EXHIBIT 10.60
THE CHALONE WINE GROUP, LTD.
CONVERTIBLE NOTE
PURCHASE AGREEMENT
THIS CONVERTIBLE NOTE PURCHASE AGREEMENT (this "AGREEMENT") is entered
into as of August 21, 2002 by and between The Chalone Wine Group, Ltd., a
California corporation (the "COMPANY") whose principal office is located at 621
Airpark Road, Napa, California 94558, and, severally and not jointly, SFI
Intermediate Limited, a Texas Limited Partnership ("SFI") whose principal office
is located at 5810 Skelly Drive, Suite 1650, Tulsa, Oklahoma 74135 and Les
Domaines Baron de Rothschild (Lafite), a French company ("DBR") whose principal
office is located at 33 rue de la Baume, Paris, France. DBR and SFI are
individually referred to herein as a "PURCHASER" and collectively as the
"PURCHASERS."
RECITALS
The Company desires to issue and sell to the Purchasers, and the
Purchasers desire to purchase, subordinated convertible promissory notes in the
aggregate principal amount of US$11,000,000 in consideration for DBR's and SFI's
respective investments of US$8,250,000 and US$2,750,000. The parties have agreed
that the foregoing notes will be convertible, under specified circumstances,
into shares of the Company's Common Stock. Simultaneously with the issuance and
delivery of the notes, the Purchasers and the Company are entering into a
registration rights agreement, pursuant to which the Company agrees, under
specified circumstances, to register the Company's Common Stock issuable upon
conversion of the notes.
NOW, THEREFORE, the parties agree as follows:
Section 1: SALE. Upon the terms and subject to the conditions hereof,
the Company shall issue to DBR, and DBR shall purchase from the Company, at the
Closing (as defined below), a subordinated convertible promissory note in the
form of EXHIBIT A ("CONVERTIBLE NOTE") for the principal amount of $8,250,000.
Upon the terms and subject to the conditions hereof, the Company shall issue to
SFI, and SFI shall purchase from the Company, at the Closing (as defined below),
a Convertible Note for the principal amount of $2,750,000. The Convertible Note
issued to DBR is referred to below as the "DBR NOTE" and the Convertible Note
issued to SFI is referred to below as the "SFI NOTE."
Section 2: CLOSING.
2.1 CLOSING DATE AND LOCATION. The closing of the issuance to and
purchase by each Purchaser of the Convertible Note (the "CLOSING") shall take
place at the principal office of the Company on August 21, 2002 at 10:00 a.m.
Pacific Time, or at such time and place as the Purchasers and the Company may
set by mutual agreement. The date of the Closing is referred to herein as the
"CLOSING DATE."
2.2 CLOSING. At the Closing, the Company shall deliver the DBR Note to
DBR and the SFI Note to SFI upon the Company's receipt of wire transfers of
$8,250,000 and $2,750,000, respectively. At the Closing, each Purchaser shall
deliver to the Company, and the Company shall deliver to each Purchaser, a duly
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executed copy of the Registration Rights Agreement in the form attached hereto
as EXHIBIT B.
Section 3: REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to each Purchaser as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California.
3.2 AUTHORIZATION. The company has all requisite corporate power and
authority to enter into this Agreement and, subject to satisfaction of the
conditions set forth herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company.
3.3 ENFORCEABILITY. This Agreement and the Convertible Note, when each
is executed and delivered by the Company, shall constitute a valid and binding
obligation of the Company, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, and other similar
laws affecting creditors' rights generally and to general principles of equity.
3.4 RESERVE OF COMMON STOCK; VALID ISSUANCE. The Company has on the date
hereof and will, at all times while the Convertible Note is outstanding,
maintain an adequate reserve of duly authorized shares of Common Stock, reserved
for issuance to the Purchaser, to enable the Company to perform the conversion
of the Convertible Note. The Common Stock issuable upon conversion of the
Convertible Note, when issued in accordance with the terms of the Convertible
Note, will be duly and validly authorized and issued, fully paid and
nonassessable.
