FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 000-23175
Beringer Wine Estates Holdings, Inc.
(Exact name of Registrant as specified in its
charter)
Delaware 68-0370340
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Pratt Avenue
St. Helena, CA 94574
(Address of principal executive offices) (Zip code)
(707) 963-7115
Registrant's telephone number including area code)
Not applicable
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X (1) No X (2)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding
Class A Common Stock 1,416,962 shares at November 3, 1997.Class B Common Stock
17,338,946 shares at November 3, 1997.
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
Consolidated Balance Sheets
(in thousands, except share and per share data)
<CAPTION>
September 30, 1997 June 30,1997
(unaudited)
ASSETS
Current assets
<S> <C> <C>
Cash $112 $115
Accounts receivable-trade, net 29,211 28,226
Inventories 260,964 214,097
Prepaids and other current assets 3,244 5,024
----------------------- ---------------
Total current assets 293,531 247,462
Property, plant and equipment 219,061 212,378
Investments 238 267
Other assets, net 7,246 7,077
----------------------- ---------------
Total assets $520,076 $467,184
----------------------- ---------------
LIABILITIES, REDEEMABLE PREFERRED STOCK, COMMON
STOCK AND OTHER STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable-trade $50,615 $10,114
Book overdraft liability 8,219 2,001
Accrued trade discounts 2,768 2,461
Accrued payroll, bonuses and benefits 3,721 3,661
Accrued interest 5,574 5,998
Other accrued expenses 5,301 5,698
Deferred tax liabilities 2,322 4,104
Current portion of long-term debt 3,800 3,714
----------------------- ---------------
Total liabilities 82,320 37,751
----------------------- ---------------
Line of credit 112,800 104,000
Long-term debt, less current portion 210,453 211,398
Deferred tax liabilities 30,626 29,368
Other liabilities 5,834 6,333
----------------------- ---------------
Total liabilities 442,033 388,850
----------------------- ---------------
Redeemable preferred stock:
Redeemable Series A Preferred Stock, $0.01 par value; stated at redemption
value, less non-accreted discount of $2,561,000 and $2,623,000, including
cumulative dividends in arrears; 2,000,000 shares authorized; 382,684 and
369,640 shares issued and
outstanding 35,708 34,341
----------------------- ---------------
Common stock and other stockholders' equity: Class A Common Stock, $0.01 par
value; 2,000,000 shares authorized; 1,019,980 shares issued and
Outstanding 10 10
Class B Common Stock, $0.01 par value; 38,000,000 shares
authorized; 11,784,316 and 11,716,212 shares issued and
outstanding 117 117
Notes receivable from stockholders (636) (636)
Warrants 1,848 1,848
Additional paid-in capital 56,485 57,470
Accumulated deficit (15,489) (14,816)
----------------------- ---------------
Total common stock and other stockholders equity 42,335 43,993
----------------------- ---------------
Total redeemable preferred stock, common stock and other
stockholders equity 78,043 78,334
----------------------- ---------------
Total liabilities, redeemable preferred stock, common stock
and other stockholders equity $520,076 $467,184
</TABLE>
--------
See notes to consolidated financial statements.
<TABLE>
Consolidated Statements of Operations
(unaudited, in thousands, except per share data) Three Months ended September 30,
<CAPTION>
1997 1996
<S> <C> <C>
Gross revenues $68,921 $58,786
Less excise taxes 3,111 2,825
----------------------- ---------------------
Net revenues 65,810 55,961
Cost of goods sold 39,166 43,236
----------------------- ---------------------
Gross profit 26,644 12,725
Selling, general and administrative expenses 21,195 14,905
----------------------- ---------------------
Operating income (loss) 5,449 (2,180)
Other income (expense):
Interest expense (7,022) (6,267)
Other, net 628 (1,247)
----------------------- ---------------------
Loss before income taxes (945) (9,694)
Benefit of income taxes 272 4,876
----------------------- ---------------------
Net loss (673) (4,818)
Cumulative preferred stock dividend and
accretion of discount (1,367) (1,193)
----------------------- ---------------------
Net loss allocable to common stockholders $(2,040) $(6,011)
----------------------- ---------------------
Loss per share:
Primary $(0.16) $(0.51)
----------------------- ---------------------
Supplemental (Note 3) $(0.26)
-------
-----------------------
Weighted average number of common shares and equivalents outstanding:
Primary 12,912 11,725
----------------------- ---------------------
Supplemental 18,432
</TABLE>
--------
See notes to consolidated financial statements.
<TABLE>
Consolidated Statements of Cash Flows
(unaudited, in thousands)
Three Months ended September 30
<CAPTION>
1997 1996
Cash flows from operating activities:
<S> <C> <C>
Net loss $(673) $(4,818)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Deferred taxes (524) (13,742)
Depreciation and amortization 2,684 1,525
Provision for doubtful accounts 3 0
Other 82 (8)
Change in assets and liabilities:
Accounts receivable-trade (988) 65
Inventories (46,867) (11,811)
Prepaids and other assets 1,479 1,539
Accounts payable-trade 40,501 22,780
Book overdraft liability 6,218 -
Accrued trade discounts 307 (957)
Accrued payroll, bonuses and benefits 60 (232)
Accrued interest (424) (350)
Other accrued expenses (397) 970
Income taxes payable - 3,616
Other liabilities (499) 833
----------------------- ---------------------
Net cash provided by (used in) operating activities 962 (590)
----------------------- ---------------------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (9,189) (3,127)
Distribution from investments 29 -
----------------------- ---------------------
Net cash used in investing activities (9,160) (3,127)
----------------------- ---------------------
Cash flows from financing activities:
Net proceeds from long-term debt and line of credit 7,895 2,558
Repayments to Nestle - (2,375)
Issuance of common stock - 826
Issuance of preferred stock - 318
Exercise of stock options 300 -
----------------------- ---------------------
Net cash provided by financing activities 8,195 1,327
----------------------- ---------------------
Net decrease in cash (3) (2,390)
Cash at beginning of period 115 14,223
----------------------- ---------------------
Cash at end of period $112 $11,833
---- -------
</TABLE>
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which include only normal
recurring adjustments) necessary to present fairly the Company's financial
position at September 30, 1997 and its results of operations and its cash flows
for the three month periods ended September 30, 1997 and 1996. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying consolidated financial statements.
For further information, reference should be made to the consolidated financial
statements and notes thereto included in the Company's Registration Statement
on Form S-1 filed with the Securities and Exchange Commission
(File No. 333-34443).
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1997
<S> <C> <C>
Wine in production $120,486 $89,890
Cased goods and retail 133,185 104,485
costs and supplies 7,283 19,722
Total $260,954 $214,097
</TABLE>
Included in inventories at September 30, 1997 and June 30, 1997 were
$39,616,000 and $47,468,000 respectively, of step-up remaining from
applying purchase accounting relative to the acquisitions of Beringer Wine
Estates Company, Chateau St. Jean, and Stags' Leap Winery.
NOTE 3 - LOSS PER SHARE
Loss per common share is computed using the weighted average number of
Class A and B common and common equivalent shares, if dilutive, outstanding
during each period. Common equivalent shares consist of stock options and
warrants (using the "treasury stock" method). Pursuant to Securities and
Exchange Commission Staff Accounting Bulletin No. 83, such computations include
all common and common equivalent shares issued within the twelve months
preceding the initial public offering (Note 4) as if they were outstanding for
all periods presented, using the treasury stock method and an initial public
offering price of $26 per share, regardless of their anti-dilutive impact.
For the supplemental loss per common and common equivalent share
calculation, common shares sold by the Company to the public pursuant to the
initial public offering were added to the weighted average number of common
shares computed for primary loss per share to determine the supplemental
weighted average number of common shares outstanding. Supplemental net loss was
determined assuming the public offering took place on July 1, 1997 with net
proceeds of $24.05 per share. It was also assumed that the net proceeds
($132,760,000) were used to repurchase all of the outstanding shares of
preferred stock, repay all of the outstanding senior subordinated notes,
including a prepayment penalty of $3,150,000, and repay $49,904,000 and
$6,000,000 of the line of credit and long-term debt, respectively. The
resulting reduction in net loss allocable to common stockholders from
adding back the preferred stock dividend and accretion of discount and interest
expense (net of income taxes), and the additional net loss allocable to common
stockholders from the early redemption of the preferred stock and the
extraordinary loss on the early redemption of the subordinated notes (net of
income taxes) of $1,367,000, $1,363,000, $2,623,000, and $2,805,000
respectively, for the quarter ended September 30, 1997, was added to the net
loss to determine supplemental net loss. Supplemental net loss was divided
by the supplemental weighted average number of common shares outstanding to
determine supplemental loss per share.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 (FAS 128), Earnings per Share. This Statement establishes new
accounting standards for the computation and manner of presentation of the
Company's earnings per share. The Company will be required to adopt the
provisions of FAS 128 for the quarter ending December 31, 1997. Earlier
application is not permitted. The Company does not believe the adoption of FAS
128 will have a material impact on earnings per share data.
NOTE 4 - SUBSEQUENT EVENT - INITIAL PUBLIC OFFERING
On November 3, 1997, Beringer Wine Estates Holdings, Inc. sold
4,920,000 shares of Class B Common Stock to the public utilizing a group of
underwriters led by Goldman, Sachs & Co., Donaldson, Lufkin, & Jenrette,
Hambrecht & Quist, and Smith-Barney, Inc., and 600,000 shares of Class B Common
Stock directly to holders of the Series A Preferred Stock. The public offering
netted the Company $132,760,000 which was used to retire all of the outstanding
subordinated notes, including a prepayment penalty of $3,150,000, redeem all of
the Series A Preferred Stock, and retire $49,904,000 and $6,000,000 of the line
of credit and long-term senior debt, respectively. The early retirement of the
subordinated notes resulted in an extraordinary loss of $4,658,000 that included
a prepayment penalty and the unamortized discount. The early redemption of the
Series A Preferred Stock resulted in a $2,478,000 reduction of net income
allocable to common stockholders, which represented the difference on the
redemption date between the carrying amount and the redemption amount of the
Series A Preferred Stock.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Overview
Beringer Vineyards was founded in 1876. The business remained family
owned until 1971, when it was acquired by a subsidiary of Nestle S.A. On January
1, 1996, an investment group led by Texas Pacific Group acquired the Company
from Nestle Holdings, Inc. (the "Acquisition"). The Company's operations were
subsequently expanded with the acquisitions of Chateau St. Jean in April 1996
and Stags' Leap Winery in February 1997.
The Acquisition and the related accounting treatment have impacted the
Company's financial results in two significant ways. Financial results have been
most significantly impacted by an increase in the cost of goods sold resulting
from the increase of inventory balances to their fair market values less costs
of completion and sale (the "inventory step-up") in accordance with purchase
accounting rules applied to record the Acquisition. See "Effect of Inventory
Step-Up". In addition, the Company's earnings have been negatively affected by
significant interest expense related to the debt incurred to finance the
Acquisition. See "Interest and Other Income/Expense".
Effect of Inventory Step-Up
The Acquisition was recorded using the purchase accounting method.
Under this method, the purchase price is allocated to the assets and liabilities
of the acquired company in the order of their liquidity and based on their
estimated fair market values at the time of the transaction. When the Company
was acquired in January 1996, $101.9 million of the purchase price in excess of
book value was allocated to the Company's inventory on hand at the transaction
date. Subsequent acquisitions have resulted in additional inventory step-ups.
The 1996 purchase of Chateau St. Jean resulted in $6.4 million in inventory
step-up and the 1997 acquisition of Stags' Leap Winery resulted in $14.6 million
in inventory step-up. The Company uses the "first-in, first-out" ("FIFO") method
of inventory accounting. As the inventory on hand at the transaction dates is
sold in the normal course of business under the FIFO method of accounting, costs
of the wine sold are charged to cost of goods sold, including the amount of the
inventory step-up allocated to the wine sold. As this inventory step-up is
charged to cost of goods sold, it reduces the Company's gross profit and its
overall operating results. The charges to cost of goods sold resulting from the
inventory step-up are non-cash items and are expected to affect the Company's
reported performance at decreasing levels through fiscal year 2000. As the
inventory step-up will affect the Company's reported financial results only in
the near term, the Company's historical results for the three months ended
September 30, 1996 and 1997 are not necessarily indicative of the Company's
future performance.
Results of Operations
Net Revenues
Net revenues for the first quarter of fiscal 1998 were $65.8 million,
an increase of 17.6% over the first quarter of fiscal 1997 net revenue of $56.0
million. Shipments of nine liter case equivalents increased 7.8% in the first
quarter of fiscal 1998 to 1.211 million cases from 1.123 million cases in the
first quarter of fiscal 1997. Net unit revenues averaged $54.34 in the first
quarter of fiscal 1998, a 9.0% increase over net unit revenues of $49.87 in the
first quarter in fiscal 1997.
Cost of Goods Sold
Cost of goods sold for the first quarter of fiscal 1998 was $39.2
million and included $7.9 million of non-cash charges resulting from the
inventory step-up. For the first quarter of fiscal 1997 cost of goods sold was
$43.2 million, which included non-cash charges resulting from the inventory
step-up of $15.2 million.
Cost of goods sold, excluding non-cash charges resulting from the
inventory step-up, for the first quarter of fiscal 1998 was $31.3 million,
compared with $28.1 million in the first quarter of fiscal 1997. Cost of goods
sold, excluding non-cash charges resulting from the inventory step-up, was 47.6%
of net revenues in the first quarter of fiscal 1998, compared with 50.2% of net
revenues in the first quarter of fiscal 1997. Cost of goods sold, excluding
non-cash charges resulting from the inventory step-up, was $25.85 per case for
the first quarter of fiscal 1998, compared with $25.02 per case for the first
quarter of fiscal 1997; a 3.3% increase in average cost of goods sold per case.
Gross Profit
Gross profit for the first quarter of fiscal 1998 was $26.6 million,
compared with $12.7 million in the first quarter of fiscal 1997. Gross profit,
stated as a percentage of net revenue, was 40.5% in the first quarter of fiscal
1998, compared with 22.7% in the first quarter of fiscal 1997.
Gross profit, excluding non-cash charges resulting from the inventory
step-up, was $34.5 million in the first quarter of fiscal 1998, compared with
$27.9 million in the first quarter of fiscal 1997. Gross profit, excluding
non-cash charges resulting from the inventory step-up, was 52.4% of net revenue
in the first quarter of fiscal 1998, compared with 49.9% of net revenue in the
first quarter of fiscal 1997. Gross margin averaged $28.49 per case in the first
quarter of fiscal 1998, compared with $24.84 per case in the first quarter of
fiscal 1997; a 14.7% increase in average gross profit per case.
The following table illustrates the effect of the inventory step-up on
cost of good sold and gross profit:
<TABLE>
Gross Profit With and Without Inventory Step-Up
($ Millions)
Quarter Ended September 30
As Reported Proforma
With Inventory Without Inventory
Step-Up Step-Up
<CAPTION>
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Revenues $65.8 $56.0 $65.8 $56.0
Cost of Goods Sold 31.3 28.1 31.3 28.1
Step-Up 7.9 15.2 0.0 0.0
Profit $26.6 $12.7 $34.5 $27.9
As a percent of net revenues 40.5% 22.7% 52.4% 49.9%
</TABLE>
Operating Expenses
Operating expenses for the first quarter of fiscal 1998 were $21.2
million, a 42.2% increase from the first quarter of fiscal 1997. These amounts,
expressed as a percentage of net revenue, were 32.2% in the first quarter of
fiscal 1998, compared with 26.6% in the first quarter of fiscal 1997. The timing
of media advertising expenditures and other marketing and sales promotional
activities accounted for the majority of the increase. Increased expenditures
associated with the initial public offering accounted for a portion of the
increase.
Operating Income
Operating income for the first quarter of fiscal 1998 was $5.4 million,
compared with an operating loss of $2.2 million in the first quarter of fiscal
1997. Operating income, expressed as a percent of net revenue, was 8.3% in the
first quarter of fiscal 1998, compared with an operating loss in the first
quarter of fiscal 1997.
Operating income, excluding non-cash charges resulting from the
inventory step-up, was $13.3 million for the first quarter of fiscal 1998,
compared with $13.0 million in the first quarter of fiscal 1997. These amounts
were 20.2% of net revenue in the first quarter of fiscal 1998, compared with
23.2% of net revenue in the first quarter of fiscal 1997.
The following table illustrates the effect of the inventory step-up on
operating income:
<TABLE>
Operating Income With and Without Inventory Step-Up
($ Millions)
Quarter Ended September 30
As Reported Proforma
With Inventory Without Inventory
Step-Up Step-Up
<CAPTION>
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Operating Income $5.4 ($2.2) $13.3 $13.0
As a percent of net revenues 8.2% (3.8%) 20.2% 23.2%
</TABLE>
Interest and Other Income/Expense
Combined interest and other income/expense was $6.4 million for the
first quarter of fiscal 1998. This represents a 14.9% reduction from the first
quarter of fiscal 1997. Interest and other income/expense, expressed as a
percentage of net sales, was 9.7% for the first quarter of fiscal 1998, compared
with 13.4% in the first quarter of fiscal 1997.
Income (Loss) Before Taxes
The Company reported a $945,000 loss before income taxes for the
quarter ended September 30, 1997. This compares with a pre-tax loss of $9.7
million in the same quarter of fiscal 1997. Excluding the non-cash charges
resulting from the inventory step-up, pre-tax profit was $6.9 million for the
first quarter of fiscal 1998, compared with $5.5 million in the first quarter of
fiscal 1997. This represents a 25.9% increase in pre-tax income for the first
quarter of fiscal 1998. Pre-tax profits, excluding non-cash charges resulting
from the inventory step-up, was 10.5% of net revenue in the first quarter of
fiscal 1998, compared with 9.8% of net revenue in the first quarter of fiscal
1997.
The following table illustrates the effect of the inventory step-up on
income (loss) before taxes:
<TABLE>
Income (Loss) Before Taxes With and Without Inventory Step-Up
($ Millions)
Quarter Ended September 30
As Reported Proforma
With Inventory Without Inventory
Step-Up Step-Up
<CAPTION>
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Income (Loss) Before Taxes $6.9 $5.5 ($0.9) ($9.7)
As a percent of net revenues 10.5% 9.8% (1.4%) (17.3%)
</TABLE>
Income Tax Provision (Benefit)
The Company reported pre-tax losses in the quarters ended September 30,
1997 and 1996, resulting in income tax benefits in both periods. The rate of tax
benefits on these losses resulted from differences between book and tax bases of
inventory and property and the amortization of tax goodwill, which is not
recognized for book purposes. During the first quarter the effective tax benefit
rate 28.8%. During the first quarter of fiscal 1997, the tax benefit rate was
50.3%.
Excluding the non-cash charges resulting from the inventory step-up,
there were pre-tax profits in both years. For the first quarter of fiscal 1998,
a proforma tax provision of $2.4 million was calculated, reflecting an effective
proforma tax rate of 35.0%. A proforma tax provision of $1.9 million was
calculated for the first quarter of fiscal 1997, reflecting an effective
proforma tax rate of 35.0%.
Net Income (Loss)
The Company reported a $673,000 net loss during the first quarter of
fiscal 1998, compared with a $4.8 million net loss during the first quarter of
fiscal 1997.
Net income, excluding non-cash charges resulting from the inventory
step-up, increased 25.9% to $4.5 million in the first quarter of fiscal 1998,
from $3.6 million in the first quarter of fiscal 1997. Net income, excluding
non-cash charges resulting from the inventory step-up, was 6.8% of net revenue
for the first quarter of fiscal 1998, compared with 6.4% of net revenue for the
first quarter of fiscal 1997.
The following table illustrates the effect of the inventory step-up on
net income (loss):
<TABLE>
Net Income (Loss) With and Without Inventory Step-Up
($ Millions)
Quarter Ended September 30
As Reported Proforma
With Inventory Without Inventory
Step-Up Step-Up
<CAPTION>
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Income (loss) ($0.7) ($4.8) $4.5 $3.6
As a percent of net revenues (1.0%) (8.6%) 6.8% 6.4%
</TABLE>
Preferred Stock Dividends and Accretion
Preferred stock dividends and accretion were $1.4 million in the first
quarter of fiscal 1998, compared with $1.2 million in the first quarter of
fiscal 1997. The preferred stock has been redeemed, subsequent to the end of the
first quarter of fiscal 1998. (See "Liquidity and Capital Resources")
Earnings (Loss) Per Share
Earnings per common share and as-reported loss per common share have
been computed using the weighted average number of common and common equivalent
shares, if dilutive, outstanding during each period. Common equivalents are
calculated using the "treasury stock" method.
The Company had a net loss of $0.16 per share for the first quarter of
fiscal 1998, after preferred dividends and accretion, calculated on a basis of
12.9 million outstanding shares. The Company had a net loss of $0.51 per share
for the first quarter of fiscal 1997, after preferred dividends and accretion,
calculated on a basis of 11.7 million outstanding shares.
Net income to common stockholders, excluding non-cash charges resulting
from the inventory step-up, was $3.1 million or $0.22 per share for the first
quarter of fiscal 1998, after preferred dividends and accretion, calculated on a
basis of 14.3 million outstanding shares. This represents a 22% increase over
the first quarter of fiscal 1997, when net income to common stockholders,
excluding non-cash charges resulting from the inventory step-up, was $2.4
million or $0.18 per share, after preferred dividends and accretion calculated
on a basis of 13.1 million outstanding shares.
Liquidity and Capital Resources
Working capital at September 30, 1997 was $211.2 million, compared to
$209.7 million at June 30, 1997.
The Company used both senior and subordinated long-term debt to finance
the Acquisition and obtained a revolving line of credit that is classified as
long term debt due to its expiration date of January 2001.
Credit arrangements have been restructured since the Acquisition and
the new credit facilities have been used, in conjunction with cash from
operations, to finance operating needs, capital expenditures and acquisitions.
The credit arrangements were restructured on October 24, 1997 in anticipation of
the de-leveraging of the Company resulting from its initial public offering. See
Exhibit 10.7(b), "Second Amendment to Second Amended and Restated Credit
Agreement". At September 30, 1997, long-term debt outstanding was $214.3 million
and the line of credit balance was $112.8 million, leaving $33.7 million
available under the terms of this line, after taking into consideration an
outstanding letter of credit of $3.5 million. Interest expense (excluding
interest payments capitalized to ongoing development activities) for the first
quarter of fiscal 1998 was $7.0 million. In November, 1997 the Company used the
net proceeds of its initial public offering to:
Retire all the outstanding Subordinated Notes, including prepayment
penalties and interest, in the amount of $39.1 million; Repay $49.9
million of its line of credit; Repay $6.0 million of its long term
senior debt; Redeem all of the Series A Preferred Stock, at the
redemption value of $38.7 million.
The Company expects that this reduction in debt, partially offset by
increased financing as a result of the large 1997 harvest, will result in a
reduction of interest expense for fiscal 1998, as compared with fiscal 1997.
The Company anticipates that current capital, combined with cash from
operations and the availability of cash from additional borrowings, will be
sufficient to meet its liquidity and capital expenditures requirements through
the end of fiscal 1998.
Forward-Looking Statements
This Form 10-Q and other information provided from time to time by the
Company contains historical information as well as forward-looking statements
about the Company, the premium wine industry and general economic conditions.
These forward-looking statements include, for example, projections about the
overall health of the economy, the future consumer demand for premium wine, and
other projections particular to the Company. These projections include, without
limitation, estimates of sales and earnings growth, costs of labor and packaging
materials, and interest rates.
Actual results may differ materially from the Company's current
projections. A shift in consumer preferences and demand for premium wine,
competition from other premium wine companies, and agricultural risks, among
other conditions, may affect the Company's forecasts.
For additional cautionary statements and risks which could cause
results to differ materially from the Company's forward-looking statements,
please refer to the "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's Prospectus,
dated October 28, 1997. For these and other reasons, no forward-looking
statements by the Company can or should be taken as a guarantee of what will
occur in the future.
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Written Consent, dated September 19, 1997, which was unanimously
approved by all stockholders, without abstention, approving: the Company's
amended and restated Certificate of Incorporation; the Certificate of Amendment
to the Certificate of Incorporation; the amendment and restatement of the
Company's 1996 Stock Plan; adoption of the Employee Stock Purchase Plan;
adoption of the 1998 Stock Plan; the form of Indemnity Agreement between the
Company and its officers and directors; and the waiver of certain voting
provisions of the Amended and Restated Stockholders' Rights Agreement and Voting
Agreement, dated as of June 7, 1996.
Item 5. Other Information
The Company completed its initial public offering of 4,920,000 shares
its Class B Common Stock and a direct offering of 600,000 shares of Class B
Common Stock to the holders of its Series A Preferred Stock in November 1997.
The total proceeds were $133,860,000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 Statement re Computation of Per Share Earnings.
Exhibit 10.7(b) Second Amendment to Second Amended and Restated Credit
Agreement, dated October 24, 1997.
Exhibits 10.1 (1996 Stock Plan), 10.4 (Employee Stock Purchase Plan) and
10.5 (1998 Stock Plan) to the Company's Registration Statement on Form S-1,
dated October 28, 1997, are incorporated herein by reference.
(b) Reports on Form 8-K None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Beringer Wine Estates Holdings, Inc.
Date: December 8, 1997 By:_Peter F. Scott___________
- --------------
Peter F. Scott, Senior Vice President,
Finance and Operations and CFO
<TABLE>
Exhibit 11
Beringer Wine Estates Holdings, Inc.
Statement Regarding Computation of Per Share Earnings
(In thousands, except per share data)
Proforma Computation of
Computation of Primary Computation of Primary Supplemental
Loss Per Share Loss Per Share Loss Per Share
Three Months
Three months Three months ended
ended September 30, ended September 30, September 30,
<CAPTION>
1997 1996 1997 1996 1997
Weighted average number of common
<S> <C> <C> <C> <C> <C>
shares outstanding during the period 12,802 11,725 12,802 11,725 12,802
Common Stock equivalents considered to
be outstanding for period presented (1) 110 - 1,487 1,377 110
Shares sold pursuant to the Company's
initial public offering 5,520
Total 12,912 11,725 14,289 13,102 18,432
Net loss allocable to common stockholders $(2,040) $(6,011) $(2,040) $(6,011) $(2,040)
Add back inventory step-up, net of
income taxes 5,163 8,383
$3,123 $2,372
Add back preferred stock dividend and
accretion of discount, interest on the
senior subordinated notes and interest
on the line of credit and term debt,
net of income taxes 2,730
Less the preferred stock redemption price
in excess of the carrying amount and
the extraordinary loss on the early
redemption of the senior subordinated
notes, net of income taxes (5,428)
$(4,738)
Primary loss per share $(0.16) $(0.51)
Proforma primary earnings per share $0.22 $0.18
Supplemental loss per share (unaudited) $(0.26)
</TABLE>
(1) Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, the calculation of Common Stock equivalents includes all common
and common equivalent shares issued within the twelve months preceding the
initial filing date of the Company's Registration Statement as if they were
outstanding for all periods presented, using the treasury stock method and an
assumed intitial public offering price, regardless of their anti-dilutive
impact.
Exhibit 10.7(b)
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of February 28, 1997
among
BERINGER WINE ESTATES COMPANY
as Borrower
and
PACIFIC COAST FARM CREDIT SERVICES, ACA
COBANK, ACB
BANK OF AMERICA NT&SA
GENERAL ELECTRIC CAPITAL CORPORATION
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.
RABOBANK NEDERLAND, NEW YORK BRANCH
BANKBOSTON, N.A.
as Lenders
and
PACIFIC COAST FARM CREDIT SERVICES, ACA
as the Agent for the Lenders
as Modified by: First Amendment to Second Amended and Restated
Credit Agreement Dated as of
October 1, 1997
endment to Second Amended and Restated Credit Agreement Dated as of
October 24, 1997
<TABLE>
TABLE OF CONTENTS
Page
<CAPTION>
ARTICLE I.
<S> <C>
GENERAL TERMS 3
1.1 Certain Defined Terms 3
1.2 Accounting Terms 32
1.3 Certain Matters of Construction 32
ARTICLE II.
AMOUNT AND TERMS OF CREDIT 33
2.1 Revolving Advances. 33
2.1A Swingline Loan 37
2.2 Term Loan 38
2.3 Mandatory Prepayments; Application Thereof 40
2.4 Other Prepayments 42
2.5 Interest on Revolving Advances 44
2.6 Interest on Term Loan 46
2.7 Other Interest Provisions 49
2.8 Fees 52
2.9 Purchase of Farm Credit Stock 55
2.10 Receipt of Payments 55
2.11 Application and Allocation of Payments
Prior to the Occurrence of an Event of Default 55
2.12 Accounting 56
2.13 Taxes 57
2.14 Capital Adequacy 58
2.15 Eligible Accounts 59
2.16 Eligible Inventory 61
2.17 Valuation of Inventory 63
2.18 Eligible Wine Barrels 63
2.19 Requests to Refinance Revolving Loan 64
2.20 Swap Loss Obligations 65
ARTICLE III.
COLLATERAL 66
3.1 Borrower's Obligations 66
3.2 Further Assurances 66
ARTICLE IV.
CONDITIONS PRECEDENT TO ADVANCES 67
4.1 Conditions to First Amendment Closing Date 67
4.2 Conditions to Each Revolving Advance,
Letter of Credit Obligation and the Term Loan 68
ARTICLE V.
REPRESENTATIONS AND WARRANTIES 69
5.1 Corporate Existence; Compliance with Law 69
5.2 Executive Offices 70
5.3 Subsidiaries 70
5.4 Corporate Power; Authorization; Enforceable
Obligations 70
5.5 Solvency 71
5.6 Financial Statements 71
5.7 Projections 71
5.8 Ownership of Property; Liens 72
5.9 No Default 73
5.10 Burdensome Restrictions 73
5.11 Labor Matters 73
5.12 Other Ventures 74
5.13 Investment Company Act 74
5.14 Margin Regulations 74
5.15 Taxes 74
5.16 ERISA 75
5.17 No Litigation 77
5.18 Brokers 77
5.19 Stock Acquisition 77
5.20 Outstanding Stock; Options; Warrants, Etc. 78
5.21 Employment and Labor Agreements 78
5.22 Patents, Trademarks, Copyrights, and Licenses 78
5.23 Full Disclosure 78
5.24 Liens 78
5.25 No Material Adverse Effect 79
5.26 Hazardous Materials 79
5.27 Insurance Policies 79
5.28 Deposit and Disbursement Accounts 80
5.29 PACA 81
5.30 Correctness of Disclosure Schedule 81
ARTICLE VI.
FINANCIAL STATEMENTS AND INFORMATION 81
6.1 Reports and Notices 81
6.2 Communication with Accountants 84
ARTICLE VII.
AFFIRMATIVE COVENANTS 84
7.1 Maintenance of Existence and Conduct of Business 84
7.2 Payment of Obligations 85
7.3 Agent's and Lenders' Bank Fees 85
7.4 Books and Records 86
7.5 Litigation 86
7.6 Insurance 86
7.7 Compliance with Laws 87
7.8 Agreements 87
7.9 Supplemental Disclosure 88
7.10 Employee Plans 88
7.11 Environmental Matters 88
7.12 Subsidiary 88
7.13 Maintenance of Equipment and Fixtures 89
7.14 Syndication 89
7.15 Payment of Grower Payables 89
7.16 Payment of Leases. 89
7.17 Interest Rate Protection 89
7.18 Notification Regarding Subordinated Debt 90
7.19 Proceeds of Second Restatement Stock. 90
ARTICLE VIII.
NEGATIVE COVENANTS 90
8.1 Mergers, Etc. 90
8.2 Investments; Loans and Advances 90
8.3 Indebtedness 91
8.4 Capital Structure 93
8.5 Maintenance of Business 93
8.6 Transactions with Affiliates 94
8.7 Guaranteed Indebtedness 94
8.8 Liens 94
8.9 Sales of Assets 94
8.10 Cancellation of Claims. 95
8.11 Events of Default 95
8.12 Restricted Payments 96
8.13 Payment or Modification of Subordinated Debt 96
8.14 Intentionally Omitted. 96
8.15 Termination of Real Property Leases 96
8.16 ERISA 97
8.17 Intentionally Omitted. 97
8.18 Intentionally Omitted. 97
8.19 Hazardous Materials 97
8.20 PACA License 98
8.21 Financial Covenants 98
8.22 Compliance With Subordinated Debt Documents 99
ARTICLE IX.
INDEMNITY 99
9.1 Indemnification 99
9.2 No Control 100
ARTICLE X.
EVENTS OF DEFAULT; RIGHTS AND REMEDIES 100
10.1 Events of Default 100
10.2 Acceleration; Remedies 104
10.3 Distribution and Application of Amounts
Received After an Event of Default 105
10.4 Waivers by Borrower 107
ARTICLE XI.
AGENCY 107
11.1 Appointment 107
11.2 Delegation of Duties 107
11.3 Limitation of Liability 108
11.4 Reliance by Agent 108
11.5 Notice of Defaul 109
11.6 Non-Reliance on Agent and the Other Lenders 109
11.7 Indemnification 110
11.8 Payments 110
11.9 Agent in Its Individual Capacity 111
11.10 Successor Agent 111
11.11 Applicability of this Article to Borrower 111
11.12 Agent's Authority To Equalize Percentages
of Revolving Lenders 112
ARTICLE XII.
ASSIGNMENTS AND PARTICIPATIONS 112
12.1 Successors and Assigns 112
12.2 Assignments 112
12.3 Participations 114
12.4 Disclosure 115
ARTICLE XIII.
MISCELLANEOUS 115
13.1 Complete Agreement; Modification of Agreement 115
13.2 Fees and Expenses 116
13.3 Access and Annual Audit 117
13.4 Set-off; Sharing; Limitation on Swap Lender 118
13.5 No Waiver by Agent or Lenders 120
13.6 Remedies 120
13.7 Severability 120
13.8 Parties 120
13.9 Conflict of Term 120
13.10 Authorized Signature 120
13.11 GOVERNING LAW 121
13.12 Notices 121
13.13 Survival 124
13.14 Section Titles 124
13.15 Counterparts 124
13.16 Performance Always Due on Business Day 124
13.17 MUTUAL WAIVER OF JURY TRIAL 125
13.18 Revival of Obligations 125
13.19 Time of the Essence 126
13.20 No Third Party Beneficiaries 126
13.21 Payments in Immediately Available Funds 126
</TABLE>
<TABLE>
INDEX OF EXHIBITS
<S>
<S> <C> <C> <C> <C> <C> <C>
Exhibit A - Form of Borrowing Base Certificate
Exhibit B - Lenders' Percentages
Exhibit C - Schedule of Documents
Exhibit C-1 - Third Amendment Schedule
Exhibit C-2 - Second Restatement Schedule
Exhibit D - Form of Notice of Revolving Advance
Exhibit E - Form of Bill of Sale
Exhibit F - Schedule of Special Real Property
Exhibit G - Form of Certification Regarding Compliance with
Financial Covenants
Exhibit H - Term Loan Tranche B Principal Amortization
Schedule
</TABLE>
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT
("Agreement"), dated as of February 28, 1997, is by and among
BERINGER WINE ESTATES COMPANY, a Delaware corporation ("Borrower"),
formerly known as WINE WORLD ESTATES COMPANY ("Wine World"), and
PACIFIC COAST FARM CREDIT SERVICES, ACA, ("Pacific Coast"), COBANK,
ACB ("CoBank"), BANK OF AMERICA NT&SA ("Bank of America"), GENERAL
ELECTRIC CAPITAL CORPORATION ("GEECapital"), COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., RABOBANK NEDERLAND, NEW YORK BRANCH
("Rabobank") and BANKBOSTON, N.A., formerly known as THE FIRST
NATIONAL BANK OF BOSTON, ("Bank of Boston") (collectively,
"Lenders" and individually, a "Lender") and PACIFIC COAST FARM
CREDIT SERVICES, ACA, as agent for Lenders (in such capacity,
"Agent") with respect to the following facts:
RECITALS
A. Borrower owns and operates several vertically
integrated wineries. On or about January 1, 1996, Borrower
consummated a transaction (the "Stock Acquisition") involving the
following elements: (i)EBorrower merged with Wine Acquisition
Corporation, a Delaware corporation, with Borrower being the
surviving entity, and (ii)Ein payment for the shares in Borrower
held by Nestle Holdings, Inc. ("Nestle"), Borrower tendered a cash
payment to Nestle and also issued to Nestle a Promissory Note dated
January 1, 1996 for Two Hundred Seventy-Five Million Dollars
($275,000,000) (the "Nestle Debt"), which Promissory Note was
secured by various real and personal property owned by Borrower.
B. Borrower originally requested that Lenders provide
Borrower with a senior secured credit facility in the maximum
aggregate principal amount of up to Three Hundred Twenty Million
Dollars ($320,000,000), consisting of two tranches, a revolving
credit facility in the maximum aggregate amount of up to One
Hundred Fifty Million Dollars ($150,000,000) (which included a
letter of credit subfacility in the maximum amount of Ten Million
Dollars ($10,000,000)) and a term loan in the maximum aggregate
amount of up to One Hundred Seventy Million Dollars ($170,000,000),
the proceeds of which Borrower used for its ordinary working
capital needs, to assist in retiring the Nestle Debt and to
facilitate the purchase of certain assets from Chateau St. Jean, a
California corporation, as more fully set forth in that certain
Asset Purchase Agreement dated as of March 22, 1996, by and between
Chateau St. Jean, Suntory International Corp. and Borrower (the
asset purchase transaction is hereafter referred to as the "Chateau
St. Jean Acquisition").
C. Lenders provided Borrower with the requested senior
secured credit facility as evidenced by that certain Credit
Agreement (the "Original Credit Agreement"), by and among,
Borrower, Lenders and Agent, dated as of JanuaryE16, 1996 as
amended by a First Amendment, Second Amendment and Third Amendment
by and among, Borrower, Lenders and Agent.
D. Subsequent to the execution of the Original Credit
Agreement by Borrower, the Board of Directors of Wine World and
Silverado Partners Acquisition Corp., a California corporation
("SPAC"), as the sole shareholder of Wine World, each adopted
resolutions authorizing an amendment to the Certificate of
Incorporation of Wine World to change the name of Wine World to
Beringer Wine Estates Company.
E. Subsequent to the authorization of the Wine World name
change, SPAC reincorporated in the state of Delaware through the
merger of SPAC with and into Beringer Wine Estates Holdings, Inc.,
a Delaware corporation ("BWEH"), a newly formed Delaware
corporation having no material assets or liabilities at the time of
the merger, pursuant to the terms of an agreement and plan of
merger by and between SPAC and BWEH.
F. In connection with the name change of Wine World and
the merger of SPAC with and into BWEH, Borrower requested that the
Lenders amend and restate the Original Credit Agreement to reflect
the Wine World name change and the merger of SPAC with and into
BWEH. Lenders agreed and Borrower, Lenders, and Agent entered into
an Amended and Restated Credit Agreement dated as of JuneE7, 1996.
