s relationships with customers, suppliers, other business partners, management and employees;

 

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Business Operation Restrictions. The fact that the Merger Agreement imposes restrictions on the conduct of the Company’s business in the Pre-Closing Period, which may adversely affect the Company’s business, including by delaying or preventing the Company from raising financing or pursuing non-ordinary course opportunities that may arise or precluding actions that would be advisable if the Company were to remain an independent company;

 

•

Transaction Expenses. The transaction expenses to be incurred in connection with the transactions contemplated by the Merger Agreement and the negative impact of such expenses on the Company’s cash reserves and operating results should the Merger not be completed; and

 

•

Interests of Insiders. The interests that certain directors and executive officers of the Company may have with respect to the transactions contemplated by the Merger Agreement that may be different from, or in addition to, their interests as the Duckhorn Stockholders or the interests of other Duckhorn Stockholders generally.

The foregoing discussion of reasons for the recommendation to adopt the Merger Agreement and approve the Merger and the transactions contemplated thereby addresses the principal reasons considered by the Company Board in consideration of its recommendation but is not intended to be exhaustive and may not include all of the factors considered by the Company Board. In view of the wide variety of reasons considered by the Company Board in connection with its evaluation of the Merger and the complexity of these matters, the Company Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific reasons considered in reaching its determination and recommendation. Rather, in considering the information and reasons described above, individual members of the Company Board each applied his or her own personal business judgment to the process and may have given differing weights to differing factors. The Company Board based its recommendation on the totality of the information presented. The explanation of the reasons and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement entitled “Forward-Looking Statements.”

Opinion of J.P. Morgan Securities LLC

Pursuant to an engagement letter, the Company retained J.P. Morgan as its financial advisor in connection with the proposed Merger. The Company selected J.P. Morgan to act as its financial advisor based on, among other things, J.P. Morgan’s independence, its prior experience advising the Company and its qualifications, experience and expertise, including with respect to serving as a financial advisor to companies within the consumer goods sector, advising companies on M&A transactions and serving as an independent financial advisor to boards of directors.

At the meeting of the Company Board on October 6, 2024, J.P. Morgan rendered its oral opinion to the Company Board to the effect that, as of such date, and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, the Merger Consideration to be paid to the Duckhorn Stockholders (other than the Specified Stockholders) in the Merger was fair, from a financial point of view, to such holders. J.P. Morgan confirmed its October 6, 2024 oral opinion by delivering its written opinion, dated October 6, 2024, to the Company Board that, as of such date, the Merger Consideration to be paid to the Duckhorn Stockholders (other than the Specified Stockholders) in the Merger was fair, from a financial point of view, to such holders.

The full text of the written opinion of J.P. Morgan, dated October 6, 2024, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken

 

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by J.P. Morgan in preparing its opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. The Duckhorn Stockholders are urged to read the opinion in its entirety. J.P. Morgan’s opinion was addressed to the Company Board (in its capacity as such) in connection with and for the purposes of its evaluation of the Merger, and was limited to the fairness, from a financial point of view, of the consideration to be paid to the Duckhorn Stockholders (other than the Specified Stockholders) in the Merger. J.P. Morgan expressed no opinion as to the fairness of any consideration to be paid in connection with the proposed Merger to the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the Merger. The issuance of J.P. Morgan’s opinion was approved by a fairness opinion committee of J.P. Morgan. The opinion does not constitute a recommendation to any Duckhorn Stockholder as to how such stockholder should vote with respect to the Merger or any other matter.

In arriving at its opinion, J.P. Morgan, among other things:

 

•

reviewed the Merger Agreement;

 

•

reviewed certain publicly available business and financial information concerning the Company and the industries in which it operates;

 

•

compared the proposed financial terms of the Merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;

 

•

compared the financial and operating performance of the Company with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Company Common Stock and certain publicly traded securities of such other companies;

 

•

reviewed certain internal financial analyses and forecasts prepared by the management of the Company relating to its business, as discussed more fully below in the section entitled “—Certain Unaudited Prospective Financial Information”; and

 

•

performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

In addition, J.P. Morgan held discussions with certain members of the management of the Company with respect to certain aspects of the Merger, and the past and current business operations of the Company, the financial condition and future prospects and operations of the Company, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by the Company or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not independently verify any such information or its accuracy or completeness, and, pursuant to J.P. Morgan’s engagement letter with the Company, J.P. Morgan did not assume any obligation to undertake any such independent verification. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of the Company or Parent under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by the Company’s management as to the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan also assumed that the Merger and the other transactions contemplated by the Merger Agreement will be consummated as described in the Merger Agreement. J.P. Morgan also assumed that the representations and warranties made by the Company, Parent and Merger Sub in the Merger Agreement and the related agreements were and will be true and correct in all respects

 

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material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to the Company with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any adverse effect on the Company or on the contemplated benefits of the Merger.

The projections furnished to J.P. Morgan were prepared by the Company’s management as discussed more fully below in the section entitled “—Certain Unaudited Prospective Financial Information”. The Company does not publicly disclose internal management projections of the type provided to J.P. Morgan in connection with J.P. Morgan’s analysis of the Merger, and such projections were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of the Company’s management, including, without limitation, factors related to general economic and competitive conditions, prevailing interest rates, and other factors as set forth in the section entitled “Forward-Looking Statements” of this proxy statement. Accordingly, actual results could vary significantly from those set forth in such projections. For more information regarding the use of projections and other forward-looking statements, please refer to the section entitled “—Certain Unaudited Prospective Financial Information”.

J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion and that J.P. Morgan does not have any obligation to update, revise or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the Merger Consideration to be paid to the Duckhorn Stockholders (other than the Specified Stockholders) in the Merger, and J.P. Morgan has expressed no opinion as to the fairness of any consideration paid in connection with the Merger to the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the Merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors or employees of any party to the Merger, or any class of such persons relative to the Merger Consideration to be paid to the Duckhorn Stockholders in the Merger or with respect to the fairness of any such compensation.

The terms of the Merger Agreement, including the Merger Consideration, were determined through arm’s length negotiations between the Company and Parent, and the decision to enter into the Merger Agreement was solely that of the Company Board.

J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the Company Board in its evaluation of the Merger and should not be viewed as determinative of the views of the Company Board or the Company’s management with respect to the Merger or the Merger Consideration.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodologies in rendering its opinion to the Company Board on October 6, 2024 and in the financial analyses presented to the Company Board on such date in connection with the rendering of such opinion. The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with rendering its opinion to the Company Board and does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.

Public Trading Multiples. Using publicly available information, J.P. Morgan compared selected financial data of the Company with similar data for selected publicly traded companies engaged in businesses that

 

44

J.P. Morgan judged to be sufficiently analogous to the Company (or aspects thereof). The companies selected by J.P. Morgan were as follows:

 

•

Treasury Wine Estates Ltd

 

•

Becle, S.A.B. de C.V.

 

•

Remy Cointreau S.A.

These companies were selected, among other reasons, by J.P. Morgan because they are publicly traded companies with operations and businesses that, for the purposes of J.P. Morgan’s analysis, J.P. Morgan considered to be similar to those of the Company. However, certain of these companies may have characteristics that are materially different from those of the Company. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the selected companies differently than they would affect the Company.

Using publicly available information, J.P. Morgan calculated, for each selected company, the multiple of the firm value (the “FV”) (calculated as equity value, plus total debt and non-controlling interests, and less cash and cash equivalents and unconsolidated assets) to the analyst consensus estimates of fiscal year 2025 Adjusted EBITDA for the applicable company (the “FV/2025E Adj. EBITDA Multiple”).

Based on the results of this analysis, J.P. Morgan selected a FV/2025E Adj. EBITDA Multiple reference range for the Company of 6.0x to 12.0x. J.P. Morgan then applied such reference range to the Company’s projected Adjusted EBITDA for fiscal year 2025 provided in the Management Forecasts. The analysis indicated a range of implied per share equity value for Company Common Stock (rounded to the nearest $0.10) of approximately $5.40 to $12.80, which J.P. Morgan compared to (i) the closing price of Company Common Stock of $5.51 per share on October 2, 2024 and (ii) the Merger Consideration of $11.10 per share of Company Common Stock.

Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining an implied fully diluted equity value per share range for the Company Common Stock. J.P. Morgan calculated the unlevered free cash flows that the Company is expected to generate during fiscal years 2025 through 2029 based on the Management Forecasts, as discussed more fully below in the section entitled “—Certain Unaudited Prospective Financial Information”, which were discussed with, and approved by, the Company Board for use by J.P. Morgan in connection with its financial analyses. J.P. Morgan also calculated a range of terminal values for the Company at the end of this period by applying perpetual growth rates ranging from 2.0% to 3.0%, based on guidance provided by the Company’s management, to estimates of terminal revenue for the Company at the end of fiscal year 2029, as provided in the Management Forecasts.

J.P. Morgan then discounted the unlevered free cash flow estimates and the range of terminal values to present value as of August 31, 2024 using a range of discount rates from 7.25% to 8.25%, which range was chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of the Company. The present values of the unlevered free cash flow estimates and the range of terminal values were then adjusted for the Company’s estimated net debt and other items as of August 31, 2024, as provided by the Company’s management. This analysis indicated a range of implied per share equity value for Company Common Stock (rounded to the nearest $0.10) of $10.70 to $15.50, which J.P. Morgan compared to (i) the closing price of Company Common Stock of $5.51 per share on October 2, 2024 and (ii) the Merger Consideration of $11.10 per share of Company Common Stock.

Miscellaneous. The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create

 

45

points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of the Company. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.

Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to the Company. However, the companies selected were chosen by J.P. Morgan because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of the Company. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to the Company and the transactions compared to the Merger.

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise the Company with respect to the Merger and deliver an opinion to the Company Board with respect to the Merger on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with the Company and the industries in which it operates.

For financial advisory services rendered in connection with the Merger, the Company has agreed to pay J.P. Morgan an estimated fee of approximately $30 million, $5 million of which became payable to J.P. Morgan at the time J.P. Morgan delivered its opinion and the remainder of which is contingent and payable upon the consummation of the Merger. In addition, the Company has agreed to reimburse J.P. Morgan for certain of its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement.

Other than financial advisory services rendered in connection with the Merger, during the two (2) years preceding the date of J.P. Morgan’s written opinion, neither J.P. Morgan nor its affiliates have had any material financial advisory or other material commercial or investment banking relationships with the Company or Butterfly, an affiliate of Parent, or its portfolio companies. During the two (2) years preceding the date of J.P. Morgan’s written opinion, J.P. Morgan and its affiliates have had and continue to have commercial or investment banking relationships with portfolio companies of TSG, an approximately 42% stockholder of the Company, for which J.P. Morgan and such affiliates have received or will receive customary compensation. Such services during such period have included providing debt syndication and financial advisory services to portfolio companies of TSG. During the two (2) years preceding the date of J.P. Morgan’s written opinion, the aggregate fees recognized by J.P. Morgan from TSG and its controlled portfolio companies were approximately $11 million. During the two (2) years preceding the date of J.P. Morgan’s written opinion, J.P. Morgan and its affiliates have had and continue to have commercial or investment banking relationships with Brown-Forman Corporation, an approximately 21% stockholder of the Company, for which J.P. Morgan and such affiliates have received or will receive customary compensation. Such services during such period have included acting as joint book manager on a bond offering in March 2023 and joint lead arranger and joint lead bookrunner on a credit facility in May 2023. During the two (2) years preceding the date of J.P. Morgan’s written opinion, the aggregate fees recognized by J.P. Morgan from Brown-Forman Corporation were approximately $2 million. In addition,

 

46

J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock of each of the Company and Brown-Forman Corporation. As of the date of its opinion, J.P. Morgan and/or its affiliates are currently providing investment banking services to TSG and/or certain of its affiliates, which services are unrelated to the Merger. J.P. Morgan expects to receive customary compensation in connection with the foregoing which, considered in the aggregate and assuming such transactions are actually completed, are expected by J.P. Morgan to be less than the estimated fee J.P. Morgan would receive from the Company in connection with the Merger. In addition, J.P. Morgan’s commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of certain portfolio companies of TSG. In the ordinary course of their businesses, J.P. Morgan and its affiliates actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of the Company and Brown-Forman Corporation for their own account or for the accounts of customers and, accordingly, likely hold long or short positions in such securities or other financial instruments.

Certain Unaudited Prospective Financial Information

Important Information Concerning the Company Management Forecasts

The Company does not, as a general matter, publicly disclose long-term forecasts as to future revenues, earnings or other results, due to, among other reasons, the unpredictability of the underlying assumptions and estimates and the inherent difficulty of accurately predicting financial performance for future periods.

