Exhibit 10.10
CONVERTIBLE SUBORDINATED DEBENTURE
(Dated as of January 1, 1995)
FOR VALUE RECEIVED, Ravenswood Winery, Inc., a California corporation
(the "Borrower"), hereby promises to pay to __________________________________
________________ (the "Holder"), or order, (subject to the offer requirement of
section 7.4), the "Principal" sum of ______________ Dollars ($________). Such
payment shall be made no later than 5 P.M., Pacific Time on December 31, 2004
("Maturity"). Conversion of this Debenture shall constitute payment in full of
all Principal. Borrower shall also pay interest upon the Principal outstanding
from time to time at the rate of eight per cent (8%) per annum from the date
hereof until this Debenture is converted or all Principal is paid, whichever
first occurs. Interest shall be payable quarterly in arrears commencing with the
first payment on April 1, 1995. Any balance of interest shall be paid at
conversion or Maturity as applicable. The initial eight percent (8%) interest
rate shall be subject to adjustment every 18 months as provided in Section 8.8.
Both Principal and interest shall be payable in lawful money of the
United States of America at the address which the Holder has provided to the
Borrower in writing. Borrower shall be entitled to take reasonable measures to
verify the Current Holder and the then current payment address before making any
payment, and time taken for such measures shall not cause a default hereunder.
The securities represented hereby have not been registered under the
Securities Act of 1933 (the "Act") or any state securities laws and may not be
resold, transferred, pledged, hypothecated or otherwise assigned until
compliance with the restrictions in Section 7.5 of this Debenture have occurred.
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FEDERAL EXEMPTION: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT."
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ARTICLE ONE
SUBORDINATION
1.1 Senior Indebtedness. As used in this Debenture, the term "Senior
Indebtedness" shall mean the principal of all indebtedness of the Borrower
regardless of whether incurred on, before or after the date of this Debenture
(i) for money borrowed from any bank, and evidenced by notes, bonds, debentures
or other written obligations and such notes, bonds, debentures or other written
obligations are interest bearing securities only and are not convertible or
issued in connection with the issue of warrants or options, whether separate or
attached, or some other rights to receive stock or participate in the earnings
of the Borrower in any form, including dividend distributions, (ii) the
Borrower's indebtedness to Farm Credit Association, where the Borrower has a
line of credit, currently at a maximum amount of $663,270 per year, renewable
annually, and (iii) in connection with any renewals or extensions of any
indebtedness described in (i) or (ii) above. Borrower reserves the right to
increase the number of its sources of bank credit, as well as to increase the
maximum loan amounts. Use of available funds for payments on Senior Indebtedness
shall not be a default under payments due to the Holder. Any such payments not
made to Holder shall cumulate at the Debenture rate of interest until paid.
1.2 Subordination. The Borrower covenants and agrees and the Holder, by
acceptance hereof, covenants, expressly for the benefit of the present and
future holders of Senior Indebtedness, that the payment of the principal and
interest on this Debenture is expressly subordinated in right of payment to the
payment in full of principal and interest and any fees, charges or penalties of
Senior Indebtedness. Upon any terminating liquidation of assets of the Borrower,
upon the occurrence of any dissolution, winding up, liquidation, whether or not
in bankruptcy, insolvency or receivership proceedings, the Borrower shall not
pay thereafter and the Holder shall not be entitled to receive thereafter, any
amount in respect of the principal and interest of the Debenture unless and
until the Senior Indebtedness shall have been paid or otherwise discharged. Upon
any dissolution, winding up, liquidation or reorganization, any payment or
distribution of assets of the Borrower, whether in cash, property or securities,
to which the Holder would be entitled except for the provisions hereof, shall be
paid by the liquidating trustee or agent or other person
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making such payment or distribution, whether a trustee in bankruptcy, a receiver
or liquidating trustee or otherwise, directly to the holders of Senior
Indebtedness, or the representative or representatives rateably according to the
aggregate amounts remaining unpaid on Senior Indebtedness held or represented by
each, to the extent necessary to pay Senior Indebtedness after giving effect to
any concurrent payment or distribution to the holders of Senior Indebtedness.
1.3 Rights Against Borrower and Others. It is understood that the
provisions of this Article One captioned "Subordination" are, and are intended
to be, solely for the purpose of defining the relative rights of the Holder on
the one hand and the holder of the Senior Indebtedness of the Borrower on the
other hand. Nothing contained in this Article One or elsewhere in this Debenture
shall or is intended to impair, as between the Borrower, its creditors other
than a holder of Senior Indebtedness, and the Holder, the unconditional and
absolute obligation of the Borrower to pay the Holder the principal of and
interest on the Debenture as and when the same shall become due and payable in
accordance with its terms or affect the relative rights of the Holder and the
creditors of the Borrower, other than a holder of such Senior Indebtedness; nor
shall anything herein prevent the Holder from exercising all remedies otherwise
permitted by applicable law upon default under the Debenture, subject to the
rights, if any, of a holder of Senior Indebtedness in respect to cash, property
or securities of the Borrower received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Borrower referred to in this
Article One captioned "Subordination," the Holder shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which any
dissolution, winding up, liquidation or reorganization proceedings are pending,
or upon a certificate of a liquidating trustee or agent or other person making
any distribution to the Holder, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of Senior Indebtedness
and other indebtedness of the Borrower, the amounts thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article One.