G. Borrower has entered into an agreement with various
individuals to purchase the stock of Stag's Leap Winery, Inc.
("Stag's Leap") and to purchase certain real property and personal
property related thereto (such stock and real property are
hereafter referred to as the "Stag's Leap Assets" and the
transaction by which such assets were acquired is hereafter
referred to as the "Stag's Leap Acquisition") pursuant to a Stock
and Asset Purchase Agreement dated as of JanuaryE31, 1997 and
certain other documents referred to therein (collectively, the
"Stag's Leap Acquisition Agreements"). Borrower has entered into an
agreement to purchase certain real property and related personal
property (the "Newhall Property") from The Newhall Land and Farming
Company ("Newhall") pursuant to an agreement and certain other
documents referred to therein (collectively, the "Newhall
Acquisition Agreements"). (The transaction by which the Newhall
Property is acquired is hereafter referred to as the "Newhall
Acquisition.")
H. Borrower has requested that Lenders increase the Term
Loan by Twelve Million Five Hundred Thousand Dollars ($12,500,000)
to facilitate Borrower's acquisition of the Stag's Leap Assets and
the Newhall Property. Borrower has further requested that
Lenders agree to certain other changes to the Agreement.
I. The Lenders are willing to agree to the above request
on the terms and conditions set forth herein and in the documents
executed in connection herewith.
NOW, THEREFORE, in consideration of the premises
and the mutual covenants hereinafter contained, the parties hereto
agree as follows:
ARTICLE I.
GENERAL TERMS
1.1 Certain Defined Terms. As used in this Agreement, all
terms defined in the preamble to this Agreement shall have the
meanings set forth therein, and the following terms shall have the
following meanings (such meanings to be equally applicable to both
the singular and plural forms of the terms defined):
"Account Debtor" shall mean any Person who may
become obligated to Borrower under, with respect to, or on account
of, an account.
"Acquisition Agreements" shall mean the Stock
Purchase Agreement by and among Nestle and various other parties
dated November 17, 1995, as amended by that certain First Amendment
to Stock Purchase Agreement dated as of December 29, 1995, and all
exhibits, schedules, amendments, modifications, or supplements
thereto and any other documents, instruments, and agreements
delivered by any party in connection with such Stock Purchase
Agreement or the transactions contemplated thereby or the Stock
Acquisition.
"Affiliate" shall mean, (a) with respect to any
Person, (i) each Person that, directly or indirectly, owns or
controls, whether beneficially, or as a trustee, guardian or other
fiduciary, ten percent (10%) or more of the Stock having ordinary
voting power in the election of directors of such Person, (ii) each
Person that controls, is controlled by or is under common control
with such Person or any Affiliate of such Person or (iii) each of
such Person's officers, directors, joint venturers and partners,
and (b) with respect to Borrower, (I) each Person, officer,
director, joint venturer and partner described in clause (a),
together with (II) Wine World Equity Partners, L.P., Silverado
Equity Partners, L.P., David Freed, George Vare, Michael Moone, and
Richard Lemon. For the purpose of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by
contract or otherwise.
"Agency Fee" shall have the meaning ascribed to
such term in Section 2.8(b).
"Agent" means Pacific Coast, but solely in its
capacity as Agent hereunder and not in any other capacity.
"Agreement" shall mean this Second Amended and
Restated Credit Agreement, including all amendments, modifications,
and supplements hereto and any appendices, exhibits, or schedules
to any of the foregoing, and, if the context shall so require,
shall refer to any previous versions of this Agreement that may
from time to time have been in effect.
"Agricultural Real Property" shall mean real
property other than Winery Real Property and Special Real Property.
"Assignment and Acceptance" shall have the meaning
ascribed to such term in Section 12.2(a).
"Authorized Financial Representative" shall mean a
person listed on the Certificate of Financial Representatives
delivered by Borrower to Lenders pursuant to the Schedule of
Documents or any person subsequently designated by Borrower as an
Authorized Financial Representative in a written notice delivered
by Borrower to Agent.
"Bankruptcy Code" shall mean 11 U.S.C. ss.ss.E101,
et seq., as in effect from time to time.
"Base Term Loan Amount" shall mean (a) sixty-nine
percent (69%) of the value of the real property (including
leasehold interests for which a deed of trust and a landlord's
agreement in favor of and satisfactory to Agent have been executed
and delivered) securing the Obligations, minus (b) the amount of
all principal payments made by Borrower on account of the Term Loan
pursuant to Section 2.2(c). The value of such real property shall
be determined by the Real Estate Valuation Schedule previously
delivered by Agent to Borrower, unless Agent decides to require, on
or after January 16, 1999, updated appraisals, the cost of which
shall be paid by Borrower, in which case the value shall be
determined by such updated appraisals but only if such updated
appraisals show a decline in value).
"BATF" shall mean the federal Bureau of Alcohol,
Tobacco and Firearms or any successor thereto.
"Borrower" shall mean Beringer Wine Estate
Company, a Delaware corporation, formerly known as Wine World
Estates Company.
"Borrower's Knowledge" means to the actual
knowledge of Borrower's chief executive officer, chief financial
officer, controller, assistant controller, vice president of field
or vineyard operations, vice presidents for winery operations, and
vice president for human resources, provided that if any such
position shall be eliminated, then the equivalent replacement
position shall be included in each case without any implication
that such individual has undertaken particular investigation of the
matter in question.
"Borrowing Base" shall mean an amount equal to the
following:
(a) eighty percent (80%) of the value of Eligible
Accounts, the value being the amount invoiced by
Borrower, less any discount for prompt payment or
other discount available to the Account Debtor;
plus
(b) sixty percent (60%) of the value, net of any
temporary price promotions (historically defined
in Borrower's financial records under the
categories of depletion expense, purchase
allowance, free goods, bonus packs, and other), of
Eligible Inventory consisting of Cased Goods
Inventory, as determined in accordance with
Section 2.16; plus
(c) fifty-five percent (55%) of the value of
Eligible Inventory, other than Cased Goods
Inventory, as determined in accordance with
Section 2.16; plus
(d) eighty-five percent (85%) of Cash Invested in
Growing Crops; provided, that the maximum amount
outstanding against Cash Invested in Growing Crops
at any one time shall not exceed (i) during the
crop year ending November 30, 1996, the lesser of
(A) eighty-five percent (85%) of the maximum
amount of Cash Invested in Growing Crops approved
by Lenders in connection with approval of the crop
budget for such crop year, and (B) Fifteen Million
Dollars ($15,000,000) and (ii) during subsequent
crop years, the lesser of (A) eighty-five percent
(85%) of the maximum amount of Cash Invested in
Growing Crops approved by Lenders in connection
with approval of the crop budget for such year, or
(B) Fifteen Million Dollars ($15,000,000) plus six
percent (6%) per annum for each crop year after
the crop year ending November 30, 1996, compounded
annually; plus
(e) seventy percent (70%) of the following: (i)
one hundred percent (100%) of the value of
Eligible Wine Barrels that are less than one (1)
year old, (ii) seventy-five percent (75%) of
Eligible Wine Barrels that are one (1) year old or
more, but less than two (2) years old, (iii) fifty
percent (50%) of Eligible Wine Barrels that are
two (2) years old or more, but less than three (3)
years old, and (iv) twenty-five (25%) percent of
Eligible Wine Barrels that are three (3) years old
or more, but less than four (4) years old, in each
case as determined by Section 2.18; minus
(f) the aggregate amount of Grower Payables
outstanding from time to time; minus
(g) such other reserves as Agent may reasonably
deem necessary from time to time.
"Borrowing Base Certificate" shall mean a
certificate in the form attached hereto as Exhibit A.
"Business Day" shall mean any day that is not a
Saturday, a Sunday, or a day on which banks are required or
permitted to be closed in the State of California.
"BWEH" shall mean Beringer Wine Estates Holdings,
Inc., a Delaware corporation, successor by merger to SPAC.
"Capital Expenditures" shall mean, for any period
and with respect to any Person, the aggregate of all expenditures
(whether paid in cash or other consideration or accrued as a
liability and including that portion of Capital Leases that is
capitalized on the balance sheet of such Person including in
connection with a sale-leaseback transaction) by such Person and
its Subsidiaries for the acquisition or leasing of fixed or capital
assets or additions to equipment (including replacements,
capitalized repairs and improvements during such period) which are
required to be capitalized under GAAP on a consolidated balance
sheet of such Person and its Subsidiaries. Capital Expenditures
shall not include (i) the actual value received for existing
equipment either traded-in at time of purchase of new equipment or
sold in the ordinary course of business (but only to the extent
such equipment is replaced), and (ii) expenditures made from
insurance proceeds.
"Capital Lease" shall mean, with respect to any
Person, any lease of any property (whether real, personal or mixed)
by such Person as lessee that, in accordance with GAAP, either
would be required to be classified and accounted for as a capital
lease on a balance sheet of such Person or otherwise be disclosed
as such in a note to such balance sheet, other than, in the case of
Borrower, any such lease under which Borrower is the lessor.
"Capital Lease Obligation" shall mean, with
respect to any Capital Lease, the amount of the obligation of the
lessee thereunder that, in accordance with GAAP, would appear on a
balance sheet of such lessee in respect of such Capital Lease or
otherwise be disclosed in a note to such balance sheet.
"Cash Collateral Account" shall have the meaning
assigned to it in Section 2.1(h).
"Cased Goods Inventory" shall mean finished
bottled and labeled wine that has been placed in cases and is ready
for delivery to customers, and as to which all taxes which are due
have been paid.
"Cash Equivalents" shall mean (i) securities
issued, guaranteed or insured by the United States of America or
any of its agencies with maturities of not more than ninety (90)
days from the date acquired, (ii) certificates of deposit with
maturities of not more than ninety (90) days from the date acquired
that have been issued by a United States Federal or state chartered
commercial bank of recognized standing, which bank has capital and
unimpaired surplus in excess of $500,000,000, based on its most
recent publicly available financial statements, and which bank or
its holding company has a short-term commercial paper rating of at
least A-1 or the equivalent by Standard & Poor's Corporation or at
least P-1 or the equivalent by Moody's Investors Services, Inc.,
(iii) commercial paper or finance company paper issued by any
Person incorporated under the laws of the United States of America
or any state thereof and having a rating of at least A-1 or the
equivalent by Standard & Poor's Corporation or at least P-1 or the
equivalent by Moody's Investors Services, Inc., in each case with
maturities of not more than ninety (90) days from the date
acquired, and (iv) investments in any money market funds registered
under the Investment Company Act of 1940 that is approved by Agent,
which approval shall not unreasonably be withheld.
"Cash Invested in Growing Crops" shall mean the
actual amount directly expended by Borrower for production of
growing crops but only to the extent that such expenditures were
included in the annual crop operating budget submitted to Agent
pursuant to Section 6.1(g) and were approved by Requisite Lenders,
such approval not to be unreasonably withheld, but shall not
include (a) expenditures for vineyard development or planting, (b)
payments on any Indebtedness, and (c) rental payments under leases
for vineyards.
"Charges" shall mean all federal, state, county,
city, municipal, local, foreign, or other governmental taxes
(including, without limitation, taxes owed to either (A) PBGC or
(B) BATF or any other federal, state or local governmental agency
in connection with the sale of alcoholic beverages) at the time due
and payable, levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) the Collateral, (ii) the
Obligations (other than Swap Loss Obligations prior to the Swap
Loss Adjustment Date), (iii) the employees, payroll, income, or
gross receipts of Borrower, (iv) Borrower's ownership or use of any
of its assets, or (v) any other aspect of Borrower's business.
"Closing Date" shall mean January 16, 1996, the
date on which Lenders made the first advance to Borrower under the
Original Credit Agreement.
"Code" shall mean the Uniform Commercial Code of
the jurisdiction with respect to which such term is used, as in
effect from time to time.
"Collateral" shall mean any and all property of
Borrower or any Guarantor in which Agent, for the benefit of
Lenders, now or hereafter has a Lien to secure all or any part of
the Obligations or the obligations of such Guarantor to Agent and
Lenders.
"Collection Account" shall mean a bank account in
the name of Agent at a bank chosen by Borrower and reasonably
acceptable to Agent which shall be, unless otherwise consented to
by Agent, the same bank at which the Disbursement Account is
maintained.
"Commitment Fee" shall have the meaning assigned
to it in Section 2.8(a).
"Compensation" shall mean, with respect to any
Person, all payments and accruals commonly considered to be
compensation, including, without limitation, all wages, salary,
deferred payment arrangements, bonus payments and accruals, profit
sharing arrangements, payments in respect of stock option or
phantom stock option or similar arrangements, stock appreciation
rights or similar rights, incentive payments, pension or employment
benefit contributions or similar payments, made to or accrued for
the account of such Person or otherwise for the direct or indirect
benefit of such Person.
"Consolidated Cash Flow" shall mean, for any
period, for Borrower and its Subsidiaries on a consolidated basis,
the sum (without duplication) of: (a) Consolidated Net Income; plus
(b) the sum of (i) federal, state, local, and foreign income taxes,
(ii) extraordinary non-cash losses, (iii) interest expense
(including the interest portion of any capitalized lease
obligations), (iv) lease expenses with respect to the Designated
Operating Leases, (v) depletion, depreciation and amortization,
(vi) losses on asset sales, and (vii) any periodic effect of any
non-cash step-ups in the stated value of inventories resulting from
the Stock Acquisition, the Chateau St. Jean Acquisition, or the
Stag's Leap Acquisition; minus (c) the sum of (I) extraordinary
gains, (II) gains on asset sales, and (III) cash taxes payable.
"Consolidated Current Assets" shall mean, as at
any date of determination, the current assets of Borrower and its
Subsidiaries, determined on a consolidated basis in conformity with
GAAP, adjusted to (i) exclude any remaining unamortized step-ups in
the stated value of inventories resulting from the Stock
Acquisition, the Chateau St. Jean Acquisition, or the Stag's Leap
Acquisition, and (ii) exclude any current asset consisting of
Deferred Taxes resulting from the Stock Acquisition, the Chateau
St. Jean Acquisition, or the Stag('s) Leap Acquisition.
"Consolidated Current Liabilities" shall mean, as
at any date of determination, the current liabilities of Borrower
and its Subsidiaries, determined on a consolidated basis in
conformity with GAAP, adjusted to (i) include all Obligations with
respect to the Revolving Loan and the Swingline Loan, and (ii)
exclude any liability for Deferred Taxes associated with the
step-ups in the stated value of inventories resulting from the
Stock Acquisition, the Chateau St. Jean Acquisition, or the Stag's
Leap Acquisition, as long as such deferred tax liability will not
result in a cash tax payment over the next twelve (12) months.
"Consolidated Debt Coverage Ratio" shall mean, as
at any date of determination, the ratio of Consolidated Cash Flow
for any period to Consolidated Debt Service for such period.
"Consolidated Debt Service" shall mean, for any
period, for Borrower and its Subsidiaries on a consolidated basis,
the sum (without duplication) of the following: (i) cash interest
expense (including the interest portion of any capitalized lease
obligations); (ii) scheduled principal payments (including the
principal portion of capitalized lease obligations); (iii)
scheduled payments on the Designated Operating Leases; and (iv)
cash dividends paid or declared.
"Consolidated EBITDA" shall mean, for any period,
for Borrower and its Subsidiaries on a consolidated basis, the sum
(without duplication) of: (a) Consolidated Net Income; plus (b) the
sum of (i) Federal, state, local, and foreign income taxes, (ii)
interest expense (including the interest portion of any capitalized
lease obligations), (iii) depletion, depreciation and amortization,
(iv) any periodic effect of any non-cash step-ups in the stated
value of inventories resulting from the Stock Acquisition, the
Chateau St. Jean Acquisition, or the Stag's Leap Acquisition, (v)
losses on asset sales, and (vi) all other non-cash expenses; minus
(c)Ethe sum of (I)Egains on asset sales, and (II) extraordinary
gains.
"Consolidated Funded Debt" shall mean, as at any
date of determination, for Borrower and its Subsidiaries on a
consolidated basis, the sum (without duplication) of: (a)E
indebtedness for borrowed money or for the deferred purchase price
of property or services (including reimbursement and all other
obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured, but excluding
obligations to trade creditors incurred in the ordinary course of
business), (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all Capital Lease
Obligations, (d) amounts owing under the Obligations (other than
Swap Loss Obligations prior to the Swap Loss Adjustment Date), and
(e) amounts owing under the Subordinated Debt.
"Consolidated Funded Debt to Consolidated EBITDA
Ratio" shall mean, as at any date of determination, the ratio of
Consolidated Funded Debt, as of such date of determination, to
Consolidated EBITDA for the rolling four-quarter period ending upon
such date of determination.
"Consolidated Net Income" shall mean, for any
period, on a consolidated basis, the net income, if any, of
Borrower and its Subsidiaries, determined in accordance with GAAP.
"Consolidated Net Loss" shall mean, for any
period, on a consolidated basis, the net loss, if any, of Borrower
and its Subsidiaries, determined in accordance with GAAP.
"Consolidated Net Worth" shall mean, as at any
date of determination, the amount, if any, by which Consolidated
Total Assets exceeds Consolidated Total Liabilities.
"Consolidated Total Assets" shall mean, as at any
date of determination, all assets of Borrower and its Subsidiaries,
as determined in accordance with GAAP.
"Consolidated Total Capitalization" shall mean, as
of any date of determination, for Borrower and its Subsidiaries on
a consolidated basis, the sum (without duplication) of (a)
Consolidated Total Debt, and (b) Consolidated Net Worth.
"Consolidated Total Debt" shall mean, as of any
date of determination, for Borrower and its Subsidiaries on a
consolidated basis, the sum (without duplication) of (a)
Consolidated Funded Debt, and (b) Grower Payables.
"Consolidated Total Liabilities" shall mean, as at
any date, on a consolidated basis, all liabilities of Borrower and
its Subsidiaries, as determined in accordance with GAAP.
"Cost of Funds Rate" shall mean, at any time, the
yield of the applicable Farm Credit Medium Term Notes, as made
available by the Federal Farm Credit Banks Funding Corporation,
most closely matching a one year, two year, three year, five year,
seven year or nine and one-half year Fixed Rate Interest Period
upon the maturity of such Interest Period.
"Default" shall mean any event or circumstance
which, with the passage of time or the giving of notice or both,
would unless remedied or waived, become an Event of Default.
"Default Rate" shall mean: (a) with respect to
Revolving Advances bearing interest at the Variable Rate, a rate of
interest equal to the higher of (i) the Prime Rate, or (ii) the
Reference Rate, in either case plus a margin of three and
three-quarters percent (3.75%) per annum; (b) with respect to
Revolving Advances bearing interest at a Fixed Rate, a rate of
interest that is three percent (3.00%) per annum higher than the
otherwise applicable Fixed Rate (until the expiration of the
applicable Interest Period at which time such Revolving Advances
shall be treated the same as Revolving Advances bearing interest at
the Variable Rate); (c) with respect to the Letter of Credit
Maintenance Fee, a fee that is three percent (3.00%) per annum
higher than the otherwise applicable Letter of Credit Maintenance
Fee; (d) with respect to any principal portion of the Term Loan, a
rate of interest that is three percent (3.00%) per annum higher
than the rate otherwise applicable to such principal portion of the
Term Loan, provided, that upon the expiration of any Interest
Period during the continuance of an Event of Default, the relevant
portion of the Term Loan shall thereafter bear interest until cure
or waiver of the Event of Default at the Discount Rate, plus a
margin of five and thirty-five one hundredths percent (5.35%) per
annum; and (e) with respect to all other Obligations (including
interest on Revolving Advances not paid when due, interest on the
Term Loan not paid when due, and payment of costs, fees, and
expenses provided for under any Loan Document, but not including
any Swap Loss Obligations prior to the Swap Loss Adjustment Date),
a rate of interest equal to the higher of (I) the Prime Rate, or
(II) the Reference Rate, in either case plus a margin of three and
three-quarters percent (3.75%) per annum.
"Deferred Taxes" shall mean, as to any Person, as
at any date of determination, accrued or assessed taxes that would
be due and payable in the year accrued or assessed, but for a
statutory or regulatory provision providing or allowing for payment
at a later date, determined in accordance with GAAP.
"Designated Operating Leases" shall mean all
operating leases under which Borrower is the lessee, excluding
leases of real property.
"Direct Compensation" shall mean, with respect to
any Person, all payments and accruals commonly considered to be
such Person's base salary and shall not include bonus payments and
accruals, profit sharing arrangements, payments in respect of stock
option or phantom stock option or similar arrangements, stock
appreciation rights or similar rights, incentive payments, pension
or employment benefit contributions or similar payments made to on
accrued for the account of such Person or otherwise for the direct
or indirect benefit of such Person.
"Disbursement Account" shall mean a bank account
at a bank chosen by Borrower and reasonably acceptable to Agent,
having the following characteristics: (a) the account will be in
the name of Agent, (b) the account will be an account in which
Lenders will wire advances under the Revolving Loan, and (c) the
bank will be instructed by Agent to transfer funds into an account
designated by Borrower.
"Disclosure Schedule" shall mean the Amended
Disclosure Schedule delivered by Borrower to Agent and Lenders
pursuant to Item 1.6 of the Third Amendment Schedule, as
supplemented by the Second Amended Disclosure Schedule referred to
in the Second Restatement Schedule.
"Discount Rate" shall mean, at any time, the
ninety (90) day Farm Credit Notes Discount Note Rate then available
from the Federal Farm Banks Funding Corporation.
"DOL" shall mean the United States Department of
Labor or any successor thereto.
"Draw Amount" shall have the meaning assigned to
it in Section 2.1(g).
"Eligible Accounts" shall have the meaning
assigned to it in Section 2.15.
"Eligible Inventory" shall have the meaning
assigned to it in Section 2.16.
"Eligible Wine Barrels" shall have the meaning
assigned to it Section 2.18.
"Environmental Laws" shall mean all federal, state
and local laws, statutes, ordinances and regulations, now or
hereafter in effect, and in each case as amended or supplemented
from time to time, and any judicial or administrative
interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or
judgment, relative to the applicable real estate, relating to the
regulation and protection of human health, safety, the environment
and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation). Environmental Laws include the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (42 U.S.C. ss.ss. 9601 et seq.) ("CERCLA");
the Hazardous Material Transportation Act, as amended (49 U.S.C.
ss.ss. 1801 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. ss.ss. 136 et seq.); the
Resource Conservation and Recovery Act, as amended (42 U.S.C.
ss.ss. 6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as
amended (15 U.S.C. ss.ss. 2601 et seq.); the Clean Air Act, as
amended (42 U.S.C. ss.ss. 7401 et seq.); the Federal Water
Pollution Control Act, as amended (33 U.S.C. ss.ss. 1251 et seq.);
the Occupational Safety and Health Act, as amended (29 U.S.C.
ss.ss. 651 et seq.); and the Safe Drinking Water Act, as amended
(42 U.S.C. ss.ss. 300(f) et seq.), and any and all regulations
promulgated thereunder, and all analogous state and local
counterparts or equivalents and any transfer of ownership
notification or approval statutes.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974 (or any successor legislation thereto), as
amended from time to time, and any regulations promulgated
thereunder.
"ERISA Affiliate" shall mean, with respect to
Borrower, any trade or business (whether or not incorporated) under
common control with Borrower and which, together with Borrower, are
treated as a single employer within the meaning of Section 4001(a)
of ERISA.
"ERISA Event" shall mean, with respect to Borrower
or any ERISA Affiliate, (i) a Reportable Event with respect to a
Title IV Plan or a Multiemployer Plan; (ii) the withdrawal of
Borrower or any ERISA Affiliate from a Title IV Plan subject to
Section 4063 of ERISA during a plan year in which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA;
(iii) the complete or partial withdrawal of Borrower or any ERISA
Affiliate from any Multiemployer Plan; (iv) the filing of a notice
of intent to terminate a Title IV Plan or the treatment of a plan
amendment as a termination under Section 4041 of ERISA; (v) the
institution of a proceeding to terminate a Title IV Plan or
Multiemployer Plan by the PBGC; (vi) the failure to make required
contributions to a Qualified Plan; or (vii) any other event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or
Multiemployer Plan or the imposition of any liability under Title
IV of ERISA, other than PBGC premiums due but not delinquent under
Section 4007 of ERISA.
"Eurodollar Business Day" shall mean a business
day on which banks generally in the City of London are open for
interbank or foreign exchange transactions.
"Event of Default" shall have the meaning
assigned to it in Section 10.1.
"Fees" shall mean any fees referred to in Section
2.8(a), the Agency Fee, the Facility Fee (unless such fee is waived
pursuant to Section 2.8(c)), the Unused Commitment Fee, the Letter
of Credit Fees, any prepayment surcharge, and any other fees due
either to Agent or any Lender pursuant to the Loan Documents.
"Final Swap Loss Amount" shall mean the final
amount (other than continuing accrual of interest) owed by Borrower
to the Swap Lender under the Swap Agreement with respect to
Permitted Swap Transactions, after all such transactions have been
terminated and the final amount owed by Borrower to the Swap Lender
can be firmly and finally established.
"Financials" shall mean the financial statements
referred to in Section 5.6.
"First Amendment" shall mean that certain First
Amendment to Second Amended and Restated Credit Agreement dated as
of October 1, 1997 between Borrower, Lenders, and Agent.
"First Amendment Closing Date" shall mean the date
of which the First Amendment becomes effective between Borrower,
Lenders, and Agent.
"Fiscal Month" shall mean any of the monthly
ccounting periods of Borrower.
"Fiscal Quarter" shall mean any of the quarterly
accounting periods of Borrower.
"Fiscal Year" shall mean the 12-month period of
Borrower ending June 30 of each year. Subsequent changes of the
fiscal year of Borrower shall not change the term "Fiscal Year,"
unless Agent shall consent in writing to such change.
"Fixed Asset" shall mean (a) real property, or an
interest in real property (but does not include crops growing or to
be grown), (b) equipment, or an interest in equipment (other than
equipment, such as wine barrels of a type that is eligible for
inclusion in the Borrowing Base), and (c) trademarks, tradenames,
and other intellectual property, or any licenses or other interests
therein; provided that, for purposes of allocating proceeds between
the Revolving Loan and the Term Loan, a disposition of an interest
in intellectual property or any other Fixed Asset shall be deemed
to occur under this Agreement only if the intellectual property or
other Fixed Asset itself is the subject of the disposition, not
upon the sale or other disposition of any assets other than Fixed
Assets the value of which may have been enhanced by the
intellectual property or the Fixed Asset.
"Fixed Rate" shall mean: (a) with respect to any
portion of the Revolving Loan that Borrower elects at any time
pursuant to Section 2.5(c) to convert to a fixed rate of interest,
the applicable LIBO Rate as of the date of such election plus a
margin equal to one and three hundred seventy-five one thousandths
percent (1.375%), or such lower margin, if any, for which Borrower
qualifies under Section 2.5(d); and (b) with respect to any
selection of rates for the Term Loan, the rates and applicable
margins provided in Section 2.6.
"Formula Yield" shall mean, with respect to each
portion of the Term Loan or the Revolving Loan to be prepaid and
bearing interest at a Fixed Rate, the interpolated yield to
maturity between the two most actively traded U.S. Treasury
obligations which on the prepayment date have a maturity most
closely corresponding to the remaining life of such Fixed Rate
portion.
"GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from time
to time.
"General Prepayment" shall mean (a) a prepayment
in full of all of the Obligations, other than a prepayment in full
fulfilling the requirements of clause (d) of the definition of
Special Prepayment, or (b) a partial prepayment other than a
Special Prepayment.
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof, and
any agency, department or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Grower Payables" shall mean (i) amounts payable
by Borrower to growers of agricultural products which have been
purchased by Borrower for processing or which are otherwise used by
Borrower in the production of wine or wine products and shall
include "grower payables," as referenced in Borrower's financial
records, and (ii) amounts payable by Borrower to wine processors or
other persons who have delivered notice to Borrower under
California Civil Code Section 3051a of the assertion of a lien
under California Civil Code Section 3051.
"Guaranteed Indebtedness" shall mean, as to any
Person, any obligation of such Person guaranteeing any
indebtedness, lease, dividend, or other obligation ("primary
obligations") of any other Person (the "primary obligor") in any
manner including, without limitation, any obligation or arrangement
of such Person (i) to purchase or repurchase any such primary
obligation, (ii) to advance or supply funds (a) for the purchase or
payment of any such primary obligation or (b) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, or (iv) to indemnify the
owner of such primary obligation against loss in respect thereof.
"Guarantor" shall mean any person that has
guaranteed to Agent and/or Lenders all or any portion of the
Obligations.
"Hazardous Material" shall mean any substance,
material or waste, the generation, handling, storage, treatment or
disposal of which is regulated by any local or state government
authority in any jurisdiction in which Borrower has owned, leased
or operated real property or disposed of hazardous materials, or by
the United States Government, including any material or substance
which is (i) defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste" or "restricted
hazardous waste" or other similar term of phrase under any such
law, (ii)petroleum, (iii) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. ss.1251
et seq. (33U.S.C. ss.1321) or listed pursuant to Section 307 of the
Clean Water Act (33 U.S.C. ss.1317), (iv) defined as a "hazardous
waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. ss.6901, et seq. (42 U.S.C. ss. 6903), or
(v) defined as a "hazardous substance" pursuant to Section 101 of
the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. ss. 9601, et seq. (42 U.S.C. ss. 9601).
"Indebtedness" of any Person shall mean (i) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (including reimbursement and
all other obligations with respect to surety bonds, letters of
credit and bankers' acceptances, whether or not matured, but
excluding obligations to trade creditors incurred in the ordinary
course of business), (ii) all obligations evidenced by notes,
bonds, debentures or similar instruments, (iii) all indebtedness
created or arising under any conditional sale or other title
retention agreements 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), (iv) all Capital Lease
Obligations, (v) all Guaranteed Indebtedness, (vi) all Indebtedness
referred to in clause (i), (ii), (iii), (iv) or (v) 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 such
Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness, (vii) the Obligations, and
(viii) all liabilities under Title IV of ERISA, other than PBGC
premiums.
"Initial Percentage" shall mean, as to each
Revolving Lender with respect to the Revolving Loan and the Letter
of Credit Obligations, the applicable percentage set forth opposite
such Revolving Lender's name on Part 4 of Exhibit B hereto; as the
same may be modified, amended, restated or supplemented from time
to time; provided that upon an assignment by any Revolving Lender
of any portion of the Revolving Loan, the Initial Percentages shall
be amended to reflect such assignment and upon any reduction in the
amount of the Maximum Revolving Loan, the Percentages shall be
amended to reflect such or reduction.
"Interest Determination Date" shall mean the date,
as designated by Borrower pursuant to Section 2.5 or Section 2.6,
on which a portion of the Revolving Advances or a portion of the
Term Loan shall begin to bear interest at a Fixed Rate.
"Interest Period" shall mean (a) with respect to
any portion of interest on Revolving Advances that Borrower elects
to have bear interest at a Fixed Rate, a period beginning on the
Interest Determination Date and ending, at Borrower's election,
either thirty (30), sixty (60), ninety (90), one hundred twenty
(120), one hundred eighty (180), two hundred seventy (270), or
three hundred sixty (360) days thereafter, (b) with respect to
interest on the Term Loan Tranche A, a period beginning on the
Interest Determination Date and ending, at Borrower's election,
either ninety (90) days, one (1) year, two (2) years, three (3)
years, five (5) years, or seven (7) years thereafter, and (c) with
respect to interest on the Term Loan Tranche B, a period beginning
on the Interest Determination Date and ending, at Borrower's
election, either ninety (90) days, one (1) year, two (2) years,
three (3) years, five (5) years, seven (7) years, or nine and
one-half (9.5) years thereafter.
"IRC" shall mean the Internal Revenue Code of
1986, as amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or
any successor thereto.
"Lenders" shall mean Pacific Coast, CoBank, Bank
of America (in its capacity as a Revolving Lender and as the Swap
Lender), GEECapital, Rabobank, and Bank of Boston so long as each
shall continue to hold any portion of the Revolving Loan, the
Swingline Loan or the Term Loan, and if at any time any of the
foregoing Lenders shall decide to assign or syndicate all or any
portion of the Revolving Loan, the Swingline Loan or the Term Loan,
such term shall include such assignee or such other members of the
syndicate.
"Letter of Credit Bank" shall have the meaning
assigned thereto in Section 2.1(f).
"Letter of Credit Maintenance Fee" shall mean a
fee, calculated and payable in accordance with Section 2.8(e),
equal to one percent (1.00%) per annum on the face amount of the
applicable Letter of Credit; provided, that if, as of the end of
any Fiscal Quarter, commencing with the Fiscal Quarter ending on
December 31, 1996, Borrower's Consolidated Funded Debt to
Consolidated EBITDA Ratio, for the period of such Fiscal Quarter
and the three immediately preceding Fiscal Quarters, calculated on
a rolling basis, is less than 4.00:1, then such fee shall be
reduced from one percent (1.0%) per annum to three-quarters of one
percent (.75%) per annum. Any such reduction to the Letter of
Credit Fee shall become effective as of the third (3rd) Business
Day after Borrower's delivery to Agent of the financial statements
required to be delivered to Agent pursuant to Section 6.1(c)
demonstrating to Agent's reasonable satisfaction Borrower's right
to such reduction. Borrower shall not be entitled to a lower margin
under this definition until after Borrower has delivered to Agent
the quarterly financial statement for the Fiscal Quarter ending
December 31, 1996. Notwithstanding anything to the contrary in the
foregoing, if a Default or Event of Default shall have occurred and
be continuing, then the fee shall be one percent (1.0%), subject to
increase to the Default Rate pursuant to Section 2.7(d).
"Letter of Credit Obligations" shall mean all
outstanding obligations incurred by the Letter of Credit Bank,
Agent or any Revolving Lender at the request of Borrower, whether
direct or indirect, contingent or otherwise, due or not due, in
connection with the issuance or guaranty, by the Letter of Credit
Bank, Agent, any Revolving Lender or another Person, of Letters of
Credit. The amount of such Letter of Credit Obligations at any time
shall equal the maximum amount which may be payable by or due to
the Letter of Credit Bank, Agent or Revolving Lenders thereupon or
pursuant thereto at such time.
"Letters of Credit" shall mean commercial or
standby letters of credit issued at the request and for the account
of Borrower for which Agent, the Letter of Credit Bank, or any
Revolving Lender has incurred Letter of Credit Obligations.
"LIBO Rate" shall mean, for any Interest
Determination Date, the rate offered from time to time for U.S.
Dollar deposits for the Interest Period selected, as quoted by
Telerate News Service on page 3750 recorded as of 11:00 A.M. London
setting time (or, if the page 3750 of the Telerate News Service is
unavailable, the comparable reference on the Reuters Screen LIBOR
Page or such other quotation service as may be chosen by Agent) on
the second full Eurodollar Business Day preceding the beginning of
the Interest Period; provided, that if two or more of such offered
rates appear on Telerate (or on the Reuters Screen LIBOR Page or
alternative service, as the case may be), the "LIBO Rate" shall be
highest of the two rates quoted.
"Lien" shall mean any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien,
charge, claim, security interest or encumbrance, or preference,
priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement perfecting a security
interest under the Code or comparable law of any jurisdiction).
"Loan Documents" shall mean this Agreement, the
Revolving Notes, the Term Notes, the Security Documents, the Third
Amendment Documents, and all other agreements, instruments,
documents, and certificates identified in the Schedule of
Documents, the Third Amendment Schedule, or the Second Restatement
Schedule in favor of Agent or any Lender and including all other
pledges, powers of attorney, consents, assignments, contracts and
agreements whether heretofore, now, or hereafter executed by or on
behalf of Borrower or any of its Affiliates, or any employee of
Borrower or any of its Affiliates, and delivered to Agent or any
Lender in connection with this Agreement, or any previous versions
of this Agreement or the transactions contemplated thereby or
hereby.
"Maintenance Capital Expenditures" shall mean
Capital Expenditures of Borrower and its Subsidiaries for or
relating to (i) facility expenditures for or relating to the
replacement, refurbishing, improvement, or repair of bottling,
fermenting, barrel storage, or crushing assets and any hospitality
facility in existence at the Closing Date or acquired in the
Chateau St. Jean Acquisition or the Stag's Leap Acquisition, (ii)
general vineyard planting, replanting and irrigation capital
expenditures for vineyards owned on the Closing Date, vineyards
acquired with the proceeds of the Newhall Advance, or vineyards
acquired in the Chateau St. Jean Acquisition or the Stag's Leap
Acquisition, including Phylloxera Capital Expenditures, and (iii)
the acquisition, replacement, refurbishing, improvement or repair
of American oak wine barrels used in connection with wineries owned
by Borrower at the Closing Date or acquired in the Chateau St. Jean
Acquisition or the Stag's Leap Acquisition, determined in
accordance with GAAP.
"Material Adverse Effect" shall mean a material
adverse effect on (i) the business, assets, operations, or
financial or other condition of Borrower, (ii) Borrower's ability
to pay the Obligations in accordance with the terms thereof, or
(iii) the Collateral or Agent's or Lenders' Liens on the Collateral
or the priority of any such Lien, or (iv) Agent's and Lenders'
rights and remedies under this Agreement and the other Loan
Documents.
"Maximum Lawful Rate" shall have the meaning
assigned to it in Section 2.7(e).
"Maximum Revolving Indebtedness" shall mean the
lesser of (i) an amount equal to the Maximum Revolving Loan minus
the aggregate amount of Grower Payables then outstanding, and (ii)
the Borrowing Base.
"Maximum Revolving Loan" shall mean One Hundred
Fifty Million Dollars ($150,000,000); provided, that such amount
shall be permanently reduced (i) by any amount paid with respect to
the Revolving Loan pursuant to Sections 2.3(c), 2.3(d) or 2.3(e),
and (ii) to any amount requested by Borrower and approved by Agent
and Lenders pursuant to Section 2.1(l).
"Minimum Payment Amount" shall mean, with respect
to any sale of real property by Borrower an amount equal to (a) if
the principal balance of the Term Loan at the time of sale exceeds
the Base Term Loan Amount, one hundred percent (100%) of the Net
Proceeds from such sale, provided, that such Net Proceeds shall not
be less than ninety-five percent (95%) of the value for such real
property as set forth on the Real Estate Valuation Schedule
previously delivered by Agent to Borrower, and (b) if the principal
balance of the Term Loan at the time of sale is equal to or less
than the Base Term Loan Amount, eighty percent (80%) of the Net
Proceeds from such sale, provided, that such Net Proceeds shall not
be less than eighty percent (80%) of the value for such real
property as set forth on such Real Estate Valuation Schedule.
"Multiemployer Plan" shall mean a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA, and to which
Borrower or any ERISA Affiliate is making, is obligated to make,
has made or been obligated to make, contributions on behalf of
participants who are or were employed by any of them.