Section 4: REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
PURCHASERS. Each Purchaser hereby represents, warrants, covenants and agrees
severally and not jointly that:
4.1 AUTHORIZATION. The Purchaser has all requisite power and authority
to enter into this Agreement and, subject to the satisfaction of the conditions
set forth herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action by the Purchaser.
4.2 INVESTMENT REPRESENTATIONS. The Purchaser will acquire the
Convertible Note (and the Common Stock issuable thereunder) for investment for
the Purchaser's own account, not as a nominee or agent, and not with a view to
the sale or distribution of any part thereof, and the Purchaser has no present
intention of selling, granting participation in or otherwise distributing the
same. The Purchaser:
(a) represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person with respect to any of the
Convertible Note or the Common Stock issuable on conversion thereof;
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(b) represents that it understands that the Convertible Note,
and the Common Stock issuable on the conversion of the Convertible Note, are not
registered under the Securities Act of 1933 (the "Securities Act") and
applicable state securities laws on the ground that the sale provided for in
this Agreement and the issuance of securities is exempt pursuant to Section 4(2)
of the Securities Act or Rule 506 of Regulation D promulgated under the
Securities Act, and state law exemptions relating to offers and sales in private
placements to accredited investors;
(c) agrees that it shall not make a disposition of the Convertible
Note (to the extent transfer is permitted by the Convertible Note), or the
Common Stock issuable upon conversion thereof (i) except pursuant to an
effective registration statement under the Securities Act and in compliance with
applicable state securities laws or (ii) unless and until it shall have (A)
notified the Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the proposed
disposition, and (B) furnished the Company with an opinion of counsel
satisfactory to the Company and its counsel to the effect that appropriate
action necessary for compliance with the Securities Act and any applicable state
securities laws has been taken or an exemption from the registration or
qualification requirements of the Securities Act and such state laws is
available, and that the proposed transfer will not violate any of such laws;
(d) represents that (i) it is an accredited investor within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act and
(ii) that it was not formed for the specific purpose of acquiring the
Convertible Note or the Common Stock issuable upon conversion thereof;
(e) represents that it is capable of evaluating an investment in
the Convertible Note and the Common Stock issuable upon conversion thereof by
reason of its own investment acumen or business experience;
(f) represents that, in relation to its income and/or net worth,
the Purchaser is able to bear the economic risks of an investment in the
Convertible Note and Common Stock issuable upon conversion thereof;
(g) agrees that the Common Stock issuable upon conversion of
the Convertible Note must be held until subsequently registered under the
Securities Act or an exemption from such registration is available;
(h) agrees that the Company shall have no obligation to issue
shares of Common Stock to the Purchasers upon conversion of the Convertible Note
unless the Company, after consultation with its counsel, is satisfied that the
issuance of the Common Stock may occur without registration under the Securities
Act and applicable state securities laws pursuant to exemptions from
registration and qualification therefrom and agrees to provide such additional
information, documentation and certifications as reasonably requested by the
Company to confirm the availability of such exemptions; and
(i) agrees that the Convertible Note and the certificates
evidencing the Common Stock issuable upon conversion of the Convertible Note may
bear a legend in substantially the following form:
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE,
IN RELIANCE UPON CERTAIN EXEMPTIVE PROVISIONS OF SUCH LAWS. SUCH SECURITIES
CANNOT BE SOLD OR TRANSFERRED EXCEPT IF, IN THE OPINION OF COUNSEL TO THE
ISSUER, SUCH SALE OR TRANSFER WOULD BE: (1) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM
SUCH REGISTRATION; AND (2) IN A TRANSACTION WHICH IS EXEMPT UNDER APPLICABLE
STATE SECURITIES LAWS, OR PURSUANT TO EFFECTIVE REGISTRATION STATEMENTS UNDER
SUCH LAWS, OR IN A TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE WITH SUCH LAWS.