In the ordinary course of business, the Company’s senior management prepares unaudited prospective financial forecasts for strategic planning purposes. These forecasts generally rely upon various assumptions and are prepared with less rigor than forecasts upon which one would rely when making a decision about whether or not to sell a company. Following receipt of the May 29 IoI from Butterfly and Party A, the Company’s management team shared its existing long-range forecasts with J.P. Morgan so that J.P. Morgan could provide the Company Board at its meeting on June 14, 2024 with a preliminary valuation analysis based on, among other things, these forecasts. We refer to the Company’s pre-existing long range forecasts as “Case A.” Case A reflected, in the view of the Company’s management, growth and operating assumptions that the Company’s management team viewed as generally conservative. Case A further assumes that the Company outsources California distribution to a third-party distributor beginning August 1, 2025. Following receipt of the May 29 IoI from Butterfly and Party A, the Company’s senior management prepared a second set of forecasts to assist the Company Board’s in its evaluation of Butterfly’s offer (“Case B”). Case B reflected the Company’s management team’s view of potential upside in its growth plan, including (as compared to Case A) a stronger industry rebound, higher market share expansion, a more robust direct-to-consumer channel and the launch of a new label. The Company’s senior management presented Case A and Case B to the Company Board in June 2024. Case A and Case B are summarized below:

Case A

(dollars in millions)

 

		2025E				2026E				2027E				2028E				2029E
Net sales		$	511			$	549			$	577			$	601			$	628
Cost of goods sold		($	244	)		($	252	)		($	263	)		($	274	)		($	287	)
Gross profit		$	268			$	298			$	314			$	326			$	342
Operating expense		($	111	)		($	115	)		($	120	)		($	124	)		($	128	)
EBIT(1)		$	157			$	182			$	194			$	202			$	214
Depreciation and Amortization		$	37			$	40			$	42			$	44			$	37
Other adjustments(2)		$	(11	)		$	(28	)		$	(30	)		$	(27	)		$	(14	)
Adjusted EBITDA(3)		$	183			$	194			$	206			$	219			$	237
Capital expenditures		$	60			$	60			$	51			$	48			$	52
Change in net working capital		$	55			$	46			$	39			$	43			$	43
Unlevered free cash flow		$	31			$	48			$	75			$	85			$	92

 

47

(1)	Earnings before interest and taxes (“EBIT”) refers to the Company’s net income plus interest expense and tax expense.

(2)	Other adjustments reflect adjustments for stock-based compensation, purchase accounting adjustments, transaction expenses, acquisition integration costs, change in fair value of derivatives, impairment loss and loss on property and equipment.

(3)

Adjusted earnings before interest, taxes depreciation and amortization (“Adjusted EBITDA”) refers to the Company’s net income plus interest expense, tax expense, depreciation and amortization and stock-based compensation expense, adjusted for purchase accounting adjustments, transaction expenses, acquisition integration costs, change in fair value of derivatives, impairment loss and loss on property and equipment.

Case B

(dollars in millions)

 

		2025E				2026E				2027E				2028E				2029E
Net sales		$	501			$	551			$	595			$	639			$	676
Cost of goods sold		($	242	)		($	255	)		($	274	)		($	293	)		($	310	)
Gross profit		$	259			$	296			$	321			$	346			$	366
Operating expense		($	105	)		($	109	)		($	114	)		($	124	)		($	130	)
EBIT		$	154			$	158			$	177			$	196			$	229
Depreciation and Amortization		$	38			$	40			$	41			$	42			$	30
Other adjustments		$	(12	)		$	0			$	0			$	0			$	0
Adjusted EBITDA		$	180			$	198			$	218			$	238			$	259
Capital expenditures		$	59			$	39			$	36			$	30			$	52
Change in net working capital		$	54			$	48			$	42			$	47			$	48
Unlevered free cash flow		$	31			$	71			$	96			$	112			$	102

Following the June 14, 2024 meeting of the Company Board, the Company’s senior management further refined the Company’s prepared preliminary unaudited prospective financial forecasts and presented the Company’s Board with two further cases at its meeting on July 13, 2024 because the Company’s management believed that Case A and Case B did not reflect certain assumptions that the Company’s management believed likely to impact future value. Case C was consistent with the previously-presented Case B, but adjusted to reflect an assumption that the Company would continue to self-distribute in California for the forecast period, eliminate a wholesale-only label and reflect a scaling-back of certain planned capital projects resulting in lower capital expenditures relative to Case B. Case D further adjusted Case C to reflect additional marketing investments in certain labels to increase their revenue growth. The Company’s senior management noted for the Company Board at its meeting on July 13, 2024 that while they believed Case D was achievable, it represented more of a “stretch” case than the others. At the same meeting, the Company’s management team shared their perspective that Case C was, in their view, a conservative case. Case D was provided to Butterfly in connection with the provision of diligence materials.

 

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Case C

(dollars in millions)

 

		2025E				2026E				2027E				2028E				2029E
Net sales		$	513			$	550			$	593			$	626			$	658
Cost of goods sold		($	249	)		($	263	)		($	276	)		($	285	)		($	300	)
Gross profit		$	264			$	287			$	317			$	340			$	358
Operating expense		($	122	)		($	131	)		($	141	)		($	149	)		($	156	)
EBIT		$	145			$	158			$	176			$	191			$	201
Depreciation and Amortization		$	42			$	44			$	44			$	44			$	47
Other adjustments		$	0			$	0			$	0			$	0			$	0
Adjusted EBITDA		$	187			$	202			$	220			$	235			$	248
Capital expenditures		$	43			$	42			$	46			$	48			$	53
Change in net working capital		$	41			$	37			$	32			$	36			$	41
Unlevered free cash flow		$	67			$	84			$	98			$	103			$	103

Case D

(dollars in millions)

 

		2025E				2026E				2027E				2028E				2029E
Net sales		$	528			$	575			$	640			$	686			$	737
Cost of goods sold		($	256	)		($	274	)		($	297	)		($	312	)		($	336	)
Gross profit		$	271			$	301			$	342			$	373			$	402
Operating expense		($	124	)		($	135	)		($	149	)		($	159	)		($	169	)
EBIT		$	147			$	166			$	194			$	215			$	233
Depreciation and Amortization		$	42			$	44			$	44			$	44			$	47
Other adjustments		$	0			$	(1	)		$	0			$	0			$	0
Adjusted EBITDA		$	193			$	211			$	238			$	259			$	280
Capital expenditures		$	43			$	42			$	46			$	48			$	53
Change in net working capital		$	44			$	40			$	36			$	41			$	47
Unlevered free cash flow		$	69			$	88			$	108			$	117			$	121

On September 30, 2024, the Company’s senior management presented a fiscal 2025 budget to the Company Board as part of its ordinary course practices following the completion of the Company’s 2024 fiscal year. The budget took into account early indications for the Company’s first quarter performance for fiscal year 2025. Following the 2025 budget process, the Company’s senior management prepared further unaudited prospective financial forecasts. The Company’s management presented two cases to the Company Board at its meeting on September 30, 2024: Case E and Case F (together with Case A, Case B, Case C, Case D and Case E, the “Forecast Cases”). Case E incorporated the recent business performance and outlook. Case F further adjusts Case E to reflect additional marketing expenditures that the Company’s management team viewed as potentially important to achieving forecasted revenue in light of competitive dynamics in the luxury wine market. Both Case E and Case F reflect continued direct distribution by the Company in California. The Company’s management noted for the Company Board at its meeting on September 30, 2024 that Case E and Case F are each more optimistic than Case C but more conservative than Case D. The Company’s management further shared with the Company Board at its meeting on September 30, 2024 that they viewed the additional marketing spend reflected in Case F as necessary to achieving the Company’s long-term plan in light of recent operational performance.

 

49

Case E

(dollars in millions)

 

		2025E				2026E				2027E				2028E				2029E
Net sales		$	502			$	552			$	604			$	642			$	682
Cost of goods sold		($	253	)		($	269	)		($	287	)		($	297	)		($	315	)
Gross profit		$	250			$	283			$	317			$	345			$	366
Operating expense		($	117	)		($	127	)		($	140	)		($	150	)		($	157	)
EBIT		$	133			$	156			$	178			$	196			$	210
Depreciation and Amortization		$	45			$	47			$	47			$	47			$	49
Other adjustments		$	6			$	2			$	0			$	(1	)		$	0
Adjusted EBITDA		$	184			$	205			$	225			$	242			$	259
Capital expenditures		$	40			$	43			$	48			$	48			$	53
Change in net working capital		$	21			$	35			$	33			$	37			$	38
Unlevered free cash flow		$	88			$	87			$	100			$	109			$	114

Case F

(dollars in millions)

 

		2025E				2026E				2027E				2028E				2029E
Net sales		$	502			$	552			$	604			$	642			$	682
Cost of goods sold		($	253	)		($	269	)		($	287	)		($	297	)		($	315	)
Gross profit		$	250			$	283			$	317			$	345			$	366
Operating expense		($	117	)		($	129	)		($	143	)		($	155	)		($	164	)
EBIT		$	133			$	154			$	174			$	190			$	203
Depreciation and Amortization		$	45			$	47			$	47			$	47			$	49
Other adjustments		$	6			$	2			$	0			$	0			$	0
Adjusted EBITDA		$	184			$	203			$	221			$	237			$	252
Capital expenditures		$	40			$	43			$	48			$	48			$	53
Change in net working capital		$	21			$	45			$	44			$	46			$	56
Unlevered free cash flow		$	88			$	76			$	86			$	95			$	92

Following a review of the revised unaudited forecasts, the Company Board determined that Case F represented a reasonable and fair projection of the Company’s operating performance over the following five years and accepted Case F as the financial forecast to be used in assisting the Company Board in its decision-making process in determining to approve and adopt the Merger Agreement (the “Management Forecasts”). The Management Forecasts were also provided to J.P. Morgan, and the Company Board approved and instructed the use of, and reliance upon, the Management Forecasts by J.P. Morgan in connection with J.P. Morgan’s opinion to the Company Board and related financial analyses described under the heading “The Merger—Opinion of J.P. Morgan Securities LLC.” None of the Forecast Cases nor the Management Forecasts were prepared with a view toward public disclosure. The inclusion of this information should not be regarded as an indication that the Company Board or its advisors, or any other person, considered, or now considers, such Management Forecasts to be material or to be necessarily predictive of actual future results, and these Management Forecasts should not be relied upon as such.

The Management Forecasts were prepared by the Company’s senior management based on assumptions they believed to be reasonably achievable at the time made. The Management Forecasts reflect numerous assumptions including with respect to (i) the probability and timing of end-market growth; (ii) the anticipated introduction of new products and initiatives; (iii) expectations regarding gross margin expansion; (iv) marketing expenditures; (v) corporate overhead costs; and (vi) other relevant factors relating to the Company’s strategic plan. The foregoing is a summary of certain key assumptions and estimates and does not purport to be a

 

50

comprehensive overview of all assumptions and estimates reflected in the forecasts prepared by Company management.

Additional Information Concerning the Forecast Cases and Management Forecasts

The summary of the Forecast Cases and the Management Forecasts is included in this proxy statement to provide the Duckhorn Stockholders with access to certain financial Management Forecasts that were made available to the Company Board and its financial advisors as described above. The Management Forecasts were generated solely for internal use and not developed with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial data or published guidelines of the SEC regarding forward-looking statements or U.S. generally accepted accounting principles (“GAAP”). The Management Forecasts are forward-looking statements. All of the Management Forecasts summarized in this section were prepared by the Company’s senior management.

The Management Forecasts contain non-GAAP financial measures, including Adjusted EBITDA, adjusted EBIT, NOPAT and unlevered free cash flow. The Company’s senior management included such measures in the Management Forecasts because it believed that such measures may be useful in evaluating, on a prospective basis, the potential operating performance and cash flow of the Company. A material limitation associated with the use of the above non-GAAP financial measures is that they have no standardized measurement prescribed by GAAP and may not be comparable with similar non-GAAP financial measures used by other companies. Due to the forward-looking nature of these Management Forecasts, specific quantification of the amounts that would be required to reconcile such Management Forecasts to GAAP measures are not available. The SEC rules that would otherwise require a reconciliation of an adjusted financial measure to a GAAP financial measure do not apply to adjusted financial measures provided to a board of directors or a financial advisor in connection with a proposed business combination such as the Merger if the disclosure is included in a document such as this proxy statement. Accordingly, Duckhorn has not provided a reconciliation of the non-GAAP financial measures included in Management Forecasts to the relevant GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with GAAP. Adjusted EBITDA, adjusted EBIT, NOPAT and unlevered free cash flow should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flow or as a measure of liquidity.

No independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the Management Forecasts or expressed any opinion or given any other form of assurance with respect thereto, and no independent registered public accounting firm assumes any responsibility for the information contained in the Management Forecasts. The PricewaterhouseCoopers LLP reports included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2024 relate solely to the historical financial information of the Company and to an assessment of the Company’s internal controls over financial reporting. Such reports do not extend to the Management Forecasts and should not be read to do so.

The Company is summarizing the Management Forecasts in this proxy statement to provide Duckhorn Stockholders with access to certain non-public, unaudited prospective financial information that was provided to the Company Board and the financial advisors, as described above. By including the Management Forecasts in this proxy statement, neither the Company nor any of its affiliates, advisors, officers, directors or Representatives has made or makes any representation to any security holder regarding the information included in the Management Forecasts or the ultimate performance of the Company, Parent, Merger Sub, the Surviving Corporation or any of their affiliates compared to the information contained in the Management Forecasts. The Company has made no representation to Parent or Merger Sub, in the Merger Agreement or otherwise, concerning the Management Forecasts.