"Net Proceeds" shall mean, with respect to any
sale of an asset of Borrower, the proceeds remaining from the sale
of such asset after the payment of Purchase Money Indebtedness
permitted by this Agreement that was secured by the asset sold,
after the payment of all escrow and closing fees, title costs,
broker's commissions, and sales or other excise taxes arising
directly from such sale; provided, that such proceeds shall not be
reduced by the amount of any legal or other professional expenses
(other than brokers' commissions) incurred by Borrower in
connection with such sale or any income or capital gains tax
arising from such sale.
"Newhall Advance" shall mean an advance of Seven
Million Five Hundred Thousand Dollars ($7,500,000) under Term Loan
Tranche B that will be made on the Newhall Advance Date to
facilitate Borrower's acquisition of the Newhall Property, but only
if all conditions precedent for the making thereof shall have been
fulfilled by Borrower.
"Newhall Advance Date" shall mean the date on
which the Newhall Acquisition Agreements shall close, but only if
all conditions precedent for making of the Newhall Advance shall
have been fulfilled by Borrower.
"Newly Acquired Capital Assets" shall mean real
property and equipment acquired by Borrower after the Closing Date
through Non-Maintenance Capital Expenditures, excluding equipment
or fixtures attached to or used in connection with the operation of
a winery or vineyard property subject to a deed of trust in favor
of Agent.
"Non-Funding Lender" shall have the meaning
assigned to it in Section 2.1(b).
"Non-Maintenance Capital Expenditures" shall mean
(a) Capital Expenditures, other than Maintenance Capital
Expenditures, (b) expenditures for current assets purchased in
connection with the purchase of fixed assets consisting of winery
or vineyard property, and (c) expenditures for the purchase of the
stock or other ownership interests in enterprises that own and
operate winery property.
"Notice of Revolving Advance" shall have the
meaning assigned to it in Section 2.1(b).
"Notice of Swingline Advance" shall have the
meaning ascribed to such term in Section 2.1A(b).
"Obligations" shall mean (i) all loans, advances, debts,
liabilities, and obligations, for the performance of covenants,
tasks or duties or for payment of monetary amounts (whether or not
such performance is then required or contingent, or amounts are
liquidated or determinable and whether or not allowed as a claim in
any proceeding referred to in Section 10.1(i) or 10.1(j)) owing by
Borrower to Agent or to Lenders, and all covenants and duties
regarding such amounts, of any kind or nature, present or future,
whether or not evidenced by any note, agreement or other
instrument, arising under any of the Loan Documents and (ii) any
Swap Loss Obligations. This term includes the Revolving Loan, the
Swingline Loan, the Letter of Credit Obligations, the Term Loan,
all principal, interest, Fees, charges, expenses, attorneys' fees
and any other sum chargeable to Borrower under this Agreement or
any of the Loan Documents.
"OSHA" shall mean the Occupational Safety and
Health Act, 29 U.S.C. ss.ss.651, et seq., as amended from time to
time, and the regulations promulgated thereunder.
"Other Lender" shall have the meaning assigned to
it in Section 2.1(b).
"PACA" shall mean the Perishable Agricultural
Commodities Act, 7 U.S.C. ss. 499e(c) (or any successor legislation
thereto), as amended from time to time, and any regulations
promulgated thereunder.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any successor thereto.
"Pension Plan" shall mean an employee pension
benefit plan, as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan), which is not an individual account plan, as
defined in Section 3(34) of ERISA, and which Borrower or, if a
Title IV Plan, any ERISA Affiliate maintains, contributes to or has
an obligation to contribute to on behalf of participants who are or
were employed by any of them.
"Percentage" shall mean, (a) as to each Revolving
Lender with respect to the Revolving Loan and the Letter of Credit
Obligations, the applicable percentage set forth opposite such
Revolving Lender's name on Part 1 of Exhibit B hereto, (b) as to
each Term Lender with respect to the Term Loan, the applicable
percentage set forth opposite such Term Lender's name on Part 2 of
Exhibit B hereto, and (c) as to each Lender with respect to the
Obligations in their entirety, the applicable percentage set forth
opposite such Lender's name on Part 3 of Exhibit B hereto; as each
may be modified, amended, restated or supplemented from time to
time; provided that upon an assignment by any Lender of any portion
of the Revolving Loan or the Term Loan, the Percentages shall be
amended to reflect such assignment and upon the payment or
prepayment of any portion of the Term Loan or upon any reduction in
the amount of the Maximum Revolving Loan, the Percentages shall be
amended to reflect such prepayment or reduction.
"Permitted Encumbrances" shall mean the following
encumbrances: (i) Liens for taxes or assessments or other
governmental Charges or levies, either not yet due and payable or
to the extent that nonpayment thereof is permitted by the terms of
Section 7.2(b); (ii) pledges or deposits securing obligations under
workmen's compensation, unemployment insurance, social security or
public liability laws or similar legislation; (iii) pledges or
deposits securing bids, tenders, contracts (other than contracts
for the payment of money) or leases to which Borrower is a party as
lessee made in the ordinary course of business; (iv) deposits
securing public or statutory obligations of Borrower; (v) inchoate
and unperfected workers', mechanics', suppliers' or similar Liens
arising in the ordinary course of business; (vi) carriers',
warehousemen's, or other similar possessory Liens arising in the
ordinary course of business and securing indebtedness either not
yet due and payable in an outstanding aggregate amount not in
excess of One Hundred Thousand Dollars ($100,000) at any time, or
to the extent that nonpayment thereof is permitted by the terms of
Section 7.2(b); (vii) Producers' Liens, so long as Borrower is not
in default under its agreements with the Producer or Producers
benefitted thereby; (viii) the Liens set forth on the schedule of
permitted liens delivered by Borrower pursuant to the Schedule of
Documents to the extent approved by Agent; (ix) deposits securing,
or in lieu of, surety, appeal or customs bonds in proceedings to
which Borrower is a party; (x) an attachment or judgment Lien, but
only for a period of thirty (30) days following attachment of such
Lien and such attachment or judgment lien shall cease to be a
Permitted Lien if the obligation that it secures has not been
satisfied or bonded during such thirty (30) day period; (xi) zoning
restrictions, easements, licenses, or other restrictions on the use
of real property or other minor irregularities in title (including
leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such real property,
leases or leasehold estates; (xii) encumbrances listed as
exceptions to title in the title policy received by Agent at the
Closing Date, but only to the extent that such encumbrances cover
the particular properties identified in such title policy as being
covered by such encumbrances, and (xiii) security interests
securing Purchase Money Indebtedness in Newly Acquired Capital
Assets to the extent permitted by Section 8.3(b).
"Permitted Swap Transactions" shall mean an
interest rate swap transaction between Borrower and the Swap Lender
pursuant to which Borrower is the fixed rate payer and the Swap
Lender is the floating rate payer (based on one month LIBOR) and
which has the following characteristics:
Swap Period Ending February 1, 2001
Fixed Rate: Not to exceed 7.00%
An initial $10,000,000 commencing March 1, 1998
An additional $30,000,000 commencing January 1, 1999
Swap Period Ending October 1, 2001
Fixed Rate: Not to exceed 7.00% An initial $ 5,000,000
commencing April 1, 1998 An additional $25,000,000
commencing January 1, 1999 An additional $20,000,000
commencing February 1, 2001
Swap Period Ending January 1, 2002
Fixed Rate: Not to exceed 7.00% An initial $10,000,000
commencing April 1, 1998 An additional $10,000,000
commencing January 1, 1999 An additional $20,000,000
commencing February 1, 2001
"Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, entity or government (whether federal, state, county,
city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Phylloxera Capital Expenditures" shall mean, for
any period, the sum of expenditures required to be capitalized
under GAAP for or relating to vineyard expenditures on
phylloxera-infested acreage.
"Plan" shall mean, with respect to Borrower or any
ERISA Affiliate, at any time, an employee benefit plan, as defined
in Section 3(3) of ERISA, which Borrower maintains, contributes to
or has an obligation to contribute to on behalf of participants who
are or were employed by any of them.
"Prime Rate" shall mean the "Prime" rate as
published from time to time in the Eastern Edition of The Wall
Street Journal, regardless of whether such rate is actually charged
by any bank, or, in the event that The Wall Street Journal ceases
publication of such rate, in such other nationally recognized
financial publication of general circulation as Agent may, from
time to time, designate in writing based on Agent's reasonable
determination that the rate so published is comparable to the
"Prime" rate published in the Eastern Edition of The Wall Street
Journal.
"Producer" shall mean any producer of any
agricultural product that sells any product which is grown by him
and which is subject to a producer's lien pursuant to Article 9
(commencing with Section 55631), Chapter 6, Division 20 of the
California Food and Agricultural Code, as now in effect or
hereafter amended.
"Producers' Liens" shall mean (i) liens in favor
of Producers arising pursuant to Article 9 (commencing with Section
55631), Chapter 6, Division 20 of the California Food and
Agricultural Code, as now in effect or hereafter amended, and (ii)
liens under California Civil Code Section 3051 of which Borrower
has received notice as provided in California Civil Code Section
3051a.
"Projections" shall mean the projections referred
to in Section 5.7.
"Purchase Money Indebtedness" means Indebtedness
incurred solely for the purchase of Newly Acquired Capital Assets;
provided that such Indebtedness is secured by purchase money Liens
on such assets, such Liens do not extend to or cover any assets of
Borrower or any Subsidiary other than such Newly Acquired Capital
Asset or a group of related Newly Acquired Capital Assets, and such
Liens secure the obligation to pay the purchase price and
acquisition costs of such Newly Acquired Capital Asset and interest
thereon only, such Indebtedness is incurred at the time of
acquisition of such Newly Acquired Capital Asset, and the fair
market value of the Newly Acquired Capital Assets so secured is at
least equal to the amount of the Indebtedness secured thereby.
"Qualified Plan" shall mean an employee pension
benefit plan, as defined in Section 3(2) of ERISA, which is
intended to be tax-qualified under Section 401(a) of the IRC, and
which Borrower or any ERISA Affiliate maintains, contributes to or
has an obligation to contribute to on behalf of participants who
are or were employed by any of them.
"Reference Rate" shall mean the rate of interest
publicly announced from time to time by Bank of America in San
Francisco as its Reference Rate, or such other rate of interest as
Bank of America in San Francisco may hereafter announce as the
substitute for its Reference Rate.
"Regulatory Change" shall mean, with respect to
any Lender, any change after the Closing Date in federal, state, or
foreign law or regulations (including Regulation D) or the adoption
or making after such date of any interpretation, directive or
request applying to a class of lenders including such Lender of or
under any Federal, state, or foreign law or regulations (whether or
not having the force of law and whether or not failure to comply
therewith would be unlawful) by any court or governmental or
monetary authority charged with the interpretation or
administration thereof.
"Reportable Event" shall mean any of the events
described in Section 4043(b)(1), (2), (3), (5), (6), or (9) of
ERISA.
"Requisite Lenders" shall mean any combination of
both (a) Lenders holding Percentages of the Revolving Loan of
sixty-six and two-thirds percent (66.66%) or more and (b) Lenders
holding Percentages of the Term Loan of sixty-six and two-thirds
percent (66.66%) or more.
"Restricted Payment" shall mean (i) the
declaration of a payment of any dividend or the occurrence of any
liability to make any other payment or distribution of cash or
other property or assets in respect of Borrower's Stock, (ii) any
payment on account of the purchase, redemption or other retirement
of Borrower's Stock or any other payment or distribution made in
respect thereof, either directly or indirectly, or (iii) any
payment, loan, contribution, or other transfer of funds or other
property to any Stockholder of Borrower except for reasonably
equivalent value.
"Retiree Welfare Plan" shall refer to any Welfare
Plan providing for continuing coverage or benefits for any
participant or any beneficiary of a participant after such
participant's termination of employment, other than continuation
coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the
participant.
"Revolving Advance" shall have the meaning
ascribed to such term in Section 2.1(a).
"Revolving Lenders" shall mean Pacific Coast,
CoBank, Bank of America, GE Capital, Rabobank, and Bank of Boston,
or any other Lender that holds a Percentage of the Revolving Loan,
but only in its capacity as the holder of such interest.
"Revolving Loan" shall mean the aggregate amount
of Revolving Advances outstanding at any time.
"Revolving Loan Maturity Date" shall mean January
16, 2001; provided, that if the Obligations shall become due and
payable in accordance with Section 10.2 or any other provision of
this Agreement, then the Revolving Loan Maturity Date shall be the
date on which the Obligations become due and payable.
"Revolving Note" shall mean any promissory notes
or similar instrument delivered by Borrower to any Revolving Lender
evidencing at any time any portion of the Revolving Loan.
"Schedule of Accounts" shall mean a schedule,
containing such information regarding accounts receivable of
Borrower as Agent shall reasonably request, delivered by Borrower
to Lender from time to time pursuant to the terms of this Agreement
or as and when requested by Agent.
"Schedule of Documents" shall mean the schedule,
including all appendices, exhibits or schedules thereto, listing
certain documents and information to be delivered in connection
with the Loan Documents and the transactions contemplated
thereunder, substantially in the form attached hereto as Exhibit C
as supplemented and amended by the Third Amendment Schedule in the
form attached hereto as Exhibit C-1 and the Second Restatement
Schedule attached hereto as Exhibit C-2.
"Schedule of Inventory" a schedule, containing
such information regarding inventory of Borrower as Agent shall
reasonably request, delivered by Borrower to Lender from time to
time pursuant to the terms of this Agreement or as and when
requested by Agent.
"Second Amendment" shall mean that certain Second
Amendment to Second Amended and Restated Credit Agreement dated as
of October 24, 1997 between Borrower, Lenders, and Agent.
"Second Restatement Closing Date" shall mean the
date on which the modifications set forth in this Agreement shall
become effective, which shall be on or about the date set forth on
the first page of this Agreement.
"Second Restatement Schedule" shall mean the
schedule, including all appendices, exhibits or schedules thereto,
listing certain documents and information to be delivered on or in
connection with the Second Restatement Closing Date and the
transactions contemplated thereunder, in the form attached hereto
as Exhibit C-2.
"Second Restatement Stock" shall mean the shares
of common Stock in Borrower issued to BWEH for the purchase price
of Five Million Dollars ($5,000,000), of which ninety percent (90%)
shall be issued by the Second Restatement Closing Date and ten
percent (10%) shall be issued by the earlier of (i) March 31, 1997,
or (ii) the Newhall Advance Date.
"Security Documents" shall mean (i) all security
agreements and other similar documents delivered by Borrower to
Agent pursuant to which Borrower or any Guarantor grants to Agent a
security interest in, assignment of, or lien upon any property of
Borrower or such Guarantor, (ii) all trademark assignments and
other similar documents delivered by Borrower to Agent pursuant to
which Borrower or any Guarantor grants to Agent a security interest
in, assignment of, or lien upon any trademark or other intellectual
property of Borrower or such Gurantor, (iii) all deeds of trust in
which Borrower is the trustor and Agent the Beneficiary and which
have been delivered by Borrower to Agent, and (iv) any other
document pursuant to which Borrower or any Affiliate of Borrower
has granted or shall grant to Agent or to any Lender a security
interest in or Lien upon any property to secure any of the
Obligations, including all amendments, modifications and
supplements thereto.
"Solvent" shall mean, when used with respect to
any Person, that:
(i) the present fair salable value of such
Person's assets is in excess of the total amount of such
Person's liabilities;
(ii)such Person is able to pay its debts as they
become due; and
(iii)such Person does not have unreasonably small
capital to carry on such Person's business as theretofore
operated and all businesses in which such Person is about
to engage.
"SPAC" shall mean Silverado Partners Acquisition
Corp., a California corporation, and its successors and assigns.
"Special Prepayment" shall mean: (a) a prepayment
of proceeds received from sale or other disposition of a Fixed
Asset, (b) a prepayment of proceeds received from an equity
investment in common or preferred Stock of Borrower, and (c) if
Borrower requests Lenders to approve a proposed transaction which,
if consummated, would create an Event of Default solely under
Section 10.1(l) and Lenders decline to approve such a request, thus
rendering it necessary for Borrower to seek alternative financing
in order to consummate such transaction, then a repayment in full
of the Obligations from such alternative financing shall constitute
a Special Prepayment so long as the repayment occurs within three
(3) months of such request.
"Special Real Property" shall mean those parcels
of real property identified in Exhibit F.
"Spill" shall have the meaning ascribed to such
term in Section 5.26.
"Stag's Leap Advance" shall mean an advance of
Five Million Dollars ($5,000,000) under Term Loan Tranche B that
will be made on the Second Restatement Closing Date to facilitate
Borrower's acquisition of the Stag's Leap Assets.
"Stock" shall mean all shares, options, warrants,
general or limited partnership interests, participations or other
equivalents (regardless of how designated) of or in a corporation,
partnership or equivalent entity whether voting or nonvoting,
including, without limitation, common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1
of the General Rules and Regulations promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934,
as amended).
"Stock Acquisition" shall have the meaning
ascribed to such term in Recital A.
"Stockholder" shall mean each holder of Stock of
Borrower.
"Subject Property" shall have the meaning assigned
to it in Section 9.1.
"Subordinated Debt" shall mean any obligation that
is subordinated in right or time of payment to all or any portion
of the Obligations, the terms of which must be reasonably
satisfactory to Agent and all Lenders.
"Subsidiary" shall mean, with respect to any
Person, (i) any corporation of which an aggregate of more than 50%
of the outstanding Stock having ordinary voting power to elect a
majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or
classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time,
directly or indirectly, owned legally or beneficially by such
Person and/or one or more Subsidiaries of such Person, or with
respect to which any such Person has the right to vote or designate
the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or otherwise and (ii) any partnership, trust,
limited liability company, or other entity in which such Person
and/or one or more Subsidiaries of such Person shall have an
interest (whether in the form of voting or participation in profits
or capital contribution) of more than 50% or of which any such
Person is a general partner or may exercise the powers of a general
partner, excluding Calcork, a California general partnership.
"Swap Agreement" shall mean the ISDA Master
Agreement, with accompanying schedules, confirmations, instruments,
and other documents entered into between Borrower and the Swap
Lender on, about, or after the date of the Second Amendment.
"Swap Lender" shall mean Bank of America.
"Swap Loss Adjustment Date" shall have the meaning
assigned to it in Section 2.20(b).
"Swap Loss Certificate" shall mean a certificate
delivered from the Swap Lender to Agent setting forth the Final
Swap Loss Amount.
"Swap Loss Obligations" shall mean any and all
obligations and liabilities of Borrower to the Swap Lender under
the Swap Agreement with respect to Permitted Swap Transactions,
whether voluntary or involuntary, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether
or not presently due and owing.
"Swingline Advance" shall have the meaning
ascribed to such term in Section 2.1A(a).
"Swingline Lender" shall mean Pacific Coast, in
its capacity as a Lender, but only in its capacity as the holder of
such interest.
"Swingline Loan" shall mean the aggregate amount
of all Swingline Advances outstanding at any time.
"Taxes" shall have the meaning assigned to it in
Section 2.13(a).
"Termination Date" shall mean the date on which
(i) the Revolving Loan, the Swingline Loan and the Term Loan and
any other Obligations under this Agreement have been completely
discharged and Borrower shall have no further right to borrow any
amounts under this Agreement, and (ii) Borrower shall have funded
the amounts required, if any, under the Loan Documents into the
Cash Collateral Account in respect of the Letter of Credit
Obligations, if any, then outstanding.
"Term Lenders" shall mean Pacific Coast, CoBank,
and any other Lender that holds a Percentage of the Term Loan, in
its capacity as a holder of such interest.
"Term Loan" shall mean a loan, consisting of Term
Loan Tranche A and Term Loan Tranche B, made by Term Lenders to
Borrower on the Closing Date in the original principal amount of
One Hundred Sixty Million Dollars ($160,000,000), which was
subsequently (i) increased to One Hundred Seventy Million Dollars
($170,000,000) on the Third Amendment Closing Date, (ii) increased
to One Hundred Eighty-Two Million Five Hundred Thousand Dollars
($182,500,000) on the Second Restatement Closing Date (of which
Five Million Dollars ($5,000,000) was advanced on the Second
Restatement Closing Date and of which Seven Million Five Hundred
Thousand Dollars ($7,500,000) was advanced on the Newhall Closing
Date), and (iii) decreased by a special principal payment of Six
Million Dollars ($6,000,000) on the First Amendment Closing Date.
"Term Loan Maturity Date" shall mean July 16,
2005; provided, that if the Obligations shall become due and
payable in accordance with Section 10.2 or any other provision of
this Agreement, then the Term Loan Maturity Date shall be the date
on which the Obligations become due and payable.
"Term Loan Tranche A" shall mean a portion of the
original principal amount of the Term Loan equal to Twenty Million
Dollars ($20,000,000), but reduced by a special principal payment
of Six Million Dollars ($6,000,000) on the First Amendment Closing
Date.
"Term Loan Tranche B" shall mean that portion of
the principal amount of the Term Loan not within the scope of Term
Loan Tranche A, which meant that the amount thereof (i) was, on the
Closing Date, One Hundred Forty Million Dollars ($140,000,000),
(ii) was, on the Third Amendment Closing Date, One Hundred Fifty
Million Dollars ($150,000,000), and (iii) was, on the Second
Restatement Closing Date, One Hundred Fifty-Five Million Dollars
($155,000,000), but increased to One Hundred Sixty-Two Million Five
Hundred Thousand Dollars ($162,500,000) on the Newhall Advance
Date.
"Term Note" shall mean any promissory notes or
similar instrument delivered by Borrower to any Term Lender
evidencing at any time any portion of the Term Loan.
"Texas Pacific Group" shall mean TPG Partners,
L.P., a Delaware limited partnership and TPG Parallel I, L.P., a
Delaware limited partnership.
"Third Amendment" shall mean the Third Amendment
to Credit Agreement dated as of April 1, 1996 among Borrower,
Lenders and Agent.
"Third Amendment Closing Date" shall mean the date
the Third Amendment was executed by the Borrower, Lenders and Agent
and delivered to the Agent.
"Third Amendment Documents" shall mean the Third
Amendment and all other agreements, instruments, documents, and
certificates identified in the Third Amendment Schedule in favor of
Agent or any Lender and including all other pledges, powers of
attorney, consents, assignments, contracts and agreements whether
heretofore, now, or hereafter executed by or on behalf of Borrower
or any of its Affiliates, or any employee of Borrower or any of its
Affiliates, and delivered to Agent or any Lender in connection with
the Third Amendment or the transactions contemplated thereby.
"Third Amendment Schedule" shall mean the
schedule, including all appendices, exhibits or schedules thereto,
listing certain documents and information to be delivered in
connection with the Third Amendment and the transactions
contemplated thereunder, in the form attached hereto as Exhibit
C-1.
"Title IV Plan" shall mean a Pension Plan, other
than a Multiemployer Plan, which is covered by Title IV of ERISA.
"Unfunded Pension Liability" shall mean, at any
time, the aggregate amount, if any, of the sum of (i) the amount by
which the present value of all accrued benefits under each Title IV
Plan exceeds the fair market value of all assets of such Title IV
Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent valuation date for each
such Title IV Plan using the actuarial assumptions in effect under
such Title IV Plan, and (ii) for a period of five (5) years
following a transaction reasonably likely to be covered by Section
4069 of ERISA, the liabilities (whether or not accrued) that could
be avoided by Borrower or any ERISA Affiliate as a result of such
transaction.
"Variable Rate" shall mean a floating rate of
interest equal to the higher of (i) Prime Rate, or (ii) the
Reference Rate.
"Welfare Plan" shall mean any welfare plan, as
defined in Section 3(1) of ERISA, which is maintained or
contributed to by Borrower.
"Winery Real Property" shall mean any real
property owned by Borrower or any Subsidiary on which a winery is
located or which is contiguous to or integrally related to any real
property on which a winery is located.
"Withdrawal Liability" shall mean, at any time,
the aggregate amount of the liabilities, if any, pursuant to
Section 4201 of ERISA, and any increase in contributions pursuant
to Section 4243 of ERISA with respect to all Multiemployer Plans.
1.2 Accounting Terms. Any accounting term used in this
Agreement shall have, unless otherwise specifically provided
herein, the meaning customarily given such term in accordance with
GAAP, and all financial computations hereunder shall be computed,
unless otherwise specifically provided herein, in accordance with
GAAP consistently applied. That certain terms or computations are
explicitly modified by the phrase "in accordance with GAAP" shall
in no way be construed to limit the foregoing.
1.3 Certain Matters of Construction. The words "herein,"
"hereof," "hereto," "hereunder," and other words of similar import
refer to this Agreement as a whole, including the Exhibits and
Schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section,
subsection or clause contained in this Agreement. Any reference to
a "Section," "Exhibit," or "Schedule" shall refer to the relevant
Section or, Exhibit, or Schedule to this Agreement, unless
specifically indicated to the contrary. Wherever from the context
it appears appropriate, each term stated in either the singular or
plural shall include the singular and plural, and pronouns stated
in the masculine, feminine or neuter gender shall include the
masculine, feminine or neuter. The term "including" shall not be
limiting or exclusive, unless specifically indicated to the
contrary. The term "real property" shall include vines and trees
affixed to such real property but shall not include crops,
including wine grapes, grown or growing on such property.
ARTICLE II.
AMOUNT AND TERMS OF CREDIT
2.1 Revolving Advances.
(a) Revolving Lenders Will Make Advances
Available. Upon and subject to the terms and conditions hereof, the
Revolving Lenders agree to make available, from time to time, until
the Revolving Loan Maturity Date, for Borrower's use and upon the
request of Borrower therefor, advances (each, a "Revolving
Advance") that shall not exceed, in the aggregate together with all
Letter of Credit Obligations and all then outstanding advances
under the Swingline Loan, the Maximum Revolving Indebtedness. The
amount of any Revolving Advance shall be not less than One Million
Dollars ($1,000,000) and shall be in integral multiples of One
Hundred Thousand Dollars ($100,000).
(b) Requests for Advances. If Borrower desires to
receive a Revolving Advance, Borrower shall deliver a notice to
Agent substantially in the form of Exhibit D no later than 2:00
p.m. (California time) on the second Business Day prior to the date
of the proposed Revolving Advance. Each such notice (a "Notice of
Revolving Advance") shall be from an Authorized Financial
Representative. Agent and Revolving Lenders shall be entitled to
rely upon and shall be fully protected under this Agreement in
relying upon any Notice of Revolving Advance reasonably believed by
Agent to be genuine. Agent shall deliver notice of its receipt of
the Notice of Revolving Advance to each Revolving Lender on or
before 11:00 a.m. (California time) on the Business Day prior to
the date of the proposed Revolving Advance, and each of the other
Revolving Lenders shall wire its Initial Percentage of such
Revolving Advance to the Disbursement Account (with notice to Agent
that such wire has been made) on or before 11:00 a.m. (California
time) on the date of the proposed Revolving Advance. Upon the close
of business on the date of the proposed Revolving Advance, the
funds in the Disbursement Account shall be made available to
Borrower by the bank at which the Disbursement Account is held,
unless such bank shall have been instructed by Agent to withhold
such funds, which instructions Agent may deliver if Agent has
determined that Borrower has failed to fulfill the applicable
conditions set forth in Article IV. All notices delivered pursuant
to this Section 2.1(b) shall be delivered by facsimile to the
facsimile number set forth in Section 13.12 or to such other
facsimile number as a party hereto shall designate in writing
pursuant to the provisions of Section 13.12. The failure of any
Revolving Lender (such Revolving Lender, a "Non-Funding Lender") to
make any Revolving Advance to be made by it on the date specified
therefor shall not relieve any other Revolving Lender ("Other
Lender") of its obligation to make its Revolving Advance on such
date, but neither any Other Lender nor Agent shall be responsible
for the failure of any Non-Funding Lender to make an Advance to be
made by such Non-Funding Lender.
(c) Maturity Date for Revolving Loan. The
Revolving Loan shall mature and shall become due and payable in
full on the Revolving Loan Maturity Date.
(d) Revolving Line of Credit. The Revolving Loan
is a revolving line of credit and Borrower may borrow, repay
principal, and reborrow in accordance with the terms of this
Agreement; provided that Borrower shall provide Agent with one (1)
day's advance notice of any repayment. Repayments of principal
shall be in integral multiples of One Hundred Thousand Dollars
($100,000).
(e) Reliance on Borrowing Base Certificate.
Borrower agrees that in making any Revolving Advance or incurring
any Letter of Credit Obligations hereunder Agent and Revolving
Lenders shall be entitled to rely upon the most recent Borrowing
Base Certificate delivered to Agent by Borrower. Borrower further
agrees that Agent and Revolving Lenders shall be under no
obligation to make any Revolving Advance or incur any Letter of
Credit Obligations until such time as Borrower shall have delivered
a current Borrowing Base Certificate to Agent and Revolving Lenders
by the time required by Section 6.1(a).
(f) Availability of Letters of Credit. Borrower
may from time to time request that Revolving Lenders make a Letter
of Credit available to Borrower upon the terms and conditions set
forth in this Agreement; provided that no letter of credit may be
issued for purposes of payment of workers compensation insurance
premiums, and provided that the format of the Letter of Credit and
the identity of the beneficiary are reasonably acceptable to the
issuing bank. Upon and subject to the terms and conditions hereof,
Revolving Lenders shall make available to Borrower such Letter of
Credit. Borrower shall request the issuance of a Letter of Credit
by written notice to Agent not less than five (5) Business Days
prior to the requested date of issuance; provided, that Borrower
shall not request a Letter of Credit and Revolving Lenders shall
not cause the issuance of a Letter of Credit if doing so would
cause the aggregate amount of all Letter of Credit Obligations at
any one time outstanding (whether or not then due and payable) to
exceed Ten Million Dollars ($10,000,000) or if the issuance of such
Letter of Credit would cause the aggregate of all Letter of Credit
Obligations and the Revolving Loan to exceed the lesser of (i) an
amount equal to the Maximum Revolving Loan minus the aggregate
amount of Grower Payables outstanding from time to time, or (ii)
the Borrowing Base; and provided further, that no Letter of Credit
shall have an expiry date which is later than (x) three hundred
sixty-five (365) days following the date of issuance thereof, or
(y) the Revolving Loan Maturity Date. Bank of America shall be
issuer of all Letters of Credit; provided, that the Revolving
Lenders may by unanimous vote at any time select another Revolving
Lender to be such issuer, whereupon such other Revolving Lender
shall be the issuer of all Letter of Credit issued after such
selection (the issuer being the "Letter of Credit Bank"). At the
time of each request by Borrower that a Letter of Credit be issued,
the Letter of Credit Bank, at its option, may require Borrower to
execute and deliver to the Letter of Credit Bank an application for
such Letter of Credit in the form customarily prescribed by the
Letter of Credit Bank to issue Letters of Credit (the
"Applications") or such other documents as the Letter of Credit
Bank may reasonably require with respect to the issuance of such
Letters of Credit. This Agreement supersedes any terms of the
Applications which are inconsistent with the terms hereof,
including terms relating to the reimbursement of draws, payment of
fees, and defaults.
(g) Draw or Other Payment on Letters of Credit. In
the event that the Letter of Credit Bank, Agent or any Revolving
Lender shall make any payment on or pursuant to any Letter of
Credit Obligation (the "Draw Amount"), such Draw Amount shall be
deemed to immediately constitute a Revolving Advance. Borrower
shall, within two (2) Business Days of being notified by Agent or
such Revolving Lender of the Draw Amount, pay to Agent for the
benefit of the Letter of Credit Bank an amount equal to the Draw
Amount, together with interest on the Draw Amount at the Variable
Rate (or, if applicable, the Default Rate) from the date of payment
by the Letter of Credit Bank to the date of the payment by
Borrower. If Borrower fails to make the required payment to the
Letter of Credit Bank, then each Revolving Lender shall upon the
request of Agent make a payment to the Letter of Credit Bank of its
Percentage of the Draw Amount and its Percentage of interest on the
Draw Amount. Such payment shall be considered a purchase by such
Revolving Lenders from the Letter of Credit Bank of their
Percentages of the Draw Amount, and interest thereon, and such
payment shall neither increase nor decrease the amounts owed by
Borrower hereunder.
(h) Letters of Credit Outstanding on the Revolving
Loan Maturity Date. In the event that any Letter of Credit
Obligation, whether or not then due or payable, shall for any
reason be outstanding on the Revolving Loan Maturity Date, Borrower
will either (i) cause the underlying Letter of Credit to be
returned and canceled and Letter of Credit Bank's corresponding
Letter of Credit Obligation to be terminated, or (ii) pay to Agent,
for the benefit of Revolving Lenders, cash in an amount equal to
the maximum amount then available to be drawn under the Letter of
Credit. Such cash shall be held by Agent in a cash collateral
account (the "Cash Collateral Account") which shall be in the name,
sole dominion and control of Agent (as a cash collateral account)
for the benefit of Revolving Lenders and subject to the terms of
this Section 2.1. Borrower agrees to execute and deliver to Agent
such documentation with respect to the Cash Collateral Account as
Agent may request, and Borrower hereby pledges and grants to Agent
a security interest in all such cash held in the Cash Collateral
Account from time to time and all interest thereon and the proceeds
thereof, as additional security for the payment of all amounts due
in respect of the Letter of Credit Obligations, whether or not then
due.
(i) Application of Funds in Cash Collateral
Account. From time to time after cash is deposited in the Cash
Collateral Account, Agent may apply such cash then held in the Cash
Collateral Account to the payment of any amounts, in such order as
Agent may elect, as shall be or shall become due and payable by
Borrower to the Letter of Credit Bank or to Revolving Lenders.
(j) Withdrawal of Funds in Cash Collateral
Account. Neither Borrower nor any Person claiming on behalf of or
through Borrower shall have any right to withdraw any of the cash
held in the Cash Collateral Account, except that upon the
termination of any Letter of Credit Obligation in accordance with
its terms and the payment of all amounts payable by Borrower to
Agent, the Letter of Credit Bank, and Revolving Lenders in respect
thereof, any funds remaining in the Cash Collateral Account in
excess of the then remaining Letter of Credit Obligations and any
other outstanding Obligations to Agent, the Letter of Credit Bank,
or Revolving Lenders shall be returned to Borrower.
(k) No Obligation to Invest Funds in Cash
Collateral Account. Neither Agent nor any other Person shall have
any obligation to invest any cash deposited in the Cash Collateral
Account or to deposit any such cash in an interest-bearing account.
(l) Voluntary Reduction of Maximum Revolving Loan.
Borrower may, at any time upon ten (10) days prior notice to Agent
and the Lenders, permanently reduce the Maximum Revolving Loan to
an amount determined by Borrower; provided, that (a) such reduction
shall be ineffective if and to the extent that the Requisite Term
Lenders reasonably determine that such reduction would impair the
ability of Borrower to make regularly scheduled payments of
interest or principal under the Term Loan, and (b) in no event may
Borrower reduce the Maximum Revolving Loan below One Hundred
Fifteen Million Dollars ($115,000,000).
2.1A Swingline Loan.
(a) Swingline Lender Will Make Advances Available.
Upon and subject to the terms and conditions hereof, the Swingline
Lender agrees to make available, from time to time, until the
eighth (8th) Business Day preceding the Revolving Loan Maturity
Date, for Borrower's use and upon the request of Borrower therefor,
advances (each, a "Swingline Advance") under the Swingline Loan;
provided that a Swingline Advance shall not be available to the
extent that such Swingline Advance would either (i) cause the
aggregate amount of all then outstanding Swingline Advances to
exceed Ten Million Dollars ($10,000,000), or (ii) cause the
aggregate amount of Swingline Advances, together with all then
outstanding advances under the Revolving Loan and all Letter of
Credit Obligations, to exceed the Maximum Revolving Indebtedness.
The amount of any Swingline Advance shall be not less than One
Hundred Thousand Dollars ($100,000) and shall be in integral
multiples of One Hundred Thousand Dollars ($100,000).
(b) Requests for Swingline Advances. If Borrower
desires to receive a Swingline Advance, Borrower shall deliver a
notice to Agent substantially in the form of Exhibit I no later
than 10:00Ea.m. (California time) on the Business Day on which
Borrower desires to receive the proposed Swingline Advance. Each
such notice (a "Notice of Swingline Advance") shall be from an
Authorized Financial Representative. Notwithstanding the foregoing,
Agent and the Swingline Lender may, in their sole discretion,
decide to permit Borrower to request a Swingline Advance by
telephone subject to such procedures as Agent and Swingline Lender
shall determine. Agent and the Swingline Lender shall be entitled
to rely upon and shall be fully protected under this Agreement in
relying upon any Notice of Swingline Advance, or any telephone
request for a Swingline Advance, reasonably believed by Agent and
the Swingline Lender to be genuine.
(c) Repayment of Swingline Loan. The Swingline
Loan is a revolving line of credit and Borrower may borrow, repay
principal, and reborrow in accordance with the terms of this
Agreement; provided that Borrower shall provide Agent with notice
of any repayment prior to 10:00 a.m. on the date of repayment.
Repayments of principal shall be in integral multiples of One
Hundred Thousand Dollars ($100,000). If any Swingline Advance has
not been repaid within seven days after such Swingline Advance was
made to Borrower, the amount of such Swingline Advance may, in the
sole discretion of Agent, be transferred from the Swingline Loan to
the Revolving Loan. If the Revolving Loan Maturity Date shall
occur, the then outstanding amount of the Swingline Loan shall
automatically be transferred from the Swingline Loan to the
Revolving Loan. If an Event of Default shall occur, the then
outstanding amount of the Swingline Loan may, in the sole
discretion of Agent, be transferred from the Swingline Loan to the
Revolving Loan. Any amounts transferred from the Swingline Loan to
the Revolving Loan shall thereafter bear interest at the Variable
Rate; provided that Borrower may subsequently elect to convert the
interest rate to a Fixed Rate for a period selected by Borrower in
accordance with the provisions of Section 2.5(c). If any amounts
are transferred from the Swingline Loan to the Revolving Loan, each
Revolving Lender shall wire its Initial Percentage of such amounts
to Agent within one (1) Business Day of being notified by Agent of
such transfer and such amounts shall be disbursed by Agent to the
Swingline Lender.
(d) Swingline Loan Interest Rate. Swingline Loan
advances hereunder shall bear interest on a daily basis at the
"Overnight Rate"; provided that if an Event of Default shall occur
and be continuing, then the Swingline Loan shall bear interest at a
rate of interest that is three percent (3%) per annum higher than
the Overnight Rate. The "Overnight Rate" shall be whatever rate the
Swingline Lender shall from time to time quote to Borrower as being
the Overnight Rate. Such rate shall be set by the Swingline Lender
in its sole discretion. Such rate shall change as of any particular
Business Day if the Swingline Lender notifies Borrower of the rate
change by 12:00 noon on such Business Day and, if not, on the
following Business Day. A change in the Overnight Rate shall apply
to amounts then outstanding under the Swingline Loan as well as to
future advances.