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ARTICLE TWO
PREPAYMENT
2.1 Prepayment. This Debenture shall be subject to prepayment, in whole
or in part, at any time after expiration of the conversion right herein and
prior to maturity, at the option of Borrower. Each prepayment shall include the
principal amount to be prepaid plus all interest due to the prepayment date. In
the case of partial prepayment, the amount and other details thereof shall be
noted on this Debenture.
ARTICLE THREE
CONVERSION AND PURCHASE RIGHTS
3.1 Conversion Right. The Holder shall have the right from and after
the date of this Debenture and then at any time at or prior to 5 o'clock p.m.
Pacific local time on December 31, 1999, to convert all, and not a portion, of
this Debenture into fully paid and nonassessable shares of the Capital Stock of
Borrower. If conversion is not requested at or before this time the conversion
right shall terminate and be of no further force or effect. If the indebtedness
represented by this Debenture has been paid or otherwise discharged, the rights
set forth in this Debenture shall not survive such payment or discharge
including but not limited to the right to convert into shares of Capital Stock
of Borrower. "Capital Stock" shall mean the common voting stock of Borrower.
Upon the surrender hereof, accompanied by the Holder's written request for
conversion, which request shall be irrevocable, Borrower shall pay within 30
days all interest accrued hereon to the date of conversion and issue and deliver
to the Holder certificates evidencing such shares of stock as hereinafter set
forth.
Subject to readjustment as provided in Section 3.2 hereof, the
Conversion Price (hereinafter the "Conversion Price") and number of shares shall
be as follows:
Each $100,000 Debenture may be converted to 547.3 shares of Capital
Stock for a price of $182 per share. The total amount of Debentures issued will
be $_________. If all Debentures are converted, and there are no adjustments
under Section 3.2, the Holders will have, in aggregate, 8.65% of the 50,000
currently outstanding shares of
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Capital Stock of the Company. Debentures in an amount more or less than $100,000
shall be entitled to proportional conversion rounded down to the nearest
hundredth share.
3.2 Adjustment of Conversion Terms. The Conversion Price and the number
and kind of shares to be issued to the Holder upon conversion pursuant to
Section 3.1 shall be adjusted to reflect the effect of any consolidation,
merger, sale of assets, reclassification of shares, share issuance or any other
change in the status of the Capital Stock or the rights or privileges of holders
of the Capital Stock (herein called a "Change" in the Capital Stock) which
occurs prior to conversion. Such adjustment to the shares of Capital Stock to be
issued upon a conversion to reflect a Change shall be calculated as if the
Debenture had been converted and the Capital Stock into which the Debenture can
be converted was issued and outstanding immediately prior to the Change and then
was adjusted, like all other shares of Capital Stock then outstanding, to
reflect the Change. Accordingly, if the debenture is then converted after a
Change, the shares issued in the conversion shall be shares adjusted to reflect
the Change. After conversion the shares issued in the conversion shall be
treated like all other similar shares outstanding when any subsequent Change
occurs.
3.3 Cash Distributions. No adjustment on account of cash dividends or
interest on Capital Stock into which this Debenture can be converted will be
made to the Conversion Price at the number of shares into which this Debenture
can be converted.
3.4 Fractional Shares. Fractional shares of Capital Stock shall be
issued in connection with any conversion hereunder rounded down to the nearest
one hundredth share.
3.5 Authorized Shares. Borrower covenants that during the period the
conversion right exists, Borrower shall reserve from its authorized and unissued
Capital Stock a sufficient number of shares to provide for the issuance of
Capital Stock upon the conversion of this Debenture. Borrower agrees that its
issuance of this Debenture shall constitute full authority to its officers who
are charged with the duty of executing stock certificates to execute and issue
the necessary certificates for shares of Capital Stock upon the conversion of
this Debenture.
3.6 Method of Conversion. This Debenture may be converted by the Holder
in whole, only, by the surrender of this Debenture at the principal office of
the Borrower as provided in section 3.1.