 

51

The assumptions and estimates underlying the Management Forecasts, all of which are difficult to predict and many of which are beyond the control of the Company, may not be realized as forecasted. Actual results may differ materially from those reflected in the Management Forecasts. In addition, the Management Forecasts will be affected by the Company’s ability to achieve strategic goals, objectives and targets over the applicable period.

The Company’s actual future financial results may differ materially from those expressed or implied in the Management Forecasts due to numerous factors, including many that are beyond the Company’s ability to control or predict. While presented with numerical specificity, the Management Forecasts necessarily are based on numerous assumptions, many of which are beyond the control of the Company and difficult to predict. Important factors that may affect actual results and result in the Management Forecasts not being achieved include, but are not limited to, the Company’s ability to achieve expected results in pricing and cost management and the related impact on margins and cash flow, the effect of global economic conditions, the cost and effect of changes in tax and other legislation and other risk factors described in the Company’s SEC filings, including the Company’s Annual Report on Form 10-K for the year ended July 31, 2024, and described in this proxy statement in the section entitled “Forward-Looking Statements”. The Management Forecasts also reflect assumptions as to certain business decisions that are subject to change. The information set forth in the Management Forecasts is not fact and should not be relied upon as being necessarily indicative of actual future results. The Management Forecasts cover multiple years, and thus, by their nature, they become subject to greater uncertainty with each successive year.

The Management Forecasts were developed based on the Company’s continued operation as a standalone, publicly traded company without giving effect to the Merger, and therefore the Management Forecasts do not give effect to the Merger or any changes to the Company’s operations or strategy that may be implemented after the consummation of the Merger or to any costs incurred in connection with the Merger. Furthermore, the Management Forecasts do not take into account the effect of any failure of the Merger to be completed and should not be viewed as accurate or continuing in that context.

The Management Forecasts summarized in this section were prepared prior to the execution of the Merger Agreement and have not been updated to reflect any changes after the date they were prepared. The Company will not update or otherwise revise the Management Forecasts hereafter to reflect circumstances arising after their preparation.

In light of the foregoing factors and the uncertainties inherent in the Management Forecasts, we caution you to not place undue, if any, reliance on the Management Forecasts.

Interests of Duckhorn’s Directors and Executive Officers in the Merger

In considering the recommendation of the Company Board that the Duckhorn Stockholders should adopt the Merger Agreement, the Duckhorn Stockholders should be aware that the executive officers and directors of Duckhorn have certain interests in the Merger that may be different from, or in addition to, the interests of the Duckhorn Stockholders generally, including those interests listed below. The Company Board was aware of and considered these interests, among other matters, in evaluating and overseeing the negotiation of the Merger Agreement, in adopting the Merger Agreement, and in recommending that the Merger Agreement be approved by the Duckhorn Stockholders. As described in more detail below, these interests may include, for one or more of our directors and executive officers:

 

•

Company Stock Options, Company PSUs and Company RSUs held by Duckhorn’s executive officers and directors will be treated as described in the section of this proxy statement captioned “The Merger—Treatment of Company Equity Awards;”

 

•

Eligibility of Duckhorn’s executive officers to receive severance payments and benefits (including equity award vesting acceleration) upon a termination of employment in certain circumstances, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of

 

52

Duckhorn’s Directors and Executive Officers in the Merger—Payment Upon Termination of Employment Following Change of Control;”

 

•

The potential receipt of payments in respect of Converted Option Cash Awards and/or Converted Stock Unit Cash Awards or other post-Closing cash and/or equity incentive grants;

 

•

The accelerated vesting and payment of balances under the Company Nonqualified Deferred Compensation Plan; and

 

•

Continued indemnification and directors’ and officers’ liability insurance to be provided by the Surviving Corporation.

Arrangements with Parent

As of the date of this proxy statement, no executive officer of Duckhorn has entered into any agreement with Parent or any of its affiliates regarding individual employment arrangements with, or the right to purchase or participate in the equity of, the Surviving Corporation or one or more of its affiliates following the consummation of the Merger.

Prior to and following the Closing, however, certain executive officers of Duckhorn may have discussions or may enter into agreements with Parent, Merger Sub, their subsidiaries or their respective affiliates regarding employment with, or the right to purchase or participate in the equity of, the Surviving Corporation or one or more of its affiliates.

Treatment of Company Equity Awards

Acceleration of Vesting of Certain Company Equity Awards

Each Company Stock Option and/or Company RSU (other than the Company Stock Options and Company RSUs granted in September 2024 and October 2024), or portion thereof, that is unvested and outstanding at the Effective Time will accelerate vesting by six (6) months, such that (A) any Company Stock Option and/or Company RSU (or portion thereof) ordinarily scheduled to vest within six (6) months following the Effective Time shall vest at the Effective Time and (B) the vesting schedule applicable to any Company Stock Option and/or Company RSU (or portion thereof) ordinarily scheduled to vest more than six (6) months following the Effective Time shall be accelerated by six (6) months.

Treatment of Company Common Stock

If the Merger is consummated, any shares of Company Common Stock held of record or beneficially owned by a director or executive officer will be converted into the right to receive the Merger Consideration at the Effective Time.

The approximate value of the cash payments that each director and executive officer of the Company would receive in exchange for his or her shares of Company Common Stock is set forth in the table below. The information is based on the number of shares of Company Common Stock as of October 31, 2024 held by each

 

53

person who served as a director or executive officer of the Company since the beginning of the fiscal year ended July 31, 2024.

 

Name of Executive Officer or Director		Number of Shares of Company Common Stock (#)				Cash Consideration for Company Common Stock ($)
Deirdre Mahlan			92,544			$	1,027,238.40
Alex Ryan(1)			1,731,628			$	19,221,070.80
Gayle Bartscherer(2)			80,383			$	892,251.30
Jennifer Fall Jung			48,899			$	542,778.90
Sean Sullivan			119,774			$	1,329,491.40
Pete Przybylinski			381,036			$	4,229,449.60
Zach Rasmuson			453,105			$	5,029,465.50
Charles Esserman			—				—
Michelle Gloeckler			29,374			$	326,051.40
Daniel Costello			—				—
Adriel Lares			25,554			$	283,649.40
James O’Hara			—				—
Marshall Farrer			—				—
Tim Nall			—				—
Dave Burwick			—				—
Melanie Cox(3)			31,957			$	354,722.70

 

(1)	Mr. Ryan retired effective September 27, 2023 and is no longer an executive officer of the Company.

(2)	Ms. Bartscherer’s employment ceased as of March 29, 2024 and she is no longer an executive officer of the Company.

(3)	Ms. Cox resigned from the Company Board effective as of April 30, 2024.

Treatment of Company Stock Options

Each Company Stock Option (or portion thereof) that is vested, outstanding and unexercised immediately prior to the Effective Time, including Company Stock Options accelerated at the Effective Time pursuant to their terms or pursuant to the terms of the Merger Agreement, will be cancelled, and, in exchange therefor, the holder of such cancelled Company Stock Option will be entitled to receive (without interest), in consideration of the cancellation of such Company Stock Option, an amount in cash (less applicable tax withholdings) equal to the product of (x) the total number of shares of Company Common Stock underlying the Company Stock Option (or vested portion) immediately prior to the Effective Time multiplied by (y) the excess, if any, of the Merger Consideration over the applicable exercise price per share of Company Common Stock underlying such Company Stock Option.

Each Company Stock Option (or portion thereof) that is unvested, outstanding and unexercised immediately prior to the Effective Time will, at the Effective Time, be cancelled, and, in exchange therefor, converted into the contingent right of the holder of such cancelled Company Stock Option to receive (without interest), in consideration of the cancellation of such Company Stock Option, an amount in cash (less applicable tax withholdings) equal to the Converted Option Cash Award. The Converted Option Cash Award shall remain subject to the same vesting schedule applicable to the related Company Stock Option (after taking into account the acceleration described herein), but excluding any terms rendered inoperative by reason of this paragraph or the transactions contemplated by the Merger Agreement and for such other administrative or ministerial changes as in the reasonable and good faith determination of Parent are appropriate to conform the Converted Option Cash Award, and the vesting of the Converted Option Cash Award will accelerate in the event the holder’s employment is terminated by the Company without cause.

 

54

The Company’s executive officers and directors may exercise their Company Stock Options prior to the Effective Time to the extent such Company Stock Options are vested and exercisable in accordance with their terms.

The approximate value of the cash payments that each director and executive officer of the Company will receive in connection with the consummation of the Merger as a result of the cancellation of his or her Company Stock Options is set forth in the table below. This information is based on the Merger Consideration, the number of vested and unvested Company Stock Options held by the Company’s directors and executive officers as of October 31, 2024, assumes the Effective Time occurs on October 31, 2024 and does not take into account any vesting, forfeiture, or exercise of equity awards between October 31, 2024 and the Effective Time, but does take into account accelerated vesting at the Effective Time pursuant to the terms of the applicable Company Equity Awards or the Merger Agreement, as described above, in each case, assuming the applicable executive officer or director continues to provide services to the Company through such time.

The actual amount payable in respect of Company Stock Options held by the Company’s directors and executive officers will depend on the number of shares of Company Common Stock subject to Company Stock Options held by such persons as of the Effective Time and the extent to which the Company Stock Options are or become vested as of the Effective Time, which may differ from the amounts in the table below. None of the Company’s directors hold Company Stock Options as of October 31, 2024.

 

Name of Executive Officer or Director		Vested Company Stock Options (#)(1)				Cash Consideration for Vested Company Stock Options ($)				Company Stock Options Expected to Accelerate (#)(2)				Cash Consideration for Accelerated Company Stock Options ($)				Unvested Company Stock Options (#)(3)				Cash Consideration for Unvested Company Stock Options ($)(4)				Total Cash Consideration for Company Stock Options in the Merger ($)
Deirdre Mahlan			—				—				—				—				—				—				—
Jennifer Fall Jung			40,266				40,908				—				—				244,200				142,470				183,378
Sean Sullivan			173,162				37,499				34,315				—				245,845				130,597				168,096
Pete Przybylinski			173,162				37,499				34,315				—				245,845				130,597				168,096
Zach Rasmuson			173,162				37,499				34,315				—				245,845				130,597				168,096
Alex Ryan(5)			—				—				—				—				—				—				—
Gayle Bartscherer(6)			—				—				—				—				—				—				—
Charles Esserman			—				—				—				—				—				—				—
Michelle Gloeckler			—				—				—				—				—				—				—
Daniel Costello			—				—				—				—				—				—				—
Adriel Lares			—				—				—				—				—				—				—
James O’Hara			—				—				—				—				—				—				—
Marshall Farrer			—				—				—				—				—				—				—
Tim Nall			—				—				—				—				—				—				—
Dave Burwick			—				—				—				—				—				—				—
Melanie Cox(7)			—				—				—				—				—				—				—

 

(1)	Number of shares of Company Common Stock subject to Company Stock Options that are vested as of October 31, 2024.

(2)

Number of shares of Company Common Stock subject to Company Stock Options that are unvested as of October 31, 2024 that are expected to accelerate vesting as of the Effective Time, assuming continued service through such date. This includes the number of shares subject to Company Stock Options that will accelerate pursuant to the terms of the Merger Agreement, as described above.

(3)	Number of shares of Company Common Stock subject to Company Stock Options that are unvested as of October 31, 2024 that are not expected to accelerate vesting as of the Effective Time.

(4)	As of the Effective Time, each unvested Company Stock Option (after taking into account any accelerated vesting in connection with the transaction) will be cancelled and converted into the contingent right to

 

55

receive an amount in cash equal to the product of (x) the total number of shares of Company Common Stock underlying the Company Stock Option (or unvested portion) immediately prior to the Effective Time multiplied by (y) the excess, if any, of the Merger Consideration over the applicable exercise price per share of Company Common Stock underlying such Company Stock Option, which amount, instead of being paid immediately following the Effective Time, will instead be paid on the applicable vesting date of such Company Stock Option, subject to earlier payment on the holder’s termination of employment without cause and/or certain other terminations of the holder’s employment pursuant to the executive’s severance entitlements described below.

(5)	Mr. Ryan retired effective September 27, 2023 and is no longer an executive officer of the Company.

(6)	Ms. Bartscherer’s employment ceased as of March 29, 2024 and she is no longer an executive officer of the Company.

(7)	Ms. Cox resigned from the Company Board effective as of April 30, 2024.

Treatment of Company RSUs and Company PSUs

Each Company Equity Award (or portion thereof), other than a Company Stock Option, that is vested and outstanding immediately prior to the Effective Time but not yet settled immediately prior to the Effective Time, including Company Equity Awards accelerated at the Effective Time pursuant to their terms or pursuant to the Merger Agreement, will, at the Effective Time, be cancelled and, in exchange therefor, the holder of such cancelled Company Equity Award will be entitled to receive (without interest) an amount in cash (less applicable tax withholdings) equal to the product of (x) the total number of shares of Company Common Stock subject to (or deliverable under) such Company Equity Award (or vested portion) immediately prior to the Effective Time multiplied by (y) the Merger Consideration.