2.2 Term Loan.
(a) Advance of Term Loan. Upon and subject to the
terms and conditions hereof, each Term Lender advanced to Borrower
on the Closing Date such Term Lender's Percentage of the Term Loan.
On the Closing Date, the aggregate amount of all such advances from
all Term Lenders equalled One Hundred Sixty Million Dollars
($160,000,000). Upon and subject to the terms and conditions
hereof, each Term Lender advanced to Borrower on the Third
Amendment Closing Date such Term Lender's Percentage of an
additional Ten Million Dollar advance under the Term Loan. On the
Third Amendment Closing Date, the aggregate amount of all such
advances from all Term Lenders equalled One Hundred Seventy Million
Dollars ($170,000,000). Each Term Lender agrees that (i) on the
Second Restatement Closing Date, the maximum amount available to be
borrowed under the Term Loan shall increase by Twelve Million Five
Hundred Thousand Dollars ($12,500,000) from One Hundred Seventy
Million Dollars ($170,000,000) to One Hundred Eighty-Two Million
Five Hundred Thousand Dollars ($182,500,000), (ii) on the Second
Restatement Closing Date, each Term Lender shall advance to
Borrower its Term Lender's Percentage of the Five Million Dollars
($5,000,000) Stag's Leap Advance, at which time the aggregate
amount of all such advances from all Term Lenders shall equal One
Hundred Seventy-Five Million Dollars ($175,000,000), and (iii) on
the Newhall Advance Date, if the Newhall Advance Date shall occur,
each Term Lender shall advance to Borrower its Term Lender's
Percentage of the Seven Million Five Hundred Thousand Dollars
($7,500,000) Newhall Advance, at which time the aggregate amount of
all such advances from all Term Lenders shall equal One Hundred
Eighty-Two Million Five Hundred Thousand Dollars ($182,500,000).
(b) Term Notes. The Term Loan made by Term Lenders
to Borrower shall be evidenced by the Term Notes to be executed and
delivered by Borrower at the Second Restatement Closing Date. The
Term Notes shall represent the obligation of Borrower to pay the
Term Loan.
(c) Term Loan Interest and Principal Payments;
Amortization. On the First Amendment Closing Date, Borrower shall
pay to Agent, for the benefit of Term Lenders, a special principal
prepayment of Six Million Dollars ($6,000,000) which shall be
applied by Term Lenders to Term Loan Tranche A. Borrower shall pay
to Agent, for the benefit of Term Lenders, interest on the Term
Loan on a quarterly basis, in arrears, commencing on April 1, 1996,
and continuing on the first Business Day of each Fiscal Quarter
thereafter until the Termination Date; provided, that, commencing
on April 1, 1998, Borrower shall pay to Agent quarterly
installments of principal and interest, which principal and
interest amounts shall be determined as of such date and shall
approximate the equal amortization of principal and interest based
on the weighted average of the Fixed Rates in effect as of such
date over a period of eighteen and one-half (18.5) years from and
including such date, (ii) with respect to One Hundred Fifty Million
Dollars ($150,000,000) of Term Loan Tranche B, from and after the
first anniversary of the Closing Date commencing April 1, 1997,
Borrower shall pay to Agent quarterly installments of principal
determined in accordance with Exhibit H (subject to adjustment if
there is a reamortization pursuant to Section 2.2(d)), and all
interest accrued thereon, amortized over a period of nineteen and
one-half (19.5) years from the first (1st) anniversary of the
Closing Date; and (iii) with respect to the remainder of Term Loan
Tranche B, commencing July 1, 1997, Borrower shall pay to Agent
quarterly installments of principal and interest, which principal
and interest amounts shall be determined as of such July 1, 1997
date and shall approximate the equal amortization of principal and
interest based on the weighted average of the Fixed Rates in effect
as of such date, amortized over a period of nineteen and
one-quarter (19.25) years from the Second Restatement Closing Date;
and provided, further, that all unpaid principal, accrued interest
and other amounts evidenced by the Term Notes shall be due and
payable in full on the Term Loan Maturity Date.
(d) Application of Prepayments on Term Loan. All
mandatory and other prepayments applied to the Term Loan pursuant
to Sections 2.3(c), (d), and (e) and 2.4 or any other provision of
this Agreement shall be applied by Agent first to Term Loan Tranche
A until all principal, interest, and other amounts owing thereunder
shall have been paid in full. (Prepayments received prior to April
1, 1999 shall be applied first to that portion of Term Loan Tranche
A referred to in clause (i) of Section 2.2(c) and then to that
portion of Term Loan Tranche A referred to in clause (ii) of
Section 2.2(c). Prepayments received on or after April 1, 1999
shall be applied pro-rata between that portion of Term Loan Tranche
A referred to in clause [i] of Section 2.2(c) and that portion of
Term Loan Tranche A referred to in clause (ii) of Section 2.2(c).)
After full payment of Term Loan Tranche A, all such prepayments
shall be applied to Term Loan Tranche B until all principal,
interest, and other amounts owing thereunder shall have been paid
in full. (Prepayments shall be applied pro-rata between that
portion of Term Loan Tranche B referred to in clause (iv) of
Section 2.2(c) and that portion of Term Loan Tranche B referred to
in clause (iii) of Section 2.2(c).) Except as otherwise provided
below, all such prepayments applied to principal under the Term
Loan shall be applied in inverse order of maturity, shall not
reduce the amount of any future installment of principal provided
for under Section 2.2(c) (other than the payment due upon maturity
of the Term Loan or, if such final installment has already been
prepaid, the most remote remaining scheduled principal payment),
and shall constitute a permanent reduction of the Term Loan.
Notwithstanding the immediately preceding sentence, if (i) Term
Loan Tranche A has been paid in full, (ii) Agent has received a
prepayment on Term Loan Tranche B which, when taken together with
all previous prepayments applied to Term Loan Tranche B, results in
an aggregate prepayment of not less than Twenty Million Dollars
($20,000,000), and (iii) no Default or Event of Default has
occurred and is continuing, then, upon Borrower's written request
in connection with such prepayment of any additional prepayment of
Term Loan Tranche B, Agent shall, on a one-time basis, without
premium or fee, reamortize the then remaining principal balance
under Term Loan Tranche B in equal, quarterly installments of
principal and interest over the original nineteen and one-half
(19.5) year amortization period, less the portion of such
amortization period that has elapsed since the amortization
commenced on the first anniversary after the Closing Date. Borrower
shall have the right to designate the various Fixed Rate portions
to which prepayments on the Term Loan shall be applied and, in the
absence of such designation, shall be applied to the Fixed Rate
portions maturing soonest.
2.3 Mandatory Prepayments; Application Thereof.
(a) Mandatory Prepayment of Revolving Loan and
Letter of Credit Obligations. If at any time, the outstanding
balance of the Revolving Loan, when aggregated with the amount of
outstanding Letter of Credit Obligations and the then outstanding
amount of the Swingline Loan, shall exceed the amount of the
Maximum Revolving Indebtedness, Borrower shall immediately repay to
Agent the outstanding Revolving Loan in the amount of such excess.
No prepayment fee shall be payable with respect to any mandatory
prepayment under this Section 2.3(a). All mandatory prepayments
under this Section 2.3(a) shall be applied by Agent to the
Obligations owing to the Revolving Lenders in accordance with their
respective Initial Percentages.
(b) Intentionally Omitted.
(c) Mandatory Prepayment from Sales of Assets. If
at any time Borrower sells or otherwise disposes of real property
in amounts permitted by Section 8.9(b) of this Agreement, Borrower
shall immediately pay to Agent the Minimum Payment Amount with
respect to such sale or disposition. Except for such permitted
sales of real property and except for the proceeds of equipment
being traded in or replaced in the ordinary course of business, if
at any time Borrower sells or otherwise disposes of any Fixed
Assets, or sells or otherwise disposes of any assets other than
Fixed Assets outside of the ordinary course of Borrower's business,
Borrower shall immediately pay to Agent all of the Net Proceeds of
such sale or other disposition. In addition to the foregoing, if at
the end of one hundred eighty (180) days after disposition of a
Fixed Asset by Borrower, Lenders have released to Borrower
aggregate proceeds from sales of Fixed Assets in an amount that
exceeds by Twenty Million Dollars ($20,000,000) the amount of such
proceeds subsequently invested by Borrower in "Productive Assets"
(defined as assets used by Borrower in the same type of business
that Borrower is engaged in on the Closing Date), then a mandatory
prepayment shall be due from Borrower to Agent in the amount of
such excess, to be applied to either the Term Loan or the Revolving
Loan as designated by Borrower. All mandatory prepayments under
this Section 2.3(c) from the sale or other disposition of any Fixed
Assets shall be applied by Agent to the Term Loan in the manner
provided in Section 2.2(d). All mandatory prepayments under this
Section 2.3(c) from the sale or other disposition of any assets
other than Fixed Assets shall be applied by Agent to the Revolving
Loan. Such amounts received by Revolving Lenders shall constitute a
permanent reduction in the Maximum Revolving Loan.
(d) Mandatory Prepayment from Issuance of
Additional Indebtedness or Equity. If at any time after the Closing
Date Borrower incurs any additional Indebtedness for borrowed
money, other than Purchase Money Indebtedness, or issues any
additional Stock (other than the Second Restatement Stock),
Borrower shall immediately pay to Agent all proceeds of such
incurrence or issuance. All mandatory prepayments under this
Section 2.3(d) shall be distributed by Agent to Revolving Lenders
and Term Lenders based on their Initial Percentages of the
Obligations. Amounts received by Term Lenders pursuant to this
Section 2.3(d) shall constitute a permanent reduction of the Term
Loan as provided in Section 2.2(d). Amounts received by Revolving
Lenders shall constitute a permanent reduction in the Maximum
Revolving Loan.
(e) Mandatory Prepayment Upon Payment of
Subordinated Debt. If at any time Borrower shall make or tender any
payment on account of the principal portion of any Subordinated
Debt that is not approved in writing by Agent, Borrower shall make
a mandatory prepayment to Agent, for the benefit of Revolving
Lenders and Term Lenders, in the amount of, and consisting of, such
payment or tendered payment. Such prepayment shall be distributed
by Agent to Revolving Lenders and Term Lenders based on their
Percentages of the Obligations. Amounts received by Term Lenders
pursuant to this Section 2.3(e) shall constitute a permanent
reduction of the Term Loan as provided in Section 2.2(d). Amounts
received by Revolving Lenders pursuant to this Section 2.3(e) shall
constitute a permanent reduction in the Maximum Revolving Loan.
2.4 Other Prepayments.
(a) Prepayment in Full. Borrower shall have the
right at any time to voluntarily prepay the entire amount of the
outstanding Revolving Loan, the outstanding Swingline Loan and the
entire amount of the outstanding Term Loan and to terminate this
Agreement upon at least three (3) Business Days notice to Agent,
without premium or penalty except Borrower shall pay to Agent, for
the benefit of Term Lenders, a prepayment surcharge calculated in
accordance with Section .3 or Section 2.4(d), and shall pay to
Agent for the benefit of Revolving Lenders a prepayment surcharge
calculated in accordance with Section 2.4(d). Prepayment in full
shall be accompanied by the payment of all accrued and unpaid
interest and all Fees and other remaining Obligations, including,
Borrower making arrangements, in accordance with the terms and
conditions of Section 2.1(h), for satisfaction with respect to any
outstanding Letter of Credit Obligation.
(b) Partial Prepayment of Term Loan. Borrower
shall have the right at any time to voluntarily prepay any portion
of the Term Loan upon at least three (3) Business Days notice to
Agent, without premium or penalty, except that Borrower shall pay
to Agent, for the benefit of Term Lenders, a prepayment surcharge
calculated in accordance with Section 2.4(c) if the prepayment is a
Special Prepayment, and shall pay to Agent for the benefit of Term
Lenders a prepayment surcharge calculated in accordance with
Section 2.4(d) if the prepayment is a General Prepayment. All
voluntary partial prepayments of the Term Loan shall be applied by
Agent in the manner provided in Section 2.2(d).
(c) Prepayment Surcharge for Special Prepayments.
At the time that Borrower makes any Special Prepayment, whether
such Special Prepayment is voluntary on behalf of Borrower or
mandatory under the terms of this Agreement, Borrower shall
simultaneously pay to Agent, for the benefit of Term Lenders and
Revolving Lenders, a prepayment surcharge for each Fixed Rate
portion so prepaid calculated as follows:
(i) For each Fixed Rate portion
of the Term Loan:
(A) Calculate the difference between (1) the annual
rate the Term Lenders allocated (in accordance
with their standard methodology) on the Interest
Determination Date to fund the amount being
prepaid, and (2)the annual rate the Term Lenders
ould allocate (in accordance with such
methodology) on the date of such prepayment to
und a new advance in such amount for the remainder
of the Interest Period for such Fixed Rate
portion. If the difference is negative, no
repayment surcharge is payable.
(B) Divide the result in (A) above by four (4);
(C) For each quarter or portion thereof during which
the amount prepaid was scheduled to have been
outstanding, however, in no such instance beyond
the remaining Interest Period for such Fixed Rate
portion, multiply the amount determined in (B)
above by the amount prepaid (such that there is a
quarterly calculation for each quarter during the
remaining Interest Period for such Fixed Rate
portion);
(D) Determine the present value of each quarterly
calculation made under (C) above, based upon the
scheduled time that interest on the amount prepaid
would have been payable during the remaining
Interest Period for such Fixed Rate portion and a
discount rate equal to the rate set forth in
(A)(2) above;
(E) Add all of the calculations made under (D) above.
The result is the prepayment surcharge; and
(ii) For each Fixed Rate portion
of the Revolving Loan, the prepayment surcharge shall
be equal to any funding losses incurred by Lenders as
a result of such prepayment, including any loss or expense
arising from the redeployment of funds.
(d) Prepayment Surcharge for General Prepayment.
At the time that Borrower makes any General Prepayment, whether
such General Prepayment is voluntary on behalf of Borrower or
mandatory under the terms of this Agreement, Borrower shall
simultaneously pay to Agent, for the benefit of Term Lenders and/or
Revolving Lenders, as the case may be, a prepayment surcharge for
each Fixed Rate portion of the Term Loan and the Revolving Loan so
prepaid, calculated as follows:
(i) For each Fixed Rate portion of
the Term Loan, the
prepayment surcharge shall equal the sum of the respective
present values of such portion for each calendar quarter
or portion of a calendar quarter remaining from the date
of such prepayment until the expiration of the applicable
Interest Period based on the sum of the Formula Yield in
effect on the date of such prepayment plus one-half
percent (.50%), and treating each portion of a calendar
quarter as an entire quarter; and
(ii) For each Fixed Rate portion
of the Revolving
Loan, the prepayment surcharge shall be equal to any
funding losses incurred by Lenders as a result of such
prepayment, including any loss or expense arising from the
redeployment of funds.
2.5 Interest on Revolving Advances.
(a) Variable Rate. Revolving Advances hereunder
shall bear interest at the Variable Rate, unless Borrower elects to
convert the interest rate to a Fixed Rate for the period selected
by Borrower in accordance with the provisions of Section 2.5(c).
(b) Intentionally Omitted.
(c) Fixed Rate for Revolving Loan. Borrower may,
from time to time, elect to convert all or a portion of the
outstanding Revolving Advances to a Fixed Rate; provided, that (i)
at least four (4) Business Days prior to the proposed Interest
Determination Date, Borrower has provided Agent with written notice
of such election, the requested Interest Determination Date, the
amount of the Revolving Advances to be converted, and the requested
Interest Period for the amount to be converted, (ii) at the time of
delivery of such written notice and upon the date of conversion, no
Default or Event of Default exists under this Agreement, (iii) at
no time shall there be more than ten (10) outstanding tranches of
the Revolving Loan bearing interest at a Fixed Rate, (iv) the last
day of the Interest Period chosen by Borrower shall not extend
beyond the Revolving Loan Maturity Date, and (v) the amount
converted to a Fixed Rate at any one time shall be not less than
One Million Dollars ($1,000,000) and any amounts in excess thereof
shall be in integral multiples of One Hundred Thousand Dollars
($100,000). Whenever Borrower shall notify Agent of an election
pursuant to this Section 2.5(c), Agent shall so notify each
Revolving Lender at least three (3) Business Days prior to the
proposed Interest Determination Date. Any election by Borrower
pursuant to this Section 2.5(c) shall be irrevocable during the
Interest Period selected by Borrower, and that portion of the
Revolving Loan so converted shall bear interest at the applicable
Fixed Rate until the expiration of the applicable Interest Period
at which time, unless another Fixed Rate has been duly elected by
Borrower pursuant to this Section 2.5(c), the interest rate for
such portion of the Revolving Loan will automatically convert to
the Variable Rate.
(d) Reduction in Margin Applicable to Fixed Rate
Elections for Revolving Loan. On and after the date set forth
below, the margin applicable to the Fixed Rate shall be adjusted on
a quarterly basis in the manner and to the extent provided in this
Section 2.5(d). If, as of the end of any Fiscal Quarter, commencing
with the Fiscal Quarter ending on March 31, 1998, Borrower's
Consolidated Funded Debt to Consolidated EBITDA Ratio, for the
period of such Fiscal Quarter and the three immediately preceding
Fiscal Quarters, calculated on a rolling basis, falls within any of
the levels listed below, then the margin applicable to the Fixed
Rate for the next Fiscal Quarter shall be adjusted, in the manner
set forth below, to the applicable margin for such level listed
below:
<TABLE>
<CAPTION>
Consolidated Funded Debt Applicable
to Consolidated EBITDA Ratio Level Margin
<S> <C> <C> <C>
4.00:1 or greater 1.375%
3.75:1 or greater, but less than 4.00:1 1.250%
3.25:1 or greater, but less than 3.75:1 1.125%
2.75:1 or greater, but less than 3.25:1 0.875%
2.25:1 or greater, but less than 2.75:1 0.625%
Less than 2.25:1 0.500%
</TABLE>
The first ratio shall be determined for the four quarters ending
with the Fiscal Quarter ending on March 31, 1998 and shall be
determined on the third (3rd) Business Day after Borrower's
delivery to Agent of the financial statements for such Fiscal
Quarter required to be delivered to Agent pursuant to Section
6.1(c). Thereafter, any change to the applicable margin shall
become effective as of the third (3rd) Business Day after
Borrower's delivery to Agent of the financial statements required
to be delivered to Agent pursuant to Section 6.1(c) demonstrating
to Agent's reasonable satisfaction Borrower's right to such changed
applicable margin. Notwithstanding anything to the contrary in the
foregoing, if a Default or Event of Default shall have occurred and
be continuing on either the date that Borrower elects to convert a
portion of the Revolving Loan to a Fixed Rate or upon the Interest
Determination Date, then Borrower shall have no right to elect a
Fixed Rate. If Borrower is nonetheless permitted to elect a Fixed
Rate, Borrower shall not be entitled to any reduction in the
applicable margin otherwise available under this Section 2.5(d).
2.6 Interest on Term Loan.
(a) Fixed Rates for Term Loan. The Term Loan shall
bear interest at a Fixed Rate, as elected by Borrower in accordance
with the terms of this Agreement. Prior to the First Amendment
Closing Date, Borrower provided Agent with written notice of the
Interest Periods elected by Borrower for the Term Loan. The
designations made by Borrower are irrevocable and portions of the
Term Loan so designated shall continue to bear interest at the
applicable Fixed Rate selected by Borrower until the expiration of
the applicable Interest Period; provided that, effective upon the
First Amendment Closing Date and continuing through expiration of
the applicable Interest Period, the applicable Fixed Rate for each
of the following Interest Periods shall be reduced by the amount
set forth below:
<TABLE>
<CAPTION>
Ending Date of Interest Period Reduction
<S> <C> <C> <C>
January 16, 1998 0.450%
February 28, 1998 0.424%
April 1, 1998 0.390%
January 16, 1999 0.320%
April 1, 1999 0.350%
January 16, 2001 0.380%
January 16, 2003 0.430%
</TABLE>
For example, if the Fixed Rate applicable to the Interest Period
ending on January 16, 1998 was 7.95%, such Fixed Rate would be
reduced upon the First Amendment Closing Date to 7.50%.
(b) Designation of Fixed Rates. At least five (5)
Business Days prior to the expiration of any Interest Period chosen
by Borrower with respect to a portion of the Term Loan, Borrower
shall provide Agent with written notice of the subsequent Interest
Period elected by Borrower for that portion of the Term Loan.
Subsequent elections shall be subject to the following conditions:
(i) Borrower may designate no more than four (4) separate Interest
Periods for Term Loan Tranche A, and no more than six (6) separate
Interest Periods for Term Loan Tranche B, (ii) the last day of an
Interest Period chosen by Borrower shall not extend beyond the Term
Loan Maturity Date, and (iii) the amount of each portion of the
Term Loan designated for an Interest Period shall be in amounts
reasonably acceptable to Agent. The designations made by Borrower
pursuant to this Section 2.6(b) shall be irrevocable during the
Interest Period selected by Borrower and any portion of the Term
Loan so designated shall bear interest at the applicable Fixed Rate
until the expiration of the applicable Interest Period. If Borrower
shall not have designated an Interest Period by the fifth (5th)
Business Day required by the first sentence of this Section 2.6(b),
then, subject to Section 2.6(c), Borrower shall be deemed to have
designated an Interest Period of ninety (90) days for the
applicable portion of the Term Loan; provided; that if the Term
Loan Maturity Date is less than ninety days (90) after such date,
then Agent shall select a shorter Interest Period. The Fixed Rates
for Interest Periods shall be as follows: (i) as to any ninety (90)
day Interest Period, the Discount Rate as of the date of such
election plus the applicable margin listed below, and (ii) as to
any one year, two year, three year, five year, or seven year
Interest Period, the Cost of Funds Rate applicable to such Interest
Period plus the applicable margin listed below:
<TABLE>
<CAPTION>
Interest Period Applicable Margin
<S> <C> <C>
90 days 1.500%
one year 1.575%
two years 1.550%
three years 1.575%
five years 1.625%
seven years 1.625%
</TABLE>
or such lower Fixed Rates, if any, to which Borrower may be
entitled pursuant to Section 2.6(c).
(c) Reduction in Margin Applicable to Fixed Rate
Elections for Term Loan. The margin applicable to each Fixed Rate
shall be adjusted on a quarterly basis in the manner and to the
extent provided in this Section 2.6(c). If, as of the end of any
Fiscal Quarter, Borrower's Consolidated Funded Debt to Consolidated
EBITDA Ratio, for the period of such Fiscal Quarter and the three
immediately preceding Fiscal Quarters, calculated on a rolling
basis, falls within any of the levels listed below, then the margin
applicable to each of the available Fixed Rates selected pursuant
to Section 2.6(b) for the next Fiscal Quarter shall be adjusted in
the manner set forth below to the applicable margin for such Fixed
Rate for such level listed below:
<TABLE>
Consolidated Funded Debt to Interest Periods &
Consolidated EBITDA Ratio Levels Applicable Margins
================================ -------------- --------------- -------------- ----------------- ================
5 or 7
<CAPTION>
90 Day 1 Year 2 Year 3 Year Year
================================ -------------- --------------- -------------- ----------------- ================
<S> <C> <C> <C> <C> <C> <C>
3.50 OR GREATER, BUT LESS THAN 1.375% 1.45% 1.425% 1.45% 1.50%
3.75:1
================================ -------------- --------------- -------------- ----------------- ================
3.25:1 or greater, but less 1.25% 1.325% 1.30% 1.325% 1.375%
than 3.50:1
================================ -------------- --------------- -------------- ----------------- ================
2.75:1 or greater, but less 1.00% 1.075% 1.05% 1.075% 1.125%
than 3.25:1
================================ -------------- --------------- -------------- ----------------- ================
2.25:1 or greater, but less .75% .95% .925% .95% 1.005%
than 2.75:1
================================ ============== =============== ============== ================= ================
Less than 2.25:1 .625% .825% .80% .825% .875%
</TABLE>
================================ ============== =============== =
The ratio shall change as of the third (3rd) Business Day after
Borrower's delivery to Agent of the financial statements required
to be delivered to Agent pursuant to Section 6.1(c).
Notwithstanding anything to the contrary in the foregoing, (i)
changes in the ratios and applicable margins described above during
any Interest Period shall not affect the Fixed Rate for such
Interest Period during such Interest Period, and (ii) if a Default
or Event of Default shall have occurred and be continuing on the
date that Borrower designates an Interest Period or on the Interest
Determination Date, Borrower shall not be entitled to the reduction
provided for by this Section 2.6(c).
(d) No Designation Upon Occurrence of a Default or
Event of Default. If a Default or Event of Default shall have
occurred, then during the continuance of such Default or Event of
Default Borrower shall have no right to designate an Interest
Period. Any portion of a Term Loan covered by an Interest Period
that expires during the continuance of a Default or an Event of
Default shall bear interest after such expiration at the Default
Rate until such time, if any, as such Default shall cease to exist
or such Event of Default shall be waived or cured and Borrower
shall make a subsequent designation of an Interest Period in
accordance with the terms of this Agreement.
2.7 Other Interest Provisions.
(a) Interest Payment Dates. Interest shall be due
and payable on the first day of each calendar quarter, commencing
April 1, 1996, with respect to all interest accrued on the
Revolving Loan, the Swingline Loan and the Term Loan during the
preceding calendar quarter; provided, that if any Interest Period
shall mature prior to the first day of a calendar quarter, then
interest accrued at a Fixed Rate during the particular Interest
Period shall be due and payable upon expiration of the Interest
Period. Interest accrued on the Revolving Loan and the Swingline
Loan but not otherwise due and payable on the Revolving Loan
Maturity Date shall become due and payable on the Revolving Loan
Maturity Date. Interest accrued on the Term Loan but not otherwise
due and payable on the Term Loan Maturity Date shall become due and
payable on the Term Loan Maturity Date.
(b) Payments Due on Business Days. If any
installment of interest or any other amount payable under any Loan
Document becomes due and payable on a day other than a Business
Day, the payment date for such payment shall be extended to the
next succeeding Business Day and, with respect to payments of
principal or other payments that bear interest (other than interest
first due on such date), interest thereon shall be payable at the
then applicable rate during such extension; provided, however, if
any installment of interest relating to (i) Revolving Advances that
have been converted to a Fixed Rate or (ii) the Term Loan, shall
become due and payable on a Saturday, the payment date for such
payment shall be the preceding Business Day.
(c) Computation of Interest. All computations of
interest on the Term Loan shall be made by Agent on the basis of a
three hundred sixty (360) day year, based on four (4) equal
quarterly periods. All computations of interest on the Revolving
Loan accruing at the Fixed Rate shall be made by Agent on the basis
of a three hundred sixty (360) day year, based on the actual number
of days occurring in the period for which such interest is payable.
All computations of interest on the Revolving Loan accruing at the
Variable Rate or on the Swingline Loan shall be made by Agent on
the basis of a three hundred sixty five (365) day year, in each
case for the actual number of days occurring in the period for
which such interest is payable. Interest determined by reference to
a floating rate (i.e., the Variable Rate, the Overnight Rate
applicable to the Swingline Loan, or such portions of the Default
Rate bearing interest at a floating rate) shall be determined on a
daily basis for use in calculating the interest that is payable for
such day, and any change in the applicable rate shall become
effective on the day such change occurs. Each determination by
Agent of an interest rate hereunder, or by the Swingline Lender
with respect to the Swingline Loan, shall be conclusive and binding
for all purposes, absent manifest error or bad faith.
(d) Default Rate. Any overdue principal of or
interest with respect to any Revolving Advance, or the Term Loan,
and the amount of any fees, costs, or expenses that Borrower is
obligated to pay to Agent or any Lender under this Agreement or any
Loan Document not paid when due, shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the
Default Rate. In addition, upon and after the occurrence of an
Event of Default and continuing until such Event of Default has
been cured or waived in writing by Agent in accordance with the
terms of this Agreement, interest shall accrue on the Obligations
(other than Swap Loan Obligations prior to the Swap Loss Adjustment
Date) at the Default Rate. The interest rate increase to the
Default Rate shall take effect immediately upon the occurrence of
an Event of Default, without prior notice to Borrower.
(e) Interest Not to Exceed Maximum Lawful Rate.
Notwithstanding anything to the contrary set forth in this
Agreement, if at any time until payment in full of all of the
Obligations, the rate of interest payable hereunder exceeds the
highest rate of interest permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem
applicable hereto (the "Maximum Lawful Rate"), then in such event
and so long as the Maximum Lawful Rate would be so exceeded, the
rate of interest payable hereunder shall be equal to the Maximum
Lawful Rate; provided, that if at any time thereafter the rate of
interest payable hereunder is less than the Maximum Lawful Rate,
Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by (i)
Revolving Lenders from the making of the Revolving Loan or
incurring the Letter of Credit Obligations hereunder, (ii) the
Swingline Lender from the making of the Swingline Loan hereunder,
and (iii) Term Lenders from making the Term Loan hereunder, is
equal to the total interest which such Lenders would have received
had the interest rate payable hereunder been (but for the operation
of this Section 2.7(e)) the interest rate payable since the Closing
Date. Thereafter, the interest rate payable hereunder shall be the
rate of interest set forth herein, unless and until the rate of
interest again exceeds the Maximum Lawful Rate, in which event this
paragraph shall again apply. In no event shall the total interest
received by Lenders pursuant to the terms hereof exceed the amount
which Lenders could lawfully have received had the interest due
hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. In the event the Maximum Lawful Rate is calculated
pursuant to this Section 2.7(e), such interest shall be calculated
at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made. In
the event that a court of competent jurisdiction, notwithstanding
the provisions of this Section 2.7(e), shall make a final
determination that Lenders have received interest hereunder or
under any of the Loan Documents in excess of the Maximum Lawful
Rate, Revolving Lenders, the Swingline Lender, and Term Lenders
shall, respectively, to the extent permitted by applicable law,
promptly apply such excess first to any interest due and not yet
paid under the Revolving Loan and Letter of Credit Obligations, the
Swingline Loan, and the Term Loan, then to the outstanding
principal of the Revolving Loan, the Swingline Loan, and the Term
Loan (without premium or penalty), and then to Fees and any other
unpaid Obligations and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise
order.
(f) Additional Fixed Rate Provisions. If at any
time Agent reasonably determines that for any reason adequate and
reasonable means do not exist for ascertaining the LIBO Rate or the
LIBO Rate generally becomes unavailable to Agent or to any Lender,
Agent shall promptly give notice thereof to Borrower, and upon the
giving of such notice, no new Fixed Rate may be selected by
Borrower, until Agent is reasonably able to ascertain the LIBO Rate
and Agent shall promptly notify Borrower at such time; provided,
that Agent's determination under this Section 2.7(f) as to Borrower
shall be in accordance with its treatment of other borrowers under
commercial loans generally. In the event that any law, treaty,
rule, regulation, or determination of a court or governmental
authority or any change therein or in the interpretation or
application thereof or compliance by Agent with any request or
directive (whether or not having the force of law) from any central
bank or governmental authority:
(i) shall subject Agent or any
Lender to any tax of
any kind whatsoever with respect to any LIBO Rate, or change the
basis of taxation of payments to any Lender of principal, interest
or any other amount payable under any Loan Document (except for
changes in the rate of tax on the overall net income of a Lender);
or
(ii) shall impose, modify or hold
applicable any
reserve, special deposit, compulsory loan, or similar requirement
against assets held by, or deposits or other liabilities in or for
the account of, advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of any Lender; or
(iii) shall impose on any Lender
any other condition;
and the result of any of the foregoing is to increase the cost to
such Lender of making, renewing, or maintaining any portion of the
Revolving Loan or Term Loan with interest rates tied to the LIBO
Rate and/or to reduce any amount receivable by any Lender in
connection therewith;
then in any such case, Borrower shall pay to such Lender,
immediately upon demand, such amount or amounts as may be necessary
to compensate such Lender for any additional costs incurred by such
Lender and/or reductions in amounts received by such Lender which
are attributable to LIBO Rates made available to Borrower
hereunder. In determining which costs incurred by a Lender and/or
reductions in amounts received by a Lender are attributable to such
LIBO Rates, any reasonable allocation made by such Lender among its
operations shall be conclusive and binding upon Borrower; provided,
that such Lender's determination under this Section 2.7(f) as to
Borrower is in accordance with its treatment of other borrowers
under commercial loans generally.
(g) Adjustment of Interest Rate Margins Upon
Receipt of Annual Audited Statement. Notwithstanding any other
provision of this Agreement, if an adjustment to any margin
applicable to the determination of any interest under this
Agreement was made based on a quarterly financial statement for a
quarter ending on DecemberE31 of any year, and the audited
financial statement when delivered shows that Borrower did not
qualify for such adjusted margin, then the margin shall immediately
be adjusted retroactively back to the date of adjustment to the
level for which Borrower qualifies based on such audited financial
statement and Borrower shall be assessed by Agent for interest
accrued at the difference between the rates and Borrower shall pay
such difference to Agent upon demand.
2.8 Fees. In addition to the other Fees listed in this
Agreement, Borrower shall pay to Agent the following Fees:
(a) Commitment Fee. Upon the Closing Date,
Borrower paid to Agent for the benefit of Lenders a commitment fee
in the amount of Three Million Dollars ($3,000,000) and upon the
Third Amendment Closing Date, Borrower paid to Agent for the
benefit of Lenders a subsequent commitment fee in the amount of One
Hundred Twenty Thousand Dollars ($120,000). On the Second
Restatement Closing Date, Borrower shall pay to Agent for the
benefit of Lenders a commitment fee of Eighteen Thousand Seven
Hundred Fifty Dollars ($18,750) and an amendment fee of One Hundred
Sixty Thousand Dollars ($160,000). The foregoing fees shall be
distributed among Agent and Lenders as they shall agree. Borrower
shall have no part in determining how such fees are distributed
among Lenders and Agent.
(b) Agency Fee. To compensate Agent for serving as
Agent under this Agreement and under the Security Documents,
Borrower shall pay to Agent for its own account (i) a periodic fee
in an amount and at the times set forth in a letter of even date
from Agent to Borrower or in such other subsequent letters as may
be entered into between Agent and Borrower, commencing on the
Closing Date and continuing until the Termination Date and (ii)
such fees as were or may be negotiated between Agent and Borrower
and set forth in separate agreements and which were paid to or are
payable to Agent on the Third Amendment Closing Date, on the Second
Restatement Closing Date, and on any future amendments of
modifications of this Agreement or any Loan Documents
(collectively, the "Agency Fee").
(c) Facility Fee. Upon the Closing Date, Borrower
was obligated to pay to Agent for the benefit of Lenders a loan
application fee (the "Facility Fee") in the amount of One Million
Five Hundred Thousand Dollars ($1,500,000). The Facility Fee was to
be paid directly to Agent from the initial Revolving Advance made
on the Closing Date. Agent and Lenders agreed to waive the full
amount of the Facility Fee due to delivery by Borrower and the
Guarantors to Agent and Lenders on the Closing Date a waiver, in
form and substance satisfactory to Agent and Lenders, of the
"borrower's rights" provisions of the Farm Credit Act of 1971, as
amended.
(d) Unused Commitment Fee. In consideration of the
commitment made by Revolving Lenders and the Swingline Lender under
this Agreement, from and after the Closing Date and until the
Revolving Loan Maturity Date, Borrower shall pay to Agent, for the
benefit of Revolving Lenders and the Swingline Lender, a quarterly
unused commitment fee (the "Unused Commitment Fee") equal to
three-tenths of one percent (.30%) per annum of the average daily
amount by which the Maximum Revolving Loan exceeds the outstanding
balance of the Revolving Loan plus the outstanding Letter of Credit
Obligations plus the Swingline Loan; provided, that the Unused
Commitment Fee shall be subject to reduction as provided below. If,
as of the end of any Fiscal Quarter, commencing with the Fiscal
Quarter ending March 31, 1998, Borrower's Consolidated Funded Debt
to Consolidated EBITDA Ratio, for the period of such Fiscal Quarter
and the three immediately preceding Fiscal Quarters, calculated on
a rolling basis, falls within any of the levels listed below, then
the Unused Commitment Fee for the next Fiscal Quarter shall be
adjusted in the manner set forth below to the percentage for such
level listed below:
<TABLE>
<CAPTION>
Consolidated Funded Debt to Unused
Consolidated EBITDA Ratio Level Commitment Fee
<S> <C> <C> <C>
4.00:1 or greater .300%
3.75:1 or greater, but less than 4.00:1 .275%
3.25:1 or greater, but less than 3.75:1 .250%
2.75:1 or greater, but less than 3.25:1 .200%
2.25:1 or greater, but less than 2.75:1 .175%
Less than 2.25:1 .150%
</TABLE>
The first ratio shall be determined for the four quarters ending
with the Fiscal Quarter ending on March 31, 1998 and shall be
determined on the third (3rd) Business Day after Borrower's
delivery to Agent of the financial statements for such Fiscal
Quarter required to be delivered to Agent pursuant to Section
6.1(c). Thereafter, any change to the Unused Commitment Fee shall
become effective as of the third (3rd) Business Day after
Borrower's delivery to Agent of the financial statements required
to be delivered to Agent pursuant to Section 6.1(c) demonstrating
to Agent's reasonable satisfaction Borrower's right to such changed
applicable margin. Notwithstanding anything to the contrary in the
foregoing, if a Default or Event of Default shall have occurred and
be continuing on the date that Borrower would otherwise be entitled
to a reduction in the Unused Commitment Fee, then the Unused
Commitment Fee shall remain or become three-tenths of one percent
(.30%) per annum. The Unused Commitment Fee shall be paid to Agent
on (i) the fifth day of each calendar quarter with respect to the
previous calendar quarter, and (ii) the Revolving Loan Maturity
Date, with respect to the period from the last full calendar
quarter through the Revolving Loan Maturity Date. Notwithstanding
the foregoing, if an adjustment to the amount of the Unused
Commitment Fee is made based on a quarterly financial statement for
a quarter ending on the last day of any Fiscal Year, and the
audited financial statement when delivered shows that Borrower did
not qualify for such adjustment, then the Unused Commitment Fee
shall immediately be adjusted retroactively back to the date of
adjustment to the level for which Borrower qualifies based on such
audited financial statement and Borrower shall be assessed by Agent
for the difference between the rates and Borrower shall pay such
difference to Agent upon demand. The Swingline Lender shall be
entitled to receive the "Swingline Portion" (as defined later in
this Section 2.8(d)) of the Unused Commitment Fee and the Revolving
Lenders shall be entitled to receive the balance. The "Swingline
Portion" of the Unused Commitment Fee is equal to the applicable
per annum percentage (which is initially three-tenths of one
percent (.30%), but which may be reduced as set forth earlier in
this Section 2.8(d)) of the average daily amount by which Ten
Million Dollars ($10,000,000) exceeds the outstanding balance of
the Swingline Loan.
(e) Letter of Credit Fee. Borrower shall pay to
Agent, for the account of Revolving Lenders, the Letter of Credit
Maintenance Fee (calculated on the basis of a 360 day year and
actual days elapsed), on the face amount of all outstanding Letter
of Credit Obligations, payable in arrears (i) for the preceding
calendar quarter, on first Business Day of the succeeding calendar
quarter, and (ii) on the Revolving Loan Maturity Date. Upon the
occurrence and during the continuance of an Event of Default, the
Letter of Credit Maintenance Fee shall be increased to the Default
Rate, and shall be payable upon demand by Agent. The Letter of
Credit Maintenance Fee shall be allocated as follows: one-quarter
percent (.25%) per annum shall be due to the Letter of Credit Bank
and the balance of the Letter of Credit Maintenance Fee shall be
allocated to each Revolving Lender (including the Letter of Credit
Bank) in accordance with each Revolving Lender's Percentage of the
Revolving Loans.) In addition to the above, Borrower shall pay to
the Letter of Credit Bank, or shall reimburse Agent and Revolving
Lenders for, all customary fees and charges of the Letter of Credit
Bank or like party in connection with the issuance, administration,
amendment, negotiation or payment of any Letter of Credit.
(f) Fees Cumulative and Non-Refundable. All Fees
payable under any Loan Document shall be cumulative and all Fees
shall be considered fully earned on the date of payment and shall
not be refundable under any circumstances.
2.9 Purchase of Farm Credit Stock. On the Closing Date,
Borrower shall purchase One Thousand Dollars ($1,000) of stock in
Pacific Coast Farm Credit Services, ACA and shall execute and
deliver to Pacific Coast Farm Credit Services, ACA such documents
as are reasonably necessary to consummate such purchase. The
purchase price for the stock shall be paid directly from the
initial Revolving Advance made on the Closing Date.
2.10 Receipt of Payments. Borrower shall make each payment
under this Agreement not later than 10:30 A.M. (California time) on
the day when due in lawful money of the United States of America by
wire transfer of immediately available funds to the Collection
Account. Borrower shall have advised Agent in writing of each
payment being made by Borrower no later than 2:00Ep.m. (California
time) on the Business Day prior to the date of making of such
payment. For purposes of computing interest and fees and
determining the amount of funds available for borrowing by Borrower
pursuant to Article II, payments of immediately available funds by
wire transfer deposited in the Collection Account not later than
10:30 a.m. (California time) (and for which Agent has received
notice prior to the making of such payment) shall be deemed
received by Agent upon that Business Day. If payment shall be
deposited later than 10:30 a.m. (California time) on any particular
Business Day (or if Agent was not given prior notice of the payment
by 2:00 p.m. (California time) on the Business Day preceding the
date of payment), such payment shall be deemed received on the
following Business Day. If Agent, in its sole discretion,
determines to accept from Borrower payment by checks, drafts, or
similar non-cash items, payment shall be deemed received by Agent
two (2) Business Days after notice to Agent and deposit of such
payment in the Collection Account.
2.11 Application and Allocation of Payments Prior to the
Occurrence of an Event of Default.
(a) Application of Payments. Borrower irrevocably
waives the right to direct the application of any and all payments
at any time or times hereafter received by Agent or Lenders from or
on behalf of Borrower, and Borrower irrevocably agrees that Agent
and Lenders shall have the continuing exclusive right to apply any
and all such payments against the then due and payable Obligations
of Borrower as Agent and Lenders may deem advisable.
(b) Allocation of Payments. Agent shall allocate
among the Lenders payments received from Borrower in the following
manner:
(i) payments of Obligations that
are owed to Agentshall be retained by Agent;
(ii) payments of Obligations other
than principal and
interest payments that are owed to Lenders shall be
allocated to the Lenders in accordance with each Lender's
respective Percentage; and
(iii) payments of principal and
interest on account of the
Swingline Loan shall be allocated to the Swingline Lender;
payments of principal and interest on account of the Term
Loan shall be allocated in accordance with each Term
Lender's respective Percentage of the Term Loan; provided,
that if any Term Lender's pro rata share of the aggregate
outstanding principal amount of the Term Loan is greater
than such Term Lender's Percentage, then principal
payments shall be allocated to such Lender until its pro
rata share of the aggregate outstanding principal amount
is equal to such Lender's Percentage; payments of
principal and interest on account of the Revolving Loan
shall be allocated in accordance with each Revolving
Lender's respective Initial Percentage, with respect to
payments received prior to Agent's taking action pursuant
to Section 11.12, or Percentage, with respect to payments
received after Agent's taking action pursuant to Section
11.12; provided, that if any Revolving Lender's pro rata
share of the aggregate outstanding principal amount of the
Revolving Advances is greater than such Lender's Initial
Percentage or Percentage, whichever is then appropriate,
then principal payments shall be allocated to such Lender
until its pro rata share of the aggregate outstanding
principal amount is equal to such Lender's Initial
Percentage or Percentage, as the case may be.
2.12 Accounting. Agent will provide a monthly accounting
of (i) transactions under the Revolving Loan and (ii) the Letter of
Credit Obligations, and a quarterly accounting of transactions
under the Term Loan to Borrower and to Lenders. Each and every such
accounting shall (absent manifest error) be deemed final, binding,
and conclusive upon Borrower and Lenders in all respects as to all
matters reflected therein, unless Borrower or a Lender, within one
hundred twenty (120) days after the date any such accounting is
rendered, shall notify Agent in writing of any objection which
Borrower or such Lender may have to any such accounting, describing
the basis for such objection with specificity. In that event, only
those items expressly objected to in such notice shall be deemed to
be disputed by Borrower or such Lender. Agent's determination,
based upon the facts available, of any item objected to by Borrower
or a Lender in such notice shall (absent manifest error) be final,
binding, and conclusive on Borrower and Lenders, unless Borrower or
such Lender shall commence a judicial proceeding to resolve such
objection within sixty (60) days following Agent's notifying
Borrower and Lenders of such determination.
2.13 Taxes.
(a) Any and all payments by Borrower hereunder or
under the Revolving Notes or Term Notes shall be made, in
accordance with this Section 2.13, free and clear of and without
deduction for any and all present or future taxes, levies, imposts,
deductions, Charges, or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on or measured by the net
income of any Lender by the jurisdiction under the laws of which
such Lender is organized or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, Charges,
withholdings and liabilities being hereinafter referred to as
"Taxes"). If Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder or under any
Revolving Note or Term Note to any Lender, (i) the sum payable
shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional
sums payable under this Section 2.13) such Lender receives an
amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions, and
(iii) Borrower shall pay the full amount deducted to the relevant
taxing or other authority in accordance with applicable law.
(b) In addition, Borrower agrees to pay any
present or future stamp or documentary taxes or any other sales,
transfer, excise, mortgage recording, or property taxes, Charges or
similar levies that arise from any payment made hereunder or under
the Revolving Notes, Term Notes, or from the execution, sale,
transfer, delivery or registration of, or otherwise with respect
to, this Agreement or the Revolving Notes, Term Notes, the Loan
Documents and any other agreements and instruments contemplated
thereby (hereinafter referred to as "Other Taxes").
(c) Borrower shall indemnify each Lender for the
full amount of Taxes or Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this
Section 2.13) paid by such Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within thirty
(30) days from the date such Lender makes written demand therefor.
(d) Within thirty (30) days after the date of any
payment of Taxes, Borrower shall furnish to each Lender the
original or a certified copy of a receipt evidencing payment
thereof.
(e) Without prejudice to the survival of any other
agreement of Borrower hereunder, the agreements and obligations of
Borrower contained in this Section 2.13 shall survive the payment
in full of all Obligations and the Termination Date.
2.14 Capital Adequacy.
(a) Borrower shall pay to Agent for the benefit of
any Lender from time to time on written request such amounts as
such Lender may reasonably determine to be necessary to compensate
such Lender for any increased costs to such Lender that it
reasonably determines are attributable to any law or regulation, or
any interpretation, directive, or request (whether or not having
the force of law and whether or not failure to comply therewith
would be unlawful) of any court or governmental or monetary
authority (i) following any Regulatory Change or (ii) implementing
after the Closing Date any risk-based capital guideline or other
capital requirement (whether or not having the force of law and
whether or not the failure to comply therewith would be unlawful)
heretofore or hereafter issued by any Governmental Authority in
respect of such Lender's Percentage of the Revolving Loan, the
Letter of Credit Obligations or Term Loan (such compensation to
include an amount equal to any reduction of the rate of return on
assets or equity of such Lender to a level below that which such
Lender could have achieved but for such law, regulation,
interpretation, directive or request); provided that with respect
to this Section 2.14, each Lender shall treat Borrower as such
Lender generally treats its other similarly situated borrowers.
(b) Each Lender will furnish to Agent and Borrower
a certificate setting forth the basis and amount of each request by
such Lender for compensation under this Section 2.14.
Determinations and allocations by any Lender for purposes of this
Section 2.14 of the effect of any Regulatory Change pursuant to or
of capital maintained pursuant to this Section 2.14, on its costs
or rate of return of maintaining Revolving Advances, Letter of
Credit Obligations or the Term Loan and or its commitment to make
Revolving Advances or the Term Loan or incur Letter of Credit
Obligations, and of the amounts required to compensate such Lender
under this Section 2.14, shall be conclusive absent manifest error
or bad faith.
2.15 Eligible Accounts. To be an "Eligible Account," an
account must be set forth on the most recent Schedule of Accounts
and must meet each and every one of the following criteria:
(a) The account must arise from the sale of goods
or the performance of services by Borrower in the ordinary course
of Borrower's business and come within the definition of "account"
as that term is used in Section 9106 of the California Commercial
Code.
(b) Borrower's right to receive payment on the
account is absolute and not contingent upon the fulfillment of any
condition whatever and Borrower is able to bring suit or otherwise
enforce its remedies against the Account Debtor through judicial
process.
(c) The account is subject to no defense,
counterclaim or setoff, whether well-founded or otherwise. (Agent
reserves the right to establish appropriate reserves for the
dilutive effect of promotional programs based on the method which
Borrower uses to accrue and account for such programs on its
financial statements).
(d) The account is a true and correct statement of
a bona fide indebtedness incurred in the amount of the account for
merchandise sold and accepted by the Account Debtor obligated upon
such account.
(e) An invoice, substantially in the form of one
of the invoices attached to the Certificate of Invoices identified
in the Schedule of Documents, or such other form of invoice as has
been approved by Agent in writing, has been sent to the Account
Debtor.
(f) The account is owned by Borrower, is subject
to a perfected first priority security interest in favor of Agent
for the benefit of Lenders, and is not subject to any right, claim,
or interest of any other Person except Producers' Liens, if any.
(g) The account does not arise from a sale to or
performance of services for an employee, Affiliate (other than
sales to Affiliates permitted under Section 8.6), parent, or
Subsidiary of Borrower, or an entity which has common officers or
directors with Borrower.
(h) The account is not the obligation of an
Account Debtor that is the federal government or a political
subdivision thereof unless Agent has agreed to the contrary in
writing and Borrower has complied with the Federal Assignment of
Claims Acts of 1940, and any amendments thereto, with respect to
such obligation.
(i) The account is not the obligation of an
Account Debtor located in a foreign country.
(j) The account is not the obligation of an
Account Debtor to whom Borrower is or may become liable for goods
sold or services rendered by the Account Debtor to Borrower.
(k) The account does not arise with respect to
goods which are delivered on a cash-on-delivery basis or placed on
consignment, guaranteed sale, sale or return, or other terms by
reason of which the payment by the Account Debtor may be
conditional.
(l) The account is not in default; provided, that
an Account shall be deemed in default upon the occurrence of any of
the following:
(i) The account is not paid
within the earlier of (A)sixty (60) days from its due date
and (B) ninety (90) days from its original invoice date;
(ii) For accounts from a state
liquor board, the
account is not paid within the earlier of (A) ninety (90)
days from its due date and (B) one hundred twenty (120)
days from its original invoice date; provided that the
aggregate amount of all accounts that are not eligible
under clause (i) of this Section 2.15(l) and that are
eligible only under this clause (ii) of this Section
2.15(l) shall not exceed Two Million Five Hundred Thousand
Dollars ($2,500,000) outstanding at any one time;
(iii) Any Account Debtor obligated
upon such Account suspends business, makes a general
assignment for the benefit of creditors, or
fails to pay its debts generally as they come due; or
(iv) Any petition is filed by or
against any Account
Debtor obligated upon such Account under the Bankruptcy
Code or any other national, state or provincial
receivership, insolvency relief or other law or laws for
the relief of debtors.
(m) The account does not, when added to all other
Eligible Accounts that are obligations of the Account Debtor, at
any time result in a total sum that exceeds twenty percent (20%) of
the total balance then due on all accounts that are Eligible
Accounts; provided, that, when so requested by Borrower, Agent will
consider increasing such twenty percent (20%) maximum for one or
more particular Account Debtors based on Agent's annual review of
the respective credit histories and creditworthiness of such
Account Debtors.
(n) The account is not the obligation of an
Account Debtor that is in default (as defined in subparagraph
(l)(i) above) on twenty percent (20%) or more of accounts owed to
Borrower.
(o) The account does not arise from any
bill-and-hold or other sale of goods which remain in Borrower's
possession or under Borrower's control.
(p) The account is not the obligation of a
distributor to whom Borrower has discontinued sales of inventory
for reasons related to the creditworthiness of such distributor.
(q) The account is otherwise reasonably acceptable
to Agent.
2.16 Eligible Inventory. To constitute "Eligible
Inventory," inventory must be set forth on the most recent Schedule
of Inventory and must meet each and every one of the following
criteria:
(a) The inventory must be owned by Borrower, must
be located in the United States, must be subject to a perfected
first priority security interest in favor of Agent for the benefit
of Lenders, and must be free and clear of all Liens and rights of
others, except Producers' Liens, if any.
(b) The inventory must consist of bulk
wine or bottled wine in cases.
(c) If the inventory is bottled wine, it
must either
(i) located on premises owned by
Borrower;
(ii) located on premises which are
leased by Borrower and for which Agent has received a
landlord notification letter from Borrower
in form and substance reasonably satisfactory to Agent;
(iii) stored in a public warehouse
for which Agent has received a notification letter from
Borrower in form and
substance reasonably acceptable to Agent.
(d) If the inventory consists of bulk wine, it
must either be:
(i) located on premises owned by
Borrower;
(ii) located on premises which are
leased by Borrower
and for which Agent has received a notification letter
from Borrower in form and substance reasonably
satisfactory to Agent; or
(iii) stored at a facility for which
Agent has received a notification letter from Borrower
in form and substance reasonably acceptable to Agent.
(e) If the inventory consists of bottled wine, the
age of such bottled wine shall not exceed the time periods set
forth below for the types of wine set forth below:
<TABLE>
<CAPTION>
<S> <C>
(i) white zinfandel 18 months
(ii) chardonnay 36 months
(iii) other white wines 24 months
(iv) proprietors reserve red 84 months
(v) European imported red 84 months
(vi) other red wines 48 months
</TABLE>
(f) If the inventory has been purchased by
Borrower from a third party that was in possession of the inventory
at the time it was sold to Borrower and the purchase by Borrower is
not accompanied by an immediate delivery of possession of the
inventory to Borrower followed by an actual and continued change of
possession of the inventory, such inventory shall not be Eligible
Inventory unless:
(i) Borrower's purchase of the
bulk wine is evidenced
by a written contract or purchase order;
(ii) With respect to each
purchase, a bill of sale or
other evidence of the transfer, which shall be
substantially in the form of Exhibit E, must be executed
by both Borrower and the seller and such document must be
duly recorded in the book of official records of the
county recorder of all counties in which any portion of
the bulk wine is located prior to the time that title to
the bulk wine has passed to Borrower;
(iii) All conditions to transfer of
title from seller
to Borrower must have been fulfilled and Borrower must
have delivered written notice to the seller that the bulk
wine has been accepted (or whatever similar terminology is
required by the contract);
(iv) With respect to each entity
from whom Borrower
purchases bulk wine, Borrower shall have filed a financing
statement fulfilling the requirements of Section
3440.1(h)(1) of the California Civil Code and shall have
published a notice of intended transfer fulfilling the
requirements of Section 3440.1(h)(2) of the California
Civil Code. Borrower shall be considered having fulfilled
those requirements if the financing statement and the
notice contain a general description of the character of
the bulk wine being transferred.
(g) Agent has reviewed and approved (such approval
not to be unreasonably withheld) of Borrower's insurance coverage
with respect to such Inventory.
(h) Agent has received, no less frequently than on
a monthly basis, and approved (such approval not to be unreasonably
withheld) all written inventory reports and reconciliations
prepared by Borrower with respect to such inventory in accordance
with the requirements of the BATF.
(i) The inventory is not covered by a negotiable
document of title unless such document has been delivered to Agent.
(j) The inventory, in Agent's reasonable opinion,
is not obsolete, unsalable, damaged, or unfit for further
processing.
(k) The inventory is not placed by Borrower on
consignment or is not sold on a "sale or return" basis as defined
in California Commercial Code Section 2-326.
(l) The inventory is of a type held for sale in
the ordinary course of Borrower's business.
(m) The inventory is otherwise reasonably
acceptable to Agent.
2.17 Valuation of Inventory. Inventory shall be valued by
Agent on a periodic basis by a comparison of market industry data
and the actual revenue being derived by Borrower from sale of such
inventory. Valuation shall be based on the "market" value rather
than Borrower's "cost." In determining market value, Agent shall be
entitled to use the Turrentine Collateral Value Report or such
other comparable reports as Agent shall deem appropriate.
2.18 Eligible Wine Barrels. To constitute "Eligible Wine
Barrels," wine barrels must meet each and every one of the
following criteria:
(a) The wine barrels are owned by Borrower (rather
than leased) and have not been leased by Borrower to any third
party, must be located in the United States, must be subject to a
perfected first priority security interest in favor of Agent for
the benefit of Lenders, and must be free and clear of all Liens and
rights of others, except Producers' Liens, if any.
(b) The wine barrels are in good condition and are
used or capable of being used in the ordinary course of Borrower's
business.
(c) The wine barrels are otherwise reasonably
acceptable to Agent.
The value of Eligible Wine Barrels shall be reasonably determined
by Agent on a periodic basis using industry comparative data.
2.19 Requests to Refinance Revolving Loan. At any time
after delivery to Lenders of Borrower's audited financial
statements for the fiscal year ending December 31, 1999, Borrower
may, subject to the prepayment and other provisions set forth in
this Agreement, seek to refinance the Revolving Loan, and, in
connection with any such refinancing, request that the Term Lenders
release or subordinate their security interests in Borrower's
accounts, inventory, or other current assets to facilitate such
refinancing. The Term Lenders may accept or reject any such
request, in their sole discretion, for any reason, based on the
facts and circumstances then existing; provided, that the Term
Lenders shall accept any such request if, as of the date of such
refinancing, each and every one of the following conditions is
satisfied: (a) no Default or Event of Default has occurred in the
payment of any amount or in any financial covenant contained in
Section 8.21 at any time since the Closing Date; (b) no Default or
Event of Default exists at the time of such request and no material
Default or Event of Default of a kind other than those specified in
clause (a) above has occurred within six (6) months prior to such
request; (c) the aggregate outstanding balance of the Term Loan is
not more than sixty-two percent (62%) of the aggregate appraised
value of the real property securing the Term Loan (based, if so
requested by the Term Lenders, on new or updated appraisals
obtained at Borrower's expense from appraisers selected by the Term
Lenders); (d) the ratio of Consolidated Total Liabilities (as
defined later in this Section 2.19) as of the end of 1999 to the
average of Consolidated EBITDA for 1998 and 1999 shall be less than
4.45:1; (e) the ratio of Consolidated Cash Flow to Consolidated
Debt Service for 1999 shall be not less than 1.40:1; (f)
Consolidated Net Worth as of the end of 1999 shall be not less than
One Hundred Twenty Five Million Dollars ($125,000,000); (g)
Consolidated EBITDA for 1999 shall be at least ninety-five percent
(95%) of Consolidated EBITDA for 1998; (h) Borrower's latest
quarterly financial statements do not show or indicate any
deterioration in Borrower's compliance with the conditions
described in clauses (d), (e), (f), and (g) above; (i) the Term
Lenders reasonably determine that the proposed revolving facility
is adequate to meet Borrower's future financing requirements; (j)
there has occurred no event or circumstance that might reasonably
be expected to cause a deterioration in the financial condition of
Borrower during the remaining term of the Term Loan, and (k) the
lender or lenders providing the proposed revolving facility are
prepared to enter into an intercreditor or subordination agreement
reasonably satisfactory to the Term Lenders. As used in this
Section 2.19, the term "Consolidated Total Liabilities" means all
liabilities of Borrower and its Subsidiaries, minus deferred taxes,
determined in accordance with GAAP. Nothing in the foregoing is
intended to imply that Borrower shall have any right to repay or
prepay the Revolving Loan other than as set forth in this Agreement
and the refinancing referred to in this Section 2.19 shall, if it
occurs, take place on the Revolving Loan Maturity Date unless
otherwise agreed by Borrower and Lenders.
2.20 Swap Loss Obligations.
(a) Establishing Final Swap Loss Amount.
Notwithstanding Section 8.3, Borrower may enter into the Permitted
Swap Transactions with the Swap Lender pursuant to the Swap
Agreement. If Borrower shall fail to pay the Final Swap Loss Amount
to the Swap Lender within ten (10) days after demand therefor by
the Swap Lender, the Swap Lender may deliver the Swap Loss
Certificate to Agent (a copy of which shall also be delivered by
the Swap Lender to Borrower). Borrower shall have ten (10) days
after delivery of the Swap Loss Certificate in which to deliver
notice to Agent of any objections that Borrower may have to the
Final Swap Loss Amount set forth in the Swap Loss Certificate (a
copy of which shall also be delivered to the Swap Lender), which
objection shall set forth reasonable evidence in support of such
objection. Borrower's failure to deliver notice of an objection to
Agent during such period shall constitute Borrower's
acknowledgement of the correctness of such amount.
(b) Transfer of Final Swap Loss Amount to
Revolving Loan Balance. Within a reasonably prompt period of time
following expiration of such ten (10) day period, Agent shall
adjust its records so as to increase the then outstanding balance
of the Revolving Loan by the Final Swap Loss Amount for such date
as set forth in the Swap Loss Certificate (the date on which such
adjustment occurs is the "Swap Loss Adjustment Date"); provided
that if Borrower has raised an objection to such amount (unless
Agent believes such objection not to be bona fide) or if Borrower
is at such time the subject of a bankruptcy or reorganization
proceeding, then Agent may, in its discretion, as a condition to
making such adjustment require the Swap Lender to indemnify and
hold harmless Agent and Lenders for any losses incurred by Agent
and Lenders as a result of such disagreement between the Swap
Lender and Borrower. If Agent's making such an adjustment results
in Borrower being required to make a mandatory prepayment pursuant
to Section 2.3(a), then Borrower shall immediately make such
mandatory prepayment.
(c) Adjustment of Percentages. On the Swap Loss
Adjustment Date, the Percentages of each Lender shall be
recalculated and adjusted by Agent. The Percentage of each
Revolving Lender with respect to the Revolving Loan shall be
recalculated and adjusted as follows: Agent shall add the Final
Swap Loss Amount to the "Commitment" amount shown next to the name
of the Swap Lender on Part 1 of Exhibit B. Agent shall calculate
the revised Percentage of each Revolving Lender using such new
"Commitment" amount for the Swap Lender, using the existing
"Commitment" amounts for the other Revolving Lenders, and using the
same $150,000,000 denominator as appears on PartE1 of Exhibit B;
provided that if the amount of the Maximum Revolving Loan has been
reduced, then Agent shall use the "commitment" amounts and the
total amount as are then applicable. Agent shall also make a
similar recalculation and adjustment with respect to each Revolving
Lender's Initial Percentage as set forth in PartE4 of Exhibit B and
with respect to each Lender's overall Percentage as set forth in
PartE3 of Exhibit B.
(d) Supplement to Swap Loss Certificate. If the
Swap Lender shall determine that a Swap Loss Certificate set forth
an incorrect amount, the Swap Lender may deliver to Agent a
supplement or supplements to the Swap Loss Certificate correcting
such error. If any such supplement increases the amount of the Swap
Loss Obligations, then the procedures set forth in the earlier
portions of this Section 2.20 shall apply to such increased amount.
If any such supplement decreases the amount of the Swap Loss
Obligations, then Agent shall adjust its records so as to decrease
the then outstanding balance of the Revolving Loan, make the
appropriate Percentage adjustments, and take such other steps as
Agent considers appropriate. Agent shall be entitled to the same
indemnities with respect to a supplement to a Swap Loss Certificate
as it was with respect to the original Swap Loss Certificate.
ARTICLE III.
COLLATERAL
3.1 Borrower's Obligations. The Obligations of Borrower to
pay all sums due to Agent and Lenders and to perform all other
covenants and agreements under this Agreement, including the Swap
Loss Obligations, and the other Loan Documents to which Borrower is
a party, shall be secured by all Collateral to the extent provided
in the Security Documents, including all real property Collateral
encumbered by deeds of trust delivered by Borrower to Agent.
3.2 Further Assurances. Borrower shall, at its sole cost
and expense, execute and deliver to the Agent for the benefit of
the Lenders all such further documents, instruments, and agreements
and to perform all such other acts which may be reasonably required
in the opinion of the Agent to enable the Agent and the Lenders to
perfect, protect, exercise, or enforce their respective rights as
the secured parties or beneficiaries under the Security Documents.
To the extent permitted by applicable law, Borrower hereby
authorizes the Agent on behalf of the Lenders to file financing
statements and continuation statements with respect to the security
interests granted under the Security Documents in favor of the
Agent for the benefit of the Lenders and to execute such financing
statements and continuation statements on behalf of Borrower and
hereby grants Agent with a limited power-of-attorney to do so. Such
power-of-attorney is coupled with an interest and is irrevocable.
ARTICLE IV.
CONDITIONS PRECEDENT TO ADVANCES
4.1 Conditions to First Amendment Closing Date.
Notwithstanding any other provision of this Agreement and without
affecting in any manner the rights of Agent or Lenders hereunder,
the First Amendment Closing Date shall not occur until and unless
each and every one of the following conditions has been satisfied
or waived, in Lenders' sole discretion:
(a) Agent shall have received executed originals
from Borrower and Guarantors of the First Amendment and any other
documents reasonably requested by Agent in connection with the
First Amendment.
(b) No Default or Event of Default shall have
occurred and be continuing.
(c) BWEH shall have consummated the sale of
approximately 23.5% of the outstanding shares of Class B common
stock of BWEH (the "Stock Issuance") substantially in accordance
with the terms previously disclosed to Agent and Lenders. (The date
on which the Stock Issuance is consummated shall be referred to as
the "Public Offering Closing Date.")
(d) Upon the Public Offering Closing Date, each
and every one of the following shall be true and correct:
(i) BWEH shall have received cash
proceeds from the
Stock Issuance (the "Gross Sales Proceeds), before
deduction of transaction fees and expenses, of not less
than One Hundred Million Dollars ($100,000,000);
(ii) BWEH shall receive as
proceeds of the Stock
Issuance, after deduction of all costs, fees, and expenses
incurred by BWEH in connection with the Stock Issuance,
(such amount received being the "Net Sale Proceeds") not
less than the following amount: Ninety-Two Million Five
Hundred Thousand Dollars ($92,500,000) plus ninety-five
percent (95%) of the amount, if any, by which the Gross
Sale Proceeds exceeds One Hundred Million Dollars
($100,000,000);
(iii) From the proceeds of the
Stock Issuance, BWEH
shall have redeemed or repurchased no more than Thirty
Million Dollars ($30,000,000), par value, of its preferred
stock, and in connection therewith shall have paid no more
than Eight Million Five Hundred Thousand Dollars
($8,500,000) to satisfy cumulative preferred dividends
with respect to such preferred stock (the amount used in
redemption of such preferred stock and payment of
dividends thereon is referred to as the "Preferred Stock
Payment");
(iv) From the proceeds of the
Stock Issuance, BWEH
shall have made a cash contribution to the capital of
Borrower (the "Capital Contribution"), in the form of
purchase of additional shares of common stock of Borrower,
equal to the Net Sale Proceeds minus the Preferred Stock
Payment;
(v) Concurrently with Borrower's
receipt of the
Capital Contribution, Borrower shall have repaid in full
all principal, interest, prepayment premiums, and any
other obligations owed by Borrower on account of those
certain 12 1/2% Senior Subordinated Notes due January 10,
2006 in the amount of Thirty-Five Million Dollars
($35,000,000) and that certain Securities Purchase
Agreement dated as of January 16, 1996 and Borrower shall
have obtained from the holders thereof a receipt
indicating such payment in full. The amount of the
prepayment premium paid by Borrower in connection with the
foregoing shall not exceed nine percent (9%) of the then
outstanding principal balance of such notes; and
(vi) The amount of the Capital
Contribution remaining
after Borrower's payment of the Subordinated Debt referred
to in the immediately preceding paragraph shall be not
less than Fifteen Million Eight Hundred Thousand Dollars
($15,800,000), of which Borrower shall have used Six
Million Dollars ($6,000,000) toward a prepayment of the
Term Loan Tranche A and the balance of which shall have
been applied against the Revolving Loan.
4.2 Conditions to Each Revolving Advance, Letter of Credit
Obligation and the Term Loan. It shall be a condition to the
funding of the initial and each subsequent Revolving Advance and
the Term Loan and the incurrence of the initial and each subsequent
Letter of Credit Obligation that the following statements shall be
true on the date of each such funding or advance:
(a) All of Borrower's representations and
warranties contained herein or in any of the Loan Documents shall
be true and correct in all material respects on and as of the
Closing Date and the date of each such Revolving Advance and the
date any Letter of Credit Obligation is incurred as though made on
and as of such date, except to the extent that any such
representation or warranty expressly relates to an earlier date and
for changes therein permitted or contemplated by this Agreement.
(b) No event shall have occurred and be
continuing, or would result from the funding of any Revolving
Advance or the Term Loan or the incurrence of any Letter of Credit
Obligation, which constitutes or would constitute a Default or an
Event of Default.
(c) After giving effect to each Revolving Advance,
and the Letter of Credit Obligations, the aggregate principal
amount of the Revolving Loan and Letter of Credit Obligations shall
not exceed the lesser of (i) the Maximum Revolving Loan minus the
then outstanding amount of Grower Payables, or (ii)Ethe Borrowing
Base.
The acceptance by Borrower of the proceeds of (i) any Revolving
Advance or (ii) the Term Loan and the request by Borrower for the
incurrence by Revolving Lenders of Letter of Credit Obligations, as
the case may be, shall be deemed to constitute, as of the date of
such acceptance, a representation and warranty by Borrower that the
conditions in this Section 4.2 have been satisfied.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Revolving Loan and
Term Loan and to incur the Letter of Credit Obligations, as herein
provided for, Borrower makes the following representations and
warranties to Lenders, each and all of which shall be true and
correct as of the date of execution and delivery of this Agreement,
and shall survive the execution and delivery of this Agreement:
5.1 Corporate Existence; Compliance with Law. Borrower (i)
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware; (ii) is duly
qualified as a foreign corporation and in good standing under the
laws of state of California and of each jurisdiction where its
ownership or lease of property or the conduct of its business
requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not have a
Material Adverse Effect); (iii) has the requisite corporate power
and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate all real property that it owns, to
lease the real property it operates under lease, and to conduct its
business as now, heretofore, and proposed to be conducted; (iv)
has, or will by the Closing Date have, all material licenses,
permits, consents, or approvals from or by, and has made all
material filings with, and has given all material notices to, all
Governmental Authorities having jurisdiction, to the extent
required for such ownership, operation, and conduct; (v) is in
compliance with its certificate of incorporation and by-laws; and
(vi) is in compliance with all applicable provisions of law where
the failure to comply would have a Material Adverse Effect.
5.2 Executive Offices. The current location of Borrower's
chief executive offices and principal place of business is the
address set forth for the giving of notices in Section 13.12.
5.3 Subsidiaries. There currently exist no Subsidiaries of
Borrower except for Cork Processors, Inc.
5.4 Corporate Power; Authorization; Enforceable
Obligations. The execution, delivery, and performance by Borrower
of the Loan Documents to which it is a party, and all instruments
and documents required to be delivered by Borrower under any of the
Loan Documents, and the creation of all Liens provided for in any
Loan Documents: (i) are within Borrower's corporate power; (ii)
have been duly authorized by all necessary or proper corporate
action; (iii) are not in contravention of any provision of
Borrower's certificate of incorporation or by-laws; (iv) will not
violate any law or regulation, or any order or decree of any court
or governmental instrumentality; (v) will not conflict with or
result in the breach or termination of, constitute a default under
or accelerate any performance required by, any material indenture,
mortgage, deed of trust, lease, agreement or other instrument to
which Borrower is a party or by which Borrower or any of its
property is bound; (vi) will not result in the creation or
imposition of any Lien upon any of the property of Borrower other
than those in favor of Lenders, all pursuant to the Loan Documents;
and (vii) do not require the consent or approval of any
Governmental Authority or any other Person, except for consents or
approvals which have been duly obtained, made, or complied with
prior to the Closing Date or specifically waived in writing by
Lenders. At or prior to the Closing Date, each of the Loan
Documents required hereunder to be delivered at or prior to the
Closing Date shall have been duly executed and delivered on behalf
of Borrower and each shall then constitute a legal, valid, and
binding obligation of Borrower, to the extent it is a party
thereto, enforceable against it in accordance with its terms except
for general principles of equity and the effect of bankruptcy,
insolvency, and other laws affecting the rights of creditors
generally.
5.5 Solvency. After giving effect to the initial Revolving
Advance, the initial Letter of Credit Obligations, and the Term
Loan made on the Closing Date and the payment of all estimated
legal, accounting, and other Fees related hereto and thereto,
Borrower will be Solvent as of and on the Closing Date.
5.6 Financial Statements.
(a) The pro forma balance sheets of Borrower and
its Affiliates as of the Closing Date delivered to Agent and
Lenders pursuant to the Schedule of Documents, have been prepared
in accordance with GAAP and have been based on an unaudited balance
sheet of Borrower as of January 16, 1996, adjusted as if the
financing transactions contemplated hereunder had occurred as of
the date of such balance sheet and presents fairly on a pro forma
basis the financial position of Borrower at such date assuming the
financing transactions had actually occurred on such date. Such
balance sheet shall show Stockholders' common equity in an amount
of not less than Eighty Million Dollars ($80,000,000).
(b) All of the balance sheets and statements of
income, retained earnings, and cash flows of the Borrower, copies
of which have been furnished to Lenders prior to the date of this
Agreement, have been prepared in a manner consistently applied
throughout the periods involved and present fairly the financial
position of Borrower in each case as at the dates thereof, and the
results of operations and cash flows for the periods then ended (as
to the unaudited interim financial statements, subject to normal
year-end audit adjustments).
(c) Borrower, as of the Closing Date, had no
obligations, contingent liabilities, or liabilities for Charges,
long-term leases or unusual forward or long-term commitments which
are not reflected in the pro forma balance sheet of Borrower and
which would, alone or in the aggregate, have a Material Adverse
Effect.
(d) There has been no material adverse change in
the business, assets, operations, prospects or financial or other
condition of Borrower taken as a whole since November 30, 1995.
5.7 Projections. The projections of Borrower's annual
operating budgets, balance sheets, and cash flow statements for the
1995, 1996, 1997, 1998, 1999, and 2000 Fiscal Years (the
"Projections"), copies of which have been delivered to Lenders,
disclose all material assumptions made with respect to general
economic, financial and market conditions in formulating such
Projections. To Borrower's Knowledge, no facts exist which would
result in any material change in any of such Projections. The
Projections are based upon reasonable estimates and assumptions,
all of which are fair in light of current conditions, have been
prepared on the basis of the assumptions stated therein, and
reflect the reasonable estimate of Borrower of the results of
operations and other information projected therein.
5.8 Ownership of Property; Liens.
(a) Borrower owns good and marketable fee simple
title to all of its real estate, valid and marketable leasehold
interests in all of its leases, and good and marketable title to,
or valid leasehold interests in, all of its other properties and
assets, and none of the properties and assets of Borrower are
subject to any Liens, except (i) Permitted Encumbrances and (ii)
from and after the Closing Date, the Lien in favor of Lenders
pursuant to the Security Documents; and Borrower has received all
deeds, assignments, waivers, consents, non-disturbance and
recognition or similar agreements, bills of sale and other
documents, and duly effected all recordings, filings, and other
actions necessary to establish, protect and perfect Borrower's
right, title, and interest in and to all such property except where
the failure to have received such documents or effected such
actions will not, in the aggregate, have a Material Adverse Effect.
(b) All real property owned or leased by Borrower
on the Closing Date is set forth on Parts (C) and (D) of the
Disclosure Schedule. Borrower does not own any other real property
nor is Borrower a lessee or lessor under any Leases other than as
set forth therein. Neither Borrower nor, to Borrower's Knowledge,
any other party to any such Lease (i) is in default of its
obligations thereunder or (ii) has delivered or received any notice
of default under any such Lease, and no event has occurred which,
with the giving of notice, the passage of time or both, would
constitute a default under any such Lease by Borrower, except in
each case for any default which would not have a Material Adverse
Effect.
(c) Borrower does not own or hold, and is not
obligated under or a party to, any option, right of first refusal
or any other contractual right to purchase, acquire, sell, assign
or dispose of any real property owned or leased by Borrower except
as set forth in Parts (C) and (D) of the Disclosure Schedule.
(d) All permits required to have been issued to
enable the real property owned or leased by Borrower to be lawfully
occupied and used for all of the purposes for which they are
currently occupied and used, have been lawfully issued and are, as
of the date hereof, in full force and effect, except for any permit
for which the failure of such permit to be issued and in full force
and effect would not have a Material Adverse Effect.
(e) Borrower has not received any notice, and to
Borrower's Knowledge does not have, any pending, threatened, or
contemplated condemnation proceeding affecting any real property
owned or leased by Borrower or any part thereof, or of any sale or
other disposition of any real property owned or leased by Borrower
or any part thereof in lieu of condemnation.
(f) Except as set forth in the Disclosure
Schedule, no portion of any real property owned or leased by
Borrower has suffered any material damage by fire or other casualty
loss or a Spill which has not heretofore been completely repaired
and restored to its original condition or is being remedied. Except
as set forth in Parts (C) and (D) of the Disclosure Schedule, no
portion of any real property owned or leased by Borrower is located
in a special flood hazard area as designated by any federal, or
other Governmental Authority.
5.9 No Default. Borrower is not in default, and to
Borrower's Knowledge no third party is in default, under or with
respect to any contract, agreement, lease or other instrument to
which it is a party which default in each case or in the aggregate
would have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
5.10 Burdensome Restrictions. No contract, lease,
agreement, or other instrument to which Borrower is a party or is
bound and no provision of applicable law or governmental regulation
has a Material Adverse Effect, or insofar as Borrower can
reasonably foresee, may have a Material Adverse Effect.
5.11 Labor Matters. There are no strikes or other labor
disputes against Borrower that are pending or, to Borrower's
Knowledge, threatened which would have a Material Adverse Effect.
Hours worked by and payment made to employees of Borrower have not
been in violation of the Fair Labor Standards Act or any other
applicable law dealing with such matters which would have a
Material Adverse Effect. All payments due from Borrower on account
of employee health and welfare insurance which would have a
Material Adverse Effect if not paid have been paid or accrued as a
liability on the books of Borrower. Except as set forth in Part (V)
of the Disclosure Schedule, Borrower does not have any obligation
under any collective bargaining agreement or any employment
agreement. There is no organizing activity involving Borrower
pending or, to Borrower's Knowledge, threatened by any labor union
or group of employees. There are, to Borrower's Knowledge, no
representation proceedings pending or, to Borrower's Knowledge,
threatened with the National Labor Relations Board, and no labor
organization or group of employees of Borrower has made a pending
demand for recognition. Except as set forth in Part (G) of the
Disclosure Schedule, there are no complaints or charges against
Borrower pending or, to Borrower's Knowledge, threatened to be
filed with any federal, state, local or foreign court, governmental
agency or arbitrator based on, arising out of, in connection with,
or otherwise relating to the employment or termination of
employment by Borrower of any individual. Borrower is not a
contractor or subcontractor and does not have a legal obligation to
engage in affirmative action.
5.12 Other Ventures. Except as set forth in Part (Q) of
the Disclosure Schedule, Borrower is not engaged in any joint
venture or partnership with any other Person.
5.13 Investment Company Act. Borrower is not an
"investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended. The
making of the Revolving Loan and Term Loan and the incurrence of
the Letter of Credit Obligations by Lenders, the application of the
proceeds and repayment thereof by Borrower and the consummation of
the transactions contemplated by this Agreement and the other Loan
Documents will not violate any provision of such Act or any rule,
regulation, or order issued by the Securities and Exchange
Commission thereunder.
5.14 Margin Regulations. Borrower does not own any "margin
security", as that term is defined in Regulations G and U of the
Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), and the proceeds of the Revolving Advances and
Term Loan will be used only for the purposes contemplated
hereunder. The Revolving Advances and Term Loan will not be used,
directly or indirectly, for the purpose of purchasing or carrying
any margin security, for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of
the loans under this Agreement to be considered a "purpose credit"
within the meaning of Regulation G, T, U, or X of the Federal
Reserve Board. Borrower will not take or permit any agent acting on
its behalf to take any action which might cause this Agreement or
any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board.
5.15 Taxes. All federal, state, local, and foreign tax
returns, reports, and statements, including information returns
(Form 1120-S) required to be filed by Borrower, have been filed
with the appropriate Governmental Authority and all Charges and
other impositions shown thereon to be due and payable have been
paid prior to the date on which any fine, penalty, interest, or
late charge may be added thereto for nonpayment thereof, or any
such fine, penalty, interest, late charge, or loss has been paid.
Borrower has paid when due and payable all Charges required to be
paid by it. Proper and accurate amounts have been withheld by
Borrower from their respective employees for all periods in full
and complete compliance with the tax, social security, and
unemployment withholding provisions of applicable federal, state,
local and foreign law and such withholdings have been timely paid
to the respective governmental agencies. None of Borrower's tax
returns with respect to Borrower's corporate income are currently
being audited by the IRS or any other applicable Governmental
Authority. Borrower has not executed or filed with the IRS or any
other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for
assessment or collection of any Charges or any taxes owed by such
Stockholder with respect to Borrower's corporate income. Borrower
has not filed a consent pursuant to IRC Section 341(f) or agreed to
have IRC Section 341(f)(2) apply to any dispositions of subsection
(f) assets (as such term is defined in IRC Section 341(f)(4)). None
of the property owned by Borrower is property which such company is
required to treat as being owned by any other Person pursuant to
the provisions of IRC Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended, and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt use
property" within the meaning of IRC Section 168(h). Borrower has
not agreed or been requested to make any adjustment under IRC
Section 481(a) by reason of a change in accounting method or
otherwise. Borrower does not have any obligation under any written
tax sharing agreement.
5.16 ERISA.
(a) Part (Y) of the Disclosure Schedule lists all
Plans maintained or contributed to by Borrower and all Qualified
Plans maintained or contributed to by any ERISA Affiliate, and
separately identifies the Title IV Plans, Multiemployer Plans, any
multiple employer plans subject to Section 4064 of ERISA, unfunded
Pension Plans, Welfare Plans and Retiree Welfare Plans.
(b) Each Qualified Plan, other than a Qualified
Plan established in 1996, has been determined by the IRS to qualify
under Section 401 of the IRC, and the trusts created thereunder
have been determined to be exempt from tax under the provisions of
Section 501 of the IRC, and to Borrower's Knowledge nothing has
occurred which would cause the loss of such qualification or
tax-exempt status. With respect to any Qualified Plan established
in 1996, application for a determination letter shall be filed with
the IRS within the remedial amendment period under the IRC.
(c) Each Plan is in compliance in all material
respects with the applicable provisions of ERISA and the IRC,
including the filing of reports required under the IRC or ERISA
which are true and correct in all material respects as of the date
filed, and with respect to each Plan, other than a Qualified Plan,
all required contributions and benefits have been paid in
accordance with the provisions of each such Plan to the extent that
the failure to pay any such contribution or benefit would have a
Material Adverse Effect.
(d) Neither Borrower nor any ERISA Affiliate, with
respect to any Qualified Plan, has failed to make any contribution
or pay any amount due as required by Section 412 of the IRC or
Section 302 of ERISA or the terms of any such plan to the extent
that the failure to make any such contribution or pay any amount
would have a Material Adverse Effect.
(e) No Title IV Plan has any Unfunded
Pension Liability.
(f) No ERISA Event or event described in Section
4062(e) of ERISA with respect to any Title IV Plan has occurred or
is reasonably expected to occur.
(g) There are no pending or, to Borrower's
Knowledge, threatened claims, actions or lawsuits (other than
claims for benefits in the normal course), asserted or instituted
against (i) any Plan or its assets, (ii) any fiduciary with respect
to any Plan or (iii) Borrower or any ERISA Affiliate with respect
to any Plan.
(h) Neither Borrower nor any ERISA Affiliate has
incurred or reasonably expects to incur any Withdrawal Liability
(and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under
Section 4201 of ERISA as a result of a complete or partial
withdrawal from a Multiemployer Plan.
(i) Within the last five (5) years, neither
Borrower nor any ERISA Affiliate has engaged in a transaction which
resulted in a Title IV Plan with Unfunded Liabilities being
transferred outside of the "controlled group" (within the meaning
of Section 4001(a)(14) of ERISA) of any such entity.
(j) No plan which is a Retiree Welfare Plan
provides for continuing benefits or coverage for any participant or
any beneficiary of a participant after such participant's
termination of employment (except as may be required by Section
4980B of the IRC and at the sole expense of the participant or the
beneficiary of the participant) which would result in a liability
in an amount which would have a Material Adverse Effect. Borrower
and each ERISA Affiliate have complied with the notice and
continuation coverage requirements of Section 4980B of the IRC and
the regulations thereunder except where the failure to comply would
not result in any Material Adverse Effect.
(k) Borrower has not engaged in a prohibited
transaction, as defined in Section 4975 of the IRC or Section 406
of ERISA, in connection with any Plan, which would subject Borrower
(after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the IRC or any
other material liability.
(l) No liability under any Plan has been funded,
nor has such obligation been satisfied with, the purchase of a
contract from an insurance company that is not rated AA by Standard
& Poor's Corporation and the equivalent by each other nationally
recognized rating agency.
5.17 No Litigation. Except as set forth in Part (G) of the
Disclosure Schedule, no action, claim or proceeding is now pending
or, to Borrower's Knowledge, threatened against Borrower, at law,
in equity or otherwise, before any court, board, commission,
agency, or instrumentality of any federal, state, or local
government or of any agency or subdivision thereof, or before any
arbitrator or panel of arbitrators, which, if determined adversely,
could have a Material Adverse Effect, nor to Borrower's Knowledge
does a state of facts exist which is reasonably likely to give rise
to such proceedings. None of the matters set forth in Part (G) of
the Disclosure Schedule questions the validity of any of the Loan
Documents or any action taken or to be taken pursuant thereto, or
would have either individually or in the aggregate a Material
Adverse Effect.
5.18 Brokers. Except as set forth in Part (W) of the
Disclosure Schedule, no broker or finder acting on behalf of
Borrower brought about the obtaining, making, or closing of the
loans made pursuant to this Agreement or the transactions
contemplated by the Loan Documents and has no obligation to any
Person in respect of any finder's or brokerage fees in connection
therewith.
5.19 Stock Acquisition. The Stock Acquisition has been
duly consummated in accordance with the terms of the Acquisition
Agreements. True and correct copies of all of the Acquisition
Agreements (including all exhibits, schedules and amendments
thereto) have been delivered to Agent. Borrower is not in default
under the Acquisition Agreements or under any instrument or
document to be delivered in connection therewith. The
representations and warranties made in the Acquisition Agreements
by Borrower or its Affiliates which are parties thereto will be
true and correct in all material respects (except for changes
expressly provided for therein or herein) on and as of the Closing
Date as though made on and as of such date. All of the transactions
engaged in by Borrower as part of the Stock Acquisition were legal
and valid and in compliance with all applicable law. The debt owed
to Nestle Holdings and paid with the proceeds of the Term Loan and
the initial advance of the Revolving Loan was, at the time it was
paid, an obligation of Borrower that was duly and validly owing.
5.20 Outstanding Stock; Options; Warrants, Etc. The
certificate of Borrower's corporate secretary delivered to Agent
and Lenders pursuant to Item 1.12(A) of the Disclosure Schedule is
complete and accurate. There are no outstanding rights to purchase,
options, warrants, or similar rights or agreements pursuant to
which Borrower may be required to issue or sell any Stock or other
equity security except as noted in such certificate.
5.21 Employment and Labor Agreements. Except as set forth
in Part (V) of the Disclosure Schedule, there are no (i)
employment, consulting or management agreements covering management
of Borrower or (ii) collective bargaining agreements or other labor
agreements covering any employees of Borrower. A true and complete
copy of each such agreement has been furnished to Agent.
5.22 Patents, Trademarks, Copyrights, and Licenses.
Borrower owns all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, and
trade names necessary to continue to conduct its business as
heretofore, presently, and in the future to be conducted by
Borrower, each of which is listed, together with Patent and
Trademark Office application or registration numbers, where
applicable, in Part (R) of the Disclosure Schedule. Except as set
forth in Part (R) of the Disclosure Schedule, Borrower conducts its
business without infringement or claim of infringement of any
license, patent, copyright, service mark, trademark, trade name,
trade secret or other intellectual property right of others, except
where such infringement or claim of infringement would not have a
Material Adverse Effect. There is no infringement or claim of
infringement by others of any material license, patent, copyright,
service mark, trademark, trade name, trade secret or other
intellectual property right of Borrower.
5.23 Full Disclosure. To Borrower's Knowledge, no
information contained in this Agreement, the other Loan Documents,
the Projections, the Financials or any written statement furnished
by or on behalf of Borrower pursuant to the terms of this
Agreement, which has previously been delivered to Lenders, contains
any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which
made.
5.24 Liens. The Liens granted to Lenders pursuant to the
Security Documents will at the Closing Date be fully perfected
first priority Liens in and to the Collateral described therein
except for Permitted Encumbrances and as provided in the Security
Documents.
5.25 No Material Adverse Effect. No event has occurred
since November 30, 1995 and is continuing which has had or could
have a Material Adverse Effect.
5.26 Hazardous Materials. Except as set forth in Part (X)
of the Disclosure Schedule, to Borrower's Knowledge, all real
property owned and all real property leased pursuant to the Leases
by Borrower is free of significant contamination from any Hazardous
Material, including, without limitation, any asbestos, PCB,
radioactive substance, methane, volatile hydrocarbons and
industrial solvents. In addition, Part (X) of the Disclosure
Schedule discloses potential environmental liabilities of Borrower,
that, to Borrower's Knowledge, are (i) not related to noncompliance
with the Environmental Laws or (ii) associated with properties not
owned, leased, subleased, or operated by Borrower. Except as set
forth in Part (X) of the Disclosure Schedule, to Borrower's
Knowledge, Borrower has not caused or suffered to occur any
significant discharge, spillage, uncontrolled loss, seepage, or
filtration of oil or petroleum or chemical liquids or solids,
liquid or gaseous products, or hazardous waste, or hazardous
substance in violation of the Environmental Laws (a "Spill") at,
under, or within any real property which it owns or leases. Except
as set forth in Part (X) of the Disclosure Schedule, to Borrower's
Knowledge, Borrower is not involved in operations that are likely
to lead to the imposition of any liability or Lien on it, or any
owner of any premises which it occupies, under the Environmental
Laws, and Borrower has not permitted any tenant or occupant of such
premises to engage in any such activity.
5.27 Insurance Policies. Item 1.9 of the Schedule of
Documents lists all insurance of any nature maintained for current
occurrences by Borrower, as well as a summary of the terms of such
insurance. The insurance policies maintained by Borrower include
the following insurance coverage:
(a) "All Risk" physical damage insurance on all of
Borrower's tangible real and personal property and assets, wherever
located, including without limitation, bulk wine located at
premises not owned or leased by Borrower and covers, without
limitation, fire and extended coverage, boiler and machinery
coverage, liquids, theft, burglary, explosion, collapse, and all
other hazards and risks ordinarily insured against by owners or
users of such properties in similar businesses. All policies of
insurance on such real and personal property contain an
endorsement, in form and substance acceptable to Agent, showing
loss payable to Lenders (Form 438 BFU or its equivalent) and extra
expense and business interruption endorsements. Such endorsement,
or an independent instrument furnished to Agent, provides that the
insurance companies will give Agent at least thirty (30) days prior
written notice before any such policy or policies of insurance
shall be altered or canceled and that no act or default of Borrower
or any other Person shall affect the right of Lenders to recover
under such policy or policies of insurance in case of loss or
damage;
(b) Difference in conditions coverage including
loss due to earthquake and flood for all real property, inventory,
and equipment to a limit of Ten Million Dollars ($10,000,000) per
occurrence and in the aggregate and subject to a deductible of ten
percent (10%) per location, per occurrence.
(c) comprehensive general liability insurance on
an "occurrence basis" against claims for personal injury, bodily
injury and property damage with a minimum limit of One Million
Dollars ($1,000,000) per occurrence and Two Million Dollars
($2,000,000) in the aggregate. Such coverage includes
premises/operations, broad form contractual liability, underground,
explosion and collapse hazard, independent contractors, broad form
property coverage, products and completed operations liability;
(d) statutory limits of worker's compensation
insurance which includes employee's occupational disease and
employer's liability in the amount of One Million Dollars
($1,000,000) for each accident or occurrence;
(e) automobile liability insurance for all owned,
non-owned or hired automobiles against claims for personal injury,
bodily injury, and property damage with a minimum combined single
limit of One Million Dollars ($1,000,000) per occurrence; and
(f) umbrella insurance of Twenty-Five Million
Dollars ($25,000,000) per occurrence and Fifty Million Dollars
($50,000,000) in the aggregate.
All of such policies are in full force and effect and in form and
with insurers recognized as adequate by Agent, and provide coverage
of such risks and for such amounts as are customarily maintained
for businesses of the scope and size of Borrower's and as otherwise
acceptable to Agent. Each insurance policy contains a clause which
provides that Agent's and Lenders' interest under such policy shall
not be invalidated by any act or omission to act of, or any breach
of warranty by, the insured, or by any change in the title,
ownership or possession of the insured property, or by the use of
the property for purposes more hazardous than is permitted in such
policy. Borrower has delivered to Agent a certificate of insurance
that evidences the existence of each policy of insurance, payment
of all premiums therefor and compliance with all provisions of this
Agreement.
5.28 Deposit and Disbursement Accounts. Part (O) of the
Disclosure Schedule lists all banks and other financial
institutions at which Borrower maintains deposits and/or other
accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the
account is held, a description of the purpose of the account, and
the complete account number.
5.29 PACA. Borrower is not a "dealer," "commission
merchant," or "broker" under PACA, and Borrower's assets are not
subject to the trust provisions provided for under PACA.
5.30 Correctness of Disclosure Schedule. The Disclosure
Schedule delivered by Borrower to Agent and Lenders pursuant to
Item 1.7 of the Schedule of Documents is complete and correct in
all material respects.
ARTICLE VI.
FINANCIAL STATEMENTS AND INFORMATION
6.1 Reports and Notices. Borrower covenants and agrees
that it shall deliver to each Lender:
(a) Within twenty-five (25) days after the end of
each calendar month, the following information certified by an
officer of Borrower: (i) a Borrowing Base Certificate, as of the
end of the previous calendar month, (ii) all inventory reports
prepared for the BATF by Borrower or any person storing or holding
juice, must, or wine for Borrower, (iii) an aged receivable trial
balance and an accounts payable aging, (iv) an updated Schedule of
Accounts, (v) an updated Schedule of Inventory, and (vi) the
certification of the president, chief executive officer, chief
operating officer, chief financial officer or corporate secretary
of Borrower that all such reports and schedules are complete and
correct. Notwithstanding the foregoing, Agent may require that,
prior to making any Revolving Advance or incurring any Letter of
Credit Obligation, it receives a Borrowing Base Certificate from
Borrower in form and detail satisfactory to Agent;
(b) Within thirty (30) days after the end of each
calendar month, financial and other information certified by an
officer of Borrower, including (i) an internally-prepared statement
of income and cash flow, balance sheet, sales and distributor
depletion reports, and management letter, each of which would
provide comparisons to the prior year's equivalent period and to
budget, and (ii) the certification of the president, chief
executive officer, chief operating officer, chief financial officer
or corporate secretary of Borrower that all such financial
statements and schedules are complete and correct and present
fairly (subject to normal year-end adjustments), the financial
position, the results of operations and the statements of cash
flows of Borrower as at the end of such month and for the period
then ended, and that there was no Default or Event of Default in
existence as of such time;
(c) Within thirty (30) days after the end of each
Fiscal Quarter, (i) a copy of the unaudited balance sheets of
Borrower as of the close of such quarter and the related statements
of income and cash flows for that portion of the Fiscal Year ending
as of the close of such quarter, (ii) a copy of the unaudited
statements of income of Borrower for such quarter, all prepared in
accordance with GAAP (subject to normal year-end adjustments) and
accompanied by the certification of the president, chief executive
officer, chief operating officer, chief financial officer or
corporate secretary of Borrower that all such financial statements
are complete and correct and present fairly in accordance with GAAP
(subject to normal year-end adjustments), the financial position,
the results of operations and the statements of cash flows of
Borrower as at the end of such quarter and for the period then
ended, and that there was no Default or Event of Default in
existence as of such time, and (iii)Ea certificate in the form
attached hereto as Exhibit G, containing the certification of
Borrower's chief financial officer that Borrower has complied with
all of the covenants set forth in Section 8.21 as of the end of
such Fiscal Quarter;
(d) By the end of each calendar year, a detailed
grape purchase contract report for such calendar year's crush;
(e) Within ninety (90) days after the end of each
Fiscal Year, audited financial statements, consisting of balance
sheets and statements of income and retained earnings and cash
flows, setting forth in comparative form in each case the figures
for the previous Fiscal Year, which financial statements shall be
prepared in accordance with GAAP, certified (only with respect to
the financial statements) without qualification by a firm of
independent certified public accountants of recognized national
standing selected by Borrower and acceptable to Agent, and
accompanied by (i) a report from such accountants to the effect
that in connection with their audit examination, nothing has come
to their attention to cause them to believe that a Default or Event
of Default had occurred and that, to the best of their knowledge,
Borrower was in compliance with all the covenants set forth in
Section 8.21 as of the end of such Fiscal Year, (ii) the annual
letter from Borrower's chief financial officer to such accountants
in connection with their audit examination detailing Borrower's
contingent liabilities and material litigation matters involving
Borrower, (iii) a certification of the president, chief executive
officer, chief operating officer, chief financial officer or
corporate secretary of Borrower that all such financial statements
are complete and correct and present fairly in accordance with GAAP
the financial position, the results of operations and the
statements of cash flow of Borrower as at the end of such year and
for the period then ended and that there was no Default or Event of
Default in existence as of such time, and (iv)Ea certificate in the
form attached hereto as Exhibit G, containing the certification of
Borrower's chief financial officer that Borrower has complied with
all of the covenants set forth in Section 8.21 as of the end of
such Fiscal Year;
(f) Before the end of each Fiscal Year,
projections, approved by Borrower's board of directors, of
Borrower's income statements, balance sheets, and cash flow
statement, which integrate plans for personnel, Capital
Expenditures and facilities, prepared on a monthly basis for the
following Fiscal Year, which include (i) projected tax payments and
reconciliations of tax payments for the preceding calendar year,
and (ii) estimated Grower Payables by month;
(g) Before November 1 of each year, a crop
operating budget for the forthcoming December 1 through November 30
period, containing such detail as Agent shall reasonably request;
(h) No later than three (3) Business Days after
filing/distribution thereof, copies of all documents filed by or on
behalf of BWEH with the Securities and Exchange Commission or any
other public agency, any disclosures or other communications
provided by BWEH to its shareholders generally, or any press
releases issued by Borrower or BWEH;
(i) As soon as practicable, but in any event
within one (1) Business Day after Borrower becomes aware of the
existence of any Default or Event of Default, or any development or
other information which would have a Material Adverse Effect,
telephonic notice specifying the nature of such Default or Event of
Default or development or information, including the anticipated
effect thereof, which notice shall be promptly confirmed in writing
within three (3) Business Days;
(j) Copies of all federal, state, local and
foreign tax returns, information returns and reports in respect of
income, franchise or other taxes on or measured by income
(excluding sales, use or like taxes) filed by Borrower;
(k) Within five (5) Business Days after Borrower's
receipt thereof, copies of any notices to Borrower under California
Civil Code Section 3051a;
(l) By April 25, 1997, a "cash tax payment
forecast" for the period 1997-2001 prepared by Borrower's certified
public accountants; and
(m) Such other information respecting Borrower's
business, financial condition or prospects as Agent may, from time
to time, reasonably request.
6.2 Communication with Accountants.
(a) Prior to the occurrence of a Default or Event
of Default, upon the request of Agent and approval of such request
by Borrower, which approval shall not be unreasonably withheld,
Borrower may authorize Agent to (i) communicate directly with
Borrower's independent certified public accountants and tax
advisors, and (ii) receive disclosure from such certified public
accountants of any and all financial statements and other
supporting financial documents and schedules including copies of
any management letter with respect to the business, financial
condition and other affairs of Borrower.
(b) Following the occurrence of a Default or Event
of Default, (i) Agent shall be authorized to communicate directly
with Borrower's independent certified public accountants and tax
advisors, (ii) such accountants and tax advisors shall be
authorized to disclose directly to Agent any and all financial
information requested by Agent.
(c) At any time upon the request of Agent,
Borrower shall deliver a letter addressed to such accountants and
tax advisors, which shall be reasonably satisfactory to Agent and
shall be generally similar to the letter delivered on or about the
Closing Date pursuant to the Schedule of Documents, instructing
them to comply with the provisions of this Section 6.2.
ARTICLE VII.
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless Agent
shall have otherwise consented, from and after the date hereof
Borrower shall comply with and observe each of the following
covenants and shall cause each of its Subsidiaries to comply with
and observe each of the following covenants, all references in this
Article VII applying to both Borrower and its Subsidiaries.
7.1 Maintenance of Existence and Conduct of Business.
Borrower shall: (a) do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence
and its rights and franchises; (b) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder;
(c) at all times maintain, preserve, and protect all of its
trademarks and trade names, and preserve all the remainder of its
property, in use or useful in the conduct of its business and keep
the same in good repair, working order, and condition (taking into
consideration ordinary wear and tear) and from time to time make,
or cause to be made, all needful and proper repairs, renewals, and
replacements, betterments and improvements thereto consistent with
industry practices, so that the business carried on in connection
therewith may be properly and advantageously conducted at all
times, except where the failure to do the above would not have a
Material Adverse Effect; (d) transact business only in such names
set forth on Part (N) of the Disclosure Schedule, or such other
names as Borrower shall specify to Agent in writing not less than
thirty (30) days prior to the first date such name is used by
Borrower; and (e) use reasonable efforts to obtain and maintain all
permits required to have been issued to enable the real property
owned or leased by Borrower to be lawfully occupied and used for
all of the purposes for which they are currently occupied and used.
7.2 Payment of Obligations.
(a) Borrower shall, subject to Section 7.2(b), pay
and discharge or cause to be paid and discharged promptly all (A)
Charges imposed upon it, its income, and profits, or any of its
property (real, personal, or mixed), and (B) lawful claims for
labor, materials, supplies, and services or otherwise before any
thereof shall become in default.
(b) Borrower may in good faith contest, by proper
legal actions or proceedings, the validity or amount of any Charges
or claims arising under Section 7.2(a); provided, that at the time
of commencement of any such action or proceeding, and during the
pendency thereof (i) adequate reserves with respect thereto are
maintained on the books of Borrower, in accordance with GAAP, (ii)
such contest operates to suspend collection of the contested
Charges or claims and is maintained and prosecuted continuously
with diligence, (iii) none of the Collateral would be subject to
forfeiture or loss or any Lien by reason of the institution or
prosecution of such contest, (iv) no Lien shall exist, be imposed
or be attempted to be imposed for such Charges or claims during
such action or proceeding, (v) Borrower shall promptly pay or
discharge such contested Charges and all additional charges,
interest, penalties, and expenses, if any, and shall deliver to
Agent evidence acceptable to Agent of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely
to Borrower, and (vi) Agent has not advised Borrower in writing
that Agent reasonably believes that nonpayment or nondischarge
thereof would have a Material Adverse Effect.
(c) Notwithstanding anything to the contrary
contained in Section 7.2(b) above, Borrower shall have the right to
pay the Charges or claims described in Section 7.2(a) and in good
faith contest, by proper legal actions or proceedings, the validity
or amount of such Charges or claims.
7.3 Agent's and Lenders' Bank Fees. Borrower shall pay to
Agent, on demand, any and all reasonable fees, costs, or expenses
that Agent or any Lender shall pay to a bank or other similar
institution arising out of or in connection with (i) the forwarding
to Borrower or any other Person on behalf of Borrower by such
Lender of proceeds of the Revolving Loan or Term Loan or (ii) the
incurrence of the Letter of Credit Obligations.
7.4 Books and Records. Borrower shall keep adequate
records and books of account with respect to its business
activities, in which proper entries, reflecting all of its
financial transactions, are made in accordance with GAAP (except
during the first year after the Closing Date for monthly statements
other than quarterly statements) and on a basis consistent with the
Financials; provided that Borrower shall make reasonable efforts to
modify its accounting systems to enable Borrower to provide monthly
statements in accordance with GAAP and Borrower's monthly
statements shall, starting no later than the month ending
JanuaryE31, 1997, reflect all financial transactions in accordance
with GAAP. Borrower shall maintain its books and records and
calculate all financial covenants based on the FIFO basis of
accounting.
7.5 Litigation. Borrower shall notify Agent in writing,
promptly upon learning thereof, of any litigation commenced or
threatened against Borrower, and of the institution against it of
any suit or administrative proceeding that (a) may involve an
amount in excess of Five Hundred Thousand Dollars ($500,000) or (b)
may have a Material Adverse Effect if adversely determined.
7.6 Insurance.
(a) Borrower shall, at its sole cost and expense,
maintain the policies of insurance described in Section 5.27 in
form and with insurers recognized as adequate by Agent, and all
such policies shall be in such amounts as may be reasonably
satisfactory to Agent. In addition, Borrower shall notify Agent
promptly of any occurrence causing a material loss or decline in
value of any real or personal property and the estimated (or
actual, if available) amount of such loss or decline. Borrower
hereby directs all present and future insurers under its "All Risk"
policies of insurance to pay all proceeds payable thereunder
directly to Agent, subject to the rights, if any, of any holders of
Permitted Encumbrances with respect to such proceeds. Borrower
irrevocably makes, constitutes and appoints Agent (and all
officers, employees, or agents designated by Agent) as Borrower's
true and lawful agent and attorney-in-fact for the purpose of
making, settling, and adjusting claims under the "All Risk"
policies of insurance, endorsing the name of Borrower on any check,
draft, instrument or other item of payment for the proceeds of such
"All Risk" policies of insurance, and for making all determinations
and decisions with respect to such "All Risk" policies of
insurance; provided Agent agrees that it shall not exercise its
right to settle or adjust any claim unless an Event of Default has
occurred and is continuing. In the event Borrower at any time or
times hereafter shall fail to obtain or maintain any of the
policies of insurance required above or to pay any premium in whole
or in part relating thereto, Agent, without waiving or releasing
any Obligations or Default or Event of Default hereunder, may at
any time or times thereafter (but shall not be obligated to) obtain
and maintain such policies of insurance and pay such premium and
take any other action with respect thereto which Agent deems
advisable. All sums so disbursed by Agent, including reasonable
attorneys' fees, court costs, expenses and other charges relating
thereto, shall be payable, on demand, by Borrower to Agent and
shall be additional Obligations hereunder secured by the
Collateral.
(b) Agent reserves the right at any time, upon
review of Borrower's risk profile, to require additional forms and
limits of insurance to, in Agent's reasonable judgment, after
consultation with Borrower, adequately protect Lenders' interests.
(c) Borrower shall, if so requested by Agent,
deliver to Agent, as often as Agent may request, a report of a
reputable insurance broker, reasonably satisfactory to Agent with
respect to its insurance policies.
7.7 Compliance with Laws.
(a) Borrower shall comply with all federal, state
and local laws and regulations applicable to it, including, those
relating to bonded wine making operations, alcoholic beverage
control, licensing, environmental, consumer credit,
truth-in-lending, ERISA, and labor matters, except where such
noncompliance would not have a Material Adverse Effect.
(b) Borrower shall comply with all statutory
procedures under California law necessary to exempt from the
provisions of Section 3440 of the California Civil Code any bulk
juice, must, or wine owned by Borrower and stored at any winery not
owned or leased by Borrower, unless otherwise disclosed to Agent.
7.8 Agreements. Borrower shall perform, within all
required time periods (after giving effect to any applicable grace
periods), all of its obligations and enforce all of its rights
under each agreement to which it is a party, including any leases
and customer contracts to which it is a party where the failure to
so perform and enforce would have a Material Adverse Effect.
Borrower shall not terminate or modify any provision of any
agreement to which it is a party which termination or modification
could have a Material Adverse Effect.
7.9 Supplemental Disclosure. From time to time as may be
necessary (in the event that such information is not otherwise
delivered by Borrower to any Lender pursuant to this Agreement), so
long as there are Obligations outstanding hereunder, Borrower will
supplement each schedule or representation herein with respect to
any matter hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or
described in such schedule or as an exception to such
representation or which is necessary to correct any information in
such schedule or representation which has been rendered inaccurate
thereby; provided that such supplement to such schedule or
representation shall not be deemed an amendment thereof unless
otherwise consented to by Agent.
7.10 Employee Plans.
(a) Borrower shall notify Agent of any and all
claims (other than claims for benefits in the normal course),
actions, or lawsuits asserted or instituted, and of any threatened
litigation or claims, against Borrower, or, to Borrower's
Knowledge, any ERISA Affiliate in connection with any Plan
maintained, at any time, by Borrower, or any ERISA Affiliate, or to
which Borrower, or any ERISA Affiliate has or had at any time any
obligation to contribute, or/and against any such Plan itself, or
against any fiduciary of or service provider to any such Plan (i)
in an amount which may reasonably be expected to be, if adversely
determined, in excess of One Hundred Thousand Dollars ($100,000) or
(ii) which, if adversely determined, would have a Material Adverse
Effect.
(b) Borrower shall notify Agent of the occurrence
of any "Reportable Event" with respect to any Pension Plan of
Borrower or any ERISA Affiliate.
7.11 Environmental Matters. Borrower shall (i) comply in
all material respects with the Environmental Laws applicable to it,
(ii) notify Agent promptly after knowledge in the event of any
Spill which is reportable to any Governmental Authority upon any
premises owned or occupied by it, and (iii) promptly forward to
Agent a copy of any order, notice, permit, application, or any
other communication or report received by Borrower in connection
with any such Spill or any other matter relating to the
Environmental Laws that may materially affect such premises. The
provisions of this Section 7.11 shall apply whether or not the
Environmental Protection Agency, any other federal agency or any
state or local environmental agency has taken or threatened any
action in connection with the presence of any Spills or hazardous
substances.
7.12 Subsidiary. Prior to forming any Subsidiary, Borrower
shall (a) provide not less than thirty (30) days prior written
notice to Agent, and (b) receive the prior written consent of Agent
consent shall not be unreasonably withheld. As a condition to
providing its consent to the formation of such Subsidiary, Agent
may require that the Subsidiary guarantee the full amount of the
Obligations and grant to Agent, for the benefit of Lenders, a Lien
on and security interest in all of such Subsidiary's property to
secure such guaranty.
7.13 Maintenance of Equipment and Fixtures. Borrower shall
keep and maintain its equipment and fixtures (each as defined in
the California Commercial Code) in good operating condition
sufficient for the continuation of Borrower's business conducted on
a basis consistent with past practices, and Borrower shall provide
or arrange for all maintenance and service and all repairs
necessary for such purpose.
7.14 Syndication. Prior to and after the Closing Date,
Borrower shall use reasonable time and efforts to assist Lenders as
necessary or appropriate to effectuate any sale, assignment, or
other syndication of the Revolving Loan or Term Loan, including (i)
the preparation of offering materials to be delivered to potential
lenders, (ii) the preparation of information and projections by
Borrower and its advisors relating to the Stock Acquisition and the
financing transaction contemplated by this Agreement, and (iii)the
participation of the relevant management in meetings with potential
lenders.
7.15 Payment of Grower Payables. Borrower shall pay all
Grower Payables as and when due under the terms of Borrower's
agreements with Borrower's account debtors, except to the extent
otherwise agreed by such account debtors and except for Grower
Payables being contested by Borrower in good faith.
7.16 Payment of Leases. Borrower shall pay as and when due
all obligations owed by Borrower under any lease of real or
personal property, except to the extent otherwise agreed by the
lessor thereof or to the extent that Borrower is in good faith
contesting its obligation to pay such obligation.
7.17 Interest Rate Protection. On or before February 15,
1996, Borrower shall have fixed pursuant to the terms of this
Agreement, or shall have hedged on terms satisfactory to Agent, for
a period of not less than three (3) years, not less than sixty
percent (60%) of the aggregate of the outstanding balances of the
Revolving Loan and the Term Loan on the Closing Date. On or before
thirty (30) days after the Third Amendment Closing Date, Borrower
shall have fixed pursuant to the terms of this Agreement, or shall
have hedged on terms satisfactory to Agent, for a period of not
less than three (3) years, not less than Seventeen Million Dollars
($17,000,000) of the aggregate of the outstanding balances of the
Revolving Loan and the Term Loan that were advanced on the Third
Amendment Closing Date.
7.18 Notification Regarding Subordinated Debt. Borrower
shall promptly provide notice to Agent of the existence of any
default or event of default by Borrower under any document
governing any Subordinated Debt, or of any breach by Borrower of,
or any failure by Borrower to observe or comply with, any provision
of any document governing any Subordinated Debt. Borrower shall
promptly notify Agent of any notice received by Borrower from any
holder of any Subordinated Debt or any representative acting on
behalf of any holder of Subordinated Debt, and provide Agent with a
copy of any notice received, if such notice concerns or references
the existence of a default, an event of default, or a breach by
Borrower with respect to any Subordinated Debt or any remedy with
respect thereto.
7.19 Proceeds of Second Restatement Stock. Borrower shall
have obtained Five Million Dollars ($5,000,000) as payment for the
Second Restatement Stock by the earlier of (a) March 31, 1997, or
(b) the Newhall Advance Date.
ARTICLE VIII.
NEGATIVE COVENANTS
Borrower covenants and agrees that, unless Agent
shall have otherwise consented, from and after the date hereof
Borrower shall comply with and observe each of the following
covenants and shall cause each of its Subsidiaries to comply with
and observe each of the following covenants, all references in this
ArticleEVIII applying on a consolidated basis to both Borrower and
its Subsidiaries.
8.1 Mergers, Etc. Borrower shall not, directly or
indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the assets or
capital stock of, or otherwise combine with, any Person or form any
Subsidiary; provided, that so long as no Event of Default shall
have occurred and be continuing, nothing in this Section 8.1 shall
limit the ability of Borrower to acquire new wineries, vineyards,
or other similar assets or properties.
8.2 Investments; Loans and Advances. Except as expressly
permitted by Section 8.6, Borrower shall not make any investment
in, or make or accrue loans or advances of money to any Person,
through the direct or indirect holding of securities or otherwise;
provided, that Borrower may: (a) make and maintain investments in
Cash Equivalents, (b) make and maintain loans or advances to, any
of its wholly-owned Subsidiaries in an aggregate amount at any one
time not to exceed Two Million Dollars ($2,000,000) (provided that
such wholly-owned Subsidiaries have guaranteed all Obligations and
secured such guarantee by a first priority security interest in all
of such Subsidiary's assets), (c) maintain (but not increase except
within the limitations permitted by clause (d) of this Section 8.2)
existing investments identified in Part Q of the Disclosure
Schedule, and (d) acquire the Stock of Stag's Leap Winery, Inc. for
the amount and on the terms set forth in the Stag's Leap
Acquisition Agreements, and (e) make and maintain investments in
any joint venture or non-wholly-owned Subsidiary; provided, that
such investments shall only be permissible under this clause (e) if
such joint venture or non wholly-owned Subsidiary is engaged in the
business of operating wineries, vineyards, or other related
businesses; and provided, further, that the aggregate amount
invested after the Closing Date in all investments permitted by
this Section 8.2(e) shall (i) not exceed Fifteen Million Dollars
($15,000,000) from time to time outstanding, and (ii) the sum of
(x) the cost of such investment (as determined by the Board of
Directors of Borrower in good faith), and (y)the aggregate cost of
all such other investments (as determined by the Board of Directors
of Borrower in good faith) does not exceed Five Million Dollars
($5,000,000) less, to the extent that the aggregate fair market
value of all other such investments is less than the aggregate cost
of such investments (in each case, as determined by the Board of
Directors of Borrower in good faith) one hundred percent (100%) of
such deficiency. Upon the occurrence of a Default or Event of
Default, Borrower shall liquidate all investments permitted under
this Section 8.2 and the proceeds of such liquidated investments
shall be immediately remitted to Agent on account of the
Obligations.
8.3 Indebtedness.
(a) Indebtedness Generally. Except as otherwise
expressly permitted by this Agreement, Borrower shall not create,
incur, assume, or permit to exist any Indebtedness, except (i)
Indebtedness secured by Liens permitted under Section 8.8, (ii) the
Revolving Loan, (iii) the Term Loan, (iv) all Deferred Taxes, (v)
all unfunded pension fund and other employee benefit plan
obligations and liabilities but only to the extent they are
permitted to remain unfunded under applicable law, (vi)
Indebtedness under Capital Leases to the extent permitted under
this Agreement, but not to exceed Five Million Dollars ($5,000,000)
at any time outstanding, (vii) Indebtedness in existence on the
Closing Date and identified on Part J of the Disclosure Schedule,
(viii) Purchase Money Indebtedness with respect to the acquisition
of Newly Acquired Capital Assets in an amount not to exceed the
maximum set forth in Section 8.3(b), and (ix) Indebtedness for
surety bonds obtained in the ordinary course of business.
(b) Purchase Money Indebtedness for Acquisition of
Newly Acquired Capital Assets. Borrower may incur Purchase Money
Indebtedness with respect to the acquisition of Newly Acquired
Capital Assets, provided that (i) such Indebtedness is secured only
by the particular Newly Acquired Capital Asset or related group of
Newly Acquired Capital Assets, (ii) no Default or Event of Default
has occurred and is continuing or would occur as result of the
incurring of such Purchase Money Indebtedness, (iii) except with
respect to the amounts provided in Section 8.3(a) below, Borrower
has delivered to Agent and Lenders the annual audited financial
statement for Borrower's Fiscal Year ending December 31, 1996, (iv)
the incurring of such Purchase Money Indebtedness does not cause
Borrower to fail to continue to achieve either of the ratios
described below upon which the right to incur such Purchase Money
Indebtedness is based, and (v) the cumulative amount of all such
Purchase Money Indebtedness shall not exceed up to the following
cumulative levels:
(i) If the post-closing balance
sheet provided by
Borrower to Lender pursuant to the Schedule of Documents, or any
subsequent quarterly financial statement provided by Borrower to
Agent pursuant to Section 6.1(c), indicates a Consolidated Funded
Debt to Consolidated EBITDA Ratio of less than five and one-half to
one (5.50:1.), then Borrower shall be entitled to incur Purchase
Money Indebtedness not to exceed Ten Million Dollars ($10,000,000)
in the aggregate from and after the Closing Date;
(ii) If and at such time as the
quarterly financial
statements provided by Borrower to Agent pursuant to Section 6.1(c)
(subject to adjustment if a subsequently delivered annual financial
statement differs from the quarterly statement), indicate that
Borrower has achieved a Consolidated Funded Debt to Consolidated
EBITDA Ratio of less than four to one (4.0:1) as of the end of the
particular Fiscal Quarter, then (but only so long as Borrower
continues each quarter to achieve such ratio) Borrower shall be
entitled to incur Purchase Money Indebtedness not to exceed Fifteen
Million Dollars ($15,000,000) in the aggregate from and after the
Closing Date;
(iii) If and at such time as the
quarterly financial
statements provided by Borrower to Agent pursuant to Section 6.1(c)
(subject to adjustment if a subsequently delivered annual financial
statement differs from the quarterly statement), indicate that
Borrower has achieved a Consolidated Funded Debt to Consolidated
EBITDA Ratio of less than three and one-half to one (3.5:1) as of
the end of the particular Fiscal Quarter, then (but only so long as
Borrower continues each quarter to achieve such ratio) Borrower
shall be entitled to incur Purchase Money Indebtedness not to
exceed Thirty Million Dollars ($30,000,000) in the aggregate from
and after the Closing Date;
(iv) If and at such time as the
quarterly financial
statements provided by Borrower to Agent pursuant to Section 6.1(c)
(subject to adjustment if a subsequently delivered annual financial
statement differs from the quarterly statement), indicate that
Borrower has achieved a Consolidated Funded Debt to Consolidated
EBITDA Ratio of less than three to one (3.0:1) as of the end of the
particular Fiscal Quarter, then (but only so long as Borrower
continues each quarter to achieve such ratio and subject to the
last sentence of this Section 8.3(b)) there shall be no further
dollar limitations on Borrower's incurring Purchase Money
Indebtedness under this Section 8.3(b).
Notwithstanding the foregoing, if the cumulative amount of
permitted Purchase Money Indebtedness shall be increased because of
Borrower's achieving the applicable ratio requirement but, as of
the end of a subsequent Fiscal Quarter, Borrower shall fail to
achieve such ratio requirement, then the cumulative amount of
permitted Purchase Money Indebtedness shall be immediately reduced
to the greater of (i) the cumulative amount of Purchase Money
Indebtedness for which Borrower qualifies based on such subsequent
financial statement, or (ii) the cumulative amount of Purchase
Money Indebtedness actually incurred by Borrower prior to the end
of such Fiscal Quarter. Similarly, if the cumulative amount of
permitted Purchase Money Indebtedness shall be increased because of
Borrower's achieving the applicable ratio requirement as of the end
of a Fiscal Quarter ending on June 30 of any year but the annual
audited financial statement subsequently delivered to Agent for
such Fiscal Year indicates that Borrower has failed to achieve both
applicable ratio requirements as of the end of such Fiscal Quarter,
then the cumulative amount of permitted Purchase Money Indebtedness
shall be immediately reduced to the greater of (i) the cumulative
amount of Purchase Money Indebtedness for which Borrower qualifies
based on such annual audited financial statement, or (ii) the
cumulative amount of Purchase Money Indebtedness actually incurred
by Borrower prior to delivery of such annual audited financial
statement.
8.4 Capital Structure.
(a) Borrower shall not issue or agree to issue any
of its respective authorized but not outstanding shares of Stock
(including treasury shares) except for additional shares that may
be issued to BWEH in exchange for additional equity investment in
Borrower.
(b) Borrower shall not make any material changes
in its capital structure (including the issuance of any shares of
stock, warrants, or other securities convertible into stock or any
revision of the terms of its outstanding Stock) or amend its
certificate of incorporation or by-laws without the prior written
consent of Requisite Lenders, which consent will not be
unreasonably withheld.
8.5 Maintenance of Business. Borrower shall not engage in
any business other than the production and sale of wine and
wine-related products, which business includes activities related
to the acquisition and operation of vineyards.
8.6 Transactions with Affiliates. Borrower shall not enter
into or be a party to any transaction with any Affiliate of
Borrower, except (a) in accordance with the terms of the management
compensation incentive plan identified in Part V of the Disclosure
Schedule (to the extent such plan includes recourse loans made by
Borrower to senior management of Borrower for purposes of financing
fifty percent (50%) of the purchase price of stock being acquired
by such managers in BWEH, in amounts not to exceed One Million
Dollars ($1,000,000); provided that such shall be permitted only if
the full amount received by BWEH for such stock is forwarded by
BWEH to Borrower as a capital contribution, but only to the extent
funds for such loan were originally provided by Borrower), (b) for
the payment of fees to be paid to certain Affiliates to the extent
identified in the schedule of fees identified in Appendix M to the
Schedule of Documents, and (c) in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and
upon fair and reasonable terms that are fully disclosed to Agent
and are no less favorable to Borrower than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate
of Borrower.
8.7 Guaranteed Indebtedness. Borrower shall not incur any
Guaranteed Indebtedness except (a) by endorsement of instruments or
items of payment for deposit to the general account of Borrower,
(b) for Guaranteed Indebtedness incurred for the benefit of
Borrower if the primary obligation is permitted by this Agreement,
and (c) those obligations set forth in Part K of the Disclosure
Schedule.
8.8 Liens. Borrower shall not create or permit any Lien on
any of its properties or assets except the Lien of Agent under the
Loan Documents and Permitted Encumbrances.
8.9 Sales of Assets.
(a) Sales of Assets Other Than Real Property.
Borrower shall not sell, transfer (including any consensual
transfer such as the execution of a deed in lieu of foreclosure),
convey, assign, or otherwise dispose of any of its assets or
properties (other than real property, which is governed by Sections
8.9(b), 8.9(c), and 8.9(d)); provided, that the foregoing shall not
prohibit (i) the sale of Inventory in the ordinary course of
business, (ii)Ethe replacement or trade-in of equipment in the
ordinary course of business, (iii) the sale of Borrower's interest
in the Pressoir Deutz Winery, and (iv) the sale or other disposal
of used equipment, other than replacement or trade-in of equipment,
in the ordinary course of Borrower's business up to a net book
value of Two Million Dollars ($2,000,000) for all such equipment
sold after the Closing Date; and, provided, further, that the Net
Proceeds from any such sale are immediately paid to Agent for
application as provided in Section 2.3(c).
(b) Sales of Agricultural Real Property. Borrower
shall not sell, transfer (including any consensual transfer such as
the execution of a deed in lieu of foreclosure), convey, assign, or
otherwise dispose of any Agricultural Real Property owned by
Borrower; provided, that Borrower may sell or otherwise dispose of
Agricultural Real Property after the Closing Date having a value
(as set forth on the Real Estate Valuation Schedule identified in
the Schedule of Documents), when aggregated with all other
Agricultural Real Property sold or disposed of by Borrower after
the Closing Date, as follows:
(i) with respect to Agricultural
Real Property that
is sold and immediately leased back by Borrower at a
market rate of rent for a period of not less than fifteen
(15) years, not more than Fifteen Million Dollars
($15,000,000); and
(ii) with respect to any other
sales of Agricultural
Real Property, not more than Ten Million Dollars
($10,000,000);
and provided, further, that in each sale described in clauses (i)
or (ii) above Borrower shall receive and immediately pay to Agent
from the proceeds of sale the Minimum Payment Amount with respect
to such sale. The Fifteen Million Dollar ($15,000,000) and Ten
Million Dollar ($10,000,000) figures used above are cumulative.
Amounts paid to Agent pursuant to this Section 8.9(b) shall be
distributed to Term Lenders as a permanent reduction of the Term
Loan as provided in Section 2.3(c).
(c) Sales of Winery Real Property. Borrower shall
not sell, transfer (including any consensual transfer such as the
execution of a deed in lieu of foreclosure), convey, assign, or
otherwise dispose of any Winery Real Property.
(d) Sales of Special Real Property. Borrower shall
not sell, transfer (including any consensual transfer such as the
execution of a deed in lieu of foreclosure), convey, assign, or
otherwise dispose of any Special Real Property unless Borrower
receives and immediately pays to Agent from the proceeds of sale
the Minimum Payment Amount with respect to such sale. Amounts paid
to Agent pursuant to this Section 8.9(d) shall be distributed to
Term Lenders as a permanent reduction of the Term Loan as provided
in Section 2.3(c).
8.10 Cancellation of Claims. Borrower shall not cancel any
claim or debt owing to it, except for reasonable consideration or
in the ordinary course of business.
8.11 Events of Default. Borrower shall not take or omit to
take any action, which act or omission would constitute (a) a
Default or an Event of Default pursuant to, or noncompliance with
any of, the terms of any of the Loan Documents, or (b) a material
default or an event of default (i) pursuant to, or noncompliance
with, any contract, lease, mortgage, deed of trust, or instrument
to which it is a party or by which it or any of its property is
bound, or any document creating a Lien, and (ii) which would have a
Material Adverse Effect.
8.12 Restricted Payments. Borrower shall not make any
Restricted Payments; provided, that so long as no Default or Event
of Default then exists, has occurred within the twelve (12) months
immediately preceding such proposed Restricted Payment, or would
result from such Restricted Payment, Borrower may pay dividends on
its common stock to BWEH if all of the following requirements are
fulfilled: (a) the dividend is declared and paid no earlier than
January 16, 2000; (b) Borrower shall have sufficient net profits
pursuant to Section 170 of the Delaware General Corporation Law
with which to pay such dividend; (c) Borrower's Consolidated Net
Worth as of the end of the immediately preceding fiscal quarter was
not less than One Hundred Seventy Million Dollars ($170,000,000)
and will not be reduced to less than One Hundred Seventy Million
Dollars ($170,000,000) as a result of such Restricted Payment, and
(d) the aggregate amount of all such Restricted Payments paid to
BWEH in any Fiscal Year shall not exceed (i) fifty percent (50%) of
the amount of Consolidated Net Income for the Fiscal Year ending
June 30, 1999 for such dividends paid during such Fiscal Year, and
(ii) fifty percent (50%) of the aggregate amount of Consolidated
Net Income earned after June 30, 1999 for such dividends paid after
such Fiscal Year; and provided further that so long as no Default
or Event of Default then exists, or would result from such
Restricted Payment, Borrower may pay dividends on its common stock
to BWEH in an amount sufficient to enable BWEH to (x) pay the
actual amount of BWEH's tax liability as the parent of a
consolidated, combined, or unitary group, including Borrower, and
(y) pay its overhead and operating expenses, not to exceed Two
Hundred Fifty Thousand Dollars ($250,000) per Fiscal Year.
8.13 Payment or Modification of Subordinated Debt.
Borrower shall not make payments on account of any Subordinated
Debt except to the extent permissible under the agreement by which
such Subordinated Debt is subordinated to the Obligations. Borrower
shall not amend, supplement, or otherwise modify any provisions of
the any documents governing any Subordinated Debt, and shall not
refinance any portion of the Subordinated Debt, except on terms no
less favorable to Borrower and Lenders and those that have been
disclosed in writing to and approved by Agent.
8.14 Intentionally Omitted.
8.15 Termination of Real Property Leases. Borrower shall
not agree to terminate any leases of agricultural real property
prior to the expiration of the scheduled term thereof, or to allow
or suffer any such leases to be terminated prior to the expiration
of the scheduled term thereof if, as a result thereof, the total
number of vineyard acres leased by Borrower as tenant shall be less
than One Thousand Four Hundred Fifty (1,450) acres, minus the
aggregate acreage under such leases terminated upon the scheduled
expiration thereof. The failure by Borrower to exercise a renewal
option, and to exercise by Borrower of a purchase option, shall not
be considered a termination "prior to the expiration of the
scheduled term" as such phrase is used in this Section 8.15.
8.16 ERISA. Without Agent's prior written consent,
Borrower shall not acquire any new ERISA Affiliate that maintains
or has an obligation to contribute to a Pension Plan that has
either an "accumulated funding deficiency," as defined in Section
302 of ERISA, or any "unfunded vested benefits," as defined in
Section 4006(a)(3)(E)(iii) of ERISA in the case of any plan other
than a Multiemployer Plan and in Section 4211 of ERISA in the case
of a Multiemployer Plan. Additionally, Borrower shall not, without
Agent's prior written consent:
(a) terminate any Pension Plan that is subject to
Title IV of ERISA where such termination could reasonably be
anticipated to result in liability to Borrower in excess of Five
Hundred Thousand Dollars ($500,000);
(b) permit any accumulated funding deficiency, as
defined in Section 302(a)(2) of ERISA, to be incurred with respect
to any Pension Plan which would result in a Material Adverse
Effect;
(c) fail to make any contributions or fail to pay
any amounts due and owing as required by the terms of any Plan
before such contributions or amounts become delinquent if the
consequence of such delinquencies could, in the aggregate,
reasonably be expected to have a Material Adverse Effect;
(d) make a complete or partial withdrawal (within
the meaning of Section 4201 of ERISA) from any Multiemployer Plan
that could reasonably be anticipated to result in liability to
Borrower in excess of Five Hundred Thousand Dollars ($500,000); or
(e) at any time fail to provide Agent with copies
of any Plan documents or governmental reports or filings, if
reasonably requested by Agent.
8.17 Intentionally Omitted.
8.18 Intentionally Omitted.
8.19 Hazardous Materials. Except as set forth in Part (X)
of the Disclosure Schedule, Borrower shall not and shall not
knowingly permit any other Person within the control of Borrower to
cause or permit the presence, use, generation, manufacture,
installation, release, discharge, storage or disposal of any
Hazardous Materials on, under, in or about any of its real estate
or the transportation of any Hazardous Materials to or from any
real estate where such presence, use, generation, manufacture,
installation, release, discharge, storage or disposal would violate
any Environmental Laws, the violation of which would have a
Material Adverse Effect.
8.20 PACA License. Borrower shall not obtain or attempt to
obtain a dealer license under the provisions of Section 499c of
PACA.
8.21 Financial Covenants.
(a) Current Ratio. Borrower shall not permit the
ratio of (i) Consolidated Current Assets to (ii) Consolidated
Current Liabilities, as of the last day of each Fiscal Quarter
during the respective measurement periods listed below, to be less
than the correlative levels for such periods shown below:
<TABLE>
<CAPTION>
Measurement Minimum
Period Ratio
<S> <C> <C> <C> <C>
Closing Date through December 31, 1997 1.20:1
January 1, 1998 through Termination Date 1.25:1
</TABLE>
(b) Capitalization Ratio. Borrower shall not
permit the ratio of (i) Consolidated Total Debt, to (ii)
Consolidated Total Capitalization, as of the last day of each
Fiscal Quarter during the respective measurement periods listed
below, to be greater than the correlative levels for such periods
shown below:
<TABLE>
<CAPTION>
Measurement Maximum
Period Ratio
<S> <C> <C> <C>
First Amendment Date through May 31, 2000 70:1
June 1, 2000 through Termination Date . 65:1
</TABLE>
(c) Debt Coverage Ratio. Borrower shall not permit
the Consolidated Debt Coverage Ratio for the four Fiscal Quarters
immediately preceding each measurement date, as of the last day of
each Fiscal Quarter during the respective measurement periods
listed below, to be less than the correlative levels for such
periods shown below:
Measurement Minimum
Period Ratio
June 30, 1997 through June 29, 1999 1.75:1
June 30, 1999 through Termination Date 2.10:1
8.22 Compliance With Subordinated Debt Documents. Borrower
shall not breach, and shall not fail to observe or comply with, any
provision of any document governing any portion of any Subordinated
Debt if such breach or failure would, with the passage of time or
the giving of notice or both, constitute an event of default with
respect to such Subordinated Debt, unless the event of default that
could arise from such breach or failure has been waived in writing
by the holders of the Subordinated Debt.
ARTICLE IX.
INDEMNITY
9.1 Indemnification. Borrower shall indemnify and hold
Agent and Lenders and Agent and Lenders' respective Affiliates,
Subsidiaries, officers, directors, employees, attorneys, and agents
(each, an "Indemnified Person"), harmless from and against any and
all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including reasonable attorneys' fees and
disbursements (including allocated costs of internal counsel) and
other costs of investigations or defense, including those incurred
upon any appeal) which may be instituted or asserted against or
incurred by such Indemnified Person as a result of credit having
been extended under this Agreement and the other Loan Documents or
in connection with or arising out of the transactions contemplated
hereunder and thereunder, including any claim, action, suit,
proceeding, loss, cost, damage, liability, deficiency, fine,
penalty, punitive damage, or expense (including reasonable
attorneys' and consultants' fees, investigation and laboratory
fees, court costs and litigation expenses), directly or indirectly
resulting from, arising out of, or based upon (i) the presence,
release, use, manufacture, installation, generation, discharge,
storage, or disposal, at any time, of any Hazardous Materials on,
under, in or about, or the transportation of any such materials to
or from, any real property (the "Subject Property") owned, leased
or operated by Borrower or any Subsidiary of Borrower or any
Guarantor, or (ii) the violation or alleged violation by Borrower
or any Subsidiary of Borrower or any Guarantor of any law, statute,
ordinance, order, rule, regulation, permit, judgment, or license
relating to the use, generation, manufacture, installation,
release, discharge, storage, or disposal of Hazardous Materials to
or from the Subject Property; which indemnity shall include, (A)
any damage, liability, fine, penalty, punitive damage, cost, or
expense arising from or out of any claim, action, suit, or
proceeding for personal injury (including sickness, disease, death,
pain, or suffering), tangible or intangible property damage,
compensation for lost wages, business income, profits, or other
economic loss, damage to the natural resources or the environment,
nuisance, pollution, contamination, leak, spill, release, or other
adverse effect on the environment, and (B) the cost of any required
or necessary repair, cleanup, treatment, remediation, or
detoxification of the Subject Property and the preparation and
implementation of any closure, disposal, remedial, or other
required actions in connection with the Subject Property; provided,
that Borrower shall not be liable for any indemnification to such
Indemnified Person to the extent that any such suit, action,
proceeding, claim, damage, loss, liability or expense was the
result of any action by such Indemnified Person or results from
such Indemnified Person's gross negligence or willful misconduct.
NEITHER AGENT NOR ANY LENDER OR ANY OTHER INDEMNIFIED PERSON SHALL
BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR,
ASSIGNEE, OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY, OR CONSEQUENTIAL DAMAGES WHICH MAY
BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED UNDER THE
LOAN DOCUMENTS.
9.2 No Control. Borrower hereby acknowledges and agrees
that neither Agent nor any Lender (a) is now nor has ever been in
control of the Subject Property or Borrower's affairs, and (b) has
the capacity through the provisions of the Loan Documents to
influence Borrower's conduct with respect to the ownership,
operation, or management of the Subject Property.
ARTICLE X.
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.1 Events of Default. The occurrence of any one or more
of the following events (regardless of the reason therefor) shall
constitute an "Event of Default" hereunder:
(a) Failure to Pay Principal.
(i) Borrower shall fail to make any
payment of principal
owing with respect to the Revolving Loan (including failure to pay
any Letter of Credit Obligations) or any regularly scheduled
payment of principal owing with respect to the Term Loan when due
and payable and such failure shall remain uncured for a period of
two (2) Business Days; provided that the failure to make such
payment may only be cured by paying the amount due together with
interest on such amount at the Default Rate.
(ii)EBorrower shall fail to make any
mandatory prepayment
of principal owing with respect to the Revolving Loan or the Term
Loan when due and payable.
(b) Failure to Pay Interest or Other Amounts Other
than Expenses. Borrower shall fail to make any payment of interest
on the Revolving Loan, the Term Loan, or any other amount (other
than expenses payable under any Loan Document) owing with respect
to the Revolving Loan, the Term Loan or any of the other
Obligations when due and payable or declared due and payable and
such failure shall remain uncured for a period of two (2) Business
Days; provided that the failure to make such payment may only be
cured by paying the amount due together with interest on such
amount at the Default Rate.
(c) Failure to Pay Expenses. Borrower shall fail
to make any payment of any expenses payable under any Loan
Document, and such failure shall have remained uncured for a period
of ten (10) days after Borrower has received notice of such failure
from Agent; provided that the failure to make such payment may only
be cured by paying the amount due together with interest on such
amount at the Default Rate.
(d) Failure to Deliver Monthly Borrowing Base
Certificate. Borrower shall fail or neglect to deliver any
Borrowing Base Certificate when required pursuant to Section
6.1(a), and such failure shall remain uncured for a period of ten
(10) Business Days; provided, that such failure shall be curable
only four (4) times during any calendar year and there shall be no
cure period for a fifth (5th) or any subsequent failure in any
calendar year.
(e) Breach of Covenants or Other Provisions of
This Agreement. Borrower shall fail or neglect to perform, keep, or
observe any other provision of this Agreement or of any of the
other Loan Documents, and the same is by its nature incapable of
being cured or shall remain unremedied for a period ending on the
first to occur of twenty (20) days after Borrower shall receive
written notice of any such failure from Agent or thirty (30) days
after Borrower shall become aware thereof. A breach by Borrower of
the financial covenants set forth in Section 8.21 are incapable of
being cured.
(f) Default Under Other Indebtedness.
(i) A default shall occur under any
other agreement,
document, or instrument to which Borrower is a party or by which
Borrower or Borrower's property is bound and such default involves
the failure to make any payment (whether of principal, interest, or
otherwise) due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise, but only after expiration of
any cure periods provided by the underlying agreement, document, or
instrument) in respect of any Indebtedness of Borrower in excess of
One Million Dollars ($1,000,000).
(ii) A default shall occur under
or with respect to
any document evidencing any Subordinated Debt, whether or not such
default involves the failure to make any payment, if the occurrence
of such default entitles any holder thereof to demand payment of
all or any portion of the principal portion of such Subordinated
Debt.
(g) Breach of Representation or Warranty. Any
material representation or warranty herein or in any Loan Document
or in any written statement pursuant thereto or hereto, report,
financial statement, or certificate made or delivered to any Lender
by Borrower shall be untrue or incorrect, as of the date when made
or deemed made (including those made or deemed made pursuant to
Section 4.2) and the same is by its nature incapable of being cured
or shall remain unremedied for a period ending on the first to
occur of twenty (20) days after Borrower shall receive written
notice of any such failure from Agent or thirty (30) days after
Borrower shall become aware thereof.
(h) Loss of Assets. (i) Any of the assets of
Borrower shall be attached, seized, levied upon, or subjected to a
writ or distress warrant, or come within the possession of any
receiver, trustee, custodian, or assignee for the benefit of
creditors of Borrower and shall remain unstayed or undismissed for
thirty (30) consecutive days, (ii)Eany Person other than Borrower
shall apply for the appointment of a receiver, trustee or custodian
for any of Borrower's assets and such application shall remain
unstayed or undismissed for thirty (30) consecutive days, or (iii)
Borrower shall have concealed, removed, or permitted to be
concealed or removed, any part of its property, with intent to
hinder, delay, or defraud its creditors or any of them or made or
suffered a transfer of any of its property or the incurring of an
obligation which may be fraudulent under any bankruptcy, fraudulent
conveyance or other similar law, in each case only to the extent
any of the events set forth in clauses (i), (ii) or (iii) would,
individually or in the aggregate, have a Material Adverse Effect.
(i) Involuntary Insolvency Actions. A case or
proceeding shall have been commenced against Borrower in a court
having competent jurisdiction seeking a decree or order (i) under
the Bankruptcy Code, or any other applicable federal, state, or
foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) of Borrower or of any substantial part of its
properties, or (iii) ordering the winding-up or liquidation of the
affairs of Borrower and such case or proceeding shall remain
undismissed or unstayed for thirty (30) consecutive days or such
court shall enter a decree or order granting the relief sought in
such case or proceeding.
(j) Voluntary Insolvency Actions. Borrower shall
(i) file a petition seeking relief under the Bankruptcy Code, or
any other applicable federal, state or foreign bankruptcy or other
similar law, (ii) consent to the institution of proceedings
thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, or sequestrator (or similar
official) of Borrower or of any substantial part of its properties,
(iii) fail generally to pay its debts as such debts become due, or
(iv) take any corporate action in furtherance of any such action.
(k) Judgments. Final judgment or judgments for the
payment of money in excess of Fifty Thousand Dollars ($50,000) in
the aggregate shall be rendered against Borrower and the same shall
not be (i) fully covered by insurance in accordance with Section
7.6, or (ii) vacated, stayed, bonded, paid, or discharged for a
period of thirty (30) days.
(l) Change in Stockholders. BWEH shall fail to be
the legal and beneficial owner of all of the issued and outstanding
shares of common stock of Borrower, or Texas Pacific Group shall,
prior to an initial public offering for BWEH, fail to control at
least fifty-one percent (51%) of the voting shares of BWEH, or
after an initial public offering for BWEH, either (i) Texas Pacific
Group shall fail to control at least thirty-five percent (35%) of
the voting shares of BWEH, or (ii) any other Person and such
Person's Affiliates shall control more of the voting shares of BWEH
than are controlled by Texas Pacific Group.
(m) Acquisitions by BWEH. BWEH shall acquire (by
purchase, consolidation, merger or otherwise) any assets other than
the stock of Borrower.
(n) ERISA. (i) With respect to any Plan, a
prohibited transaction within the meaning of Section 4975 of the
IRC or Section 406 of ERISA occurs which in the reasonable
determination of Agent could result in direct or indirect liability
to Borrower, (ii) with respect to any Title IV Plan, the filing of
a notice to voluntarily terminate any such plan in a distress
termination, (iii) with respect to any Multiemployer Plan, Borrower
or any ERISA Affiliate shall incur any Withdrawal Liability, (iv)
with respect to any Qualified Plan, Borrower or any ERISA Affiliate
shall incur an accumulated funding deficiency or request a funding
waiver from the IRS, or (v) with respect to any Title IV Plan or
Multiemployer Plan which has an ERISA Event not described in
clauses (ii) - (iv) hereof, in the reasonable determination of
Agent there is a reasonable likelihood for termination of any such
plan by the PBGC; provided, that the events listed in clauses (i) -
(v) hereof shall constitute Events of Default only if the
liability, deficiency, or waiver request of Borrower or any ERISA
Affiliate, whether or not assessed, exceeds Fifty Thousand Dollars
($50,000) in any case set forth in (i) - (v) above, or exceeds One
Hundred Thousand Dollars ($100,000) in the aggregate for all such
cases.
(o) Guaranties. There shall occur an Event of
Default or an Event of Guaranty Default under and as defined in any
guaranty of all or any part of the Obligations by any Person or any
such guarantor shall renounce, repudiate, or terminate such
guaranty.
(p) Payment of Principal With Respect to
Subordinated Debt. Except as approved by Agent in writing, Borrower
shall make any payment of principal on account of any Subordinated
Debt or tender any payment of principal to any holder of any
Subordinated Debt.
10.2 Acceleration; Remedies.
(a) Automatic Acceleration; Notice of Acceleration and
Exercise of Remedies. If an Event of Default shall occur and be
continuing: (i) all Obligations and any indebtedness of Borrower
under any of the Loan Documents, any term thereof to the contrary
notwithstanding, shall at Lenders' option and without notice be
accelerated and become immediately due and payable without
presentment, demand, protest, or notice of dishonor, all of which
are hereby expressly waived by Borrower; (ii) the obligation, if
any, of Lenders to make further Revolving Advances or incur further
Letter of Credit Obligations shall immediately cease and terminate;
(iii) the obligation, if any, of the Swingline Lender to make
further Swingline Advances shall immediately cease and terminate;
and (iv) Agent may require that all Letter of Credit Obligations be
fully cash collateralized in accordance with the terms of Section
2.2. Upon and after an Event of Default, Agent may send Borrower a
notice that all of the Obligations have been accelerated and are
due in full (a "Notice of Acceleration"), which Notice of
Acceleration may be included in any notice from Agent to Borrower
that an Event of Default has occurred. Upon and after sending
Borrower the Notice of Acceleration, Agent and Lenders shall have
all rights, powers, and remedies available under each of the Loan
Documents, and including the right to resort to any or all
Collateral for any Obligations and to exercise any or all of the
rights of a beneficiary or secured party with respect to the
Collateral pursuant to applicable law. All rights, powers and
remedies of Agent and Lenders in connection with each of the Loan
Documents (x) may be exercised at any time by them and from time to
time after the occurrence and during the continuation of an Event
of Default, and after the sending of the Notice of Acceleration,
(y)Eare cumulative and not exclusive, and (z) shall be in addition
to any other rights, powers or remedies provided by law or equity.
(b) Payments to Third Parties. At its sole discretion and
without any obligation to do so, Agent may pay any amount to any
Person as Agent deems reasonably necessary to preserve the value
of, avoid loss of or damage to, or prevent foreclosure, sale, or
forfeiture of any of the Collateral, including bidding at or
redeeming from any sale of Collateral; provided that Agent may make
such payment no sooner than ten (10) calendar days before the date
first set for the event which could result in such loss, damage,
sale, foreclosure, or forfeiture; and provided further that Agent
shall notify Borrower at least two (2) calendar days in advance of
making such payment of its intent to make such payment, but such
notice shall not obligate Agent to make such payment; and provided
further, the failure of Agent to give such advance notice shall not
impair Agent's ability to make such payment and the legal effect
thereof with regard to such Person or the Collateral and Borrower's
remedy with respect to breach of the foregoing proviso shall be
limited to monetary damages. Any amounts paid or expended by Agent
in connection herewith shall constitute Obligations which shall be
payable on demand and which shall bear interest at the Default Rate
from the date paid by Agent.
(c) Appointment of Receiver. After the occurrence of an
Event of Default and delivery of a Notice of Acceleration, Agent
may (but shall not be obligated to) seek to obtain the appointment
of a receiver who shall be vested with any and all such powers and
rights as Agent may request of the court, including the right
(i)Eto sell the Collateral at one or more private or public sales,
(ii) to undertake cultivation, harvest, purchasing, processing,
sales, collections, or other work in connection with any Collateral
(or any portion thereof) in accordance with this Agreement and the
other Loan Documents (or any other plan of cultivation, harvest,
processing, preservation or maintenance approved by Agent and the
receiver or the court), and (iii) to exercise any or all such
rights, powers or privileges as Borrower or Agent might exercise on
its own behalf.
10.3 Distribution and Application of Amounts Received
After an Event of Default.
(a) Distribution of Amounts Received After an
Event of Default. Any amounts received by Agent on account of the
Obligations after an Event of Default, whether from voluntary
payment by Borrower, from a foreclosure sale, or from some other
source shall be distributed as follows: First, Agent may, but shall
not be obligated to, retain such amounts as are necessary to cover
payment of any fees, costs, or expenses due to Agent. Second,
amounts shall be distributed to Term Lenders and Revolving Lenders
based on their Percentages of the Obligations until each Lender has
received payment of all interest then due and owing to such Lender.
Third, amounts shall be distributed to Term Lenders and Revolving
Lenders as follows: (i) if the source of such amount was the sale
or other disposition of a Fixed Asset, then such amount shall be
distributed to Term Lenders based on their Percentages of the Term
Loan until such time as the Obligations to the Term Lenders have
been paid in full and any excess shall be distributed to Revolving
Lenders based on their Percentages of the Revolving Loan, and (ii)
if the source of such amount was from any source other than sale or
other disposition of a Fixed Asset, then such amount shall be
distributed to Revolving Lenders based on their Percentages of the
Revolving Loan until such time as the Revolving Loan has been paid
in full and, if any Letter of Credit Obligations remain
outstanding, the Cash Collateral Account shall have been funded in
an amount equal to the Letter of Credit Obligations, and any excess
shall be distributed to Term Lenders based on their Percentages of
the Term Loan. Notwithstanding the foregoing, if a payment made
after an Event of Default is in an amount that would be sufficient
to cure such Event of Default or is believed by Agent to be
intended by Borrower to cure such Event of Default, then Agent may
distribute the payment as necessary to permit cure of such an Event
of Default.
(b) Determining the Source of Funds; Resolution of
Dispute Over Source of Funds. In determining the source of funds
used to make a payment, Agent shall make an initial determination
and shall distribute such funds as are payable to each Lender in
accordance with such determination. Within ten (10) days after
making a distribution, Agent shall deliver to each Lender a report
setting forth the basis for Agent's determination as to the source
and allocation of funds. Agent's determination shall be final and
conclusive to the extent described in the report delivered to each
Lender unless any Lender shall deliver written notice to Agent and
all other Lenders that it disputes such determination within thirty
(30) days of Agent's delivery of the report referred to in the
previous sentence. Following the delivery of such a notice, Agent
and all Lenders shall negotiate in good faith to try and resolve
the dispute. If the dispute cannot be resolved within thirty (30)
days after delivery of the notice, then the dispute may be
submitted by any Lender to arbitration. Arbitration shall be
conducted by one arbitrator appointed in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association then in effect. The arbitrator shall consider the
dispute in San Francisco, California. The parties hereto agree that
the decision of the arbitrator shall be final, conclusive, and
binding upon the parties. In such arbitration, the Agent shall be
neutral (although Pacific Coast may participate in its role as a
Lender if it so chooses). The arbitrator shall not be authorized to
award the fees, costs, or expenses incurred by a Lender against
another Lender, although such fees, costs, and expenses may by
charged by such Lender to the Borrower.
(c) Application of Payments. Borrower irrevocably
waives the right to direct the application of any and all payments
at any time or times hereafter received by Agent or Lenders from or
on behalf of Borrower, and Borrower irrevocably agrees that Agent
and Lenders shall have the continuing exclusive right to apply any
and all such payments against the then due and payable Obligations
of Borrower as Agent and Lenders may deem advisable.
(d) Allocation of Payments among Lenders. Amounts
distributed by Agent to Term Lenders shall be allocated in
accordance with each Term Lender's respective Percentage of the
Term Loan. Amounts distributed by Agent to Revolving Lenders shall
be allocated in accordance with each Revolving Lender's respective
Percentage of the Revolving Loan. Amounts distributed by Agent to
all Lenders shall be allocated in accordance with each Lender's
respective Percentage of the Obligations. Notwithstanding the
foregoing, if any Term Lender's or Revolving Lender's pro rata
share of the aggregate outstanding principal amount of the Term
Loan or the Revolving Loan or the Obligations is greater than such
Lender's Percentage, then payments shall be allocated to such
Lender until its pro rata share of the aggregate outstanding Term
Loan, Revolving Loan or Obligations, as the case may be, is equal
to such Lender's Percentage.
10.4 Waivers by Borrower. Except as otherwise provided for
in this Agreement, Borrower waives (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension, or renewal of
any or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by any
Lender on which Borrower may in any way be liable and hereby
ratifies and confirms whatever any Lender may do in this regard,
(ii) all rights to notice and a hearing prior to any Lender's
taking possession or control of, or to any Lender's replevy,
attachment or levy upon, the Collateral or any bond or security
which might be required by any court prior to allowing such Lender
to exercise any of its remedies, and (iii) the benefit of all
valuation, appraisal, and exemption laws.
ARTICLE XI.
AGENCY
11.1 Appointment. Each Lender hereby (a) irrevocably
appoints Pacific Coast as the agent of such Lender under this
Agreement and the other Loan Documents and as agent for the lending
syndicate in the event any portion of the Revolving Loan or Term
Loan is hereafter syndicated, and (b) irrevocably authorizes Agent
to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers
and perform such duties as are expressly delegated to Agent by the
terms of this Agreement and the other Loan Documents, together with
such other powers as are reasonably incidental thereto.
Notwithstanding anything to the contrary herein, Agent shall have
no duties, responsibilities, or fiduciary relationships with any
Lender, except those expressly set forth in this Agreement and the
other Loan Documents, and no implied covenants, responsibilities,
duties, obligations, or liabilities shall be read into this
Agreement or the other Loan Documents or otherwise exist against
Agent.
11.2 Delegation of Duties. Agent may exercise any of its
powers or execute any of its duties under this Agreement and the
other Loan Documents by or through one or more agents or
attorneys-in-fact and shall be entitled to take, and to rely on,
advice of counsel concerning all matters pertaining to such rights
and duties. Agent may utilize the services of such agents and
attorneys-in-fact as Agent in its sole discretion reasonably
determines, and all reasonable fees and expenses of such agents and
attorneys-in-fact shall be paid by Borrower on demand. Agent shall
not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by Agent with reasonable care.
11.3 Limitation of Liability. Neither Agent nor its
officers, directors, employees, agents, attorneys, or Affiliates
shall be (a) liable for any waiver, consent, or approval given or
any action taken or omitted to be given or taken by them or by such
Person under or in connection with this Agreement or the other Loan
Documents, or (b) responsible for the consequences of any oversight
or error in judgment by them or such Person whatsoever, except for
their or such Person's own gross negligence or willful misconduct.
Agent shall not be responsible for (v) the execution, validity,
enforceability, effectiveness, or genuineness of this Agreement or
the other Loan Documents, (w) the collectibility of any amounts
owing under this Agreement or the other Loan Documents, (x) the
value, sufficiency, enforceability, or collectibility of any
collateral security therefor, (y) the failure by Borrower to
perform its obligations hereunder, or (z) the truth, accuracy, and
completeness of the recitals, statements, representations, or
warranties made by Borrower or any officer or agent thereof
contained in this Agreement or the other Loan Documents or in any
certificate, report, statement, or other document referred to or
provided for in, or received by the Agent in connection with, this
Agreement or the other Loan Documents.
11.4 Reliance by Agent. Agent shall not have any
obligation (a) to ascertain or to inquire as to the observance or
performance of any of the conditions, covenants, or agreements in
this Agreement or the other Loan Documents or in any document,
instrument, or agreement at any time constituting, or intended to
constitute, collateral security therefor, (b) to ascertain or
inquire as to whether any notice, consent, waiver, or request
delivered to it shall have been duly authorized or is genuine,
accurate and complete, or (c) to inspect the properties, books, or
records of Borrower. Agent shall be entitled to rely, and shall be
fully protected in relying, (x) upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex, teletype, or telephonic message,
statement, order, or other document, instrument or conversation
believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, or (y) upon advice
and statements of legal counsel (including counsel to Borrower),
independent accountants, and other experts selected by Agent. Agent
may deem and treat the Lenders party hereto or to any Assignment
and Acceptance as a Lender for all purposes unless a written notice
of the assignment, negotiation, or transfer thereof, in accordance
with the provisions of this Agreement, shall have been delivered to
Agent identifying the name of any successor or assignee Lender.
Agent shall be entitled to fail or refuse, and shall be fully
protected in failing or refusing, to take any action under this
Agreement or the other Loan Documents unless (a) it first shall
receive such advice or concurrence of the Lenders as it deems
appropriate, or (b) it first shall be indemnified to its
satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or
continuing to take any such action. In all cases Agent shall be
fully protected in acting, or in refraining from acting, under this
Agreement or the other Loan Documents in accordance with a request
of the Lenders, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and all
future Lenders.
11.5 Notice of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of
Default unless Agent has received notice from a Lender or Borrower
referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "Notice of Default." If
Agent receives such a notice or if the officers of Agent
administering the Revolving Loan and the Term Loan have actual
knowledge of the occurrence of a Default or an Event of Default,
Agent promptly shall give notice thereof to the Lenders. Agent
shall take such action with respect to such Default or Event of
Default (unless such Default or Event of Default is waived in
accordance with the provisions of Section 13.1) as shall be
directed by the Requisite Lenders; provided, that if the Requisite
Lenders do not provide directions to Agent within a reasonable
period of time after the occurrence of an Event of Default, then
Agent shall notify Borrower that the Obligations have been
accelerated and unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such
additional action, or refrain from taking such additional action,
with respect to such Default or Event of Default as it deems
advisable in the best interests of Lenders.
11.6 Non-Reliance on Agent and the Other Lenders. Each
Lender expressly acknowledges that neither Agent nor any of its
officers, directors, employees, agents, attorneys, or Affiliates
has made any representations or warranties to it. Agent shall have
no obligation or liability to any of the Lenders regarding the
creditworthiness or financial condition of Borrower. No act by
Agent hereinafter taken, including any review of Borrower, shall be
deemed to constitute any representation or warranty by Agent to any
Lender. Each Lender represents to Agent that, independently and
without reliance upon Agent or any other Lender and based on such
documents and information as it has deemed appropriate, it has made
its own appraisal of and investigation into the business,
operations, property, financial, and other condition and
creditworthiness of Borrower and has made its own decision to make
its Revolving Advances, the Term Loan and to incur Letter of Credit
Obligations hereunder and to enter into this Agreement. Each Lender
also represents that, independently and without reliance upon Agent
or any other Lender, and based on such documents and information as
it deems appropriate at the time, it shall continue to make its own
credit analysis, appraisals, and decisions in taking or not taking
action under this Agreement and the other Loan Documents and to
make such investigation as it deems necessary to inform itself as
to the business, operations, property, financial and other
condition, and creditworthiness of Borrower. Except for notices,
reports and other documents expressly required to be furnished to
Lenders by Agent hereunder, Agent shall have no obligation or
liability to provide any Lender with any credit or other
information concerning the business, operations, property,
financial and other condition or creditworthiness of Borrower which
may come into the possession of either of Agent or any of its
officers, directors, employees, agents, attorneys-in-fact, or
Affiliates.
11.7 Indemnification. Each of the Lenders shall indemnify,
defend, and hold harmless Agent in its capacity as such (to the
extent not reimbursed by Borrower and without limiting the
obligation of Borrower to do so), ratably according to their
respective Percentages, from and against any and all claims,
demands, lawsuits, costs, expenses, fees, liabilities, obligations,
losses, damages, actions, recoveries, judgments, suits, costs,
expenses, or disbursements of any kind whatsoever, including
interest, penalties, and reasonable attorneys' fees and costs,
whether direct, indirect, consequential or incidental, which at any
time (including at any time following the payment of the Revolving
Notes and Term Notes and all other amounts payable hereunder or
thereunder) may be imposed on, incurred by, or asserted against
Agent in any way relating to, resulting from or arising out of this
Agreement or the other Loan Documents, the transactions
contemplated hereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided, that no
Lender shall be liable for the payment of any portion of such
claims, demands, lawsuits, costs, expenses, fees, liabilities,
obligations, losses, damages, actions, remedies, judgments, suits,
costs, expenses, or disbursements to the extent such result from
Agent's gross negligence or willful misconduct. The agreements in
this Section 11.7 shall survive the payment of the Revolving Notes
and all other amounts payable hereunder and thereunder and shall be
in addition to and not in lieu of any other indemnification
agreements set forth in the Loan Documents.
11.8 Payments. If, in the opinion of Agent, the
distribution of any amount received by Agent in such capacity under
this Agreement or the other Loan Documents might result in
liability for Agent, Agent may refrain from making the distribution
thereof until Agent's right to make such distribution shall have
been adjudicated by a court of competent jurisdiction. If Agent so
refrains from making any distribution, the amount thereof shall be
held in an interest bearing account for the benefit of the Person
or Persons ultimately determined to be entitled to such
distribution. If a court of competent jurisdiction shall adjudge
that any amount received from and distributed by Agent in such
capacity as Agent is to be repaid, each Person to whom any such
distribution shall have been made either (a) shall repay to Agent
its proportionate share of the amount so adjudged to be repaid or
(b) shall repay the same in such manner and to such Persons as
shall be determined by such court.
11.9 Agent in Its Individual Capacity. The Agent in its
individual capacity, and its Affiliates, may make loans and other
financial accommodations to, accept deposits from and generally
engage in any kind of business with Borrower as though Agent was
not the Agent hereunder, subject only to such restrictions as are
generally applicable to all Lenders. With respect to the portion of
the Revolving Loan and Term Loan made by it and the Letter of
Credit Obligations incurred by it and its Revolving Note and Term
Note, the Agent in its individual capacity shall have the same
benefits, rights, powers, and privileges under this Agreement and
the other Loan Documents as any Lender and may exercise the same as
though it were not Agent, and the terms "Lender," "Lenders,"
"Revolving Lender," "Revolving Lenders," "Term Lender" and "Term
Lenders" shall include the Agent in its individual capacity.
11.10 Successor Agent. Agent may resign as such upon ten
(10) days' prior written notice to the Lenders or the Requisite
Lenders may terminate Agent upon ten (10) days' written notice. If
Agent shall resign or be terminated as such under this Agreement,
then the Requisite Lenders shall appoint from among Lenders a
successor agent for Lenders. Upon acceptance of its appointment as
successor agent, (a) such successor agent shall succeed to the
rights, powers, privileges, and duties of Agent, (b) the retiring
Agent shall be discharged of all its obligations and liabilities in
such capacity under this Agreement and the other Loan Documents,
(c) the term "Agent" shall mean such successor agent effective upon
its appointment, and (d) the retiring Agent's rights, powers, and
duties as Agent shall be terminated, without any other or further
act or deed on the part of such former Agent or any of the parties
to this Agreement. After any retiring Agent's resignation or
termination hereunder as Agent, the provisions of this Article XI
shall continue to inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
11.11 Applicability of this Article to Borrower.
Notwithstanding any other provision contained in this Article XI,
the rights and obligations of Borrower under this Agreement shall
not be affected by any provision otherwise included in this Article
XI. The Borrower shall be permitted to rely on communications from
Agent which it reasonably believes are made on behalf of Agent and,
if specified therein, Lenders or the Requisite Lenders, and except
as otherwise set forth specifically herein, all notices and
payments to be made by Borrower hereunder shall be made to Agent.
Further, if any Lender shall be in default hereunder, such default
shall not affect the right and obligations of Borrower hereunder.
11.12 Agent's Authority To Equalize Percentages of
Revolving Lenders. It is the intent of the Revolving Lenders that
the risk exposure of each Revolving Lender with respect to the
Revolving Loan and the Swingline Loan shall be equal to such
Lender's Percentage. If an Event of Default shall occur and the
principal balance of the Revolving Loan held by each Revolving
Lender differs from such Revolving Lender's Percentage of the
Revolving Loan (due to the fact that each Revolving Lender's
Initial Percentage is different from each Revolving Lender's
Percentage, due to a Revolving Lender's having failed to fund, or
due to other reasons), Agent shall take such actions as Agent
considers appropriate under the circumstances so that the principal
balance of the Revolving Loan held by each Revolving Lender is
equal to such Lender's Percentage of the Revolving Loan. To
accomplish such equality, Agent may instruct one or more Revolving
Lenders to wire transfer funds to one or more other Revolving
Lenders and Revolving Lenders agree to comply with such
instructions. In addition, Agent may take such other actions as are
necessary to accomplish such equality.
ARTICLE XII.
ASSIGNMENTS AND PARTICIPATIONS
12.1 Successors and Assigns. This Agreement and the other
Loan Documents shall be binding on and shall inure to the benefit
of Borrower, Agent, Lenders and their respective successors and
assigns, except as otherwise provided herein or therein. Borrower
may not assign, transfer, hypothecate, or otherwise convey its
rights, benefits, obligations, or duties hereunder or thereunder
without the prior express written consent of Lenders. Any purported
assignment, transfer, hypothecation, or other conveyance by
Borrower without the prior express written consent of all of the
Lenders shall be void. Neither Agent nor any of Lender may sell,
assign, transfer, grant a participation in, or otherwise dispose of
all or any portion of its interest in this Agreement, the Revolving
Notes, the Term Notes or the other Loan Documents except as
expressly provided herein.
12.2 Assignments.
(a) Conditions for Assignment. Each Lender may
assign all or a portion of its right, title, and interest under
this Agreement and the other Loan Documents (including all or a
portion of the Revolving Loan or the Term Loan at the time owing to
it) to one or more banks or other financial institutions; provided,
that (a) the assignees shall execute and deliver to the Agent an
"Assignment and Acceptance" in a form reasonably satisfactory to
Agent, (b) Ea Lender may not assign any interest without the prior
approval of Agent and Borrower, which approval shall not be
unreasonably withheld, (c) the assignment shall be for an amount
not less than the lesser of (i) all of such Lender's Revolving
Advances, (ii) all of such Lender's Term Loan or (iii) Ten Million
Seven Hundred Fourteen Thousand Three Hundred Dollars
($10,714,300), (d) after giving effect to such assignment, such
Lender shall continue to hold an interest in the Revolving Loan or
the Term Loan, as the case may be, of not less than Ten Million
Seven Hundred Fourteen Thousand Three Hundred Dollars ($10,714,300)
unless such assignment is an assignment of all of such Lender's
interest, (e) Pacific Coast shall not assign any portion of the
Term Loan held by it if as a result of such assignment the
aggregate Percentage held by Pacific Coast (including that portion
of the Term Loan participated by Pacific Coast to CoBank) shall be
less than the amount necessary to constitute the Requisite Lenders
with respect to the Term Loan, (f)EPacific Coast shall not assign
any portion of the Revolving Loans held by it (except for
participations granted by Pacific Coast to CoBank) if such
assignment would cause the aggregate Percentage of the Revolving
Loan held by Pacific Coast and CoBank to be less than thirty three
and one-third percent (33 1/3%), and (g) Bank of America shall not
assign any portion of the Revolving Loans held by it if such
assignment would cause the aggregate Percentage of the Revolving
Loan held by Bank of America to be less than thirty three and
one-third percent (33 1/3%).
(b) Replacement of Transferor Lender by Assignee.
Upon the sale, assignment, transfer or other disposition (other
than the sale of a participation) of any of a Lender's right,
title, and interest under this Agreement and the other Loan
Documents to any assignee in accordance with this Section 12.2,
then upon the execution, delivery, and acceptance of the Assignment
and Acceptance, from and after the effective date specified
therein, (a) the transferor Lender no longer shall be a party to
this Agreement and the other Loan Documents, or have the rights,
benefits, and obligations under this Agreement or the other Loan
Documents to the extent of the interest transferred (except for
such rights, benefits, and obligations that such Lender would
retain under this Agreement or the other Loan Documents upon
payment in full of the Obligations) and (b) the assignee shall
become a Lender, shall succeed to the rights and benefits and
assume the obligations of such transferor Lender hereunder and
thereunder to the extent of the interest transferred.
(c) Borrower's Cooperation. Borrower hereby agrees
that it shall (i) execute and deliver, at the reasonable request of
Agent, any amendment to any Loan Document to effectuate the
provisions of this Section 12.2 and (ii) use reasonable efforts to
assist and cooperate with each Lender in any manner reasonably
requested by such Lender to effect the sale of participations in or
assignments of any of the Loan Documents or of any portion thereof
or interest therein, including assistance in the preparation of
appropriate disclosure documents or placement memoranda and
provision of complete and correct information describing Borrower
and its affairs to potential participants and assignees. Borrower
will not be obligated to incur or reimburse Lender for any direct
out-of-pocket costs or expenses in connection with any such
assignment, resale, syndication, or participation except for
expenses incurred by Pacific Coast in selling participations on or
about the Closing Date to CoBank, Agribank, FCB, and other entities
that are part of the Farm Credit System, all of which shall be
payable on the same terms and in the same manner as other expenses
incurred by Pacific Coast.
(d) Pledge of Rights. Notwithstanding any other
provision in this Agreement, any Lender may at any time create a
security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any entity to
which all loans of this type are secured or pledged, including any
Federal Reserve Bank in accordance with Regulation A of the Federal
Reserve Board or U.S. Treasury Regulation 31 CFR ss.E203.14, and
such entity or Federal Reserve Bank may enforce such pledge or
security interest in any manner permitted under applicable law.
12.3 Participations. Any Lender may grant one or more
participations in its interest in the Revolving Loan and Term Loan;
provided, that (a) such Lender shall remain a "Lender" for all
purposes under this Agreement and such Lender shall not be relieved
of any of its duties under this Agreement, (b) any such grant of a
participation will be made in compliance with all applicable state
or federal laws, rules, and regulations, and (c)Ethe participation
shall be for an amount not less than Five Million Dollars
($5,000,000), (d) after giving effect to such participation, such
Lender shall continue to hold an interest in the Revolving Loan or
the Term Loan, as the case may be, of not less than Five Million
Dollars ($5,000,000), and (e) except for the participation being
granted by Pacific Coast to CoBank which shall not be subject to
any restrictions, no Lender shall grant any participation under
which the participant shall have rights to approve any amendment
to, waiver of, or consent under this Agreement or the Loan
Documents, except for those that require approval of all Lenders as
provided in Section 13.1. Except for CoBank which is a Lender and
shall have all of the rights of a Lender, the participant shall not
have any rights under this Agreement or any of the other Loan
Documents entered into in connection herewith (the participant's
right against such Lender in respect of such participation to be
those set forth in the participation or other agreement executed by
such Lender and the participant relating thereto) and all amounts
payable to any Lender hereunder shall be determined as if such
Lender had not sold such participation. In no event shall any
participant grant a participation in its participation interest in
a Revolving Advance or in the Term Loan without the prior written
consent of Agent.
12.4 Disclosure. In connection with any assignments,
participations, or offers therefor pursuant to this Article XII,
each Lender shall be entitled to provide to any assignee or
participant or prospective assignee or participant such information
pertaining to Borrower as such Lender may deem appropriate or such
assignee or participant or prospective assignee or participant may
request; provided, that such assignee or participant or prospective
assignee or participant shall agree (a) to treat in confidence such
information, (b) not to disclose such information to any third
party, and (c) not to make use of such information for purposes of
transactions other than contemplated by such assignment or
participation.
ARTICLE XIII.
MISCELLANEOUS
13.1 Complete Agreement; Modification of Agreement. The
Loan Documents constitute the complete agreement between the
parties with respect to the subject matter hereof and may not be
modified, altered, or amended except by an agreement in writing
signed by Borrower and the Requisite Lenders, except as provided
below. No amendment or waiver of any provision of this Agreement or
any Loan Document, nor consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Requisite Lenders; provided, that to
the extent such amendment, consent, or waiver would do any of the
following, it shall not be effective unless signed by all of the
Lenders: (i) extend the final maturity date for payment of the
Revolving Loan or the Term Loan or the due date for any installment
payment of principal with respect to the Term Loan; (ii) reduce the
interest rate or extend the time of payment of interest (other than
interest payable in connection with mandatory prepayments under
Section 2.3) or Fees payable under this Agreement or reduce the
amount of principal or Fees payable under this Agreement; (iii)
change the amount of the Maximum Revolving Loan; (iv) change the
definitions of Borrowing Base or Fixed Assets (or any defined term
used therein) or make any change in Sections 2.3 or 10.3; (v)
release all or a substantial portion of the Collateral; (vi) change
the definition of "Requisite Lenders" or change this Section 13.1;
(vii) subordinate the priority of any lien or security interest
covering a material portion of collateral; (viii) make a material
change in any indemnity provided to any Lender; and (ix) increase
the interest rate or fees under, accelerate the payment of any
portion of, or modify or waive the subordination provisions with
respect to, the Subordinated Debt. Notwithstanding the foregoing,
(i) any amendment that would result in a change in the duties,
rights, or obligations of Agent shall not be effective unless
signed by Agent, and (ii) any provision of this Agreement setting
forth rights and duties of Lenders vis-a-vis each other or the
rights and duties of Lenders vis-a-vis Agent may be modified by
Lenders and Agent without the consent of Borrower.
13.2 Fees and Expenses. Borrower shall reimburse Agent and
Lenders (but in the case of Lenders, except for clauses (a) and (b)
below, only to the extent such are incurred after the occurrence of
a Default or Event of Default) for all reasonable fees, costs, and
expenses incurred in connection with:
(a) the preparation and negotiation of the Loan
Documents (including the reasonable fees and expenses of internal
counsel and, with respect to Bank of America, the cost of
conducting a pre-closing audit of Borrower, and, with respect to
Agent only, appraisers and consultants, retained in connection with
the Loan Documents and the transactions contemplated thereby and
advice in connection therewith); or
(b) any amendment, modification, or
waiver of, or consent with
respect to, any of the Loan Documents; or
(c) in the case of Agent only, any advice in
connection with the administration of the Revolving Loan, the Term
Loan, this Agreement, any Loan Document, or the Collateral, or the
performance of Agent's duties under the Loan Documents; or
(d) any litigation, contest, dispute, suit,
proceeding, or action (whether instituted by any Lender, Borrower
or any other Person) in any way relating to the Collateral, any of
the Loan Documents or any other agreements to be executed or
delivered in connection therewith or herewith, including any
litigation, contest, dispute, suit, case, proceeding or action, and
any appeal or review thereof, in connection with a case commenced
by or against Borrower or any other Person that may be obligated to
any Lender by virtue of this Agreement, or the other Loan
Documents, under the Bankruptcy Code, or any other applicable
federal, state or foreign bankruptcy or other similar law
(including the seeking of relief from the automatic stay or
proposal of opposition to a plan of reorganization); or
(e) any attempt to enforce any rights of Agent or
any Lender against Borrower or any other Person that may be
obligated to any Lender by virtue of any of the Loan Documents; or
(f) any attempt to (i) monitor the Revolving Loan
or Term Loan, (ii) evaluate, observe, assess Borrower or its
affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of the Collateral,
including environmental and field inspections; then, in any such
event, the reasonable attorneys' and other professional and service
providers' fees (including internally-allocated costs of in-house
counsel) arising from such services, including those of any
appellate proceedings, and all expenses, costs, charges, and other
fees incurred by such counsel and others in any way or respect
arising in connection with or relating to any of the events or
actions described in this Section 13.2, shall be payable, on
demand, by Borrower to Agent and shall be additional Obligations
secured under this Agreement and the other Loan Documents by all of
the Collateral. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees may include: paralegal fees,
costs and expenses; accountants', environmental advisors',
appraisers' and investment bankers' fees, costs and expenses;
management and other consultants' fees, costs and expenses; court
costs and expenses; photocopying and duplicating expenses; court
reporter fees, costs and expenses; long distance telephone charges;
air express charges; telegram charges; secretarial overtime
charges; and expenses for travel, lodging and food paid or incurred
in connection with the performance of such legal or other advisory
services.
13.3 Access and Annual Audit.
(a) Access. Borrower shall provide access to Agent
(and if requested by Agent, to any Lender as well) and any of its
officers, employees, and agents, or cause to be provided access to
Agent and any of its officers, employees and/or agents, exercisable
as frequently as Agent reasonably determines to be appropriate,
upon reasonable advance notice (unless an Event of Default shall
have occurred and be continuing, in which event no notice shall be
required and Agent shall have access at any and all times), during
normal business hours (or at such other times as may reasonably be
requested by Agent), to inspect the properties and facilities of
Borrower and to inspect, audit, and make extracts from all of
Borrower's records, files, and books of account. Borrower shall
make available to Agent and its counsel, as quickly as practicable
under the circumstances, originals or copies of all books, records,
board minutes, contracts, insurance policies, environmental audits,
business plans, files, financial statements (actual and pro forma),
filings with federal, state and local regulatory agencies, and
other instruments and documents which Agent may request. Borrower
shall deliver any document or instrument reasonably necessary for
Agent, as it may from time to time request, to obtain records from
any service bureau maintaining records for Borrower, and shall
maintain duplicate records or supporting documentation on media,
including computer tapes and discs owned by Borrower. Prior to the
occurrence of a Default or Event of Default, upon the request of
Agent and approval of such request by Borrower, which approval
shall not unreasonably be withheld, Borrower shall instruct any
banking or other financial institution to make available to Agent
such information and records as Agent may reasonably request.
Following the occurrence of a Default or Event of Default, Borrower
shall instruct all of its banking and other financial institutions
to make available to Agent such information and records as Agent
may reasonably request. Without limiting the generality of the
foregoing, Borrower will permit Agent and/or any industry
consultant acceptable to Agent to inspect, review and evaluate
Borrower's wine inventory, at Borrower's locations and at premises
not owned by or leased to Borrower upon request by Agent.
(b) Annual Audit. Borrower shall cooperate with
Agent in Agent's performance of an annual audit concerning
Borrower's business. In addition to other Fees payable to Agent
hereunder, Borrower shall reimburse Agent for the cost of
performing such audit (which may included internally-allocated
costs of Agent or any Lender) in an amount not to exceed Twenty
Thousand Dollars ($20,000) per audit. In conducting such audit,
Agent may utilize the services of and be accompanied by one or more
Lenders.
13.4 Set-off; Sharing; Limitation on Swap Lender.
(a) Setoff. In addition to any rights and remedies
of Agent and any Lender provided by law, each Lender shall have a
security interest in any and all deposits of Borrower (general or
special, time or demand, provisional or final) at any time held by
any Lender which security interest shall secure the Obligations.
Upon the occurrence and during the continuance of an Event of
Default, provided that it has first received the written consent of
Agent, without prior notice to Borrower (any such notice being
specifically waived by Borrower to the fullest extent permitted by
applicable law), each Lender may set off and apply against any
Obligations, whether matured or unmatured, of Borrower to such
Lender, any amount owing from the Lender to Borrower. No Lender
shall exercise any right of set-off it may have against any
Borrower or any Guarantor in connection with the Obligations
without the prior written consent of Agent or as provided in
Section 13.4(d). Each Lender promptly shall notify Borrower and
Agent after any such setoff and application made by any such
Lender; provided, that failure to give such notice shall not affect
the validity of such setoff and application.
(b) Sharing. Each Lender agrees that to the extent
that it shall receive or shall have received or collected, in
respect of any of the Obligations (other than the Swap Lender in
respect of the Swap Loss Obligations prior to the Swap Loss
Adjustment Date), any payment or distribution of any cash or other
property of Borrower or any Guarantor at any time, including by
payment or distribution from Borrower or any Guarantor, by exercise
of any right of set-off or counterclaim, by liquidation of
Collateral, as a distribution in a bankruptcy, insolvency, or
similar proceeding or otherwise, and any such payment or
distribution results in such Lender's receiving or having received
more than it would otherwise be entitled to receive under this
Agreement such Lender shall promptly deliver the same to Agent in
cash or the form received (except for the endorsement or the
assignment of or by such Lender where necessary), and Agent shall
promptly distribute the same to all Lenders in the same manner as
if it were a payment to be distributed pursuant to this Agreement,
and until so delivered, the same shall be held in trust by such
Lender as property of all Lenders.
(c) Returned Payments. Each Lender agrees that to
the extent that any payment or other transfer made under this
Agreement on account of the principal portion of any Obligations
(other than the Swap Lender in respect of the Swap Loss Obligations
prior to the Swap Loss Adjustment Date) shall be recovered (a
"Returned Payment") from any Lender pursuant to any preference,
fraudulent transfer, or similar provision under any bankruptcy,
insolvency, or similar law or otherwise, each other Lender shall
purchase from such Lender a participation in its Percentage of such
Returned Payment. To the extent that any Lender is required by the
provisions of this Section 13.4(c) to purchase a participation from
one or more other Lenders, such purchase shall be effected by (i)
Ethe payment to Agent by the Lender making such purchase of the
amount required to be paid, and (ii) Agent's distribution of the
amount or amounts required to be paid to the respective Lender or
Lenders from whom such purchase is required to be made. Borrower
agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in any
Obligations, whether or not acquired pursuant to the foregoing
arrangements, may exercise any rights of set-off or counterclaim
and other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of Borrower
in the amount of such participation.
(d) Special Provisions Regarding Swap Lender's
Exercise of Rights Under Swap Agreement. If Borrower shall default
in its obligations to the Swap Lender under the Swap Agreement, the
Swap Lender may exercise such rights and remedies as are available
to it under the Swap Agreement; provided that (i) the Swap Lender
shall not obtain a judgment against Borrower with respect to any
Swap Loss Obligations, and (ii) the Swap Lender shall not exercise
any rights of set off against Borrower with respect to any Swap
Loss Obligations. Nothwithstanding the foregoing, the Swap Lender
may (x) enforce the arbitration provision, if any, of the Swap
Agreement to establish the amount of the Final Swap Loss
Obligations so long as no judgment is entered with respect to such
determination, and (y) exercise rights of set off with respect to
Swap Loss Obligations, but only as permitted under Section 13.4(a)
or if the Swap Lender has provided to Agent and Lenders an
indemnity, in form and substance satisfactory to Agent, from all
losses or damages caused to Agent and Lenders arising out of such
exercise of setoff rights.
13.5 No Waiver by Agent or Lenders. Agent's or Lenders'
failure, at any time or times, to require strict performance by
Borrower of any provision of this Agreement and any of the other
Loan Documents shall not waive, affect, or diminish any right of
Agent or Lenders thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Agent or Lenders
of an Event of Default by Borrower under the Loan Documents shall
not suspend, waive, or affect any other Event of Default by
Borrower under this Agreement and any of the other Loan Documents
whether the same is prior or subsequent thereto and whether of the
same or of a different type. None of the undertakings, agreements,
warranties, covenants, and representations of Borrower contained in
this Agreement or any of the other Loan Documents and no Default or
Event of Default by Borrower under this Agreement and no defaults
by Borrower under any of the other Loan Documents shall be deemed
to have been suspended or waived by Agent or Lenders, unless such
suspension or waiver is by an instrument in writing signed by an
officer of Agent or Lenders, as the case may be, and directed to
Borrower specifying such suspension or waiver.
13.6 Remedies. Agents and Lenders' rights and remedies
under this Agreement shall be cumulative and nonexclusive of any
other rights and remedies which Agent or any Lender may have under
any other agreement, including the Loan Documents, by operation of
law or otherwise. Recourse to the Collateral shall not be required.
13.7 Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
13.8 Parties. This Agreement and the other Loan Documents
shall be binding upon, and inure to the benefit of, the successors
of Borrower, each Lender and the assigns, transferees and endorsees
of each Lender.
13.9 Conflict of Terms. Except as otherwise provided in
this Agreement or any of the other Loan Documents by specific
reference to the applicable provisions of this Agreement, if any
provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern
and control.
13.10 Authorized Signature. Unless Agent shall be notified
by Borrower the contrary, the signature upon any document or
instrument delivered pursuant hereto by any officer or Authorized
Financial Representative of Borrower shall bind Borrower and be
deemed to be the act of Borrower affixed pursuant to and in
accordance with resolutions duly adopted by Borrower's Board of
Directors.
13.11 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN ANY OF THE LOAN DOCUMENTS AND EXCEPT FOR MATTERS
ARISING UNDER THE SWAP AGREEMENT BETWEEN BORROWER AND THE SWAP
LENDER, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO
THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER HEREBY
CONSENTS AND AGREES THAT THE SUPERIOR COURTS OF SAN FRANCISCO
COUNTY, CALIFORNIA, OR, AT AGENT'S OPTION, THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA, SHALL HAVE
NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN BORROWER AND LENDERS PERTAINING TO THIS AGREEMENT
OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT.
BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING FOR SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT, AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE
OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS
SET FORTH IN SECTION 13.12 OF THIS AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE ANY LENDER OR BORROWER FROM BRINGING
SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION.
13.12 Notices. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request,
consent, approval, declaration, or other communication shall or may
be given or delivered to or served upon any of the parties by
another, or whenever any of the parties desires to give or deliver
or serve upon another any communication with respect to this
Agreement, each such notice, demand, request, consent, approval,
declaration, or other communication shall be in writing, shall be
addressed to the addresses set forth below, or such other or
additional address as the parties may notify each other of in
writing, and shall be deemed to have been sent, delivered, or given
and received upon the earlier of: (a) if by facsimile, upon
transmission if transmission occurs between 8:00 a.m. and 5:00 p.m.
on any Business Day; (b) if by Federal Express or other overnight
or one-day mail or delivery service, on the next Business Day
following deposit with such delivery service; (c) if by personal
delivery, upon completion of delivery; or (d) if by mail, three (3)
Business Days after deposit in the U.S. Mail, first class, postage
prepaid :
(a) If to Pacific Coast, as a Lender or as
Agent, at:
Pacific Coast Farm Credit Services
5560 South Broadway
Eureka, California 95503
Attention: Mr. Sean P. O'Day
Facsimile: (707) 442-1268
Pacific Coast Farm Credit Services
595 Arthur Road
Watsonville, California 95077
Attention: Mr. James G. Cooper
Facsimile: (408) 761-8695
Pacific Coast Farm Credit Services
8471 Brooks Road
Windsor, California 94592
Attention: Account Executive for
Beringer Wine Estates Company
Facsimile: (707) 838-3456
With copies to:
Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Randy Rogers, Esq.
Facsimile: (415) 421-7879
(b) If to CoBank:
CoBank
P.O. Box 5110
Denver, Colorado 80217
Attention: Mr. Bill Wilson
Facsimile: (303) 694-5830
(c) If to Bank of America, at
Bank of America NT&SA
Santa Rosa Commercial Banking Group 1498
10 Santa Rosa Avenue
Santa Rosa, California 95404
Attention: Mr. David M. Meddaugh
Facsimile: (707) 525-2287
(d) If to GE Capital, at:
General Electric Capital Corporation
10 South LaSalle St., Suite 2700
Chicago, Illinois 60603
Attention: Ms. Heidi Holverson
Facsimile: (312) 419-5977
With copies to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927-5100
Attention: John A. Sirico, Esq.
Facsimile: (203) 316-7889
(e) If to Rabobank, at:
Rabobank Nederland
245 Park Avenue
New York, New York 10167
Attention: Corporate Services
Facsimile: (212) 916-7880
With copies to:
Rabobank Nederland
4 Embarcadero Center, Suite 3200
San Francisco, California 94111
Attention: Ms. Jessalyn W. Peters
Facsimile: (415) 986-8349
(f) If to Bank of Boston, at:
BankBoston, N.A.
100 Federal Street
Mail Stop 01-09-01
Boston, MA 02106
Attention: Ms. Diane Exter
and Ms. Linda Alto
Facsimile: (617) 434-4929
(g) If to Borrower, at:
Beringer Wine Estates Company
1000 Pratt Avenue
P.O. Box 111
St. Helena, California 94574
Attention: Walter T. Klenz, President
Facsimile: (707) 963-7248
With copies to:
Texas Pacific Group
201 Main Street, No. 2420
Fort Worth, Texas 76102
Attention: James J. O'Brien
Facsimile: (817) 871-4010
Texas Pacific Group
345 California Street, Suite 3300
San Francisco, California 94104
Attention: James G. Coulter
Facsimile: (415) 743-1501
and
Pillsbury Madison & Sutro LLP
235 Montgomery Street, Suite 1653
San Francisco, California 94104
Attention: James Brown, Esq.
Facsimile: (415) 983-1200
or at such other address as may be substituted by notice given as
herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice.
Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration, or other communication to
the persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration, or other communication.
13.13 Survival. The representations and warranties of
Borrower in this Agreement shall survive the execution, delivery
and acceptance hereof by the parties hereto and the closing of the
transactions described herein or related hereto.
13.14 Section Titles. The Section titles and Table of
Contents contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties hereto.
13.15 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which shall be deemed an
original, but all such counterparts together shall constitute one
and the same instrument.
13.16 Performance Always Due on Business Day. To the
extent that any date under this Agreement is not a Business Day,
then the payment or performance due on such day shall be due on the
next Business Day.
13.17 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES
ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT
PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO
APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING
BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
13.18 Revival of Obligations.
(a) Revival of Obligations. If any payment received by
Agent or Lenders from any source on account of the Obligations
(other than Swap Loss Obligations prior to the Swap Loss Adjustment
Date), or any portion of Agent's or any Lender's interest in any
Collateral which has been applied by Agent or Lender in
satisfaction of any Obligations (a "Contested Payment"), is (before
or after the Revolving Loan Maturity Date or the Term Loan Maturity
Date and regardless of whether payment has been made hereunder)
held to be invalid, set aside, void or avoidable, or subject to any
setoff, recoupment, or counterclaim, due to any cause of action
asserted by Borrower or Borrower's creditors or trustee in
bankruptcy for any reason, including preference, fraudulent
conveyance, breach of contract, or tort, or any portion of such
Contested Payment is rescinded, returned, assigned, or reconveyed
by Agent or any Lender due to any such holding, then the
Obligations shall be revived, and continued in effect without
reduction or discharge for the Contested Payment to the extent of
such rescission, return, assignment, or reconveyance by Agent or
Lender, until payment in full of the Obligations.
(b) Contested Payments. The determination whether any
Contested Payment is or should be rescinded, returned, assigned, or
reconveyed shall be made by Agent and Lenders in their sole
discretion, provided, that if Agent and Lenders choose not to
contest any such rescission, return, assignment, or reconveyance,
Agent shall so notify Borrower in writing and any guarantor of the
Obligations (but only such obligors as are not then a debtor under
any case under the Bankruptcy Code) and such obligor may, in its
sole discretion, accept tender of defense of such rescission,
return, assignment, or reconveyance, upon the following terms and
conditions:
(i) within thirty (30) days after receipt of
such notice from Agent, the obligor shall notify Agent in writing
of acceptance of tender of defense of such rescission, return,
assignment, or reconveyance (upon such notice to Agent, the obligor
shall become a "Contesting Obligor");
(ii) the Contesting Obligor shall, at its own
cost, expense, and risk, institute and diligently prosecute any
legal action or proceeding as may be necessary to contest such
rescission, return, assignment, or reconveyance, and shall pay and
or satisfy any money judgment that may be entered against Agent or
Lenders in connection therewith;
(iii) the Contesting Obligor shall indemnify and
hold Agent and Lenders harmless from and against all costs and
expenses, including reasonable fees and expenses of attorneys,
accountants, appraisers, and other professionals which are expended
or incurred by Agent in connection with such contest, including in
any litigation with respect thereto; and
(iv) the Contesting Obligor shall provide Agent
with adequate assurance of its financial and legal ability to
perform under this Section 13.18(b).
If no obligor timely accepts tender of defense as a Contesting
Obligor, or upon the failure of any of the other terms and
conditions set forth above, Agent and Lenders may, in their sole
discretion, rescind, return, assign, or reconvey such Contested
Payment. Any rescission, return, assignment, or reconveyance by
Agent or Lenders whether or not in connection with any action,
proceeding, settlement, or determination pursuant to this Section
13.18(b) shall cause the Obligations to be revived as provided by
Section 13.18(a).
13.19 Time of the Essence. Time is of the essence in every
provision of this Agreement.
13.20 No Third Party Beneficiaries. This Agreement is made
and entered into for the sole protection and benefit of the parties
hereto and their respective permitted successors and assigns, and
no other Person shall be a third party beneficiary of, or have any
direct or indirect cause of action or claim in connection with,
this Agreement or any other Loan Document.
13.21 Payments in Immediately Available Funds. All
payments required to made under this Agreement shall be made in
immediately available funds.
13.22 Waivers of Events of Default. If an Event of Default
has been waived by Lenders in accordance with the provisions of
this Agreement, then such Event of Default shall no longer continue
as an Event of Default.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK]
IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date first written above.
BERINGER WINE ESTATES COMPANY, formerly
known as Wine World Estates Company,
as Borrower
By:_____________________________
Name:___________________________
Title:__________________________
PACIFIC COAST FARM CREDIT SERVICES, ACA,
as a Lender and as Agent
By:______________________________
Name:____________________________
Title:___________________________
CoBANK, ACB
as a Lender
By:______________________________
Name:____________________________
Title:___________________________
BANK OF AMERICA NT&SA,
as a Lender
By:______________________________
Name:____________________________
Title:___________________________
GENERAL ELECTRIC CAPITAL CORPORATION,
as a Lender
By:______________________________
Name:____________________________
Title:___________________________
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., RABOBANK
NEDERLAND, NEW YORK BRANCH, as a Lender
By:______________________________
Name:____________________________
Title:___________________________
By:______________________________
Name:____________________________
Title:___________________________
BANKBOSTON, N.A.
as a Lender
By:______________________________
Name:____________________________
Title:___________________________