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ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
4.1 Existence and Rights. At the date hereof Borrower is a corporation
duly organized and existing under the laws of the State of California without
limit as to the duration of its existence, and is authorized and in good
standing to do business in the State of California. Borrower has corporate
powers and adequate authority, rights and franchises to own its property and to
carry on its business as now conducted, and is duly qualified and in good
standing in each State in which the character of the properties owned by it
herein or the conduct of its business makes such qualification necessary; and
Borrower has the corporate power and adequate authority to issue this Debenture
and the underlying shares of Capital Stock. Borrower has no investment in any
other corporation.
4.2 Debenture Authorized. The execution and delivery of this Debenture
and the performance of the provisions of this Debenture are not in contravention
of or in conflict with any law or regulation or any term or provision of
Borrower's Articles of Incorporation or By-Laws and are duly authorized and do
not require the consent or approval of any governmental body or other regulatory
authority; and this Debenture is the valid, binding and legally enforceable
obligation of Borrower in accordance with the terms herein.
4.3 No Conflict. The execution, delivery and performance of this
Debenture are not in contravention of or conflict with any agreement, indenture
or undertaking to which Borrower is a party or by which it or any of its
property may be bound or affected, and does not cause any lien, charge or other
encumbrance to be created or imposed upon any such property by reason thereof.
4.4 Shares Outstanding. As of the date hereof, the Borrower's
authorized Capital Stock consists of 1,000,000 shares of which 50,000 shares are
outstanding. As of this date no shares have been reserved for issuance under a
Qualified Employee Stock Option Plan. Upon the date of this debenture there are
no other shares of Common or Preferred Stock reserved for issuance or subject to
any agreement, right, option or warrant with respect to the sale or issuance
thereof by Borrower.
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ARTICLE FIVE
RECORDS AND REPORTS
Borrower shall maintain a standard and modern system of accounting applied on a
consistent basis. Financial data shall be from the books and records of the
Borrower, presented under the tax basis of accounting which the Borrower uses in
preparation of the Borrower's income tax reports. This data shall be subjected
to an accountant's reviewed financial report. It shall permit representatives of
Holder, as long as it holds this Debenture, or any securities acquired upon
conversion of this Debenture, to have access to and to examine its properties,
books and records to the extent permitted under California law for shareholders.
Borrower shall also provide such other information relating to the affairs of
Borrower to which shareholders are entitled under California law as Holder may
request from time to time.
ARTICLE SIX
EVENTS OF DEFAULT
Except as provided in Article One, the failure to pay any installment of
principal or interest hereon when due and continuance thereof for a period of
ten business days after written notice to Borrower from Holder shall be a
default hereunder.
ARTICLE SEVEN
REGISTRATION
7.1 Investment Representation. Holder hereby represents and warrants
that it has acquired this Debenture for the purpose of investment and with no
present intent to sell or to distribute the same. Should it exercise the
conversion privilege contained herein, any securities of Borrower so acquired
will be with the same investment intent.
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7.2 Definitions. The following constitute definitions of certain of the
terms used in this Article:
A. "Act" means the Securities Act of 1933 as amended.
B. "Commission" means the Securities and Exchange Commission.
C. "Securities" shall mean the Debenture, and any of the shares
issuable upon the conversion thereof.
7.3 Registration Initiated By Borrower. The Borrower agrees that it
will give at least 30 days prior written notice to all holders of its intention
to file any registration statement covering any of its securities and will
afford such Holders the opportunity to register their holdings of Securities
thereunder and to take advantage, to a reasonable extent, of all blue sky
qualifications effected by the Borrower in connection therewith, provided Holder
notifies Borrower within 10 days of such notice from Borrower, that Holder
wishes to participate. The costs and expenses of registration statements filed
by Borrower as provided in this Section shall be borne by Borrower.
7.4 Right of First Offer. Prior to the expiration of the conversion
right, Holder shall not be entitled to transfer this Debenture or any interest
in it without first offering to transfer the entire Debenture to Borrower for a
price and upon terms chosen by Holder, all as provided in this section.
Any attempted transfer that does not comply with this section shall be
void, and of no force or effect. Without limiting any other remedies, Borrower
shall be entitled to an injunction requiring Holder to comply with the
provisions of this section. The only exception to the restriction on transfer in
this section is for transfer at death and certain lifetime transfers to family
as described later in this section.
If Holder wishes to transfer this Debenture in a transaction not
excepted below, Holder shall, in writing, first offer this Debenture to
Borrower, stating the price and terms upon which Holder offers to transfer the
Debenture to Borrower. Any consideration in kind shall also be stated in money
terms so in all cases the transfer can be closed by the payment of money.
Borrower shall have fifteen (15) business days in which to accept the offer and
a total of thirty (30) business days in which to close the transfer. Time is of
the essence for this transaction. Borrower shall have the right to designate a
third person or persons to accept the offer, however, once the offer is
accepted, Borrower, as well as any third person, shall be jointly and severally
liable, including but not limited to reasonable attorneys fees
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and costs to the prevailing party, in case of litigation concerning the offer
transaction.
