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THE CHALONE WINE GROUP, LTD.
FIRST AMENDMENT AND CONSENT
Dated as of August 23, 2002
To
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
Dated as of April 19, 2002
Re: $5,000,000 Adjustable Rate Senior Secured Notes, Series A, Due
September 15, 2010
$10,000,000 Adjustable Rate Senior Secured Notes, Series B, Due
September 15, 2010
$15,000,000 Adjustable Rate Senior Secured Notes, Series C, Due
September 15, 2010
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FIRST AMENDMENT AND CONSENT TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
This First Amendment and Consent dated as of August 23, 2002
(the or this "FIRST AMENDMENT") to the Amended and Restated Note Purchase
Agreement dated as of April 19, 2002 is among The Chalone Wine Group, Ltd., a
California corporation ("COMPANY"), the Subsidiary Guarantors (as defined below)
and Farm Credit Services of America, PCA and AgStar Financial Services, PCA DBA
Farm Credit Services Commercial Finance Group (collectively, the "NOTEHOLDERS").
RECITALS:
A. The Company and the Noteholders have heretofore entered
into that certain Amended and Restated Note Purchase Agreement dated as of April
19, 2002 (the "NOTE AGREEMENT"). The Company has heretofore issued its
$5,000,000 Adjustable Rate Senior Secured Notes, Series A, Due September 15,
2010 bearing PPN 157639 B* 5 (the "SERIES A NOTES"), dated April 19, 2002, its
$10,000,000 Adjustable Rate Senior Secured Notes, Series B, Due September 15,
2010 bearing PPN 157639 B@ 3 (the "SERIES B NOTES"), dated April 19, 2002 and
its $15,000,000 Adjustable Rate Senior Secured Notes, Series C, Due September
15, 2010 bearing PPN 157639 B# 1 and dated April 19, 2002 (the "SERIES C NOTES";
the Series A Notes, the Series B Notes and the Series C Notes are hereinafter
collectively referred to as the "NOTES") pursuant to the Note Agreement. The
Noteholders are the holders of 100% of the principal amount of the Notes
presently outstanding.
B. Edna Valley Vineyard, a California general partnership
("EDNA VALLEY"), Canoe Ridge Vineyard L.L.C., a Washington limited liability
company ("CANOE RIDGE"), Staton Hills Winery Company Limited, a Washington
corporation ("STATON HILLS"), Canoe Ridge Winery, Inc., a Washington corporation
("CANOE RIDGE WINERY") and SHW Equity Co., a Washington corporation ("SHW")
(Edna Valley, Canoe Ridge, Staton Hills, Canoe Ridge Winery and SHW are
hereinafter collectively referred to as the "SUBSIDIARY Guarantors") have
heretofore entered into those certain Subsidiary Guarantee Agreements, each
dated as of April 19, 2002 (collectively, the "SUBSIDIARY GUARANTEE AGREEMENTS")
under and pursuant to which each of the Subsidiary Guarantors guaranteed the
payment of the Notes and the performance by the Company of its obligations under
the Note Agreement.
C. The Company desires to consummate the Winery Acquisition
(as defined herein) and in connection therewith issue its Convertible
Subordinated Promissory Notes dated August 23, 2002 (the "SUBORDINATED NOTES")
to the sellers, Les Domaines Baron de Rothschild (Lafite) ("DBR") and SFI
Intermediate Limited ("SFI", DBR and SFI are collectively referred to as the
"SELLERS") and the Company and the Noteholders now desire to consent to the
Winery Acquisition and to amend the Note Agreement as of August 23, 2002 (the
"EFFECTIVE DATE") in the respects, but only in the respects, hereinafter set
forth. The Subsidiary Guarantors now desire to affirm their respective
obligations under the Subsidiary Guarantee Agreements.
D. All requirements of law have been fully complied with and
all other acts and things necessary to make this First Amendment a valid, legal
and binding instrument according to its terms for the purposes herein expressed
have been done or performed.
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NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of this First Amendment set forth in
SS.6 hereof, the Company, the Subsidiary Guarantors and the Noteholders, for
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, do hereby agree as follows:
SECTION 1 DEFINITIONS; REFERENCES. Unless otherwise specifically defined
herein, each term used herein which is defined in the Note Agreement shall have
the meaning assigned to such term in the Note Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Note Agreement shall from and after the date hereof refer to
the Note Agreement as amended hereby.
