-------------------------------------
CREDIT AGREEMENT
between
CHALONE WINE GROUP, LTD.
and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND," NEW YORK BRANCH
March 31, 1999
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TABLE OF CONTENTS
Page
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SECTION I. GENERAL MATTERS....................................................1
1.1 Definitions.................................................1
1.2 Accounting Terms............................................9
SECTION II. THE LOAN..........................................................9
2.1 The Loans...................................................9
2.2 Evidence of the Loans......................................10
2.3 Interest Rates; Commitment Fee.............................10
2.4 Conversion and Continuation Elections......................11
2.5 Repayment of the Loans.....................................12
2.6 Prepayments and Commitment Reductions......................13
2.7 Payments to the Bank.......................................14
2.8 Illegality.................................................14
2.9 Increased Costs and Reduction of Return....................15
2.10 Funding Losses.............................................15
2.11 Inability to Determine Rates...............................16
2.12 Reserves on Offshore Rate Loans............................16
2.13 Certificates of Bank.......................................16
2.14 Survival...................................................17
SECTION III. CONDITIONS PRECEDENT............................................17
3.1 Conditions Precedent to Loan...............................17
SECTION IV. REPRESENTATIONS AND WARRANTIES...................................19
4.1 Representations and Warranties.............................19
SECTION V. COVENANTS OF BORROWER.............................................23
5.1 Affirmative Covenants......................................23
5.2 Negative Covenants.........................................24
5.3 Financial Covenants........................................26
SECTION VI. DEFAULT..........................................................27
6.1 Events of Default..........................................27
6.2 Effect of Event of Default.................................28
SECTION VII. MISCELLANEOUS...................................................29
7.1 Amendments and Waivers.....................................29
7.2 Notices....................................................29
7.3 No Waiver; Cumulative Remedies.............................29
7.4 Costs and Expenses; Indemnification; Other Charges.........29
7.5 Survival...................................................31
7.6 Benefits of Agreement......................................31
7.7 Governing Law..............................................31
7.8 Waiver of Jury Trial.......................................31
i.
7.9 Entire Agreement...........................................32
7.10 Severability...............................................32
7.11 Counterparts...............................................32
EXHIBITS
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Exhibit A Form of Revolving Loan Note
Exhibit B Form of Term Loan Note
Exhibit C Form of Notice of Conversion/Continuation
Exhibit D Form of Opinion of Borrower's Counsel
Exhibit E Form of Borrowing Base Certificate
Exhibit F Form of Compliance Certificate
Exhibit G Form of Guaranty
ii.
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of March 31, 1999, by
and between CHALONE WINE GROUP, LTD., a California corporation ("Borrower"), and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND," NEW
YORK BRANCH (the "Bank").
RECITALS
This Agreement is made and delivered on the basis of the
following facts and understandings of the parties:
A Borrower has requested from the Bank a term loan in the
maximum aggregate principal amount of $30,000,000.
B Borrower has requested from the Bank a revolving loan
facility in the maximum aggregate principal amount of $40,000,000.
C Subject to the terms and conditions stated in this
Agreement, the Bank has agreed to make the term loan and the revolving loan
facility available to Borrower.
AGREEMENT
NOW, THEREFORE, in consideration of the promises contained in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION I. GENERAL MATTERS
1.1 Definitions.
"Agreement" means this Credit Agreement.
"Acquisition" means any transaction or series of related
transactions for the purpose of, or resulting, directly or indirectly, in (a)
the acquisition of all or substantially all of the assets of a Person, or any
line or segment of business or division of a Person, (b) the acquisition of in
excess of 50% of the capital stock, partnership interests, membership interests
or equity of any Person, or otherwise causing any Person to become a Subsidiary,
or (c) a merger or consolidation or any other combination with another Person
(other than a Person that is a Subsidiary) provided that (i) the Borrower or a
Subsidiary is the surviving entity or (ii) after giving effect to such merger or
consolidation, such other Person has become a Subsidiary of a Borrower.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy."
1.
"Borrowing Base" means, in respect of the Borrower at any
time, the aggregate sum of (i) 100% of Eligible Inventory at such time plus (ii)
80% of Eligible Receivables at such time minus (iii) Grower Payables at such
time.
"Borrowing Base Certificate" means a certificate of a
Responsible Officer of the Borrower in substantially the form of EXHIBIT E, with
such changes thereto as the Bank may from time to time reasonably request.
"Business Day" means a day other than a Saturday, a Sunday, or
a day on which commercial banks in New York City, New York, are authorized to
close and, if the applicable day relates to any LIBOR Rate Loan, means such a
day on which dealings are carried on in the applicable offshore U.S. Dollar
interbank market.
"Canoe Ridge Intercompany Loan Amount" means the sum of (i)
$10,000,000 plus (ii) on each anniversary of the Closing Date, 10% of the Canoe
Ridge Intercompany Loan Amount then in effect.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a bank.
"Change of Control" means (a) any "person" (as such term is
used in subsections 13(d) and 14(d) of the Exchange Act) or group of persons on
or after the Closing Date other than "affiliates" (as such term is used in Rule
405 of the Securities Act of 1933), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing 51% or more of the combined voting power of the
Company's then-outstanding voting securities, or (b) the existing directors for
any reason cease to constitute a majority of the Company' board of directors.
"Existing directors" means (x) individuals constituting the Company's board of
directors on the Closing Date, and (y) any subsequent director whose election by
the board of directors or nomination for election by the Company's shareholders
was approved by a vote of at least a majority of the directors then in office,
which directors either were directors on the Closing Date or whose election or
nomination for election was previously so approved.
"Closing Date" has the meaning given to such term in Section
3.1 of this Agreement.
"Compliance Certificate" means a certificate of a Responsible
Officer of the Borrower, in substantially the form of EXHIBIT F, with such
changes thereto as the Bank may from time to time reasonably request.
"Conversion/Continuation Date" means each date on which a
Revolving Loan is continued as or converted into a Reference Rate Loan or a
LIBOR Rate Loan, as the case may be, in accordance with Section 2.4.
2.
"Drawdown Expiration Date" means the date which is 18 months
after the Closing Date.
"EBIT" means, in respect of the Borrower for any period, net
income plus Interest Expense plus income tax expense, in each case which were
deducted in determining net income, determined in accordance with GAAP on a
consolidated basis.
"EBITDA" means, in respect of the Borrower for any period, net
income plus Interest Expense plus income tax expense plus depreciation and
amortization expense, in each case which were deducted in determining net
income, determined in accordance with GAAP on a consolidated basis.
"Eligible Inventory" means, at any time, the aggregate amount
of such Borrower's bulk wine, cased wine, separately bottled wine and Wine
Bottling Inventory. Eligible Inventory shall be valued (A) in the case of bulk
wine, at 65% of the book value at the date of determination, (B) in the case of
cased wine or separately bottled wine, at 60% of the book value at the date of
determination, and (C) in the case of Wine Bottling Inventory, at 60% of book
value at the date of determination.
"Eligible Receivables" means, at any time, the aggregate
amount of the Borrower's Receivables, payable in cash in U.S. dollars, net of
applicable allowances, reserves, discounts, returns, credits or offsets
(including allowances or reserves for doubtful accounts), excluding Receivables
that are 90 days or more past due.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directives, requests, licenses, authorizations
and permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid
Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the
Toxic Substances Control Act, the Emergency Planning and Community Right-to-Know
Act, the California Hazardous Waste Control Law, the California Solid Waste
Management, Resource Recovery and Recycling Act, the California Water Code and
the California Health and Safety Code.
"Edna Valley Intercompany Loan Amount" means the sum of (i)
$15,000,000 plus (ii) on each anniversary of the Closing Date, 10% of the Edna
Valley Intercompany Loan Amount then in effect.
"Event of Default" has the meaning given to such term in
Section 6.1 of this Agreement.
"Existing Subordinated Notes" means the Borrower's Convertible
Subordinated Debentures due in 1999, bearing interest at 5% per annum, in the
original principal amount of $8,500,000.
3.
"Fixed Rate Term Loan" means, at any time, the unpaid
principal balance of the Term Loan equal to the lesser of (i) $20,000,000 and
(ii) the unpaid principal balance of the Term Loan outstanding at such time.
"GAAP" means generally accepted accounting principles in the
United States as in effect from time to time.
"Governmental Authority" means any federal, state, county,
local or other governmental department, commission, board, bureau, agency,
central bank, court, tribunal or other instrumentality, domestic or foreign.
