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From: lewis.perdue@wineindustryinsight.com

Subject: UNDEAD! Suitors Sparring Over New Vine's Bones, Quick Deal Expected

Date: 2009-06-02 23:39:30

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WINE INDUSTRY INSIGHT

EMAIL EDITION - VOLUME I, NUMBER 91 - June 2, 2009

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THIS ISSUE SPONSORED BY:

Hinman & Carmichael,Alcoholic Beverage Law     Miramont Estate: Put our prize-winning wine in your bottles

We apologize for sending you two email editions in one day, but the New Vine situation is changing so quickly that we wanted to make sure all our readers were kept up to date with the fast-moving events.

UNDEAD!

Suitors Sparring Over New Vine's Bones, Quick Deal Expected

People with a lot of money rarely scurry as fast as the 20+ companies and other parties now clutching for a piece of New Vine's body.

But unaccustomed as they might be, the tire-kicking and deal-floating have been described by several participants as "a frantic rush to own the body before the last breath has been drawn."

One person involved in the financial melee told Wine Industry Insight that, "the situation is fluid; reality changes minute by minute, but the fact is that the investors are desperate to salvage the real value from this meltdown."

Another source in a knowledgeable position took a dimmer view of the process: "There are several deals floating around, mostly bottom feeders looking for a fire-sale asset deal. Some have passed on the deal already based on the potential liabilities involved."

NEW VINE IS DEAD! LONG LIVE NEW VINE?


The equity partners are looking for a single, large, well-financed party to take New Vine off its hands. And while Amazon is their ultimate fantasy, the "after" photo of New Vine is unlikely to bear any resemblance to the "before."

The process has been described as a "survival of the choice parts, not a resurrection."

The multitude of deals include some floated by New Vine's top competitors such as Ship Compliant, WTN Services and Inertia Beverage Group. However, other companies involved primarily in compliance or shipping have also entered the fray.

Even Amazon is said by many to be taking a closer look.

AMAZON: THE RELUCTANT GIANT

As mentioned in Wine Industry Insight's article on Monday, taxation and other liability issues have made Amazon leery of the process.

However, a knowledgeable party close to the process and an in-depth understanding of the people involved told Wine Industry Insight: "Amazon was totally taken by surprise at the events of last Friday. Next Friday was the national launch of the program to "Friends and Family" shipments, and their public relations machine was about to start promoting the wine program.

"Amazon does have some rights under the deal with NVL to take over the operation," the source said, "but there are serious nexus problems for them to do so in California. Anything is possible however.

"But they are looking at other options with other fulfillment partners," the source said. "Compliance management is still the key, and this was the strong suit for Amazon with NVL."

SOFTWARE, CUSTOMER BASE AT ISSUE


New Vine's most valuable assets, most agree are its software followed by its customer base. The software system, which was originally designed by Virtual Vineyards, further developed by wine.com and expanded at New Vine has been described as "one of the most elegant software systems on the planet."

New Vine's technical team is often described in much the same glowing terms.

CUSTOMER EXODUS COMPELS 48-HOUR DEAL


While most view the software as New Vine's most valuable asset, few involved want to acquire a system with no customers to run through it.

"It's like the Israelite exodus from Egypt," one person close to the process said of the customer defections. "Another 48 hours max. After that, the Red Sea's not going to be parted anymore."

CORRECTIONS AND ADDITIONS
  • Constantin Partners was not included as one of New Vine's venture capital investors in Wine Industry Insight's previous article.
  • Hanzell was not a customer of New Vine.
  • And an experienced industry executive took issue with our description of how New Vine actually began.
In that executive's own words:

 "KPMG put in $1 million in seed money in 2002 to help launch NVL as a favor to the go-forward group. They were soon diluted out in subsequent equity rounds and had no stake or role in the company.

"Ted Schlein was on the initial advisory board and has had no involvement with the company for the past several years. His father, Phil Schlein, who owns Emilio's Terraces, a winery in Napa, was an investor through Angels Forum/Halo as well, but played no role in the company. This was always very small potatoes for KPMG since they lost large sums at wine.com.

"They never recruited Katie Hoertkorn, she convinced them to contribute some seed money to her plan."

WINE INDUSTRY INSIGHT REGRETS ITS ERRORS AND OMISSIONS


We regret these errors and incompleteness.

 Reporting is an error-fraught process made unusually difficult by deadlines and people who would rather not volunteer information.

But as I learned as a much younger reporter covering Washington D.C. and Richard Nixon, stonewalling is never an excuse for failing to dig.

The best a reporter can do in this environment is dig, press sources and corroborate and confirm.

We're always aware that sources can be misinformed, can deliberately mislead, or have just a part of a story, even those who corroborate what others say.

And we are always grateful to those in the know who come forth with information, or can tell us where we're wrong or going astray. Good reporting is a partnership between the reporter and those with information.

We say "thank you" to all our partners. You know who you are.

All the mistakes, on the other hand, are ours alone.
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Lewis Perdue
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Phone: 707-326-4503, fax: 707-940-4146
Email: lewis.perdue@wineindustryinsight.com