Each Company RSU that is unvested and outstanding immediately prior to the Effective Time will, at the Effective Time, be cancelled, and, in exchange therefor, converted into the contingent right of the holder of such cancelled Company RSU to receive (without interest) an amount in cash (less applicable tax withholdings) equal to the Converted Stock Unit Cash Award. The Converted Stock Unit Cash Award shall remain subject to the same vesting schedule applicable to the related Company RSU (after taking into account the acceleration described herein), but excluding any terms rendered inoperative by reason of this paragraph or the transactions contemplated by the Merger Agreement and for such other administrative or ministerial changes as in the reasonable and good faith determination of Parent are appropriate to conform the Converted Stock Unit Cash Award, and the vesting of the Converted Stock Unit Cash Award will accelerate in the event the holder’s employment is terminated by the Company without cause.

The approximate value of the cash payments that each director and executive officer of the Company will receive in connection with the consummation of the Merger as a result of the cancellation of his or her Company PSUs and/or Company RSUs is set forth in the table below. This information is based on the Merger Consideration and the number of unvested Company PSUs and/or Company RSUs held by the Company’s directors and executive officers as of October 31, 2024, assumes that the Effective Time occurs on [•] and does not take into account any vesting or forfeiture of equity awards between October 31, 2024 and the Effective Time, but does take into account accelerated vesting at the Effective Time pursuant to the terms of the applicable Company Equity Awards or the Merger Agreement, as described above, in each case, assuming the applicable executive officer or director continues to provide services to the Company through such time. The actual amount payable in respect of Company PSUs and/or Company RSUs held by the Company’s directors and executive officers will depend on the number of shares of Company Common Stock subject to Company PSUs and/or Company RSUs held by such persons as of the Effective Time, the extent to which the Company PSUs and/or

 

56

Company RSUs are or become vested as of the Effective Time, which may differ from the amounts in the table below and the degree to which the Company Equity Awards are earned after the closing of the Merger.

 

Name of Executive Officer or Director		Number of Unvested Company RSUs and Company PSUs Expected to Accelerate (#)(1)				Cash Consideration for Accelerated Company RSUs and Company PSUs ($)				Number of Unvested Company RSUs (#)(2)				Cash Consideration for Unvested Company RSUs ($)(3)				Total Cash Consideration for Unvested Company PSUs and Company RSUs in the Merger ($)
Deirdre Mahlan			531,286				5,897,275				—				—				5,897,275
Jennifer Fall Jung			—				—				81,401				903,551				903,551
Sean Sullivan			11,441				126,995				81,950				909,645				1,036,640
Pete Przybylinski			11,441				126,995				81,950				909,645				1,036,640
Zach Rasmuson			11,441				126,995				81,950				909,645				1,036,640
Alex Ryan(4)			—				—				—				—				—
Gayle Bartscherer(5)			—				—				—				—				—
Charles Esserman			—				—				—				—				—
Michelle Gloeckler			12,775				141,803				—				—				141,803
Daniel Costello			—				—				—				—				—
Adriel Lares			12,775				141,803				—				—				141,803
James O’Hara			—				—				—				—				—
Marshall Farrer			—				—				—				—				—
Tim Nall			—				—				—				—				—
Dave Burwick			9,011				100,022				—				—				100,022
Melanie Cox(6)			—				—				—				—				—

 

(1)

Number of shares of Company Common Stock subject to Company RSUs and Company PSUs that are unvested as of October 31, 2024 that are expected to accelerate vesting as of the Effective Time, assuming continued service through such date. This includes all Company RSUs held by Ms. Mahlan, all Company PSUs (which are only held by Ms. Mahlan), and the number of shares subject to Company RSUs that will accelerate pursuant to the terms of the Merger Agreement, as described above.

(2)	Number of shares of Company RSUs that are unvested as of October 31, 2024 that are not expected to accelerate vesting as of the Effective Time.

(3)

As of the Effective Time, each unvested Company RSU (after taking into account any accelerated vesting in connection with the transaction) will be cancelled and converted into the contingent right to receive an amount in cash equal to the product of (x) the total number of shares of Company Common Stock subject to (or deliverable under) such Company RSU immediately prior to the Effective Time multiplied by (y) the Merger Consideration, which amount, instead of being paid immediately following the Effective Time, will instead be paid on the applicable vesting date of such Company RSU, subject to earlier payment on the holder’s termination of employment without cause and/or certain other terminations of the holder’s employment pursuant to the executive’s severance entitlements described below. The Company RSUs held by our directors and the Company RSUs and Company PSUs held by Ms. Mahlan will accelerate as of the Effective Time, subject to continued service through such time. The Company RSUs held by our other executive officers will accelerate by six months at the Effective Time, as described above.

(4)	Mr. Ryan retired effective September 27, 2023 and is no longer an executive officer of the Company.

(5)	Ms. Bartscherer’s employment ceased as of March 29, 2024 and she is no longer an executive officer of the Company.

(6)	Ms. Cox resigned from the Company Board effective as of April 30, 2024.

Treatment of Company ESPP

The Company sponsors the Company ESPP in which executive officers and other employees are eligible to participate. Pursuant to the terms of the Merger Agreement, the Company Board (or, if appropriate, the

 

57

committee administering the Company ESPP) has or will adopt resolutions and take all other actions as may be required to provide that (i) no new participants will commence participation in the Company ESPP after October 6, 2024; (ii) no current Company ESPP participant will be allowed to increase their payroll contribution rate or purchase elections from those in effect as of October 6, 2024 or make separate non-payroll contributions on or following October 6, 2024; (iii) no new offering period will commence or be extended pursuant to the Company ESPP after October 6, 2024; (iv) if the Effective Time is expected to occur prior to the end of the current offering period, the Company will take action to shorten the offering period and the applicable purchase date with respect to the offering period will occur as close to the Effective Time as is administratively practicable; and (v) the Company ESPP shall terminate as of or immediately prior to the Effective Time.

Potential Payments upon Termination or Change in Control

Each of Duckhorn’s executive officers is party to an employment agreement with Duckhorn that provides for certain payments and benefits in the event of certain terminations of employment. The material terms of these agreements are summarized below. As used in the summary below, the terms “cause” and “good reason” have the meanings set forth in the applicable employment agreement. The Merger will constitute a change in control of Duckhorn for purposes of the employment agreements and award agreements.

If Ms. Mahlan’s employment is terminated by Duckhorn other than for cause or by Ms. Mahlan for good reason, she will be entitled to receive base salary continuation for twelve months (six months in the event that a termination for good reason by Ms. Mahlan occurs on account of a diminution in her duties and responsibilities for no longer being a CEO of a publicly traded company following a change in control), reimbursement of COBRA premiums for up to twelve months (six months in the event that a termination for good reason by Ms. Mahlan occurs on account of a diminution in her duties and responsibilities for no longer being a CEO of a publicly traded company following a change in control), based on the portion of monthly health premiums paid by the Company immediately prior to her termination, and any annual bonus for the fiscal year prior to the fiscal year in which such termination occurs, to the extent not yet paid, in each case, subject to her execution of a separation agreement containing a general release of claims.

If the employment of any of Duckhorn’s executive officers other than Ms. Mahlan is terminated by Duckhorn other than for cause or by the executive officer for good reason, he or she will be entitled to receive base salary continuation for twelve months, reimbursement of COBRA premiums for up to twelve months (based on the portion of monthly health premiums paid by the Company immediately prior to his or her termination), and any annual bonus for the fiscal year prior to the fiscal year in which such termination occurs, to the extent not yet paid, in each case, subject to his or her execution of a separation agreement containing a general release of claims.

Each of Duckhorn’s currently employed executive officers’ employment agreements includes a Section 280G better-off cutback provision, which provides that, in the event that the payments and benefits provided to the executive would be subject to the excise tax imposed by Section 4999 of the Code, the severance payments and benefits will either be delivered in full or reduced to the extent necessary to avoid the excise tax, whichever would result in the executive receiving the largest amount of payments and benefits on an after-tax basis.

With respect to the options and RSUs held by Duckhorn’s currently employed executive officers, in the event of a change in control of the Company (as defined in the award agreements) in which an acquiring or surviving entity assumes, continues or substitutes the options and/or RSUs, as applicable, if the executive officer’s employment is terminated without cause or for good reason, in either case, within 18 months following such change in control, the options and/or RSUs, as applicable, will become fully vested upon such termination.

In the event of a change in control, any then outstanding and unvested RSUs granted to Ms. Mahlan in connection with her commencement of employment as President and Chief Executive Officer will vest immediately prior to such change in control.

 

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Other than Ms. Mahlan’s RSUs, including her performance-based RSUs, no benefits would be payable upon a change in control without an associated termination of employment (unless options and/or RSUs are not assumed, continued or substituted as described above).

For an estimate of the value of the severance payments and benefits described above that would be payable to the Company’s named executive officers upon a qualifying termination in connection with the Merger, see the section entitled “Golden Parachute Compensation” below.

Nonqualified Deferred Compensation Plan

The Duckhorn Wine Company, an indirect subsidiary of the Company, maintains the Company Nonqualified Deferred Compensation Plan in which participants, including our executive officers, receive employer contributions equal to the excess of the employer contribution they would have received under our 401(k) plan, but for Internal Revenue Service limits, over the employer contributions made on their behalf to the 401(k) plan. Pursuant to the Company Nonqualified Deferred Compensation Plan, unvested employer contributions in each executive officer’s account will vest in connection with a change in control, which includes the Merger, and the full account balances will be paid out in connection with the Merger. The approximate value of the cash payments that each director and executive officer of the Company will receive in connection with the consummation of the Merger as a result of the payment of his or her deferred compensation account balances is set forth in the table below. This information is based on the deferred compensation plan account balances of the Company’s directors and executive officers as of October 31, 2024 and does not take into account any contributions or distributions between October 31, 2024 and the Effective Time. The actual amount payable in respect of the deferred compensation plan to the Company’s directors and executive officers will depend on the account balances of such persons as of the Effective Time, which may differ from the amounts in the table below. None of our directors participates in the Company Nonqualified Deferred Compensation Plan.

 

Name of Executive Officer or Director		Non-qualified Deferred Compensation Plan Vested Account Balance ($)				Non-qualified Deferred Compensation Plan Unvested Account Balance ($)				Non-qualified Deferred Compensation Plan Total Account Balance ($)
Deirdre Mahlan			—				20,283				20,283
Alex Ryan(1)			—				—				—
Gayle Bartscherer(2)			—				—				—
Jennifer Fall Jung			85,781				20,173				105,954
Sean Sullivan			42,926				95,101				138,027
Pete Przybylinski			182,060				93,218				275,278
Zach Rasmuson			2,762,167				98,027				2,860,194
Charles Esserman			—				—				—
Michelle Gloeckler			—				—				—
Daniel Costello			—				—				—
Adriel Lares			—				—				—
James O’Hara			—				—				—
Marshall Farrer			—				—				—
Tim Nall			—				—				—
Dave Burwick			—				—				—
Melanie Cox(3)			—				—				—

 

(1)	Mr. Ryan retired effective September 27, 2023 and is no longer an executive officer of the Company.

(2)	Ms. Bartscherer’s employment ceased as of March 29, 2024 and she is no longer an executive officer of the Company.

(3)	Ms. Cox resigned from the Company Board effective as of April 30, 2024.

 

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Employee Benefits

Parent has agreed to cause the Surviving Corporation and each of the Company’s subsidiaries to, for one year following the Effective Time (or until employment terminates, if sooner), maintain for the individuals employed by the Company or any of the Company’s subsidiaries at the Effective Time and who remain employed by the Surviving Corporation (or its other subsidiaries) immediately following the Effective Time, including the Company’s executive officers (each, a “Current Employee”) (i) each of base salary and wage rate (as applicable) and a target annual cash incentive compensation opportunity (excluding any equity or equity-based, change in control, retention, transaction or similar incentive opportunities) at least as favorable as those provided to the Current Employee as of immediately prior to the Effective Time, (ii) employee benefits (excluding any defined benefit pension, equity or equity-based, severance, change in control, retention, employee stock purchase plan and nonqualified deferred compensation, or post-termination or retiree health or welfare benefits) that are substantially comparable in the aggregate to the employee benefits provided to the Current Employees as of immediately prior to the Effective Time under the Company’s employee benefit plans (subject to the same exclusions) and (iii) severance benefits that are at least as favorable as the severance benefits provided by the Company or a Company subsidiary to the Current Employee as of immediately prior to the Effective Time.

Other Arrangements

As of the date of this proxy statement, Parent has informed the Company that none of the Company’s executive officers has entered into any new agreement, arrangement or understanding with Parent or its affiliates regarding employment with the Surviving Corporation. Although it is possible that Parent or the Surviving Corporation may enter into employment agreements or other employment or consultancy arrangements with the Company’s executive officers, as of the date of this proxy statement, there can be no assurance that any parties will reach an agreement.