Section 5: CONDITIONS TO THE PURCHASER'S OBLIGATIONS AT CLOSING. The
applicable obligations of each Purchaser under this Agreement are subject to the
fulfillment on or before the Closing Date of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company set forth in SECTION 3 shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date.
5.2 PERFORMANCE. The Company shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or complied
with by the Company on or before the Closing Date.
5.3 SECURITIES LAWS. At the time of the Closing, the issuance, sale and
delivery of the Convertible Note by the Company to the Purchaser shall be
legally permitted by all securities laws and regulations to which the Company
and the Purchaser are subject.
5.4 ABSENCE OF LEGAL PROCEEDINGS. As of the Closing Date, (a) there
shall be no effective injunction, writ, preliminary restraining order or any
order of any nature issued by a court of competent directing that the
transactions contemplated by this Agreement or any of them not be consummated as
so provided or imposing any conditions on the consummation of the transactions
contemplated hereby, and (b) there shall not have been instituted or pending,
or, to the best of the Company's knowledge, threatened, any suit, action, or
other proceeding that seeks to restrain, prevent or change the transactions
contemplated by this Agreement or to otherwise question the validity or legality
of such transaction.
5.5 LAWFUL ISSUANCE. As of the Closing Date, the purchase of the
Convertible Note by the Purchaser, and the sale of the Convertible Note by the
Company, shall be legally permitted by all laws and regulations to which the
Company and the Purchaser are subject.
Section 6: CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
applicable obligations of the Company to each Purchaser under this Agreement are
subject to the fulfillment on or before the Closing Date of each of the
following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchaser set forth in SECTION 4 shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date.
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6.2 PERFORMANCE. The Purchaser shall have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by the Purchaser on or before the Closing Date.
6.3 QUALIFICATION OF PURCHASER. The Company shall be reasonably
satisfied that the Purchaser is an investor fully qualified to make an
investment in the Convertible Note so as to permit the sale to occur without
registration under the Securities Act.
6.4 ABSENCE OF LEGAL PROCEEDINGS. As of the Closing Date, (a) there
shall be no effective injunction, writ, preliminary restraining order or any
order of any nature issued by a court of competent directing that the
transactions contemplated by this Agreement or any of them not be consummated as
so provided or imposing any conditions on the consummation of the transactions
contemplated hereby, and (b) there shall not have been instituted or pending,
or, to the best of the Purchaser's knowledge, threatened, any suit, action, or
other proceeding that seeks to restrain, prevent or change the transactions
contemplated by this Agreement or to otherwise question the validity or legality
of such transaction.
6.5 LAWFUL ISSUANCE. As of the Closing Date, the purchase of the
Convertible Note by the Purchaser, and the sale of the Convertible Note by the
Company, shall be legally permitted by all laws and regulations to which the
Company and the Purchaser are subject.
Section 7: REPAYMENT OF CONVERTIBLE NOTES. If the Company repays the out-
standing indebtedness under the Convertible Notes in cash in lieu of converting
the Convertible Notes into shares of the Company's Common Stock, the Company
shall not use the proceeds of an offering of its equity securities to pay any
part of the outstanding indebtedness under the Convertible Notes unless the
average closing price per share of the Company's Common Stock over the five
consecutive trading days immediately preceding the repayment date is at least
$15.00. The foregoing limitation on the Company's use of proceeds of an equity
financing to repay the Convertible Notes shall terminate upon a Change of
Control Transaction (as such term is defined in the Convertible Notes).
Section 8: INDEMNIFICATION.
8.1 INDEMNIFICATION BY THE COMPANY. Subject to the limitations contained
in this SECTION 8, the Company hereby agrees to indemnify, defend and hold
harmless each Purchaser, and its officers, directors, employees, attorneys and
agents, and successors in interest as to any and all claims, demands, losses,
costs, expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees and expenses that
any such person shall incur or suffer, that arise, result from or relate to any
breach of, or failure by the Company to perform, any of its representations,
warranties, covenants or agreements in this Agreement.