SECTION 2 AMENDMENTS.
(a) Schedule B to the Note Agreement shall be and is hereby amended by the
following:
(i) A new defined term "SHAREHOLDER SUBORDINATED DEBT" is inserted in
proper alphabetical order as follows:
"SHAREHOLDER SUBORDINATED DEBT" means the Indebtedness of the
Company evidenced by (i) that certain Convertible Subordinated
Promissory Note dated August 23, 2002, made by the Company in
favor of Les Domaines Baron de Rothschild (Lafite) ("DBR"), in
the original principal amount of $8,250,000 and (ii) that
certain Convertible Subordinated Promissory Note dated August
23, 2002, made by the Company in favor of SFI Intermediate
Limited ("SFI"), in the original principal amount of
$2,750,000, which convertible subordinated promissory notes
were issued by the Company pursuant to that certain
Convertible Note Purchase Agreement dated as of August 23,
2002, among the Company, DBR and SFI, and the proceeds of
which shall be used by the Company to complete the Winery
Acquisition and for capital expenditures permitted under this
Agreement."
(ii) A new defined term "WINERY ACQUISITION" is inserted in proper
alphabetical order as follows:
""WINERY ACQUISITION" means the acquisition by the Company of
all of the capital stock, or all or substantially all of the
assets, of Napa Beaucanon Company for a purchase price not to
exceed $9,500,000."
(iii) The definition of "Subordinated Debt" is hereby amended by
deleting the reference to "Section 10.04(a)(viii)" and replacing it with
"Section 10.5(k)."
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(iv) The definition of "Subsidiary Guarantor" is hereby amended by
adding ", Canoe Ridge Winery, Inc." after the words "Staton Hills Winery
Company Ltd." therein.
(b) Section 9.8 of the Note Agreement is amended by deleting the reference
to "Section __" and replacing it with "Section 8.7(c)."
(c) Section 10.4 of the Note Agreement is amended by inserting after
subsection (e) the following new sentence:
"The financial covenants set forth in subsections 10.4(a)
(captioned "Leverage Ratio"), 10.4(c) (captioned "Interest
Coverage Ratio") and 10.4(d) (captioned "Fixed Charge Coverage
Ratio") shall be calculated without giving effect to the
principal amount of the Shareholder Subordinated Debt or any
interest payable thereunder."
(d) Subsection 10.5(k) of the Note Agreement is amended and restated as
follows:
"(k) (i) until August 23, 2004, Indebtedness under the
Shareholder Subordinated Debt in an aggregate principal amount
not to exceed $11,000,000; and (ii) other Indebtedness
subordinated to the Obligations on terms satisfactory to the
Required Holders in an aggregate principal amount not to
exceed $2,000,000 at any time outstanding; and"
(e) Section 11(n) of the Note Agreement is amended by deleting the words
"[intentionally omitted]" and replacing it with "the outstanding principal
amount and all accrued interest on the Shareholder Subordinated Debt shall not
have been extinguished and converted into shares of common stock of the Company
pursuant to a non-cash transaction on or before August 23, 2004."
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To induce the
Noteholders to execute and deliver this First Amendment (which representations
shall survive the execution and delivery of this First Amendment), each of the
Company and the Subsidiary Guarantors represent and warrant to the Noteholders
that:
(a) since June 30, 2002, there has been no change in the condition,
financial or otherwise, of the Company and its Subsidiaries as shown on the
consolidated balance sheet as of such date except changes in the ordinary course
of business, none of which individually or in the aggregate has had, or
reasonably could be expected to have, a Material Adverse Effect;
(b) this First Amendment has been duly authorized, executed and delivered
by it and this First Amendment constitutes the legal, valid and binding
obligation, contract and agreement of the Company and Subsidiary Guarantors
enforceable against it in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or in law);
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(c) the Note Agreement, as amended by this First Amendment, constitutes the
legal, valid and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or in law);
(d) the execution, delivery and performance by the Company and the
Subsidiary Guarantors of this First Amendment (i) has been duly authorized by
all requisite corporate action and, if required, shareholder action, (ii) does
not require the consent or approval of any governmental or regulatory body or
agency, and (iii) will not (A) violate (1) any provision of law, statute, rule
or regulation or its certificate of incorporation or bylaws, (2) any order of
any court or any rule, regulation or order of any other agency or government
binding upon it, or (3) any provision of any material indenture, agreement or
other instrument to which it is a party or by which its properties or assets are
or may be bound, including, without limitation, the Note Agreement (as amended
by this First Amendment), or (B) result in a breach or constitute (along or with
due notice or lapse of time or both) a default under any indenture, agreement or
other instrument referred to in clause (iii)(A)(3) of this SS.3(D);
(e) as of the date hereof and after giving effect to this First Amendment,
no Default or Event of Default has occurred which is continuing; and
(f) except as otherwise set forth in the Schedules to the Note Agreement or
on Schedule I hereto, all the representations and warranties contained in SS.5
of the Note Agreement are true and correct in all material respects with the
same force and effect as if made by the Company and Subsidiary Guarantors on and
as of the date hereof.