If Holder's offer is not accepted within the fifteen business day
period, Holder shall be free to transfer the Debenture for a price and upon
terms which are not more favourable to the transferee than were offered to
Borrower. The transfer shall include Holder's entire interest in the Debenture.
If a transfer is not contracted for within one calendar year from the date that
Holder is free to offer the transfer to others, and closed within a total of
fourteen (14) calendar months from that date, then any transfer shall require a
new offer to Borrower by Holder.
The exception to Holder's obligation first to offer this Debenture to
Borrower before any transfer, as provided above, is that Holder shall have the
right to transfer by will to anyone and to transfer this Debenture to children,
to parents, to a spouse, or parents of a spouse, or trusts for the benefit of
any of them. To qualify for this exception the Holder must transfer the entire
Debenture. It may be transferred to more than one transferee, however, only one
excepted transfer per transferee is allowed and the transferee shall not be
entitled to transfer pursuant to this exception. Thus a transferee shall not be
entitled to transfer without first making the offer set forth above. Each
transferee, by will or otherwise, shall be required to agree to and to sign a
copy of these transfer restrictions. When an excepted transfer results in
multiple ownership of this Debenture and the conversion right has not expired,
the owners shall designate one of their group to represent them. Borrower shall
be entitled to rely upon any agreement or representation of the representative.
If the owners do not designate a representative within thirty (30) days after a
request by Borrower, Borrower shall have the right to designate one of the
owners as the representative of the owners upon whom Borrower can rely. Within
Borrower's sole discretion, Borrower shall have the right to modify this
exception to the transfer restriction in order to meet what Borrower considers
to be appropriate family planning goals of a Holder.
7.5 Restriction on Transfer. In addition to Section 7.4 above, no
Holder shall transfer any Securities until the Holder has first given written
notice to Borrower describing briefly the manner of any such proposed transfer
and until (i) the Borrower has received from Holder's counsel an opinion
satisfactory to Borrower that such transfer can be made without compliance with
the registration provisions of the Act and without the necessity of perfection
of an exemption pursuant to the Act, or (ii) a registration statement filed by
Borrower is declared effective by the Commission or steps necessary to perfect
an exemption are completed.
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7.6 Legend. Any certificate representing Securities shall be stamped
with a suitable endorsement to the effect that said Securities are subject to
the terms and conditions of this Article and stating that said terms and
conditions are fully set forth in this Article, a copy of which is on file and
available for the inspection at the main office of the Borrower.
ARTICLE EIGHT
MISCELLANEOUS
8.1 Survival of Warranties. All agreements, representations and
warranties made herein shall survive the execution and delivery hereof.
8.2 Failure or Indulgence Not Waiver. No failure or delay on the part
of Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
8.3 Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or sent by United States mail and
shall be deemed to have been given when deposited in the United States mail,
registered, with postage prepaid and properly addressed. For the purposes
hereof, the address of the Holder and the address of Borrower shall be as
follows:
Borrower Holder
-------- ------
Ravenswood Winery, Inc.
000 Xxxxxx Xxxxxx #000
Xxx Xxxxxxxxx, XX 00000
Both Holder and Borrower may change the address for service by service of
written notice to the other as herein provided. Telegraphic and "FAX" notice is
also permitted.
8.4 Amendment Provision. The term "Debenture" or "this Debenture" and
all reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed or if later amended or supplemented.
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8.5 Assignability. Subject to the provisions of section 7.4 this
Debenture shall be binding upon Borrower, its successors and assigns, and shall
inure to the benefit of Holder, its successors and assigns.
8.6 Cost of Collection. If default is made in the payment of this
Debenture, Borrower shall pay the Holder hereof costs of collection, including
reasonable attorneys' fees, should Holder prevail.
8.7 Governing Law. This Debenture has been executed by Borrower in, and
shall be governed by the laws of the State of California.
8.8 Interest Rate. Notwithstanding any other provision of this
Debenture, the maximum total interest that the Holder shall be entitled to
receive hereunder shall not exceed the maximum rate permitted under applicable
law. Subject to this limitation, the initial 8% interest rate shall be subject
to adjustment up or down after the first 18 months, and every 18 months
thereafter to 1% over the prime interest rate or the Bank's index rate given to
prime commercial customers (the Prime Rate) by the Bank of America, NTSA, San
Francisco, California. There will be a limit of a 2% adjustment, plus or minus,
at any one adjustment period, and a maximum interest rate of 11%. Prime Rate
changes which produce rates which exceed these limits shall not be taken into
account.
IN WITNESS HEREOF, Borrower has caused this Debenture to be signed in its name
by its duly authorized officers.
Dated:
Ravenswood Winery, Inc.
by: _______________________________
Attest: ___________________________
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