Insurance and Indemnification of Directors and Executive Officers

The Merger Agreement provides that Parent and Merger Sub will cause the certificate of incorporation and bylaws of the Surviving Corporation to contain provisions no less favorable with respect to indemnification, advancement of expenses, and exculpation from liabilities of present and former directors, officers and employees of the Company than such provisions set forth in the organizational documents of the Company as of the date of the Merger Agreement. Such provisions may not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of such individual, and will be observed by the Surviving Corporation and its subsidiaries to the fullest extent available under Delaware (or other applicable) law until six (6) years from the Effective Time, and in the event that any action is pending or asserted or any claim made during such period, until the disposition of any such action or claim, unless such amendment, modification, or repeal is required by applicable law, in which case Parent will, and will cause the Surviving Corporation to, make such changes to the certificate of incorporation and the bylaws as to have the least adverse effect on the rights of the individuals referenced in this provision.

In addition, the Merger Agreement provides for indemnification and exculpation rights with respect to liabilities for acts and omissions occurring prior to or at the Effective Time, as well as related rights to advancement of expenses, in favor of the current and former directors and officers of the Company (together with such person’s heirs, executors, administrators or affiliates), who we refer to collectively as the “indemnitees.” Specifically, from and after the Effective Time, Parent and the Surviving Corporation will, jointly and severally, indemnify and hold harmless each current or former director and officer of the Company against all obligations to pay a judgment, settlement, or penalty and reasonable expenses incurred in connection with any action, whether civil, criminal, administrative, arbitrative, or investigative, and whether formal or informal, arising out of or pertaining to any action or omission, including any action or omission in connection with the fact that the indemnitee is or was an officer, director, employee, affiliate, fiduciary, or agent of the Company or its

 

60

subsidiaries, or of another entity if such service was at the request of the Company, whether asserted or claimed prior to, at, or after the Effective Time, to the extent provided for under the Company’s organizational documents or contractual arrangements providing for indemnification in effect as of the date of the Merger Agreement. The Merger Agreement also provides that Parent and the Surviving Corporation will advance reasonable fees and expenses (including reasonable attorneys’ fees) as incurred by any such indemnitee in the defense of such legal action (provided that any person to whom expenses are advanced shall have provided, to the extent provided for under the Company’s organizational documents or contractual arrangement providing for indemnification, an undertaking to repay such advances if it is finally determined that such person is not entitled to indemnification).

The Merger Agreement further provides that prior to the Effective Time, the Company may purchase a tail policy under the current directors’ and officers’ liability insurance policies maintained at such time by the Company, which tail policy (i) will be effective until the sixth (6th) anniversary of the Effective Time with respect to claims arising from facts or events that existed or occurred prior to or at the Effective Time and (ii) will contain coverage that is at least as protective to such directors and officers as the coverage provided by such existing policies, subject to certain limits on the aggregate premium for such tail policy. In addition, without limiting the foregoing, unless the Company has purchased a tail policy, the Merger Agreement requires the Surviving Corporation to purchase such tail policy at or after the Effective Time. Parent will cause the Surviving Corporation to maintain such policy in full force and effect for the full six (6)-year term.

Golden Parachute Compensation

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each named executive officer of Duckhorn that is based on or otherwise relates to the Merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section, we use such term to describe the merger-related compensation payable to Duckhorn’s named executive officers. The “golden parachute” compensation payable to these individuals is subject to a non-binding advisory vote of Duckhorn Shareholders, as described below in this section. The approval of the “golden parachute” compensation is not a condition to the completion of the Merger.

The estimated value of the payments and benefits that Duckhorn’s named executive officers will or may be entitled to receive in connection with the Merger is quantified in the below table. The amounts set forth in the table are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement and the footnotes to the table. As a result, the actual amounts, if any, that a named executive officer receives may materially differ from the amounts set forth in the table. The table below assumes that (i) the Merger is consummated on October 31, 2024, (ii) the named executive officer’s employment is terminated by the Company without cause on the same day; (iii) the Merger Consideration is $11.10 per share of Company Common Stock; (iv) the named executive officer’s base salary rate remains unchanged from those in effect as of the date of this proxy statement; (v) annual bonuses for the fiscal year prior to the fiscal year in which such termination occurs have been paid to the named executive officer; (vi) each named executive officer has properly executed any required releases and complied with all requirements necessary in order to receive the payments and benefits; (vii) none of the named executive officers’ Company Equity Awards that are outstanding as of October 31, 2024, vest (except as described above), are exercised or are forfeited, and none of the named executive officers are granted additional equity awards, in each case prior to the date of the named executive officer’s termination; and (viii) no named executive officer enters into any new agreement with the Company or is otherwise legally entitled to, prior to the Effective Time, additional compensation or benefits. In addition, these amounts do not include any reduction on account of Section 280G or 4999 of the Code. The calculation in the table below does not include amounts under contracts, agreements, plans or arrangements to the extent they do not discriminate in scope, terms, or operation in favor of the named executive officers and that are available generally to all of the Company’s salaried employees. Additional detail regarding the named executive officers’ interests in the Merger is provided above under the heading “Interests of Duckhorn’s Directors and Executive Officers in the Merger”.

 

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For purposes of this discussion, “single-trigger” refers to benefits that arise as a result of the completion of the Merger and “double-trigger” refers to benefits that require two conditions, which are the completion of the Merger and a qualifying termination.

 

Name(1)		Cash ($)(2)				Equity ($)(3)				Pension / NQDC ($)(4)				Perquisites/ Benefits ($)(5)				Total ($)
Deirdre Mahlan			721,000				5,897,275				20,283				3,600				6,642,158
Jennifer Fall Jung			525,000				1,046,021				20,173				17,532				1,608,726
Sean Sullivan			422,000				1,167,237				95,101				5,784				1,690,122
Pete Przybylinski			410,000				1,167,237				93,218				15,804				1,686,259
Zach Rasmuson			410,000				1,167,237				98,027				15,804				1,691,068

 

(1)

Alex Ryan is not included in the table as following his retirement on September 27, 2023 and he is not eligible to receive any compensation that is based on or otherwise relates to the Merger. In addition, Gayle Bartscherer is not included in the table as following the end of Ms. Bartscherer’s employment on March 29, 2024, and she is not eligible to receive any compensation that is based on or otherwise relates to the Merger.

(2)	The amounts reported in this column represent double-trigger base salary continuation for twelve (12) months that each named executive officer is entitled to pursuant to the named executive officer’s applicable employment agreement.

(3)

The amounts reported in this column represent the acceleration of Company Equity Awards as described above under “Interests of Duckhorn’s Directors and Executive Officers in the Merger,” which includes (1) single-trigger payments for (i) the Company PSUs and the Company RSUs held by Ms. Mahlan and (ii) the acceleration of Company Stock Options and Company RSUs held by each other named executive officer by six (6) months pursuant to the Merger Agreement, and (2) double-trigger payments for all other unvested Company Equity Awards (which will be Converted Option Cash Awards and Converted Stock Unit Cash Awards, as applicable, following the Merger) held by each named executive officer in the event that a named executive officer is terminated without cause following the Merger pursuant to the Merger Agreement and/or terminated without cause or for good reason within eighteen (18) months following the Merger pursuant to the applicable award agreements. The value of Company Stock Options set forth in the table is equal to the product of (x) the total number of shares of Company Common Stock underlying the applicable unvested Company Stock Options held by the applicable named executive officer immediately prior to the Effective Time multiplied by (y) the excess, if any, of the Merger Consideration over the applicable exercise price per share of Company Common Stock underlying such Company Stock Options. The value of Company RSUs and Company PSUs set forth in the table is equal to the product of (x) the total number of shares of Company Common Stock subject to the applicable unvested Company RSU or Company PSU, as applicable, immediately prior to the Effective Time multiplied by (y) the Merger Consideration.

 

Name		Company Stock Options (Single- Trigger) ($)(a)				Company Stock Options (Double- Trigger) ($)				Company RSUs (Single- Trigger) ($)(a)				Company RSUs (Double- Trigger) ($)				Company PSUs (Single- Trigger) ($)
Deirdre Mahlan			—				—				3,931,520				—				1,965,755
Jennifer Fall Jung			—				142,470				—				903,551				—
Sean Sullivan			—				130,597				126,995				909,645				—
Pete Przybylinski			—				130,597				126,995				909,645				—
Zach Rasmuson			—				130,597				126,995				909,645				—

 

(a)

Includes the Company Equity Awards that vest at Closing due to the acceleration by six (6) months or the single-trigger acceleration of Ms. Mahlan’s awards.

 

(4)	The single-trigger amounts reported in this column represent unvested employer contributions under the Company Nonqualified Deferred Compensation Plan, which amounts will vest in connection with the Merger.

 

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(5)

The double-trigger amounts reported in this column represent reimbursement of COBRA premiums for twelve (12) months (based on the portion of monthly health premiums paid by the Company immediately prior to the applicable named executive officer’s termination), which each named executive officer is entitled to in the event of a qualifying termination pursuant to such named executive officer’s employment agreement. The benefit continuation amount reported for Ms. Mahlan includes a $300 monthly payment in lieu of Company-provided health and welfare benefits.

Financing of the Merger

We presently anticipate that the total funds needed to complete the Merger and the related transactions will be approximately $[●], which will be funded via the Equity Financing and Debt Financing described below.

Equity Commitment Letter

Pursuant to the Equity Commitment Letter, the Equity Investors have committed to contribute or cause to be contributed to Parent at the closing of the Merger equity financing (the “Equity Financing”) for the purpose of allowing Parent to fund (i) the aggregate Merger Consideration on the terms and subject to the conditions of the Merger Agreement and (ii) any fees and expenses that Parent is required to pay pursuant to the terms of the Merger Agreement, including repayment of any indebtedness as set forth in the Merger Agreement.

The obligations of the Equity Investors to provide the Equity Financing under the Equity Commitment Letter are subject to (i) the satisfaction, or written waiver by Parent, of all conditions set forth in Section 6.1 and Section 6.2 of the Merger Agreement (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or written waiver by Parent of such conditions), (ii) the terms of the Equity Commitment Letter, (iii) the substantially simultaneous funding of the Debt Financing (and any Alternative Financing) at the Closing and (iv) the substantially simultaneous consummation of the Merger in accordance with the terms of the Merger Agreement.

The obligation of the Equity Investors to fund the equity commitment will terminate automatically and immediately upon the earliest to occur of (i) the valid termination of the Merger Agreement in accordance with its terms, (ii) commencement by the Company or any of its affiliates of a lawsuit or other proceeding asserting any claim (whether in tort, contract or otherwise) for payment under or in respect of, the Merger Agreement, the Equity Commitment Letter, the Limited Guarantee, or the transactions contemplated thereby (including in respect of any oral representations made or alleged to be made in connection therewith) against certain affiliates of the Equity Investors or Parent, subject to certain exceptions.

The Company is an express third-party beneficiary of certain rights granted to Parent under the Equity Commitment Letter and is entitled to (i) specifically enforce the obligations of the Equity Investors to fund their respective commitments under the Equity Commitment Letter in accordance with the Equity Commitment Letter, (ii) cause each Equity Investor to call its capital commitments or otherwise specifically enforce the commitments provided by its third-party investor(s) and (iii) rely on the representations and warranties made by the Equity Investors in the Equity Commitment Letter and certain oral representations made by the Equity Investor in connection with the Equity Commitment Letter (solely, in each case, to the extent that Parent can enforce the equity commitment pursuant to the terms of the Equity Commitment Letter).

Limited Guarantee

Concurrently with the execution of the Merger Agreement, each Guarantor has executed and delivered the Limited Guarantee in favor of the Company. Pursuant to the Limited Guarantee, the Guarantors have agreed to guarantee the due and punctual payment of and discharge of a pro rata percentage of Parent’s payment obligation to pay both (i) the Parent Termination Fee to the Company when and only if the Parent Termination Fee becomes

 

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payable pursuant to Section 7.5(c) of the Merger Agreement solely to the extent a court of competent jurisdiction shall have entered a final, non-appealable judgment that such obligation is due and payable by Parent and (ii) any amount that becomes payable by Parent to the Company pursuant to Section 7.5(d) or Section 5.15(a)(iii) of the Merger Agreement, in each case, on the terms and subject to the conditions set forth in the Merger Agreement and the Limited Guarantee, in each case, on the terms and subject to the conditions set forth in the Merger Agreement and the Limited Guarantee; provided, that in no event shall the maximum aggregate liability of all of the Guarantors under the Limited Guarantee exceed the Cap; and provided, further, that in no event shall the aggregate liability of any one Guarantor under the Limited Guarantee exceed such Guarantor’s “Maximum Amount.”

The Limited Guarantee will terminate and be of no further force and effect, and the Company will have no rights under the Limited Guarantee from and after, the earliest of (i) immediately following the later of the Effective Time and the deposit of cash with the Paying Agent in an amount sufficient to pay the aggregate Merger Consideration pursuant to Section 2.4(a) of the Merger Agreement, (ii) the valid termination of the Merger Agreement in accordance with its terms by mutual consent of the parties or in any other circumstance which would not give rise to the right of the Company to receive the Parent Termination Fee, (iii) the two-month anniversary of any valid termination of the Merger Agreement in accordance with its terms under circumstances in which Parent would be obligated to pay the Parent Termination Fee if, by such two-month anniversary, the Company has not presented a claim in writing for payment of the obligations to either Parent or the Guarantors under the Limited Guarantee, as applicable, or, in the case of this clause (iii), the date such claim is finally satisfied or otherwise resolved, and (iv) the indefeasible payment by the Guarantors, Parent or Merger Sub of an amount of the obligations under the Limited Guarantee equal to the Cap (or, with respect to any Guarantor, the indefeasible payment by such Guarantor of an amount of the obligations equal to such Guarantor’s Maximum Amount).