"Grower Payables" means, in respect of the Borrower, the
aggregate amount due from the Borrower to any other Person on account of any
crops, produce, or raw materials supplied by such Person to the Borrower as to
which crops, produce or raw materials such Person has statutory lien rights.
"Guaranty" means a Guaranty in substantially the form of
EXHIBIT G.
"Hazardous Substances" means any toxic or hazardous
substances, materials or wastes, contaminants or pollutants, including asbestos,
PCBs, petroleum products and byproducts, substances defined or listed as
"hazardous substances," "hazardous materials" or "toxic substances" or similarly
identified in or pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Hazardous Materials Transportation
Act and the Resource Conservation and Recovery Act, any chemical substance or
mixture regulated under the Toxic Substances Control Act of 1976, any "toxic
pollutants" under the Federal Water Pollution Control Act of 1972, any hazardous
air pollutant under the Clean Air Act, any hazardous or toxic substance, waste
or pollutant regulated under any other applicable Environmental Law, or any
other substance or material which may cause or be claimed to cause any liability
of any owner or operator of any property to any Person, any owner of any other
property, or any Governmental Authority in connection with any Environmental
Law.
"Indebtedness" means, for any Person:
a. All indebtedness or other obligations of
such Person for borrowed money or for the
deferred purchase price of property or
services;
b. All indebtedness created or arising under
any conditional sale or other title
retention agreement with respect to
property acquired by such Person (even
though the rights and remedies of the
seller or lender under such agreement in
the event of default are limited to
repossession or sale of such property);
c. All obligations under capital leases;
4.
d. All reimbursement or other obligations of
such Person under or in respect of letters
of credit, bankers acceptances, interest
rate swaps, caps, floors and collars,
currency swaps, or other similar financial
products;
e. All indebtedness of another Person of the
types referred to in clause (a), (b), (c)
or (d) above, guaranteed directly or
indirectly in any manner by the Person for
whom Indebtedness is being determined, or
in effect guaranteed directly or
indirectly by such Person through an
agreement (1) to pay or purchase such
Indebtedness or to advance or supply funds
for the payment or purchase of such
Indebtedness, (2) to purchase, sell or
lease (as lessee or lessor) property, or
to purchase or sell services, primarily
for the purpose of enabling the debtor to
make payment of such Indebtedness or to
assure the holder of such Indebtedness
against loss, (3) to supply funds to or in
any other manner invest in the debtor
(including any agreement to pay for
property or services irrespective of
whether or not such property is received
or such services are rendered), or (4)
otherwise to assure a creditor against
loss; and
f. All indebtedness of another Person of the
types referred to in clause (a), (b), (c)
or (d) above secured by (or for which the
holder of such indebtedness has an
existing right, contingent or otherwise,
to be secured by) any Lien upon or in
property (including accounts and contract
rights) owned by the Person for whom
Indebtedness is being determined, even
though such Person has not assumed or
become liable for the payment of such
indebtedness of such other Person.
"Indemnified Liabilities" has the meaning given to such term
in Section 7.4(B) of this Agreement.
"Indemnified Person" has the meaning given to such term in
Section 7.4(B) of this Agreement.
"Interest Expense" means, in respect of the Borrower for any
period, interest expense (including that attributable to capital leases) of the
Borrower, including all commissions, discounts and other fees and charges owed
with respect to standby letters of credit, determined in accordance with GAAP on
a consolidated basis.
"Interest Period" means the period commencing on the borrowing
date of a LIBOR Rate Loan or on the Conversion/Continuation Date on which a Loan
is converted into or
5.
continued as a LIBOR Rate Loan, and ending on the date one, two or three months
thereafter as selected by Borrower in its borrowing notice or Notice of
Conversion/Continuation; provided that:
(i) if any Interest Period would otherwise end
on a day that is not a Business Day, that Interest Period shall be extended
to the following Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar month
at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond
the Revolving Loan Maturity Date.
"LIBOR Margin" means, with respect to LIBOR Rate Loans, the
amount set forth opposite the indicated Level below the heading "LIBOR Margin"
in the pricing grid set forth on Annex I in accordance with the parameters for
calculations of such amounts also set forth on Annex I.
"LIBOR Rate" shall mean the interest per annum at which
deposits in dollars are offered to the Cayman Branch of Bank in the London
eurodollar market two business days before the first day of the applicable
Interest Period for the LIBOR Rate Loan for a period equal to such Interest
Period and in the amount of the LIBOR Rate Loan.
"LIBOR Rate Loan" means a Loan at such times as it bears
interest at a rate determined by reference to the LIBOR Rate.
"Lien" means any mortgage, deed of trust, pledge, security
interest, assignment, deposit arrangement, charge or encumbrance, lien
(statutory or other), or other preferential arrangement (including any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing or any agreement
to give any security interest).
"Loans" means, collectively, the Term Loan and the Revolving
Loans.
"Loan Documents" means this Agreement, the Term Loan Note, the
Revolving Loan Note, the Guaranties and all other documents, agreements and
instruments delivered to the Bank under or in connection with this Agreement.
"Maximum Intercompany Loan Amount" means the sum of (i)
$20,000,000 plus (ii) on each anniversary of the Closing Date, 10% of the
Maximum Intercompany Loan Amount then in effect.
6.
"Net Worth" means, in respect of the Borrower on any date of
determination, total assets of the Borrower on such date minus total liabilities
of the Borrower on such date, determined in accordance with GAAP on a
consolidated basis.
"Notes" means, collectively, the Term Loan Note and the
Revolving Loan Note.
"Notice of Conversion/Continuation" means a notice in
substantially the form of EXHIBIT C.
"Opinion of Counsel to Borrower" means that certain opinion of
legal counsel to Borrower, substantially in the form of EXHIBIT D.
"Permitted Liens" means:
a. Liens in favor of the Bank securing
Borrower's Indebtedness to Bank;
b. Liens in existence as of the Closing Date
and listed on Schedule 1.1, or renewals or
extension of such liens (other than any
renewal or extension of the Wells Fargo
Bank Liens);
c. Additional Liens on the assets of one or
more Subsidiaries of the Borrower securing
Indebtedness which, together with all
Indebtedness secured by Liens referenced
in the preceding clause (b), does not
exceed in the aggregate $3,000,000 at any
time outstanding; and
d. The following, if the validity or amount
thereof is being contested in good faith
by appropriate and lawful proceedings, so
long as levy and execution thereon have
been stayed and continue to be stayed and
they do not, in the aggregate, materially
detract from the value of the Borrower's
assets, or materially impair Borrower's
financial condition: (1) Claims or liens
for taxes, assessments, or charges due and
payable and subject to interest or
penalty; and(2) Adverse judgments on
appeal.
"Person" means an individual, corporation, partnership, joint
venture, limited liability company, trust, unincorporated organization or any
other juridical entity.
"Receivable Debtor" means any Person obligated on a
Receivable.
"Receivables" means all rights to payment arising out of the
sale or lease of goods or the performance of services in the ordinary and usual
course of business, however evidenced.
7.
"Reference Rate" means the rate of interest periodically
established by the Bank as its "Reference Rate," as such rate may change, from
time to time. The Reference Rate is not necessarily the lowest or best rate of
interest made available by the Bank to its most creditworthy customers, and no
representation, express or implied, is made with respect thereto.
"Reference Rate Loan" means a Loan at such times as it bears
interest at a rate determined by reference to the Reference Rate.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to or binding
upon the Person or any of its property or to which the Person or any of its
property is subject.
"Responsible Officer" means, with respect to any Person, the
chief executive officer, the manager, the president, the chief financial
officer, any vice president or the treasurer of such Person, or any other senior
officer of such Person having substantially the same authority and
responsibility; or, with respect to compliance with financial covenants, the
chief financial officer or the treasurer of any such Person, or any other senior
officer of such Person involved principally in the financial administration or
controllership function of such Person and having substantially the same
authority and responsibility.
"Revolving Loan" has the meaning assigned to such term in
Section 2.1(B) of this Agreement.
"Revolving Loan Facility" has the meaning assigned to such
term in Section 2.1(B) of this Agreement.
"Revolving Loan Facility Commitment" means the commitment of
the Bank to make Revolving Loans to the Borrower in accordance with and subject
to the terms hereof in an aggregate principal amount not to exceed $40,000,000
at any time outstanding, as the same may be reduced from time to time in
accordance with the terms hereof.
"Revolving Loan Maturity Date" means March 31, 2001.
"Revolving Loan Note" means that certain promissory note from
Borrower to the order of the Bank substantially in the form of EXHIBIT A.
"Subsidiary" means any corporation, association, partnership,
joint venture, limited liability company or other business entity of which 50%
or more of the voting stock or other equity interest is owned directly or
indirectly by any Person or one or more of the other Subsidiaries of such Person
or a combination thereof. Unless the context otherwise clearly requires, all
references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower.
"Tangible Net Worth" means, in respect of the Borrower as of
any date of determination, total assets minus total liabilities, measured on a
consolidated basis for the
8.
Borrower and its Subsidiaries in accordance with GAAP; provided, however, that
there shall be excluded from total assets all assets which would be classified
as intangible assets in accordance with GAAP, including goodwill, organizational
expense, research and development expense, patent applications, patents,
trademarks, trade names, brands, copyrights, trade secrets, customer lists,
licenses, franchises and covenants not to compete.
"Term Loan" has the meaning assigned to such term in Section
2.1(A) of this Agreement.
"Term Loan Commitment" means the commitment of the Bank to
make the Term Loan to the Borrower in accordance with and subject to the terms
hereof in an aggregate principal amount not to exceed $30,000,000 at any time
outstanding, as the same may be reduced from time to time in accordance with the
terms hereof.
"Term Loan Maturity Date" means March 31, 2006.
"Term Loan Note" means that certain promissory note from
Borrower to the order of the Bank substantially in the form of EXHIBIT B.
"Upfront Fee" means the sum of $75,000, payable by Borrower to
the Bank at closing.
"Wells Fargo Bank Debt" means the total amount of Indebtedness
owing by the Borrower and its Subsidiaries to Wells Fargo Bank, N.A.. (As of
March 26, 1999, the principal amount of the Wells Fargo Bank Debt was
$23,866,335).
"Wells Fargo Bank Liens" means those Liens granted by Borrower
and its Subsidiaries on certain of their assets in favor of Wells Fargo Bank,
N.A., which Liens secure the Wells Fargo Bank Debt.
"Wine Bottling Inventory" means Borrower's bottles, corks and
other supplies used in its wine production.
1.2 Accounting Terms. Accounting terms used and not otherwise
defined in this Agreement have the meanings determined by GAAP. Unless otherwise
provided in this Agreement, all calculations with respect to accounting or
financial matters shall be computed in accordance with GAAP, consistently
applied.
SECTION II. THE LOAN
2.1 The Loans
(A) The Term Loan. Subject to the terms of this Agreement,
the Bank agrees to make loans to Borrower from time to time on any Business Day
during the period from the Closing Date through the Drawdown Expiration Date in
an amount not to exceed the Term
9.
Loan Commitment (such loans, as the aggregate outstanding principal amount
thereof may be reduced from time to time by scheduled payment, prepayment or
otherwise, the "Term Loan"). Any amount of the Term Loan that is repaid may not
be reborrowed.
(B) The Revolving Loan Facility. Subject to the terms of
this Agreement, the Bank agrees to make available to Borrower during the period
from the Closing Date to the Revolving Maturity Date a revolving loan facility
in an aggregate amount outstanding not to exceed at any time the lesser of (i)
$40,000,000, and (ii) the Borrowing Base then in effect (the "Revolving Loan
Facility"). Each revolving loan made to Borrower pursuant to the Revolving Loan
Facility shall be a "Revolving Loan." Amounts borrowed under the Revolving Loan
Facility may be repaid and reborrowed in accordance with the terms of this
Agreement.
(C) Wells Fargo Bank Payoff. Borrower hereby agrees that
the first advances under the Term Loan and the Revolving Loan Facility shall be
made for the sole purpose of repaying in full the Wells Fargo Bank Debt existing
on the Closing Date. Borrower hereby authorizes and directs the Bank to pay
directly to Wells Fargo Bank, N.A. such proceeds of the Loans as are necessary
to pay in full the Wells Fargo Bank Debt owing on the Closing Date.
2.2 Evidence of the Loans.
(A) Notes. As additional evidence of the Loans, Borrower
shall execute and deliver to the Bank the Notes.
(B) Recordkeeping. The Bank shall record in its internal
records the date and amount of each disbursement of proceeds under the Loans,
the amount of principal and interest due and payable hereunder from time to
time, each payment thereof and the resulting unpaid principal balance of each of
the Loans. Any such recordation shall be rebuttable presumptive evidence of the
accuracy of the information so recorded. Any failure to so record or any error
in doing so shall not, however, limit or otherwise affect the obligations of
Borrower hereunder and under the Notes to pay the Indebtedness owing under the
Loans.
2.3 Interest Rates; Commitment Fee.
(A) Term Loan. The unpaid principal balance of the Term
Loan shall bear interest as follows:
(i) at all times prior to the Drawdown Expiration
Date, the unpaid principal balance of the Term Loan shall bear interest
calculated at a fluctuating rate per annum equal to, at the Borrower's option
(except as otherwise provided herein) (I) the LIBOR Rate plus 1.20% during any
Interest Period or (II) the Reference Rate plus 0%; and
(ii) at all times from and after the Drawdown
Expiration Date, the unpaid principal balance of the Term Loan shall bear
interest calculated at a fluctuating rate per annum equal to, at the Borrower's
option (except as otherwise provided herein) (1) the
10.
LIBOR Rate plus the LIBOR Margin during any Interest Period or (2) the Reference
Rate plus 0%.
(B) Revolving Loans. The unpaid principal balance of each
Revolving Loan shall bear interest calculated at a fluctuating rate per annum
equal to, at Borrower's option (except as otherwise provided herein), (i) the
LIBOR Rate plus 0.875% during any Interest Period, (ii) the Reference Rate plus
0%, or (iii) such other interest rates for such other interest periods as shall
be mutually agreed upon from time to time by the Borrower and the Bank.
(C) Commitment Fee The Borrower agrees to pay to the Bank
a commitment fee on the average daily unused portion of the Revolving Loan
Facility Commitment as in effect from time to time from the Closing Date until
the Revolving Loan Maturity Date at the rate of 0.125% per annum, payable
quarterly in arrears on the last Business Day of each calendar quarter,
commencing on the first such date after the Closing Date, and terminating on the
earlier of the date the Revolving Loan Facility Commitment is terminated
hereunder or the Revolving Loan Maturity Date.
(D) Default Rate; Calculation Period. During the
continuance of an Event of Default, Borrower shall pay interest on all unpaid
amounts due and owing in connection with the Loans and the Loan Documents
calculated at a fluctuating rate per annum equal to the Reference Rate plus
three percent (3%). All interest, for any period, shall be calculated on the
basis of a 360-day year and the actual number of days elapsed during the
relevant period.
2.4 Conversion and Continuation Elections.
(A) The Borrower may, upon irrevocable written notice to
the Bank in accordance with subsection (B) below:
a. elect, as of any Business Day, in the case
of a Reference Rate Loan, or as of the
last day of the applicable Interest
Period, in the case of a LIBOR Rate Loan,
to convert such Reference Rate Loan or
LIBOR Rate Loan into the other; or
b. elect, as of the last day of the
applicable Interest Period, to continue a
LIBOR Rate Loan having an Interest Period
expiring on such day.
(B) The Borrower shall deliver a Notice of
Conversion/Continuation to be received by the Bank not later than 11:00 a.m.
(California time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Loan is to be converted into or continued
as a LIBOR Rate Loan; and (ii) one Business Day in advance of the
Conversion/Continuation Date, if the Loan is to be converted into a Reference
Rate Loan, specifying:
11.
a. the proposed Conversion/Continuation Date;
b. whether the proposed conversion or
continuation will result in a Reference
Rate Loan or a LIBOR Rate Loan; and
c. other than in the case of conversion into
a Reference Rate Loan, the duration of the
requested Interest Period.
(C) If upon the expiration of any Interest Period
applicable to a LIBOR Rate Loan, the Borrower has failed to select timely a new
Interest Period to be applicable to the LIBOR Rate Loan, or if any Event of
Default then exists, the Borrower shall be deemed to have elected to convert the
LIBOR Rate Loan into a Reference Rate Loan effective as of the expiration date
of such Interest Period.
(D) Unless the Bank otherwise consents, during the
existence of an Event of Default, the Borrower may not elect to have the Loans
converted into or continued as a LIBOR Rate Loan.
(E) Unless the Bank otherwise consents, after giving
effect to any continuation or conversion of Loans, there shall not be more than
ten Interest Periods in effect.
2.5 Repayment of the Loans.
(A) Term Loan. Prior to the Term Loan Maturity Date,
accrued interest shall be due and payable on the unpaid principal balance of the
Term Loan in arrears on the last day of each calendar month, commencing on April
30, 1999. The unpaid principal balance of the Term Loan shall be repaid in
twenty-two substantially equal consecutive installments (based on a ten-year
amortization schedule) due and payable on the last day of each calendar quarter
and commencing on December 31, 2000, plus a final principal installment equal to
the unpaid principal balance of the Term Loan then outstanding, together with
all accrued and unpaid interest thereon, due and payable on the Term Loan
Maturity Date.
(B) Revolving Loans. Prior to the Revolving Loan Maturity
Date, accrued interest shall be due and payable on the Revolving Loans in
arrears on the last day of each calendar month, commencing on April 30, 1999.
The Revolving Loans shall be due and payable in full on the Revolving Loan
Maturity Date.
2.6 Prepayments and Commitment Reductions.
(A) Optional Prepayments. Upon at least ten (10) Business
Days' written notice to the Bank, Borrower may, subject to Section 2.10, prepay
the outstanding principal amount of the Loans in whole or in part, and from time
to time, without premium or penalty.
12.
(B) Mandatory Prepayments. If at any time the aggregate
principal amount of the outstanding Revolving Loans shall exceed the Borrowing
Base then in effect, the Borrower, upon becoming aware of such excess, shall,
not later than three Business Days after becoming so aware, prepay the
outstanding principal amount of the Revolving Loans in an amount equal to such
excess, subject to Section 2.10.
(C) Effect of Prepayments. All partial prepayments of any
kind shall not relieve Borrower of its obligation to make regularly scheduled
payments of principal, interest or other Indebtedness as required by this
Agreement or any other Loan Document.
(D) Optional Reduction or Termination of Commitments. The
Borrower may, upon not less than ten (10) Business Days' prior written notice to
the Bank, terminate or voluntarily reduce the Revolving Loan Facility Commitment
and/or the Term Commitment by an aggregate minimum amount, in each case, of
$1,000,000 or any multiple of $1,000,000 in excess thereof. Once reduced in
accordance with this subsection 2.6(D), the Revolving Loan Facility Commitment
or the Term Commitment, as the case may be, may not be increased. All accrued
and unpaid commitment fees to the effective date of any reduction or termination
of the Revolving Loan Facility Commitment shall be paid on the effective date of
such reduction or termination. If after giving effect to any such reduction or
termination of the Revolving Loan Facility Commitment the aggregate principal
amount of the Revolving Loans then outstanding would exceed the Revolving Loan
Facility Commitment then in effect, the Borrower shall concurrently with the
effectiveness of such reduction or termination prepay the outstanding principal
amount of the Revolving Loans in an amount equal to such excess, subject to
Section 2.10. If after giving effect to any such reduction or termination of the
Term Commitment the aggregate principal amount of the Term Loan then outstanding
would exceed the Term Commitment then in effect, the Borrower shall concurrently
with the effectiveness of such reduction or termination prepay the outstanding
principal amount of the Term Loan in an amount equal to such excess, subject to
Section 2.10. Any reduction or termination of the Revolving Loan Facility
Commitment or the Term Commitment effective on or prior to the date that is
twenty-three months after the Closing Date shall be subject to a prepayment fee
equal to 2% of the aggregate principal amount of such reduction or termination,
which prepayment fee shall be due and payable concurrently with the
effectiveness of such reduction or termination.
2.7 Payments to the Bank.
All payments of interest on, principal of, and all other
amounts payable to the Bank in respect of or in connection with the Loans shall
be paid directly to the Bank in immediately available funds on the dates
specified under this Agreement, or if any such date is not a Business Day, then
on the next succeeding Business Day (and all such extensions of time shall be
included in the computation of the amount of interest to be paid by Borrower),
in immediately available funds. The Bank shall send Borrower statements of all
amounts due under this Agreement for interest, principal, fees and expenses.
Those statements shall be considered prima facie evidence of the accuracy of the
amounts due, absent manifest error, and shall be
13.
binding on Borrower unless Borrower notifies the Bank to the contrary within ten
(10) days of receipt of any statement that Borrower deems to be incorrect.
2.8 Illegality.
(A) If the Bank determines that the introduction after the
date hereof of any Requirement of Law, or any change in any Requirement of Law,
or in the interpretation or administration of any Requirement of Law, has made
it unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for the Bank or its applicable lending office to
make any LIBOR Rate Loan, then, on notice thereof by the Bank to the Borrower,
any obligation of the Bank to make a LIBOR Rate Loan shall be suspended until
the Bank notifies the Borrower that the circumstances giving rise to such
determination no longer exist.
(B) If the Bank determines that it is unlawful to maintain
any LIBOR Rate Loan, the Borrower shall be deemed to have elected to convert
such LIBOR Rate Loan to a Reference Rate Loan effective upon the earlier of (i)
the last day of the Interest Period thereof, if the Bank may lawfully continue
to maintain such LIBOR Rate Loan to such day, or (ii) immediately, if the Bank
may not lawfully continue to maintain such LIBOR Rate Loan. The Borrower shall
be required to pay to the Bank upon demand any amounts payable under Section
2.10 resulting from any such mandatory conversion from a LIBOR Rate Loan to a
Reference Rate Loan.
2.9 Increased Costs and Reduction of Return.
(A) If the Bank determines that, due to either (i) the
introduction of or any change in or in the interpretation by a Governmental
Authority, of competent jurisdiction, in each case after the date hereof, of any
law or regulation or (ii) the compliance by the Bank with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law), which introduction, change or interpretation, imposes
or modifies any reserve, special deposit or similar requirement or changes the
basis on which taxes (other than taxes imposed on or measured by the net income
of Bank or its applicable lending office) relating to the extension of the Loans
hereunder, there shall be any increase in the cost to the Bank of agreeing to
make or making, funding or maintaining any LIBOR Rate Loan, then the Borrower
shall be liable for, and shall from time to time, upon demand, pay to the Bank
additional amounts as are sufficient to compensate the Bank for such increased
costs.
(B) If the Bank shall have determined that (i) the
introduction after the date hereof of any Capital Adequacy Regulation, (ii) any
change after the date hereof in any Capital Adequacy Regulation, (iii) any
change after the date hereof in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Bank (or its applicable lending office) or any corporation controlling the
Bank with any Capital Adequacy Regulation after the date hereof, affects or
would affect the amount of capital required
14.
or expected to be maintained by the Bank or any corporation controlling the Bank
and (taking into consideration the Bank's or such corporation's policies with
respect to capital adequacy and the Bank's desired return on capital) determines
that the amount of such capital is increased as a consequence of its Loan or
obligations under this Agreement, then, upon demand by the Bank to the Borrower,
the Borrower shall pay to the Bank, from time to time as specified by the Bank,
additional amounts sufficient to compensate the Bank for such increase.
2.10 Funding Losses. The Borrower shall reimburse the Bank and
hold the Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of:
(A) the failure of the Borrower to make on a timely basis
any payment of principal required hereunder of any LIBOR Rate Loan;
(B) the failure of the Borrower to borrow, continue or
convert any of the Loans after the Borrower has given (or is deemed to have
given) a borrowing notice or a Notice of Conversion/ Continuation;
(C) the failure of the Borrower to make any prepayment in
accordance with any notice delivered under Section 2.6;
(D) the prepayment (including pursuant to Section 2.6) or
other payment of a LIBOR Rate Loan on a day that is not the last day of the
relevant Interest Period; or
(E) the automatic conversion under Section 2.8 of any
LIBOR Rate Loan to a Reference Rate Loan on a day that is not the last day of
the relevant Interest Period;
including (without limitation) any such loss or expense arising from (i) the
liquidation or reemployment of funds obtained by it to maintain its LIBOR Rate
Loans or fixed rate loans, (ii) fees payable to terminate the deposits,
contracts or other arrangements from which such LIBOR funds or fixed rate funds
were obtained, and (iii) all other costs, expenses and fees of any kind incurred
by the Bank as a result of such prepayment.
2.11 Inability to Determine Rates. If the Bank determines that
for any reason adequate and reasonable means do not exist for determining the
LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR
Rate Loan, or that the LIBOR Rate applicable pursuant to Section 2.3 for any
requested Interest Period with respect to a proposed LIBOR Rate Loan does not
adequately and fairly reflect the cost to the Bank of funding or maintaining
such LIBOR Rate Loan, the Bank will promptly so notify the Borrower. Thereafter,
the obligation of the Bank to make or maintain any LIBOR Rate Loan hereunder
shall be suspended until the Bank revokes such notice in writing. Upon receipt
of such notice, the Borrower may revoke any borrowing notice or Notice of
Conversion/Continuation then submitted by it. If the Borrower does not revoke
such Notice, the Bank shall make, convert or continue the Revolving Loan, as
proposed by the Borrower, but the Revolving Loan shall be made, converted or
continued as a Reference Rate Loan instead of a LIBOR Rate Loan.
15.
2.12 Reserves on Offshore Rate Loans. The Borrower shall pay
to the Bank, as long as the Bank shall be required under regulations of the
Board of Governors of the Federal Reserve System to maintain reserves with
respect to liabilities or assets consisting of or including Eurocurrency funds
or deposits (currently known as "Eurocurrency liabilities"), additional costs on
the unpaid principal amount of any LIBOR Rate Loan equal to the actual costs of
such reserves allocated to such LIBOR Rate Loan by the Bank (as determined by
the Bank in good faith, which determination shall be conclusive), payable on
each date on which interest is payable on the Loan, provided the Borrower shall
have received at least 15 days' prior written notice of such additional interest
from the Bank. If the Bank fails to give notice 15 days prior to the relevant
interest payment date, such additional interest shall be payable 15 days from
receipt of such notice.
2.13 Certificates of Bank. If the Bank claims any
reimbursement or compensation under any of Sections 2.8, 2.9, 2.10, 2.11 or
2.12, it shall deliver to the Borrower a certificate setting forth in reasonable
detail the reasons for and calculation of the amount payable to the Bank
hereunder and a statement that Borrower is being treated no worse than any
similarly situated customer. Such certificate shall be conclusive and binding on
the Borrower in the absence of manifest error. The Bank will notify the Borrower
of any event occurring after the date of this Agreement which would entitle the
Bank to compensation under such Sections (a "Compensable Event") as soon as
practicable after it obtains knowledge of such Compensable Event and determines
to request compensation therefor. The Bank shall not be entitled to compensation
under such Sections for any amounts of which the Bank has knowledge incurred
more than 180 days before the Bank makes demand on Borrower therefor. The Bank
shall, if so requested by the Borrower, designate a different applicable lending
office for LIBOR Rate Loans if such designation will avoid the need for or
reduce the amount of such compensation and will not, in the reasonable opinion
of the Bank, cause the Bank to incur any unreimbursed cost or otherwise be
materially disadvantageous to the Bank. No assignee of the Bank shall be
entitled to claim any greater amount of compensation under such Sections than
the Bank would have been entitled to receive in respect of the interest so
assigned had no such assignment been made, unless the event or circumstances
giving rise to such right to compensation did not exist at the time such
assignment was made. The Bank shall not be entitled to claim on behalf of any
participant any greater amount of compensation under such Sections than the Bank
would have been entitled to receive in respect of the participation had no such
participation been transferred. If the obligation of the Bank or any assignee
thereof to make LIBOR Rate Loans is suspended under any of Sections 2.8 through
2.12 or any Compensable Event occurs, the Borrower shall have the right to seek
a substitute lender or lenders through satisfactory to the Borrower and any
remaining lenders, to purchase the Notes and assume the commitment of the
affected lender and such affected lender shall sell its Notes and execute and
deliver appropriate assignment and assumption agreements reasonably satisfactory
to the Borrower and any remaining lenders and take such other steps as may be
reasonably necessary to effect the assumption of the rights and obligations of
such substitute lender or lenders.
16.
2.14 Survival. The agreements and obligations of the Borrower
in Sections 2.8, 2.9, 2.10, 2.11 and 2.12 shall survive the payment of all other
Indebtedness of the Borrower to the Bank hereunder.
SECTION III. CONDITIONS PRECEDENT
3.1 Conditions Precedent to Loan. The obligation of the Bank
to make the Loans under this Agreement on the date of the initial disbursement
of the Loans hereunder (the "Closing Date") is subject to the satisfaction of
each of the following conditions precedent:
(A) Fees and Expenses. Borrower shall have paid the
Upfront Fee and all fees, expenses and attorneys fees incurred by the Bank in
connection with the Loan.
(B) Documents Relating to Loan. The Bank shall have
received the following Loan Documents:
a. a counterpart of this Agreement, executed
and delivered by Borrower;
b. the Notes, executed and delivered by
Borrower;
c. the Guaranties, executed and delivered by
each Subsidiary of the Borrower; and
d. a completed Borrowing Base Certificate
signed by a Responsible Officer of the
Borrower for the calendar month ended
February 28, 1999.
(C) Additional Closing Documents. The Bank shall have
received evidence that all (1) authorizations or approvals of any Governmental
Authority or (2) approvals or consents of any other Person required in
connection with the execution, delivery and performance of the Loan Documents
shall have been obtained.
(D) Corporate Documents. The Bank shall have received the
following, in form and substance satisfactory to it:
a. Certified copies of the articles of
incorporation of Borrower, together with a
good standing certificate, from the
Secretary of State of the State of
California, each dated as of a recent date
prior to the Closing Date; and
b. A certificate of the corporate secretary
of Borrower, dated the Closing Date,
certifying (a) copies of the by-laws of
Borrower and the resolutions of the board
of directors of Borrower authorizing the
execution, delivery and
17.
performance of the Loan Documents, and (b)
the incumbency, authority and signatures
of each officer of Borrower who will
execute and deliver the Loan Documents on
behalf of Borrower.
(E) Legal Opinion. The Bank shall have received the
Opinion of Counsel to Borrower.
(F) Wells Fargo Bank Payoff Letter. The Bank shall have
received a copy of a letter from Wells Fargo Bank, N.A. (1) specifying the total
amount of the Wells Fargo Bank Debt owing as of the Closing Date, and (2)
stating that, once Wells Fargo Bank, N.A. has received payment of the Wells
Fargo Bank Debt, it will release the Wells Fargo Bank Liens.
SECTION IV. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties. Borrower represents and
warrants to the Bank that:
(A) Organization and Powers. Borrower and each Subsidiary
is a corporation, general partnership or limited liability company, as the case
may be, duly organized, validly existing and in good standing under the law of
the jurisdiction of its incorporation or formation, is qualified to do business
and is in good standing in each jurisdiction in which the failure so to qualify
or be in good standing would have a material adverse effect on Borrower and has
all requisite power and authority to own its assets and carry on its business
and to execute, deliver and perform its obligations under the Loan Documents.
(B) Authorization; No Conflict. The execution, delivery
and performance by Borrower and each Subsidiary of the Loan Documents to which
they are a party have been duly authorized by all necessary corporate action of
Borrower and each Subsidiary and do not and will not:
a. Result in a breach of or constitute a
default under any indenture or loan or
credit agreement or any other agreement,
lease or instrument to which Borrower or
such Subsidiary is a party or by which it
or its properties may be bound or
affected;
b. Violate any provision of any law, rule,
regulation, order, writ, judgment,
injunction, decree or the like binding on
or affecting Borrower or such Subsidiary;
or
c. Except as contemplated by this Agreement,
result in, or require, the creation or
imposition of any Lien upon or with
respect to any of the properties of
Borrower or such Subsidiary.
18.
(C) Binding Obligation. The Loan Documents constitute, or
when delivered under this Agreement will constitute, legal, valid and binding
obligations of Borrower and its Subsidiaries, enforceable against Borrower and
its Subsidiaries in accordance with their respective terms, subject to judicial
discretion regarding specific performance or other equitable remedies and except
as may be limited by bankruptcy, reorganization, insolvency, moratorium or other
laws relating to or affecting the enforcement of creditors' rights and remedies
generally.
(D) Governmental Consents. No authorization, consent,
approval, license, exemption of, or filing or registration with, any
Governmental Authority is required for the due execution, delivery or
performance by Borrower and its Subsidiaries of any of the Loan Documents to
which they are a party.
(E) No Defaults. Neither Borrower nor any of its
Subsidiaries is in default under any material contract, lease, agreement,
judgment, decree or order to which it is a party or by which it or its
properties may be bound.
(F) Title to Properties; Liens. Borrower and each
Subsidiary has good and marketable title to its properties and assets, and there
is no Lien upon or with respect to any of such properties or assets, which
secures Indebtedness of any Person, except as contemplated herein and except for
Permitted Liens.
(G) Litigation. There are no actions, suits or proceedings
pending or, to the best of Borrower's knowledge, threatened against or affecting
Borrower or any of its Subsidiaries or the properties of Borrower or any of its
Subsidiaries before any Governmental Authority or arbitrator which (1) if
determined adversely to Borrower or any such Subsidiaries may materially
adversely affect the operations, properties, business or condition (financial or
otherwise) of Borrower, or (2) purport to affect the legality, validity or
enforceability of any of the Loan Documents.