8.2 INDEMNIFICATION BY THE PURCHASERS. Subject to the limitations
contained in this SECTION 8, each Purchaser hereby agrees to indemnify, defend
and hold harmless the Company, and its officers, directors, employees, attorneys
and agents, and successors in interest as to any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees and
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expenses that any such person shall incur or suffer, that arise, result from or
relate to any breach of, or failure by the Purchaser to perform, any of its
representations, warranties, covenants or agreements in this Agreement.
8.3 SURVIVAL. The representations, warranties and covenants of the
parties contained in this Agreement shall survive the Closing.
Section 9: MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement, including the Exhibits,
constitutes the entire agreement among the parties, and no party shall be liable
or bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein.
9.2 AMENDMENTS AND WAIVERS. This Agreement may not be amended or
terminated, or any right or obligation hereunder waived, other than by a written
instrument signed by the party against whom enforcement of such amendment,
termination or waiver is sought.
9.3 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Except as expressly provided herein, this Agreement is
not intended to confer upon any other third party any rights, remedies,
obligations or liabilities.
9.4 GOVERNING LAW. Except for applicable federal securities laws this
Agreement shall be governed in all respects by the laws of the State of
California.
9.5 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures to each counterpart were
upon a single instrument and is intended to be binding when all parties have
delivered their signatures to the other parties. Signatures may be delivered by
facsimile transmission. All counterparts shall be deemed an original of this
Agreement.
9.6 HEADINGS. The table of contents and headings used herein are used
for convenience only, are not part of this Agreement and shall not be considered
in construing or interpreting this Agreement.
9.7 NOTICES. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and will be effective (a)
immediately upon delivery in person or by messenger, (b) the next business day
after deposit with a commercial courier or delivery service for next day
delivery, (c) upon receipt by facsimile as established by evidence of successful
transmission or (d) three business days after deposit with the United States
Postal Service, certified mail, return receipt requested, postage prepaid. All
notices must be properly addressed as follows (or to such other address as a
party may specify by notice in pursuant to this SECTION 9.7):
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(a) If to the Company:
The Chalone Wine Group, Ltd.
621 Airpark Road
Napa, CA 94558
Attention: Thomas Selfridge
Facsimile No.: (707) 254-4204
with a copy to:
Farella Braun + Martel LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Daniel E. Cohn, Esq.
Facsimile No.: (415) 954-4480
(b) If to DBR:
__________________________________
__________________________________
__________________________________
__________________________________
Facsimile No.:
with a copy to:
Piper Rudnick LLP
1251 Avenue of the Americas
New York, NY 10020
Attention: Michael A. Varet, Esq.
Facsimile No.: (212) 835-6001
(c) If to SFI:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
with a copy to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, TX 77002
Attention: Gray Jennings, Esq.
Facsimile No.: (713) 229-1522
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9.8 SEVERABILITY. If any one or more of the provisions of this Agreement
or of any amendment thereto is determined to be void or unenforceable, all other
provisions of this Agreement (and such amendment) shall be given effect
separately from the provision or provisions determined to be void or
unenforceable.
9.9 ATTORNEY'S FEES. In the event of any breach of this Agreement that
results in arbitration or litigation between the parties, the prevailing party
shall be entitled to its reasonable attorney's fees, expert witness fees and
costs of suit. The prevailing party shall be determined by the court or
arbitrator, as applicable, based upon an assessment of which party's major
arguments or positions taken in the proceedings could fairly be said to have
prevailed over the other party's major arguments or positions on major disputed
issues in the court's or arbitrator's decision.
IN WITNESS WHEREOF the parties hereto have signed or caused this
Agreement to be signed as of the date first written above.
COMPANY: THE CHALONE WINE GROUP, LTD.
By: __________________________________________
Name:
Title:
PURCHASERS: LES DOMAINES BARON DE ROTHSCHILD (LAFITE)
By:___________________________________________
Name:
Title:
SFI INTERMEDIATE LIMITED
By:___________________________________________
Name:
Title:
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EXHIBIT A
CONVERTIBLE NOTE
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT