CREDIT AGREEMENT
Exhibit
10.6
Borrower
has requested that Bank extend or continue credit to Borrower as described
below, and Bank has agreed to provide such credit to Borrower on the terms
and
conditions contained herein.
ARTICLE
I
SECTION
1.1. TERM
LOAN.
(a) Term
Loan.
Subject
to the terms and conditions of this Agreement, Bank hereby agrees to make
a loan
to Borrower in the principal amount of One Million Six Hundred Ninety Thousand
Dollars ($1,690,000.00) ("Term Loan"), the proceeds of which shall be used
to
refinance Borrower's outstanding credit accommodations from Bank. Borrower's
obligation to repay the Term Loan shall be evidenced by a promissory note
dated
as of March 1, 2004 ("Term Note"), all terms of which are incorporated herein
by
this reference. Bank's commitment to grant the Term Loan shall terminate
on
April 1, 2004.
(b) Repayment.
The
principal amount of the Term Loan shall be repaid in accordance with the
provisions of the Term Note.
(c) Prepayment.
Borrower may prepay principal on the Term Loan solely in accordance with
the
provisions of the Term Note.
SECTION
1.2. INTEREST/FEES.
(a) Interest.
The
outstanding principal balance of the Term Loan shall bear interest at the
rate
of interest set forth in the Term Note.
(b) Computation
and Payment.
Interest shall be computed on the basis of a 360-day year, actual days elapsed.
Interest shall be payable at the times and place set forth in each promissory
note or other instrument or document required hereby.
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(c) Commitment
Fee.
Borrower shall pay to Bank a non-refundable commitment fee for the Term Loan
equal to $5,000.00, which fee shall be due and payable in full upon execution
this Agreement.
SECTION
1.4. COLLATERAL.
As
security for all indebtedness of Borrower to Bank subject hereto, Borrower
hereby grants to Bank a lien of not less than first priority on that certain
real property located at 0000 Xxxxxxxxxxx Xxxxxxx Xxxxx, Xxxxxxxxxx, XX 00000
("Real Property").
All
of
the foregoing shall be evidenced by and subject to the terms of such security
agreements, financing statements, deeds of trust and other documents as Bank
shall reasonably require, all in form and substance satisfactory to Bank.
Borrower shall reimburse Bank immediately upon demand for all costs and expenses
incurred by Bank in connection with any of the foregoing security, including
without limitation, filing and recording fees and costs of appraisals, audits
and title insurance.
ARTICLE
II
Borrower
makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement
and
shall continue in full force and effect until the full and final payment,
and
satisfaction and discharge, of all obligations of Borrower to Bank subject
to
this Agreement.
SECTION
2.1. LEGAL
STATUS. Borrower is a corporation, duly organized and existing and in good
standing under the laws of the State of California, and is qualified or licensed
to do business (and is in good standing as a foreign corporation, if applicable)
in all jurisdictions in which such qualification or licensing is required
or in
which the failure to so qualify or to be so licensed could have a material
adverse effect on Borrower.
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(a) All
taxes, governmental assessments, insurance premiums, and water, sewer and
municipal charges, and rents (if any) which previously became due and owing
in
respect thereof have been paid as of the date hereof.
(b) There
are
no mechanics' or similar liens or claims which have been filed for work,
labor
or material (and no rights are outstanding that under law could give rise
to any
such lien) which affect all or any interest in any such real property and
which
are or may be prior to or equal to the lien thereon in favor of
Bank.
(c) None
of
the improvements which were included for purpose of determining the appraised
value of any such real property lies outside of the boundaries and/or building
restriction lines thereof, and no improvements on adjoining properties
materially encroach upon any such real property.
(d) There
is
no pending, or to the best of Borrower's knowledge threatened, proceeding
for
the total or partial condemnation of all or any portion of any such real
property, and all such real property is in good repair and free and clear
of any
damage that would materially and adversely affect the value thereof as security
and/or the intended use, thereof.
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ARTICLE
III
SECTION
3.1. CONDITIONS
OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any credit
contemplated by this Agreement is subject to the fulfillment to Bank's
satisfaction of all of the following conditions:
(a) Approval
of Bank Counsel.
All
legal matters incidental to the extension of credit by Bank shall be
satisfactory to Bank's counsel.
(b) Documentation.
Bank
shall have received, in form and substance satisfactory to Bank, each of
the
following, duly executed:
(i) This
Agreement and each promissory note or other instrument or document required
hereby.
(ii) Corporate
Resolution: Borrowing.
(iii) Certificate
of Incumbency.
(iv) Deed
of
Trust and Assignment of Rents and Leases and any modifications.
(v) Such
other documents as Bank may require under any other Section of this
Agreement.
(c) Financial
Condition.
There
shall have been no material adverse change, as determined by Bank, in the
financial condition or business of Borrower, nor any material decline, as
determined by Bank, in the market value of any collateral required hereunder
or
a substantial or material portion of the assets of Borrower.
(d) Insurance.
Borrower shall have delivered to Bank evidence of insurance coverage on all
Borrower's property, in form, substance, amounts, covering risks and issued
by
companies satisfactory to Bank, and where required by Bank, with loss payable
endorsements in favor of Bank, including without limitation, policies of
fire
and extended coverage insurance covering all real property collateral required
hereby, with replacement cost and mortgagee loss payable endorsements, and
such
policies of insurance against specific hazards affecting any such real property
as may be required by governmental regulation or Bank.
(e) Appraisals.
Bank
shall have obtained, at Borrower's cost, an appraisal of all real property
collateral required hereby, and all improvements thereon, issued by an appraiser
acceptable to Bank and in form, substance and reflecting values satisfactory
to
Bank, in its discretion.
(f) Title
Insurance.
Bank
shall have received an ALTA Policy of Title Insurance, with such endorsements
as
Bank may require, issued by a company and in form and substance satisfactory
to
Bank, in such amount as Bank shall require, insuring Bank's lien on the real
property collateral required hereby to be of first priority, subject only
to
such exceptions as Bank shall approve in its discretion, with all costs thereof
to be paid by Borrower.
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(g) Tax
Service Contract.
Borrower shall have procured and delivered to Bank, at Borrower's cost, such
tax
service contract as Bank shall require for any real property collateral required
hereby, to remain in effect as long as such real property secures any
obligations of Borrower to Bank as required hereby.
SECTION
3.2. CONDITIONS
OF EACH EXTENSION OF CREDIT. The obligation of Bank to make each extension
of
credit requested by Borrower hereunder shall be subject to the fulfillment
to
Bank's satisfaction of each of the following conditions:
(a) Compliance.
The
representations and warranties contained herein and in each of the other
Loan
Documents shall be true on and as of the date of the signing of this Agreement
and on the date of each extension of credit by Bank pursuant hereto, with
the
same effect as though such representations and warranties had been made on
and
as of each such date, and on each such date, no Event of Default as defined
herein, and no condition, event or act which with the giving of notice or
the
passage of time or both would constitute such an Event of Default, shall
have
occurred and be continuing or shall exist.
(b) Documentation.
Bank
shall have received all additional documents which may be required in connection
with such extension of credit.
ARTICLE
IV
Borrower
covenants that so long as Bank remains committed to extend credit to Borrower
pursuant hereto, or any liabilities (whether direct or contingent, liquidated
or
unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower shall, unless Bank otherwise consents in writing:
(a) not
later
than 120 days after and as of the end of each fiscal year, an audited financial
statement of Borrower, prepared by a certified public accountant acceptable
to
Bank, to include balance sheet and income statement;
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(b) not
later
than 45 days after and as of each June 30 and December 31, an operating
statement and rent roll for the Real Property;
(c) not
later
than September 1, 2004, an Operations and Maintenance Plan which addresses
the
implementation plan for the "in place" management of asbestos containing
materials with respect to the Real Property, with such implementation plan
to be
acceptable to Bank;
(d) not
later
than September 1, 2004, copy of the official closure notice from the State
of
California with respect to soil and groundwater contamination issues in
connection with the underground storage tank previously at the Real Property;
and
(e) from
time
to time such other information as Bank may reasonably request.
SECTION
4.8. LITIGATION.
Promptly give notice in writing to Bank of any litigation pending or threatened
against Borrower.
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(a) Debt
Service Coverage Ratio not less than 1.25 to 1.0 on an annual basis, determined
as of each fiscal year end, with "Debt Service Coverage Ratio" defined as
the
aggregate of gross income received by Borrower from the Real Property in
each
fiscal year less all expenses (excluding depreciation and interest expense)
paid
by Borrower in connection with the Real Property in such fiscal year divided
by
principal and interest payments on debt secured by the Real Property during
such
fiscal year.
ARTICLE
V
Borrower
further covenants that so long as Bank remains committed to extend credit
to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower will not without Bank's prior written
consent:
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ARTICLE
VI
SECTION
6.1. The
occurrence of any of the following shall constitute an "Event of Default"
under
this Agreement:
(a) Borrower
shall fail to pay when due any principal, interest, fees or other amounts
payable under any of the Loan Documents.
(b) Any
financial statement or certificate furnished to Bank in connection with,
or any
representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.
(c) Any
default in the performance of or compliance with any obligation, agreement
or
other provision contained herein or in any other Loan Document (other than
those
referred to in subsections (a) and (b) above), and with respect to any such
default which by its nature can be cured, such default shall continue for
a
period of twenty (20) days from its occurrence.
(d) Any
default in the payment or performance of any obligation, or any defined event
of
default, under the terms of any contract or instrument (other than any of
the
Loan Documents) pursuant to which Borrower, any guarantor hereunder or any
general partner or joint venturer in any Borrower which is a partnership
or
joint venture (with each such guarantor, general partner and/or joint venturer
referred to herein as a "Third Party Obligor") has incurred any debt or other
liability to any person or entity, including Bank.
(e) The
filing of a notice of judgment lien against Borrower or any Third Party Obligor;
or the recording of any abstract of judgment against Borrower or any Third
Party
Obligor in any county in which Borrower or such Third Party Obligor has an
interest in real property; or the service of a notice of levy and/or of a
writ
of attachment or execution, or other like process, against the assets of
Borrower or any Third Party Obligor; or the entry of a judgment against Borrower
or any Third Party Obligor.
(f) Borrower
or any Third Party Obligor shall become insolvent, or shall suffer or consent
to
or apply for the appointment of a receiver, trustee, custodian or liquidator
of
itself or any of its property, or shall generally fail to pay its debts as
they
become due, or shall make a general assignment for the benefit of creditors;
Borrower or any Third Party Obligor shall file a voluntary petition in
bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform
Act,.Title 11 of the United States Code, as amended or recodified from time
to
time ("Bankruptcy Code"), or under any state or federal law granting relief
to
debtors, whether now or hereafter in effect; or any involuntary petition
or
proceeding pursuant to the Bankruptcy Code or any other applicable state
or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any Third Party Obligor, or Borrower
or any Third Party Obligor shall file an answer admitting the jurisdiction
of
the court and the material allegations of any involuntary petition; or Borrower
or any Third Party Obligor shall be adjudicated a bankrupt, or an order for
relief shall be entered against Borrower or any Third Party Obligor by any
court
of competent jurisdiction under the Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or other relief
for
debtors.
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(g) There
shall exist or occur any event or condition which Bank in good faith believes
impairs, or is substantially likely to impair, the prospect of payment or
performance by Borrower of its obligations under any of the Loan
Documents.
(h) The
death
or incapacity of any individual Borrower or Third Party Obligor. The dissolution
or liquidation of any Borrower or Third Party Obligor which is a corporation,
partnership, joint venture or other type of entity; or Borrower or any such
Third Party Obligor, or any of its directors, stockholders or members, shall
take action seeking to effect the dissolution or liquidation of such Borrower
or
Third Party Obligor.
(i) The
sale,
transfer, hypothecation, assignment or encumbrance, whether voluntary,
involuntary or by operation of law, without Bank's prior written consent,
of all
or any part of or interest in any real property collateral required
hereby.
ARTICLE
VII
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BORROWER: |
SONOMAWEST
HOLDINGS, INC.
|
0000
Xxxxxxx 000 X.
Xxxxxxxxxx,
XX 00000
BANK: |
XXXXX
FARGO BANK, NATIONAL ASSOCIATION
|
North
Coast Regional Commercial Banking Xxxxxx
000
X
Xxxxxx, 0xx
Xxxxx
Xxxxx
Xxxx, XX 00000
or
to
such other address as any party may designate by written notice to all other
parties. Each such notice, request and demand shall be deemed given or made
as
follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail,
upon
the earlier of the date of receipt or three (3) days after deposit in the
U.S.
mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt.
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SECTION
7.7. TIME.
Time is of the essence of each and every provision of this Agreement and
each
other of the Loan Documents.
SECTION
7.10. GOVERNING
LAW. This Agreement shall be governed by and construed in accordance with
the
laws of the State of California.
SECTION
7.11. ARBITRATION.
(a) Arbitration.
The
parties hereto agree, upon demand by any party, to submit to binding arbitration
all claims, disputes and controversies between or among them (and their
respective employees, officers, directors, attorneys, and other agents),
whether
in tort, contract or otherwise arising out of or relating to in any way (i)
the
loan and related Loan Documents which are the subject of this Agreement and
its
negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit.
(b) Governing
Rules.
Any
arbitration proceeding will (i) proceed in a location in California selected
by
the American Arbitration Association ("AAA"); (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between the parties;
and (iii) be conducted by the AAA, or such other administrator as the parties
shall mutually agree upon, in accordance with the AAA's commercial dispute
resolution procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and costs in
which
case the arbitration shall be conducted in accordance with the AAA's optional
procedures for large, complex commercial disputes (the commercial dispute
resolution procedures or the optional procedures for large, complex commercial
disputes to be referred to, as applicable, as the "Rules"). If there is any
inconsistency between the terms hereof and the Rules, the terms and procedures
set forth herein shall control. Any party who fails or refuses to submit
to
arbitration following a demand by any other party shall bear all costs and
expenses incurred by such other party in compelling arbitration of any dispute.
Nothing contained herein shall be deemed to be a waiver by any party that
is a
bank of the protections afforded to it under 12 U.S.C. §91 or any similar
applicable state law.
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(c) No
Waiver of Provisional Remedies, Self-Help and Foreclosure.
The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after
the
pendency of any arbitration proceeding. This exclusion does not constitute
a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise
of
the actions detailed in sections (i), (ii) and (iii) of this
paragraph.
(d) Arbitrator
Qualifications and Powers.
Any
arbitration proceeding in which the amount in controversy is $5,000,000.00
or
less will be decided by a single arbitrator selected according to the Rules,
and
who shall not render an award of greater than $5,000,000.00. Any dispute
in
which the amount in controversy exceeds $5,000,000.00 shall be decided by
majority vote of a panel of three arbitrators; provided however, that all
three
arbitrators must actively participate in all hearings and deliberations.
The
arbitrator will be a neutral attorney licensed in the State of California
or a
neutral retired judge of the state or federal judiciary of California, in
either
case with a minimum of ten years experience in the substantive law applicable
to
the subject matter of the dispute to be arbitrated. The arbitrator will
determine whether or not an issue is arbitratable and will give effect to
the
statutes of limitation in determining any claim. In any arbitration proceeding
the arbitrator will decide (by documents only or with a hearing at the
arbitrator's discretion) any pre-hearing motions which are similar to motions
to
dismiss for failure to state a claim or motions for summary adjudication.
The
arbitrator shall resolve all disputes in accordance with the substantive
law of
California and may grant any remedy or relief that a court of such state
could
order or grant within the scope hereof and such ancillary relief as is necessary
to make effective any award. The arbitrator shall also have the power to
award
recovery of all costs and fees, to impose sanctions and to take such other
action as the arbitrator deems necessary to the same extent 8 judge could
pursuant to the Federal Rules of Civil Procedure, the California Rules of
Civil
Procedure or other applicable law. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction. The institution
and
maintenance of an action for judicial relief or pursuit provisional or ancillary
remedy shall not constitute a waiver of the right of any party, including
the
plaintiff, to submit the controversy or claim to arbitration if any other
party
contests such action for judicial relief.
(e) Discovery.
In any
arbitration proceeding discovery will be permitted in accordance with the
Rules.
All discovery shall be expressly limited to matters directly relevant to
the
dispute being arbitrated and must be completed no later than 20 days before
the
hearing date and within 180 days of the filing of the dispute with the AAA.
Any
requests for an extension of the discovery periods, or any discovery disputes,
will be subject to final determination by the arbitrator upon a showing that
the
request for discovery is essential for the party's presentation and that
no
alternative means for obtaining information is available.
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(f) Class
Proceedings and Consolidations.
The
resolution of any dispute arising pursuant to the terms of this Agreement
shall
be determined by a separate arbitration proceeding and such dispute shall
not be
consolidated with other disputes or included in any class
proceeding.
(g) Payment
Of Arbitration Costs And Fees.
The
arbitrator shall award all costs and expenses of the arbitration
proceeding.
(h) Real
Property Collateral; Judicial Reference.
Notwithstanding anything herein to the contrary, no dispute shall be submitted
to arbitration if the dispute concerns indebtedness secured directly or
indirectly, in whole or in part, by any real property unless (i) the holder
of
the mortgage, lien or security interest specifically elects in writing to
proceed with the arbitration, or (ii) all parties to the arbitration waive
any
rights or benefits that might accrue to them by virtue of the single action
rule
statute of California, thereby agreeing that all indebtedness and obligations
of
the parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If
any
such dispute is not submitted to arbitration, the dispute shall be referred
to a
referee in accordance with California Code of Civil Procedure Section 638
et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant
to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and
645.
(i) Miscellaneous.
To the
maximum extent practicable, the AAA, the arbitrators and the parties shall
take
all action required to conclude any arbitration proceeding within 180 days
of
the filing of the dispute with the AAA. No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results thereof,
except for disclosures of information by a party required in the ordinary
course
of its business or by applicable law or regulation. If more than one agreement
for arbitration by or between the parties potentially applies to a dispute,
the
arbitration provision most directly related to the Loan Documents or the
subject
matter of the dispute shall control. This arbitration provision shall survive
termination, amendment or expiration of any of the Loan Documents or any
relationship between the parties.
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SONOMAWEST HOLDINGS, INC.
By: /s/
Xxxxx
Xxxxx
Xxxxx
Xxxxx
Chairman
of the Board
|
XXXXX
FARGO BANK,
NATIONAL
ASSOCIATION
By: /s/
Xxxx
Xxxxxxx
Xxxx
Xxxxxxx
Relationship
Manager
|
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