Debt Commitment Letter

Pursuant to the Debt Commitment Letter, the Debt Commitment Parties have committed to provide debt financing consisting of a $900,000,000 first lien term loan facility and a $300,000,000 first lien cash flow revolving facility, in each case, on the terms and subject to the conditions set forth in the Debt Commitment Letter.

Voting and Support Agreements

The following summary describes the material provisions of the Voting Agreements. The descriptions of the Voting Agreements in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Voting Agreements, the form of which is attached to this proxy statement as Annex C and incorporated into this proxy statement by reference. We encourage you to read the form of Voting Agreement carefully and in its entirety because this summary may not contain all the information about the Voting Agreements that is important to you. The rights and obligations of the parties to the Voting Agreements are governed by the express terms of the Voting Agreements and not by this summary or any other information contained in this proxy statement.

Concurrently with the execution of the Merger Agreement, and following approval by the Company Board, Parent and Merger Sub have entered into the Voting Agreements with the Specified Stockholders.

Under the Voting Agreements, the applicable stockholders commit to vote certain of their respective shares of Company Common Stock, among other things, in favor of the adoption of the Merger Agreement and against any competing transaction or any other action, agreement or proposal which to its knowledge would reasonably be expected to prevent or materially impede or materially delay the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement. The Specified Stockholders have agreed to vote, in the aggregate, approximately [●]% of the outstanding shares of the Company Common Stock in favor of the adoption of the Merger Agreement.

 

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The Voting Agreements also include certain restrictions on transfer of the shares of Company Common Stock held by such stockholders. The Voting Agreements terminate in certain circumstances, including in connection with a termination of the Merger Agreement by the Company in order to accept a Superior Proposal.

Appraisal Rights

If the Merger is consummated, holders and beneficial owners of shares of Company Common Stock who do not vote in favor of the adoption of the Merger Agreement (whether by voting against the adoption of the Merger Agreement, abstaining or otherwise not voting with respect to the adoption of the Merger Agreement), who properly and validly demand an appraisal of their shares of Company Common Stock in writing, who continuously hold (in the case of holders) or continuously own (in the case of beneficial owners) their shares of Company Common Stock through the Effective Time, who otherwise comply with the statutory requirements of Section 262 and who do not withdraw their demands or otherwise lose their rights to appraisal, subject to the conditions thereof, are entitled to seek appraisal of their shares of Company Common Stock in connection with the Merger under Section 262. Unless the context requires otherwise, all references in Section 262 and in this summary to a “stockholder” or to a “holder of shares” are to a record holder of Company Common Stock. Unless the context requires otherwise, all references in Section 262 and in this summary to a “beneficial owner” are to a person who is the beneficial owner of shares of Company Common Stock held either in voting trust or by a nominee on behalf of such person. Unless the context requires otherwise, all references in Section 262 and in this summary to a “person” are to any individual, corporation, partnership, unincorporated association or other entity.

Persons who exercise appraisal rights under Section 262 will not receive the Merger Consideration they would otherwise be entitled to receive pursuant to the Merger Agreement. They will receive an amount determined to be the “fair value” of their shares of Company Common Stock following petition to, and an appraisal by, the Delaware Court of Chancery. Persons considering seeking appraisal should recognize that the fair value of their shares of Company Common Stock determined under Section 262 could be more than, the same as or less than the Merger Consideration they would otherwise be entitled to receive pursuant to the Merger Agreement. Strict compliance with the procedures set forth in Section 262 is required. Failure to comply strictly with all of the procedures set forth in Section 262 may result in the withdrawal, loss or waiver of appraisal rights. Consequently, and in view of the complexity of the provisions of Section 262, persons wishing to exercise appraisal rights are urged to consult their legal and financial advisors before attempting to exercise such rights.

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262 and is incorporated into this proxy statement by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that the Company’s stockholders or beneficial owners exercise their appraisal rights under Section 262. Holders of record and beneficial owners of shares of Company Common Stock should carefully review the full text of Section 262 as well as the information discussed below. Failure to follow the steps required by Section 262 for demanding and perfecting appraisal rights may result in the loss of such rights.

Under Section 262, if the Merger is completed, holders of record or beneficial owners of shares of Company Common Stock who (1) submit a written demand for appraisal of such holder’s or owner’s shares of Company Common Stock to the Company prior to the vote on the adoption of the Merger Agreement, (2) do not vote in favor of the adoption of the Merger Agreement (whether by voting against the Merger Proposal, abstaining or otherwise not voting with respect to the adoption of the Merger Agreement), (3) continuously hold (in the case of a holder of record) or own (in the case of a beneficial owner) such shares of Company Common Stock through the Effective Time, (4) do not withdraw their demands or otherwise lose their rights to appraisal, and (5) otherwise comply with the statutory requirements and satisfy certain ownership thresholds set forth in Section 262, may be entitled to have their shares of Company Common Stock appraised by the Delaware Court

 

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of Chancery and to receive payment in cash for the “fair value” of their shares of Company Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be fair value from the Effective Time through the date of payment of the judgment. If you are a beneficial owner of shares of Company Common Stock and you wish to exercise appraisal rights in such capacity, in addition to the foregoing requirements, your demand must also (1) reasonably identify the holder of record of the shares of Company Common Stock for which that demand is made, (2) be accompanied by documentary evidence of your beneficial ownership of such shares of Company Common Stock and include a statement that such documentary evidence is a true and correct copy of what it purports to be, and (3) provide an address at which you consent to receive notices given by the Surviving Corporation and to be set forth on the verified list required by subsection (f) of Section 262. However, after an appraisal petition has been filed, the Delaware Court of Chancery, at a hearing to determine persons entitled to appraisal rights, will dismiss appraisal proceedings as to all persons who are otherwise entitled to appraisal rights unless (1) the total number of shares of Company Common Stock entitled to appraisal exceeds one percent of the outstanding shares of the class of Company Common Stock eligible for appraisal, or (2) the aggregate Merger Consideration in respect of the shares of Company Common Stock for which appraisal rights have been pursued and perfected exceeds $1,000,000. The Company refers to these conditions as the “ownership thresholds.” Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date of payment of the judgment at five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period (except that, if at any time before the entry of judgment in the proceeding, the Surviving Corporation makes a voluntary cash payment to each person seeking appraisal, interest will accrue thereafter only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the shares of Company Common Stock as determined by the Delaware Court of Chancery, and (2) interest theretofore accrued, unless paid at that time). The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.

Under Section 262, where the proposed merger for which appraisal rights are provided is to be submitted for approval at a meeting of the Company’s stockholders, the corporation, not less than twenty (20) days prior to the meeting, must notify each of its stockholders of record as of the Record Date for notice of such meeting that appraisal rights are available and include in the notice a copy of Section 262 or information directing the Company’s stockholders to a publicly available electronic resource at which Section 262 may be accessed without subscription or cost. This proxy statement constitutes the Company’s notice to its stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. In connection with the Merger, any holder of record or beneficial owner of Company Common Stock who wishes to exercise appraisal rights, or who wishes to preserve such holder’s or owner’s right to do so, should review Section 262 carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A stockholder or beneficial owner who loses such holder’s or owner’s appraisal rights will be entitled to receive the Merger Consideration described in the Merger Agreement without interest and less any applicable withholding taxes. Because of the complexity of the procedures for exercising the right to seek appraisal of shares of Company Common Stock, the Company believes that if a stockholder or a beneficial owner is considering exercising such rights, that stockholder or beneficial owner should seek the advice of legal counsel.

Stockholders or beneficial owners wishing to exercise the right to seek an appraisal of their shares of Company Common Stock must do ALL of the following:

 

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the stockholder or beneficial owner must deliver to the Company a written demand for appraisal of such holder’s or owner’s shares of Company Common Stock before the vote on the adoption of the Merger Agreement at the Special Meeting;

 

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•

the stockholder or beneficial owner must not vote in favor, or abstain from voting, of the adoption of the Merger Agreement; and

 

•

the stockholder must continuously hold or the beneficial owner must continuously own the shares of Company Common Stock from the date of making the demand through the Effective Time (a stockholder or beneficial owner will lose appraisal rights if the stockholder or beneficial owner transfers the shares of Company Common Stock before the Effective Time).

Any holder or beneficial owner of shares of the Company Common Stock who has complied with the applicable requirements of Section 262 and is otherwise entitled to appraisal rights or the Surviving Corporation may file a petition in the Delaware Court of Chancery demanding a determination of the value of the stock of all such persons within one hundred and twenty (120) days after the date of the Merger (the Surviving Corporation is under no obligation to file any petition and has no intention of doing so).

In addition, after an appraisal petition has been filed, the Delaware Court of Chancery, at a hearing to determine persons entitled to appraisal rights, will dismiss appraisal proceedings as to all persons who asserted appraisal rights unless one of the ownership thresholds is met.

For stockholders, because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, each stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the Merger Agreement, abstain or not vote his, her or its shares of Company Common Stock.

Written Demand

A stockholder or beneficial owner wishing to exercise appraisal rights must deliver to the Company, before the vote on the adoption of the Merger Agreement at the Special Meeting, a written demand for the appraisal of such holder’s or beneficial owner’s shares of Company Common Stock. In addition, that stockholder or beneficial owner must not vote or submit a proxy in favor of the adoption of the Merger Agreement. A vote in favor of the adoption of the Merger Agreement, at the Special Meeting or by proxy (whether by mail or via the Internet or telephone), will result in loss of appraisal rights in respect of the shares of Company Common Stock so voted and will nullify any previously filed written demands for appraisal with respect to such stockholder’s shares of Company Common Stock. A stockholder exercising appraisal rights must hold of record the shares of Company Common Stock on the date the written demand for appraisal is made and must continue to hold the shares of Company Common Stock of record through the Effective Time. A beneficial owner exercising appraisal rights must own the shares of Company Common Stock on the date the written demand for appraisal is made and must continue to own such shares of Company Common Stock through the Effective Time. For a stockholder, a proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. A stockholder or beneficial owner who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement or abstain from voting on the adoption of the Merger Agreement. Neither voting against the adoption of the Merger Agreement nor abstaining from voting or failing to vote on the adoption of the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. A stockholder’s or beneficial owner’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the Special Meeting will constitute a waiver of appraisal rights.

A holder of record of shares of Company Common Stock is entitled to demand appraisal for the shares of Company Common Stock registered in that holder’s name. A demand for appraisal in respect of shares of Company Common Stock by a holder of record must reasonably inform the Company of the identity of the stockholder and that the stockholder intends thereby to demand an appraisal of such stockholder’s shares.

 

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A beneficial owner may, in such person’s name, demand in writing an appraisal of such beneficial owner’s shares of Company Common Stock. A demand for appraisal in respect of shares of Company Common Stock should be executed by or on behalf of the beneficial owner and must reasonably inform the Company of the identity of the beneficial owner and that the beneficial owner intends thereby to demand an appraisal of such owner’s shares of Company Common Stock. The demand made by such beneficial owner must also (1) reasonably identify the holder of record of the shares of Company Common Stock for which the demand is made, (2) be accompanied by documentary evidence of such beneficial owner’s continuous ownership of the stock and a statement that such documentary evidence is a true and correct copy of what it purports to be, and (3) provide an address at which such beneficial owner consents to receive notices given by the Surviving Corporation and to be set forth on the verified list required by subsection (f) of Section 262. If the shares of Company Common Stock are owned of record or beneficially owned in a fiduciary or representative capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner or beneficial owner, and if the shares of Company Common Stock are owned of record or beneficially owned by more than one (1) person, as in a joint tenancy and tenancy in common, the demand must be executed by or on behalf of all joint record holders or beneficial owners. An authorized agent, including an authorized agent for two (2) or more joint record holders or beneficial owners, may execute a demand for appraisal on behalf of a holder of record or beneficial owner; however, the agent must identify the record owner or owners or beneficial owner or owners, respectively, and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners or beneficial owner or owners, as applicable. All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:

The Duckhorn Portfolio, Inc.

1201 Dowdell Lane

Saint Helena, CA 94574

Attention: Sean Sullivan & Corporate Secretary

At any time within sixty (60) days after the date of the Merger (or thereafter, with written approval from the Company), any holder or beneficial owner of shares of the Company Common Stock who has submitted a demand for appraisal who has not commenced an appraisal proceeding or joined that proceeding as a named party will have the right to withdraw such person’s demand for appraisal and to accept the Merger Consideration offered pursuant to the Merger Agreement, without interest and less any applicable withholding taxes, by delivering to the Company, as the Surviving Corporation, a written withdrawal of the demand for appraisal. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any holder or beneficial owner of shares of the Company Common Stock without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that this shall not affect the right of any such person who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such person’s demand for appraisal and to accept the Merger Consideration within sixty (60) days after the date of the Merge. Except with respect to any holder or beneficial owner of shares of the Company Common Stock who withdraws such person’s demand in accordance with the proviso in the immediately preceding sentence, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding with respect to such person, the person will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the Merger Consideration being offered pursuant to the Merger Agreement.

Notice by the Surviving Corporation

If the Merger is completed, within ten (10) days after the Effective Time, the Surviving Corporation will notify each record holder of shares of Company Common Stock who has properly and validly made a written demand for appraisal pursuant to Section 262, and who has not voted in favor of the adoption of the Merger Agreement, and any beneficial owner who has demanded appraisal in accordance with Section 262 that the Merger has become effective and the effective date thereof.

 

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Filing a Petition for Appraisal

Within one hundred and twenty (120) days after the date of the Merger, but not thereafter, the Surviving Corporation or any holder or beneficial owner of shares of the Company Common Stock who has complied with Section 262 and who is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a person, demanding a determination of the fair value of the shares of Company Common Stock held by all such persons entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and the Duckhorn Stockholders and beneficial owners should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of Company Common Stock. Accordingly, any such persons who desire to have their shares of Company Common Stock appraised should take all actions necessary to perfect their appraisal rights in respect of their shares of Company Common Stock within the time and in the manner prescribed in Section 262. The failure to file such a petition within the period specified in Section 262 will nullify a previous written demand for appraisal.

Within one hundred and twenty (120) days after the date of the Merger, any holder or beneficial owner of shares of the Company Common Stock who has complied with the requirements for an appraisal of such person’s shares of Company Common Stock pursuant to Section 262 and who is entitled to appraisal rights under Section 262 will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares of Company Common Stock not voted in favor of the adoption of the Merger Agreement and with respect to which the Company has received demands for appraisal, and the aggregate number of stockholders or beneficial owners holding or owning such shares of Company Common Stock (provided that, where a beneficial owner makes a demand pursuant to Section 262, the holder of record of such shares of Company Common Stock will not be considered a separate stockholder holding such shares of Company Common Stock for purposes of such aggregate number). The Surviving Corporation must send this statement to the requesting person within ten (10) days after receipt by the Surviving Corporation of the written request for such a statement or within ten (10) days after the expiration of the period for delivery of demands for appraisal, whichever is later.

If a petition for an appraisal is duly filed by a holder or beneficial owner of shares of the Company Common Stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within twenty (20) days after such service to file with the office of the Delaware Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all such persons who have demanded appraisal for their shares of Company Common Stock and with whom agreements as to the value of their shares of Company Common Stock have not been reached. The Delaware Court of Chancery may order that notice of the time and place fixed for the hearing of such petition be given to the Surviving Corporation and all of such persons shown on the verified list at the addresses stated therein. The forms of the notices by mail and by publication will be approved by the Delaware Court of Chancery and the costs of any such notice are borne by the Surviving Corporation.

After providing the foregoing notice, at the hearing on such petition, the Delaware Court of Chancery will determine the holder or beneficial owner of shares of the Company Common Stock who have complied with Section 262 and who are entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the holder or beneficial owner of shares of the Company Common Stock who demanded appraisal for their shares and who hold stock represented by certificates to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceedings. If any person fails to comply with the direction, the Delaware Court of Chancery may dismiss the proceedings as to such person.

The Delaware Court of Chancery will dismiss appraisal proceedings as to all holders or beneficial owners of shares of the Company Common Stock who are otherwise entitled to appraisal rights unless (1) the total number of shares of Company Common Stock entitled to appraisal exceeds one percent of the outstanding shares of the

 

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class of Company Common Stock eligible for appraisal or (2) the aggregate Merger Consideration in respect of the shares of Company Common Stock for which appraisal rights have been pursued and perfected exceeds $1,000,000.

Determination of Fair Value

After the Delaware Court of Chancery determines the holders or beneficial owners of shares of the Company Common Stock entitled to appraisal, and that at least one (1) of the ownership thresholds above has been satisfied, then the appraisal proceeding will be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will determine the “fair value” of the shares of Company Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value (subject, in the case of interest payments, to any voluntary payments made by the Surviving Corporation pursuant to subsection (h) of Section 262 that have the effect of limiting the sum on which interest accrues as described below). In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at five percent (5%) over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. However, the Surviving Corporation has the right, at any time prior to the Delaware Court of Chancery’s entry of judgment in the proceedings, to make a voluntary cash payment to each person seeking appraisal. If the Surviving Corporation makes a voluntary cash payment pursuant to subsection (h) of Section 262, interest will accrue thereafter only on the sum of (1) the difference, if any, between the amount paid by the Surviving Corporation in such voluntary cash payment and the fair value of the shares of Company Common Stock as determined by the Delaware Court of Chancery, and (2) interest accrued before such voluntary cash payment, unless paid at that time. In Weinberger v. UOP, Inc., Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the Merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Persons considering seeking appraisal should be aware that the fair value of their shares of Company Common Stock as so determined by the Delaware Court of Chancery could be more than, the same as or less than the Merger Consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares of Company Common Stock and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a merger is not an opinion as to, and may not in any manner address, fair value under Section 262. Although the Company believes that the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and holders of record and beneficial owners of Company Common Stock should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Merger Consideration. Neither the Company nor Parent anticipates offering more than the Merger Consideration to any stockholder or beneficial owner exercising appraisal rights, and each of the Company and Parent reserves the

 

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rights to make a voluntary cash payment pursuant to subsection (h) of Section 262 and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of Company Common Stock is less than the Merger Consideration. If a petition for appraisal is not timely filed, or if neither of the ownership thresholds above has been satisfied in respect of persons seeking appraisal rights, then the right to an appraisal will cease. The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a person whose name appears on the list filed by the Surviving Corporation pursuant to Section 262(f) who participated in the proceeding and incurred expenses in connection therewith, the Delaware Court of Chancery may also order that all or a portion of such expenses, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares of Company Common Stock entitled to an appraisal not dismissed pursuant to subsection (k) of Section 262 or subject to such an award pursuant to a reservation of judgment under such subsection (a “Reservation”). In the absence of such determination or assessment, each party bears its own expenses.

If any person who demands appraisal of his, her or its shares of Company Common Stock under Section 262 fails to perfect, or loses or validly withdraws, such person’s right to appraisal, such person’s shares of Company Common Stock will be deemed to have been converted at the Effective Time into the right to receive the Merger Consideration as provided in the Merger Agreement, without interest and less any applicable withholding taxes. A person will fail to perfect, or effectively lose, such person’s right to appraisal if no petition for appraisal is filed within one hundred and twenty (120) days after the Effective Time, if neither of the ownership thresholds above has been satisfied in respect of persons seeking appraisal rights or if the person delivers to the Surviving Corporation a written withdrawal of such person’s demand for appraisal and an acceptance of the Merger Consideration as provided in the Merger Agreement in accordance with Section 262.

From and after the Effective Time, no person who has demanded appraisal rights with respect to some or all of such person’s shares of Company Common Stock in compliance with Section 262 will be entitled to vote such shares of Company Common Stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the Effective Time); provided, however, that if no petition for an appraisal is filed within the time provided in Section 262, if neither of the ownership thresholds above has been satisfied in respect of the persons seeking appraisal rights or if such person delivers to the Surviving Corporation a written withdrawal of such person’s demand for an appraisal and an acceptance of the Merger within sixty (60) days after the Effective Time, then the right of such person to an appraisal will cease. Notwithstanding the foregoing, no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any person without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just, including, without limitation, a Reservation; provided, however, that the foregoing will not affect the right of any person who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such person’s demand for appraisal and to accept the Merger Consideration within sixty (60) days after the Effective Time.

Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of a person’s appraisal rights under Section 262. In that event, you will be entitled to receive the Merger Consideration for your shares of Company Common Stock in accordance with the Merger Agreement, without interest and less any applicable withholding taxes. Consequently, any holder or beneficial owner of shares of the Company Common Stock wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

Accounting Treatment

The Merger will be accounted for as a “business combination” for financial accounting purposes.

 

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Certain Material U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of certain material U.S. federal income tax consequences of the Merger that may be relevant to U.S. Holders and Non-U.S. Holders (each as defined in this proxy statement) of shares of Company Common Stock whose shares are converted into the right to receive cash pursuant to the Merger. This discussion is limited to Duckhorn Stockholders who hold their shares of Company Common Stock as “capital assets” within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”) (generally, property held for investment purposes). This discussion is based upon the Code, Treasury Regulations promulgated under the Code, rulings and other published positions of the Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations at any time, possibly with retroactive effect. Any such change or differing interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion is not binding on the IRS or the courts and, accordingly, the IRS may assert, or a court may sustain, a position contrary to any of the tax considerations described in this discussion. No advance ruling has been or will be sought from the IRS regarding any matter discussed below.

This discussion is for general information purposes only and does not purport to be a complete analysis of all of the U.S. federal income tax considerations that may be relevant to particular holders in light of their particular facts and circumstances, or to Duckhorn Stockholders subject to special rules under U.S. federal income tax laws, including, for example, but not limited to:

 

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banks and other financial institutions;

 

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insurance companies;

 

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brokers or dealers in securities, currencies or commodities;

 

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dealers or traders in securities subject to a mark-to-market method of accounting with respect to shares of Company Common Stock;

 

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regulated investment companies and real estate investment trusts;

 

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retirement plans, individual retirement and other tax-deferred accounts;

 

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tax-exempt organizations, governmental agencies, instrumentalities or other governmental organizations and pension funds;

 

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holders that are holding shares of Company Common Stock as part of a “straddle,” hedge, constructive sale, or other integrated transaction or conversion transaction or similar transactions;

 

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U.S. Holders (as defined in this proxy statement) whose functional currency is not the U.S. dollar;

 

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partnerships, other entities classified as partnerships for U.S. federal income tax purposes, “S corporations,” or any other pass-through entities for U.S. federal income tax purposes (or investors in such entities);

 

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expatriated entities subject to Section 7874 of the Code;

 

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holders that are required to accelerate the recognition of any item of gross income as a result of such income being recognized on an “applicable financial statement”;

 

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persons subject to the alternative minimum tax;

 

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U.S. expatriates and former citizens or long-term residents of the United States;

 

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holders that own or at any time during the five (5)-year period ending on the date of the Merger have owned (directly, indirectly or constructively) five percent (5%) or more of Company Common Stock (by vote or value);

 

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grantor trusts;

 

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controlled foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income tax;

 

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holders that received their shares of Company Common Stock in a compensatory transaction, through a tax qualified retirement plan or pursuant to the exercise of options or warrants;

 

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holders that own a direct or indirect equity interest in Parent following the Merger;

 

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holders that hold their shares of Company Common Stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States; and

 

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holders that do not vote in favor of the Merger and that properly demand appraisal of their shares of Company Common Stock under Section 262.

This discussion does not address any U.S. federal tax considerations other than those pertaining to the income tax (such as estate, gift or other non-income tax considerations) or any state, local or foreign income or non-income tax considerations. In addition, this discussion does not address any considerations arising under the Medicare contribution tax.

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of Company Common Stock, the U.S. federal income tax consequences of the Merger to a partner in such partnership will generally depend upon the status of the partner, the activities of the partner and the partnership, and certain determinations made at the partner level. Partnerships holding shares of Company Common Stock and partners therein are urged to consult their tax advisors regarding the consequences to them of the Merger.

THE U.S. FEDERAL INCOME TAX TREATMENT OF THE TRANSACTIONS DISCUSSED HEREIN TO ANY PARTICULAR DUCKHORN STOCKHOLDER WILL DEPEND ON SUCH STOCKHOLDER’S PARTICULAR TAX CIRCUMSTANCES. WE URGE EACH DUCKHORN STOCKHOLDER TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO IT IN CONNECTION WITH THE MERGER IN LIGHT OF ITS OWN PARTICULAR CIRCUMSTANCES, INCLUDING U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES.

U.S. Holders

This section applies to “U.S. Holders.” For purposes of this discussion, a “U.S. Holder” means a beneficial owner of shares of Company Common Stock that is for U.S. federal income tax purposes:

 

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an individual who is a citizen or resident of the United States;

 

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a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any political subdivision thereof (including the District of Columbia);

 

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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

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a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of such trust and one (1) or more “United States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust or (ii) the trust validly elected to be treated as a “United States” person for U.S. federal income tax purposes.

The receipt of cash by a U.S. Holder in exchange for shares of Company Common Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder will recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to, and the U.S. Holder’s adjusted tax basis in the shares of Company Common Stock surrendered

 

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pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares of Company Common Stock. A U.S. Holder’s gain or loss on the disposition of shares of Company Common Stock generally will be characterized as capital gain or loss. Any such gain or loss will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one (1) year at the time of the completion of the Merger. Under current law, a preferential tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations. U.S. Holders who hold different blocks of Company Common Stock (shares of Company Common Stock purchased or acquired on different dates or at different prices) should consult their tax advisor to determine how the above rules apply to them.

Non-U.S. Holders

This section applies to “Non-U.S. Holders.” For purposes of this discussion, a “Non-U.S. Holder” means a beneficial owner of Company Common Stock that is not a U.S. Holder.