(H) Compliance with Laws.
a. Environmental Laws. Borrower and each
Subsidiary is in material compliance with
all Environmental Laws, whether in
connection with the ownership, use,
maintenance or operation of its property
or the conduct of any business thereon, or
otherwise. Neither Borrower nor any of its
Subsidiaries nor to the best of Borrower's
knowledge, after due and diligent inquiry
and investigation, any previous owner,
tenant, occupant, user or operator of
their respective properties, or any
present tenant or other present occupant,
user or operator of their respective
properties has used, generated,
manufactured, installed, treated,
released, stored or disposed of any
Hazardous Substances on, under, or at any
of such properties, except in compliance
with all
19.
applicable Environmental Laws. After due
and diligent inquiry and investigation,
Borrower has determined, to the best of
Borrower's knowledge, that no Hazardous
Substances have at any time been spilled,
leaked, dumped, deposited, discharged,
disposed of or released on, under, at or
from any of such properties, nor have any
of such properties been used at any time
by any Person as a landfill or waste
disposal site. There are no actions,
suits, claims, notices of violation,
hearings, investigations or proceedings
pending or, to the best of Borrower's
knowledge, threatened against or affecting
Borrower or any of its Subsidiaries or
with respect to the ownership, use,
maintenance and operation of their
respective properties, relating to
Environmental Laws or Hazardous
Substances.
b. All Other Laws. Borrower, its Subsidiaries
and their respective properties are in
full compliance with all other applicable
laws (including, without limitation, the
Americans with Disabilities Act). All
improvements to, and other construction or
building projects on, such properties will
be at all times in full compliance with
all applicable laws (including, without
limitation, the Americans with
Disabilities Act).
(I) Governmental Regulation. Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940, the Interstate Commerce Act, any
state public utilities code or any other federal or state statute or regulation
limiting its ability to incur Indebtedness.
(J) Subsidiaries. Borrower has no Subsidiaries except as
set forth on Schedule 4.1(J).
(K) Margin Regulations. Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying "margin
stock" (within the meaning of Regulations G or U of the Board of Governors of
the Federal Reserve System of the United States). No part of the proceeds of the
Loans will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock.
(L) Taxes. Borrower and each Subsidiary has duly filed all
tax and information returns required to be filed, and has paid all taxes, fees,
assessments and other governmental charges or levies that have become due and
payable, except to the extent such taxes or other charges are being contested in
good faith and are adequately reserved against in accordance with GAAP.
20.
(M) Patents and Other Rights. Borrower and each Subsidiary
possesses all permits, franchises, licenses, patents, trademarks, trade names,
service marks, copyrights and all rights with respect thereto, free from
burdensome restrictions, that are necessary for the ownership, maintenance and
operation of its business and neither Borrower nor any of its Subsidiaries is in
violation of any rights of others with respect to the foregoing.
(N) Insurance. The properties of Borrower and its
Subsidiaries are insured, with financially sound and reputable insurance
companies, in such amounts, with such deductibles and covering such risks as is
customarily carried by companies engaged in similar businesses and owning
similar properties in the localities where Borrower or any such Subsidiary
operates.
(O) Year 2000. Borrower has reviewed the areas within its
business and operations which could be adversely affected by, and has developed
or is developing a program to address on a timely basis, the "Year 2000 Problem"
(that is, the risk that computer applications used by Borrower may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date on or after December 31, 1999), and will make related
appropriate inquiry of material suppliers and vendors. Based on such review and
program, Borrower believes that the "Year 2000 Problem" will not have a material
adverse effect on Borrower.
(P) Liabilities. Borrower and its Subsidiaries have no
material liabilities, fixed or contingent, other than those owing to Bank and
those disclosed on Schedule 5.2(D).
(Q) Disclosure. None of the representations or warranties
made by Borrower or any Subsidiary in the Loan Documents as of the date of such
representations and warranties, and none of the statements contained in each
exhibit or report furnished by or on behalf of Borrower or any of its
Subsidiaries to the Bank in connection with the Loan Documents, contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they are made, not misleading.
(R) Acknowledgments. The Bank's activities in connection
with this Agreement, all other Loan Documents and the Borrower are not "outside
the scope of the activities of a lender of money" within the meaning of Section
3434 of the California Civil Code. The Bank shall not be liable or responsible
for any acts, omissions or decisions of the Borrower. The Bank is not, and shall
not be construed as, a partner of, joint venturer with or controlling person of
the Borrower.
SECTION V. COVENANTS OF BORROWER
5.1 Affirmative Covenants. Borrower hereby covenants and
agrees with the Bank that, so long as any of the Indebtedness owing to the Bank
under this Agreement or any other
21.
Loan Document remain unsatisfied, or any other commitment under this Agreement
remains outstanding, Borrower shall comply at all times with the following
affirmative covenants:
(A) Within 45 days following the conclusion of each fiscal
quarter, Borrower shall provide the Bank with consolidated financial statements
that (1) have been prepared by Borrower internally, and (2) are in a form and
format reasonably satisfactory to the Bank. Within 90 days following the end of
each fiscal year, Borrower shall provide the Bank with audited consolidated
financial statements.
(B) Within 30 days after the end of each calendar month
(commencing with May 1999), the Borrower shall provide the Bank with a completed
Borrowing Base Certificate for such preceding calendar month signed by a
Responsible Officer of the Borrower.
(C) Within 45 days after the end of each fiscal quarter,
the Borrower shall provide the Bank with a completed Compliance Certificate for
such preceding fiscal quarter signed by a Responsible Officer of the Borrower.
(D) Following reasonable notice by the Bank, Borrower
shall provide representatives of the Bank reasonable access to its books and
records. In addition, Borrower shall furnish the Bank any information regarding
Borrower's or any Subsidiary's business affairs and financial condition that is
reasonably requested by the Bank within a reasonable time after written request
for such information.
(E) Borrower and its Subsidiaries shall pay when due (or
within applicable grace periods) all material Indebtedness due to any Person.
(F) Borrower shall notify the Bank immediately if Borrower
becomes aware of the occurrence of any Event of Default, or of any fact,
condition, or event that with the giving of notice or passage of time, or both,
would become an Event of Default, or if it becomes aware of any material adverse
change in its financial condition (including, without limitation, proceedings in
bankruptcy, insolvency, reorganization, or the appointment of a receiver or
trustee), or of the failure of Borrower or any Subsidiary to observe any of its
undertakings under this Agreement, the Guaranties or any other Loan Documents.
(G) Borrower shall use its best efforts to ensure that the
Wells Fargo Bank Liens are released or terminated to the satisfaction of the
Bank.
5.2 Negative Covenants. Borrower hereby covenants and agrees
with the Bank that, so long as any of the Indebtedness owing to the Bank under
this Agreement or any other Loan Document remains unsatisfied, or any other
commitment under this Agreement remains outstanding, Borrower shall not and
shall not permit any Subsidiary to:
(A) Mortgage, pledge, grant, or permit to exist a security
interest in or a Lien upon any of its assets, now owned or hereafter acquired,
except for Permitted Liens.
22.
(B) Furnish the Bank any certificate or other document
that will contain any untrue statement of material fact or that, taken together
with all other information furnished, will omit to state a material fact
necessary to make it not misleading in light of the circumstances under which it
was furnished.
(C) Pay any dividends or make any distributions to its
shareholders or equity owners (other than to the Borrower) in excess of 50% of
net income in any fiscal year; provided that no Event of Default then exists or
would result therefrom.
(D) Incur any Indebtedness to any person or entity other
than the Bank, other than (i) trade debt incurred in the ordinary course of
Borrower's or any Subsidiary's business, (ii) Indebtedness existing on the
Closing Date and listed on Schedule 5.2(D), (iii) intercompany Indebtedness
permitted under Section 5.2(F) below, (iv) any renewal, extension or refinancing
of the Existing Subordinated Notes; provided that any such renewal, extension or
refinancing shall be on terms substantially similar to the terms which govern
the Existing Subordinated Notes on the date hereof or on terms which are more
favorable to the Borrower than such governing terms existing on the date hereof;
and provided further that the aggregate principal amount thereof shall not at
any time outstanding exceed $8,500,000, and (v) other Indebtedness of the
Borrower's Subsidiaries which, together with all Indebtedness listed on Schedule
5.2(D), does not exceed in the aggregate $3,000,000 at any time outstanding.
(E) Take any action that materially and adversely affects,
or, with the giving of notice or passage of time, or both, would materially and
adversely affect Borrower's or any Subsidiary's ability to perform its
obligations to the Bank pursuant to this Agreement or any other Loan Document.
(F) Purchase or otherwise acquire the capital stock,
assets (constituting a business unit), obligations or other securities of or any
interest in any Person, or otherwise extend any credit to, guarantee the
obligations of or make any additional investments in any Person, other than in
connection with:
a. extensions of credit in the nature of
notes receivable arising from the sales of
goods or services in the ordinary course
of business;
b. investments in cash equivalents and
short-term marketable securities;
c. investments existing on the Closing Date
in Subsidiaries;
d. extensions of credit by the Borrower to
its Subsidiary Canoe Ridge Vineyard LLC
and/or its Subsidiary Edna Valley Vineyard
on or after the Closing Date in an
aggregate amount for all such extensions
of credit not to exceed, without the prior
written consent of the Bank in its
23.
sole discretion, the Maximum Intercompany
Loan Amount; provided that all such
extensions of credit by the Borrower (i)
to Canoe Ridge Vineyard LLC shall not at
any time outstanding exceed the Canoe
Ridge Intercompany Loan Amount, and (ii)
to Edna Valley Vineyard shall not at any
time outstanding exceed the Edna Valley
Intercompany Loan Amount; and provided
further that no Event of Default shall
exist at the time of making any such
credit extension or would result
therefrom.
e. employee loans and guarantees in
accordance with such Borrower's usual and
customary practices with respect thereto;
f. guaranty obligations of the Borrower in
respect of the Indebtedness of its
Subsidiaries, which Subsidiary
Indebtedness is permitted under subsection
5.2(D) above; and
g. Acquisitions by the Borrower on and after
the Closing Date; provided that (i) such
Acquisitions are undertaken in full
compliance with all applicable
Requirements of Law (ii) no Event of
Default shall exist at the time of or
immediately after giving effect to any
such Acquisition and (iii) the aggregate
cash consideration for any single such
Acquisition shall not exceed $5,000,000.
(G) Allow a Change of Control.
(H) Sell more than ten percent (10%) of its total assets
in any one year. In the event of all asset sales (other than sales of inventory
in the ordinary course), the proceeds of such asset sales shall be paid to the
Bank and be applied against the Term Loans.
(I) Forgive, cancel, discount or otherwise reduce the
principal amount owing in respect of any extension of credit by the Borrower to
Canoe Ridge Vineyard LLC or Edna Valley Vineyard, without the prior written
consent of the Bank.
5.3 Financial Covenants.
(A) The Borrower shall maintain, for each fiscal quarter
period, a ratio of (i) current assets to (ii) current liabilities, in each case
determined in accordance with GAAP on a consolidated basis, of not less than
1.35 to 1.00, measured as of the last day of each fiscal quarter.
24.
(B) The Borrower shall maintain, for each rolling
4-quarter period, a ratio of (i) EBIT for such 4-quarter period to (ii) Interest
Expense for such 4-quarter period, in each case determined in accordance with
GAAP on a consolidated basis, of not less than 2.00 to 1.00, measured as of the
last day of each fiscal quarter.
(C) The Borrower will maintain a ratio of (i) EBITDA to
(ii) the sum of (A) the current portion of long term Indebtedness plus (B)
Interest Expense, in each case determined in accordance with GAAP for the
Borrower and its Subsidiaries on a consolidated basis for the rolling 4-quarter
period then most recently ended, of not less than 1.75 to 1.00, measured as of
the last day of each fiscal quarter.
(D) The Borrower shall maintain a ratio of (i) senior long
term indebtedness plus the current portion of all other long term debt to (ii)
senior long term indebtedness plus the current portion of all other long term
indebtedness plus Net Worth plus up to $8,500,000 in principal amount of the
Existing Subordinated Notes then outstanding, in each case determined in
accordance with GAAP on a consolidated basis, of not more than 0.65 to 1.00,
measured as of the last day of each fiscal quarter.
(E) The Borrower shall not permit its Tangible Net Worth
to be less than (i) $45,000,000 plus (ii) 50% of net income earned in each
quarterly accounting period commencing after the Closing Date (without deduction
for losses), determined in accordance with GAAP on a consolidated basis,
measured as of the last day of each fiscal quarter.
SECTION VI. DEFAULT
6.1 Events of Default. The occurrence of any one or more of
the following events shall constitute an Event of Default under this Agreement:
(A) Payments. Borrower shall fail to pay (i) any amount of
principal of the Loans when due, or (ii) interest on the Loans when due, or
(iii) any fee or other amount payable hereunder or under any of the other Loan
Documents within three (3) Business Days after the same shall become due.
(B) Representations and Warranties. Any representation or
warranty by Borrower or any of its Subsidiaries under or in connection with this
Agreement or the other Loan Documents shall prove to have been incorrect in any
material respect when made or deemed made.
(C) Failure by Borrower to Perform Covenants. Borrower
shall fail in any material respect to perform or observe any term, covenant or
agreement contained in this Agreement or any other Loan Document on its part to
be performed or observed.
(D) Bankruptcy. Borrower or any Subsidiary shall admit in
writing its inability to, or shall fail generally or be generally unable to, pay
its debts (including its payrolls) as such debts become due, or shall make a
general assignment for the benefit of creditors; or
25.
Borrower or any Subsidiary shall file a voluntary petition in bankruptcy or a
petition or answer seeking reorganization, to effect a plan or other arrangement
with creditors or any other relief under the Bankruptcy Code or under any other
state or federal law relating to bankruptcy or reorganization granting relief to
debtors, whether now or hereafter in effect, or shall file an answer admitting
the jurisdiction of the court and the material allegations of any involuntary
petition filed against Borrower or any Subsidiary pursuant to the Bankruptcy
Code or any such other state or federal law; or Borrower or any Subsidiary shall
be adjudicated a bankrupt, or shall make an assignment for the benefit of
creditors, or shall apply for or consent to the appointment of any custodian,
receiver or trustee for all or any substantial part of Borrower's or such
Subsidiary's property, or shall take any action to authorize any of the actions
set forth above in this subsection; or an involuntary petition seeking any of
the relief specified in this subsection shall be filed against Borrower or any
Subsidiary and shall not be dismissed within 30 days; or any order for relief
shall be entered against Borrower or any Subsidiary in any involuntary
proceeding under the Bankruptcy Code or any such other state or federal law.
(E) Default Under Other Indebtedness. Borrower or any
Subsidiary shall (1) fail to make any payment of any principal of, or interest
or premium on, any Indebtedness when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Indebtedness; or (2) fail to perform or observe
any term, covenant or condition on its part to be performed or observed under
any agreement or instrument relating to any such Indebtedness, when required to
be performed or observed, and such failure shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such failure to perform or observe is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof.
(F) Material Adverse Change. A material adverse change in
the business, results of operations or condition (financial or otherwise) of
Borrower shall have occurred which gives reasonable grounds to conclude, in the
reasonable judgment of the Bank, that Borrower may not, or will be unable to,
perform or observe in the normal course of its obligations under the Loan
Documents.
(G) Invalidity of Loan Documents. Any of the Loan
Documents, after delivery thereof, shall for any reason be revoked or
invalidated, or otherwise cease to be in full force and effect, or Borrower, any
Subsidiary or any other Person shall contest in any manner the validity or
enforceability thereof, or Borrower, any Subsidiary or any other Person shall
deny that it has any further liability or obligation thereunder.
6.2 Effect of Event of Default. If any Event of Default shall
occur, the Bank may, without limitation, (A) cease making disbursements of the
Loan proceeds, (B) declare the entire unpaid principal amount of the Loans and
the Notes, all interest accrued and unpaid thereon and all other amounts payable
under or in connection with this Agreement and the other Loan
26.
Documents to be forthwith due and payable, whereupon the Loans and the Notes,
all such accrued interest and all such other amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by Borrower, (C)
exercise any or all of the Bank's rights and remedies under the Loan Documents,
and (D) proceed to enforce all other rights and remedies available to the Bank
under applicable law. All of the Bank's rights and remedies hereunder are
cumulative and not exclusive.
SECTION VII. MISCELLANEOUS
7.1 Amendments and Waivers. The Bank and Borrower may from
time to time enter into a written amendment to any provision of this Agreement
and the other Loan Documents, and the Bank may from time to time execute and
deliver to Borrower a written instrument waiving any provision of this Agreement
or any other Loan Document, or consenting to any departure by Borrower
therefrom. Any such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
7.2 Notices. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including by
telex or telecopier) and mailed, sent or delivered to the respective parties
hereto at or to their respective addresses or telex or telecopier numbers set
forth below their names on the signature pages hereof, or at or to such other
address or telex or telecopier number as shall be designated by any party in a
written notice to the other parties hereto. All such notices and communications
shall be effective (1) if delivered by hand, upon delivery; (2) if sent by mail,
upon the earlier of the date of receipt or five Business Days after deposit in
the mail, first class, postage prepaid; and (3) if sent by telecopy, upon
receipt.
7.3 No Waiver; Cumulative Remedies. No failure on the part of
the Bank to exercise, and no delay in exercising, any right, remedy, power or
privilege hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, remedy,
power or privilege preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights and remedies
under this Agreement and the other Loan Documents are cumulative and not
exclusive of any rights, remedies, powers and privileges that may otherwise be
available to the Bank.
7.4 Costs and Expenses; Indemnification; Other Charges.
(A) Costs and Expenses. Borrower agrees to pay on demand,
whether or not the transactions contemplated hereby shall be consummated:
a. the reasonable out-of-pocket costs and
expenses of the Bank, and the reasonable
fees and disbursements of counsel to the
Bank (including allocated costs of
internal counsel), in connection with the
negotiation, preparation, execution,
delivery and administration of the Loan
Documents, and
27.
any amendments, modifications or waivers
of the terms thereof; and
b. all costs and expenses of the Bank and
fees and disbursements of counsel
(including allocated costs of internal
counsel) in connection with (a) any
default or Event of Default, (b) the
enforcement or attempted enforcement of,
and preservation of any rights under, the
Loan Documents, (c) any out-of-court
workout or other refinancing or
restructuring or any bankruptcy case or
insolvency proceeding, and (d) the
preservation of, and realization upon, any
collateral, including any losses, costs
and expenses sustained by the Bank as a
result of any failure by Borrower to
perform or observe its obligations
contained in the Loan Documents.
(B) Indemnification. Whether or not the transactions
contemplated hereby shall be consummated, Borrower hereby agrees to indemnify
the Bank and its directors, officers, employees, agents, counsel and other
advisors (each an "Indemnified Person"), against and hold each of them harmless
from any and all liabilities, obligations, losses, claims, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever, including the reasonable fees and disbursements of counsel to
an Indemnified Person (including allocated costs of internal counsel), which may
be imposed on, incurred by, or asserted against any Indemnified Person, in
connection with any investigation, litigation or other proceeding, irrespective
of whether the Indemnified Person shall be designated a party thereto, in any
way relating to or arising out of this Agreement or any other Loan Document, the
use or intended use of the proceeds of the Loans or the transactions
contemplated hereby or thereby (the "Indemnified Liabilities"); provided that
Borrower shall not be liable for any portion of such Indemnified Liabilities
resulting from an Indemnified Person's gross negligence or willful misconduct.
If and to the extent that the foregoing indemnification is for any reason held
unenforceable, Borrower agrees to make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
(C) Other Charges. Borrower agrees to indemnify the Bank
against and hold it harmless from any and all present and future stamp,
transfer, documentary and other such taxes, levies, fees, assessments and other
charges made by any jurisdiction by reason of the execution, delivery,
performance and enforcement of the Loan Documents.
7.5 Survival. All covenants, agreements, representations and
warranties made in any Loan Document and in any certificates, documents or other
instruments delivered pursuant thereto shall, except to the extent otherwise
provided therein, survive the execution and delivery of this Agreement, the
making of the Loans and the execution and delivery of the Notes and shall
continue in full force and effect so long as the Bank has any obligations under
the Loan Documents, any Loan remains outstanding or any obligation to make any
payment hereunder or
28.
under the Notes remains outstanding and unpaid, or any obligation to perform any
other act hereunder or under any other Loan Document remains unsatisfied.
Without limiting the generality of the foregoing, the obligations of Borrower
under Section 7.4 of this Agreement shall survive the repayment of the Loans and
the termination of the Bank's obligations under this Agreement.
7.6 Benefits of Agreement. This Agreement and the other Loan
Documents are entered into for the sole protection and benefit of the parties
hereto and their successors and assigns, and no other Person shall be a direct
or indirect beneficiary of, or shall have any direct or indirect cause of action
or claim in connection with, this Agreement or any other Loan Document.
(A) Binding Effect. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by Borrower, the Bank and their
respective permitted successors and assigns.
(B) Assignment. Borrower shall not have the right to
assign its rights and obligations hereunder or under the other Loan Documents or
any interest herein or therein without the prior written consent of the Bank.
The Bank may sell, assign, transfer or grant participations in all or any
portion of the Bank's rights and obligations hereunder and under the other Loan
Documents.
7.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
7.8 Waiver of Jury Trial. BORROWER AND THE BANK HEREBY AGREE
TO WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. BORROWER AND THE BANK HEREBY AGREE THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT IN ANY
WAY LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM, OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS. A COPY OF THIS SECTION 7.8 MAY BE FILED WITH ANY
COURT AS
29.
WRITTEN EVIDENCE OF THE WAIVER OF THE RIGHT TO TRIAL BY JURY AND CONSENT TO
TRIAL BY COURT.
7.9 Entire Agreement. This Agreement and the other Loan
Documents reflect the entire agreement between Borrower and the Bank with
respect to the matters set forth herein and therein and supersede any prior
agreements, commitments, discussions and understandings, oral or written, with
respect thereto.
7.10 Severability. If one or more provisions contained in this
Agreement or the other Loan Documents shall be invalid, illegal or unenforceable
in any respect in any jurisdiction or with respect to any party, such
invalidity, illegality or unenforceability in such jurisdiction or with respect
to such party shall, to the fullest extent permitted by applicable law, not
invalidate or render illegal or unenforceable any such provision in any other
jurisdiction or with respect to any other party, or any other provisions of this
Agreement or the other Loan Documents.
7.11 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement.
30.
IN WITNESS WHEREOF, the parties to this Agreement have duly
executed this Agreement as of the date first above written.
CHALONE WINE GROUP, LTD. Address for Notices:
621 Airpark Road
Napa, CA 94558
By /s/ Francois Muse Attn: Mr. Francois Muse
----------------------------------- Fax: (707) 254-4203
Title (Acting) Chief Financial Officer Tel: (707) 254-4200
--------------------------------
COOPERATIEVE CENTRALE Address for Notices:
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND," Rabobank International
NEW YORK BRANCH c/o Rabobank Support Services, Inc.
10 Exchange Place
16th Floor
By /s/ W. Jeffrey Vollack Jersey City, NJ 07302
------------------------------------ Attn: Nilsa Ware
Title Senior Credit Officer Fax: (201) 499-5317
Senior Vice President Tel: (201) 499-5326
---------------------------------
By /s/ John McHuch
------------------------------------
Title Vice President
---------------------------------
31.
ANNEX I
to Credit Agreement
-------------------
PRICING MATRIX
- ------------------------- -------------------------------------- --------------------------------------------
TEST I Basis Points Per Annum
-------------------------------------- --------------------------------------------
Level Debt Service Ratio LIBOR Margin
- ------------------------- -------------------------------------- --------------------------------------------
Level I less than or equal to 2.50 to 1.00 137.0
- ------------------------- -------------------------------------- --------------------------------------------
Level II greater than 2.50 to 1.00 but less 128.5
than or equal to 3.00 to 1.00
- ------------------------- -------------------------------------- --------------------------------------------
Level III greater than 3.00 to 1.00 120.0
- ------------------------- -------------------------------------- --------------------------------------------
The LIBOR Margin shall be determined on any date of
determination by reference to the Level set forth in the above Pricing Matrix
corresponding to the Level corresponding to the Borrower's Debt Service Ratio as
set forth in the Compliance Certificate then most recently delivered to the Bank
pursuant to Section 5.1(D) of the Credit Agreement. Each change, if any, in the
LIBOR Margin shall become effective on the date on which the Borrower delivers a
completed Compliance Certificate to the Bank pursuant to Section 5.1(D). If at
any time the Borrower fails to deliver a completed Compliance Certificate to the
Bank within the applicable time period after each fiscal quarter set forth in
Section 5.1(D), the LIBOR Margin shall be deemed to be fixed at Level I above
until such time as the Borrower delivers a completed Compliance Certificate
pursuant to Section 5.1(D).
As used herein, the "Debt Service Ratio" shall mean the ratio
of (i) EBITDA to (ii) the sum of (A) the current portion of long term
Indebtedness plus (B) Interest Expense, in each case determined in accordance
with GAAP for the Borrower and its Subsidiaries on a consolidated basis for the
rolling 4-quarter period then most recently ended, measured as of the last day
of each fiscal quarter.
32.