SECTION 4 AFFIRMATION OF SUBSIDIARY GUARANTEE AGREEMENTS. Each of the
Subsidiary Guarantors hereby affirm each of their obligations under their
respective Subsidiary Guarantee Agreements after giving effect to this First
Amendment.
SECTION 5 CONSENT TO WINERY ACQUISITION. Pursuant to Section 10.8(e) of
the Note Agreement, the Required Holders hereby consent to the Winery
Acquisition (as defined herein); PROVIDED that (a) immediately prior to and
after giving effect to such acquisition, no Event of Default shall have occurred
and be continuing, (b) after giving effect to such acquisition, the Company
shall be in full pro forma compliance with each of the financial covenants set
forth in Section 10.4 (as amended by this First Amendment), measured as of the
last day of the fiscal quarter then most recently ended, and (c) the prior
effective written consent or approval to such acquisition of the board of
directors or equivalent governing body of the acquiree shall have been obtained.
SECTION 6 CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. This
First Amendment shall not become effective until, and shall become effective
when, each and every one of the following conditions shall have been satisfied:
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(a) executed counterparts of this First Amendment, duly executed by the
Company, the Subsidiary Guarantors and the holders of 100% of the outstanding
principal of the Notes, shall have been delivered to the Noteholders;
(b) the representations and warranties of the Company and the Subsidiary
Guarantors set forth inSS.3 hereof are true and correct on and with respect to
the date hereof;
(c) the Company shall have paid the reasonable fees and expenses of
McDermott, Will & Emery, counsel to the Noteholders, in connection with the
negotiation, preparation, approval, execution and delivery of this First
Amendment; and
(d) the Company shall have complied with the terms and provisions of
Section 9.9 of the Note Agreement.
SECTION 7 MISCELLANEOUS.
(a) This First Amendment shall be construed in connection with and as part
of the Note Agreement, and except as modified and expressly amended by this
First Amendment, all terms, conditions and covenants contained in the Note
Agreement, as amended on the date hereof, are hereby ratified and shall be and
remain in full force and effect.
(b) Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this First Amendment
may refer to the Note Agreement without making specific references to this First
Amendment but nevertheless all such references shall include this First
Amendment unless the context otherwise requires.
(c) The descriptive headings of the various Sections or parts of this First
Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
(d) This First Amendment shall be governed by and construed in accordance
with New York law.
(e) The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this first amendment may be
executed in any number of counterparts, each executed counterpart constituting
an original, but all together only one agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written
THE CHALONE WINE GROUP, LTD.
By:
___________________________________________
Title
EDNA VALLEY VINEYARD
By: The Chalone Wine Group, Ltd.,
Managing General Partner
By:
___________________________________________
Title
SHW EQUITY CO.
By:
___________________________________________
Title
CANOE RIDGE VINEYARD, L.L.C.
By:
___________________________________________
Title
STATON HILLS WINERY COMPANY LIMITED
By:
___________________________________________
Title
CANOE RIDGE WINERY, INC.
By:
___________________________________________
Title
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Accepted and Agreed: FARM CREDIT SERVICES OF AMERICA,
PCA
By:
___________________________________________
Title
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Accepted and Agreed: AGSTAR FINANCIAL SERVICES, PCA,
DBA FARM CREDIT SERVICES
COMMERCIAL FINANCE GROUP
By:
___________________________________________
Title