Subject to the discussion of backup withholding, the Foreign Investment in Real Property Tax Act of 1980 and FATCA below, a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized in connection with the Merger, unless:

 

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the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the additional branch profits tax at a rate of thirty percent (30%) (or a lower rate under an applicable income tax treaty); or

 

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such Non-U.S. Holder is an individual who is present in the United States for one hundred and eighty three (183) days or more in the taxable year of disposition of shares of Company Common Stock pursuant to the Merger, and certain other specified conditions are met, in which case such gain (net of certain U.S.-source losses provided such Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses) will be subject to U.S. federal income tax at a rate of thirty percent (30%) (or a lower rate under an applicable income tax treaty)

Information Reporting and Backup Withholding

Generally, information reporting requirements may apply in connection with payments made to U.S. Holders or Non-U.S. Holders in connection with the Merger.

Backup withholding of tax (currently, at a rate of twenty four percent (24%)) generally will apply to the proceeds received by a U.S. Holder pursuant to the Merger, unless the U.S. Holder provides the applicable withholding agent with a properly completed and executed IRS Form W-9 providing such U.S. Holder’s correct taxpayer identification number and certifying that such holder is not subject to backup withholding, or otherwise establishes an exemption, and otherwise complies with the backup withholding rules. Backup withholding of tax may also apply to the proceeds received by a Non-U.S. Holder pursuant to the Merger, unless the Non-U.S. Holder provides the applicable withholding agent with a properly completed and executed IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable IRS Form W-8), attesting to such Non-U.S. Holder’s status as a non-U.S. person and otherwise complies with applicable certification requirements.

Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder or Non-U.S. Holder generally may be allowed as a credit against such holder’s U.S. federal income tax liability, if any, and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.

 

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Additional Withholding Requirements under the Foreign Account Tax Compliance Act (FATCA)

Sections 1471 through 1474 of the Code, and the U.S. Treasury Regulations and administrative guidance issued thereunder (which we refer to as, collectively, “FATCA”), impose a U.S. federal withholding tax of thirty percent (30%) on certain payments made to a “foreign financial institution” (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding certain U.S. account holders of such institution (which include certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or an exemption applies. FATCA also generally imposes a U.S. federal withholding tax of 30 percent (30%) on certain payments made to a non-financial foreign entity unless such entity provides the withholding agent a certification identifying certain direct and indirect U.S. owners of the entity or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes.

The U.S. Treasury Department has released proposed regulations which, if finalized in their present form, would eliminate the FATCA withholding applicable to the gross proceeds of a sale or other disposition of Company Common Stock. In its preamble to such proposed regulations, the U.S. Treasury Department stated that taxpayers generally may rely on the proposed regulations until final regulations are issued.

Duckhorn Stockholders are urged to consult with their tax advisors regarding the possible implications of FATCA on the disposition of Company Common Stock pursuant to the Merger.

THE DISCUSSION ABOVE IS BASED ON CURRENT LAW. LEGISLATIVE, ADMINISTRATIVE OR JUDICIAL CHANGES OR INTERPRETATIONS, WHICH CAN APPLY RETROACTIVELY, COULD AFFECT THE ACCURACY OF THE STATEMENTS SET FORTH THEREIN. THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE TAX ADVICE. IT DOES NOT ADDRESS TAX CONSIDERATIONS THAT MAY VARY WITH, OR ARE CONTINGENT ON, A HOLDER’S INDIVIDUAL CIRCUMSTANCES OR THE APPLICATION OF ANY U.S. NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-U.S. JURISDICTION AND HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING SUCH MATTERS AND THE TAX CONSEQUENCES OF THE MERGER TO THEM IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

Regulatory Approvals Required for the Merger

General

Pursuant to the Merger Agreement, each of the parties has agreed to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper, or advisable under applicable laws to consummate the Merger and the other transactions contemplated by the Merger Agreement as promptly as possible and, in any event, by or before the Outside Date. The parties have agreed to cause their respective ultimate parent entities (as such term is defined in the HSR Act) to, (i) make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the Merger as promptly as practicable and in any event prior to the expiration of any applicable legal deadline and (ii) make an appropriate response as promptly as practicable to any request for additional information and documentary material that may be made pursuant to the HSR Act or any other antitrust law. Unless otherwise agreed by the Company and Parent in writing, the Merger Agreement requires that filing of a Notification and Report Form pursuant to the HSR Act must be made within ten (10) business days after the date of the Merger Agreement, subject to certain limitations as Filing of a Notification and Report Form pursuant to the HSR Act was made on October 21, 2024, pursuant to the requirement under the Merger Agreement that such filing must be made within ten (10) business days after the date of the Merger Agreement, subject to certain limitations as outlined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement — Reasonable Best Efforts to Consummate the Merger; Regulatory Filings.”

 

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HSR Act and Antitrust Matters

Under the HSR Act and the rules promulgated thereunder, the Merger may not be completed until Duckhorn and Parent each files a Notification and Report Form with the Antitrust Division of the U.S. Department of Justice (the “DOJ”) and the Federal Trade Commission (the “FTC”), and the applicable waiting period has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration or termination of a thirty (30)-calendar-day waiting period following the parties’ filings of their respective HSR Act notification and report forms. If the FTC or DOJ issues a request for additional information and documents (which we refer to as the “Second Request”) prior to the expiration of the initial waiting period, the parties must observe a second thirty (30)-day waiting period, which would begin to run only after both parties have substantially complied with the Second Request, unless the waiting period is terminated earlier, the parties agree to extend any applicable waiting period, or the parties otherwise agree to delay Closing.

Duckhorn and Parent each filed a Notification and Report Form with respect to the Merger with the FTC and DOJ on October 21, 2024 and the applicable waiting period expired on November 20, 2024 at 11:59 p.m. (Eastern Time).

At any time before or after consummation of the Merger, notwithstanding the termination or expiration of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license or hold separate assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties.

Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot be certain that a challenge to the Merger will not be made or that, if a challenge is made, we will prevail.

Legal Proceedings

As of the filing of this proxy statement, there were no legal proceedings pending related to the Merger.

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (i) were made only for purposes of the Merger Agreement and as of specific dates; (ii) were made solely for the benefit of the parties to the Merger Agreement; and (iii) may be subject to important qualifications, limitations and supplemental information agreed to by the Company, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement and contained in the confidential disclosure letter delivered to Parent and Merger Sub pursuant to the Merger Agreement. In addition, the representations and warranties have been included in the Merger Agreement for the purpose of allocating contractual risk between the Company, Parent and Merger Sub rather than to establish matters as facts and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. The Duckhorn Stockholders and any prospective Duckhorn Stockholders are not third-party beneficiaries of the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Parent and Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of the Company, Parent and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter delivered to Parent and Merger Sub pursuant to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below and included as Annex A only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding the Company, Parent, Merger Sub or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding the Company and its business.

Merger Agreement

On October 6, 2024, the Company entered into the Merger Agreement, by and among the Company, Parent, and Merger Sub, pursuant to which Merger Sub will merge with and into the Company, with the Company surviving the Merger.

Principal Terms of the Merger

Effect of the Merger

The Merger Agreement provides that, upon the terms and subject to the conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub will be merged with and into the Company, whereupon the separate corporate existence of Merger Sub will thereupon cease, and the Company will continue as the Surviving Corporation. As a result of the Merger, the Surviving Corporation will become a wholly owned subsidiary of Parent and the Company Common Stock will no longer be publicly traded. In addition, the Company Common Stock will be delisted from NYSE and de-registered under the Exchange Act, in each case, in accordance with applicable laws, rules and regulations, and Duckhorn will no longer file periodic

 

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reports with the SEC on account of the Company Common Stock. The Merger will be governed by the DGCL. If the Merger is consummated, you will not own any shares of capital stock of the Surviving Corporation.

Closing and Effective Time

Subject to the provisions of the Merger Agreement and pursuant to the DGCL, the Closing will take place as soon as practicable, but in no event later than the second (2nd) business day, after the satisfaction or, to the extent permitted by law, waiver of the conditions to the Closing (or on such other date as Parent and the Company may mutually agree), provided that, notwithstanding the satisfaction or valid waiver of the conditions to the Closing, if the Marketing Period (as defined herein) has not ended at the time of the satisfaction or valid waiver of such conditions to the Closing, the Closing will occur instead on the date following the satisfaction or valid waiver of such conditions that is the earliest to occur of (i) any business day during the Marketing Period specified by Parent to the Company on no less than two (2) business days’ written notice to the Company and (ii) the third (3rd) business day after the final day of the Marketing Period, but subject, in each case, to the satisfaction or, to the extent permitted by law, waiver of the conditions to the Closing. On the date of Closing (the “Closing Date”), the parties will file a certificate of merger with the Secretary of State of the State of Delaware in accordance with the DGCL. The Merger will become effective upon the filing of the certificate of merger, or at such later time as the parties may mutually agree and specify in the certificate of merger.

Certificate of Incorporation; Bylaws; Directors and Officers

At the Effective Time, the certificate of incorporation and the bylaws of the Company will be amended and restated in their entirety to read in the forms as set forth in annexes to the Merger Agreement and, as so amended, will be the certificate of incorporation and bylaws of the Surviving Corporation until thereafter amended in accordance with the certificate of incorporation of the Surviving Corporation and as provided by applicable law.

At the Effective Time, the directors of Merger Sub immediately prior to the Effective Time will be the initial directors of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time will be the initial officers of the Surviving Corporation, in each case, until the earlier of his or her death, resignation or removal, or until his or her successor is duly elected and qualified in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

Conditions to the Closing of the Merger

The obligations of the Company, Parent and Merger Sub to effect the Merger are subject to the satisfaction or waiver (to the extent permitted by applicable law) at or prior to the Effective Time of each of the following conditions:

 

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the absence of any order, injunction or decree issued by any governmental body of competent jurisdiction preventing the consummation of the Merger and the absence of any law, order, injunction or decree enacted, entered, promulgated, or enforced by any governmental body that prohibits or makes illegal the consummation of the Merger;

 

•

the adoption of the Merger Agreement by the Company Requisite Vote in accordance with the DGCL and the organizational documents of the Company; and

 

•

the expiration or termination of any applicable waiting period under the HSR Act (the “Regulatory Approvals Condition”).

In addition, the respective obligations of Parent and Merger Sub to effect the Merger are subject to the satisfaction or waiver in writing (where permissible) at or prior to the Effective Time of each of the following conditions:

 

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the representation and warranty of the Company relating to the Company having not experienced a Company Material Adverse Effect from July 31, 2024 to October 6, 2024 being true and correct in all

 

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respects on the date of the Merger Agreement and as of the Closing Date as though made on and as of such date;

 

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the Company’s representations with respect to outstanding equity interests being true and correct in all respects except for any inaccuracies or combination of inaccuracies relative to the total fully-diluted equity capitalization of the Company that do not result in an increase in the aggregate consideration otherwise payable by Parent in the Merger by more than $7,500,000, as of the Closing Date as though made on and as of such date (except for those representations and warranties which address matters as of an earlier date, which shall have been so true and correct as of such earlier date);

 

•

each of the representations and warranties of the Company relating to organization and corporate power, authorization, broker fees, and opinion from financial advisor, being true and correct in all material respects on the date of the Merger Agreement and as of the Closing Date as though made on and as of such date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty is true and correct in all material respects as of such earlier date);

 

•

each of the other representations and warranties of the Company contained in the Merger Agreement being true and correct, except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “Company Material Adverse Effect”) has not had, individually or in the aggregate, a Company Material Adverse Effect, on the date of the Merger Agreement and as of the Closing Date, as if made of such date (except for those representations and warranties which address matters as of an earlier date, which shall have been so true and correct as of such earlier date);

 

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the Company having performed or complied with in all material respects (or if any time prior to the Closing, if the Company has not performed or complied with covenants or obligations that are capable of being cured, such non-performance and non-compliance having been cured) all covenants and obligations that the Company is required to comply with or to perform under the Merger Agreement at or prior to the Closing Date;

 

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no Company Material Adverse Effect having occurred since the date of the Merger Agreement; and

 

•

the Company having delivered to Parent a certificate signed by an authorized officer of the Company, dated as of the Closing Date, certifying as to the satisfaction by the Company of the conditions described in the preceding five (5) bullets.

In addition, the obligations of the Company to effect the Merger are subject to the satisfaction or waiver in writing (where permissible) at or prior to the Effective Time of each of the following conditions:

 

•

each of the representations and warranties of Parent and Merger Sub contained in the Merger Agreement being true and correct, except where the failure of such representations and warranties to be true and correct (without giving effect to any limitation as to “materiality” or “Parent Material Adverse Effect”) has not had, individually or in the aggregate, a Parent Material Adverse Effect, on the date of the Merger Agreement and as of the Closing Date, as if made as of such date (except for those representations and warranties which address matters as of an earlier date, which shall have been so true and correct as of such earlier date);

 

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Parent and Merger Sub having performed or complied in all material respects (or if any time prior to the Closing, if Parent and Merger Sub have not performed or complied with covenants or obligations that are capable of being cured, such non-performance and non-compliance having been cured) with all covenants and obligations that they are required to comply with or to perform under the Merger Agreement at or prior to the Closing Date; and

 

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Parent having delivered to the Company a certificate signed by an authorized officer of Parent, dated the Closing Date, certifying as to the satisfaction by Parent and Merger Sub of the conditions described in the preceding two (2) bullets.

 

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