TERM NOTE $1,690,000.00 Santa Rosa, California March 1, 2004
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Exhibit
10.5
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$1,690,000.00
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Santa
Rosa, California
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March
1, 2004
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FOR
VALUE
RECEIVED, the undersigned SONOMAWEST HOLDINGS, INC. (“Borrower”)
promises to pay to the order of ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION (“Bank”)
at its office at it’s North Coast Regional Commercial Banking Office at ▇▇▇ ▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other place as the
holder
hereof may designate, in lawful money of the United States of America and
in
immediately available funds, the principal sum of One
Million Six Hundred Ninety Thousand Dollars ($1,690,000.00),
with
interest thereon as set forth herein.
DEFINITIONS:
As
used
herein, the following terms shall have the meanings set forth after each,
and
any other term defined in this Note shall have the meaning set forth at the
place defined:
(a) “Business
Day” means any day except a Saturday, Sunday or any other day on which
commercial banks in California are authorized or required by law to
close.
(b) “Fixed
Rate Term” means a period commencing on a Business Day and continuing for 1, 2
or 3 months, as designated by Borrower, during which all or a portion of
the
outstanding principal balance of this Note bears interest determined in relation
to LIBOR; provided however, that no Fixed Rate Term may be selected for a
principal amount less than Five Hundred Thousand Dollars ($500,000.00); and
provided further, that no Fixed Rate Term shall extend beyond the scheduled
maturity date hereof. If any Fixed Rate Term would end on a day which is
not a
Business Day, then such Fixed Rate Term shall be extended to the next succeeding
Business Day.
(c) “LIBOR”
means the rate per annum (rounded upward, if necessary, to the nearest whole
1/8
of 1%) and determined pursuant to the following formula:
LIBOR
=
Base
LIBOR
100%
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LIBOR Reserve Percentage
(i) “Base
LIBOR” means the rate per annum for United States dollar deposits quoted by Bank
as the Inter-Bank Market Offered Rate, with the understanding that such rate
is
quoted by Bank for the purpose of calculating effective rates of interest
for
loans making reference thereto, on the first day of a Fixed Rate Term for
delivery of funds on said date for a period of time approximately equal to
the
number of days in such Fixed Rate Term and in an amount approximately equal
to
the principal amount to which such Fixed Rate Term applies. Borrower understands
and agrees that Bank may base its quotation of the Inter-Bank Market Offered
Rate upon such offers or other market indicators of the Inter-Bank Market
as
Bank in its discretion deems appropriate including, but not limited to, the
rate
offered for U.S. dollar deposits on the London Inter-Bank Market.
(ii) “LIBOR
Reserve Percentage” means the reserve percentage prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for “Eurocurrency
Liabilities” (as defined in Regulation D of the Federal Reserve Board, as
amended), adjusted by Bank for expected changes in such reserve percentage
during the applicable Fixed Rate Term.
(d) “Prime
Rate” means at any time the rate of interest most recently announced within Bank
at its principal office as its Prime Rate, with the understanding that the
Prime
Rate is one of Bank’s base rates and serves as the basis upon which effective
rates of interest are calculated for those loans making reference thereto,
and
is evidenced by the recording thereof after its announcement in such internal
publication or publications as Bank may designate.
INTEREST:
(a) Interest.
The
outstanding principal balance of this Note shall bear interest (computed
on the
basis of a 360-day year, actual days elapsed) either (i) at a fluctuating
rate
per annum one-quarter percent (0.25%) above the Prime Rate
in effect
from time to time, or (ii) at a fixed rate per annum determined by Bank to
be
three and one quarter percent (3.25%) above LIBOR in effect on the first
day of
the applicable Fixed Rate Term. When interest is determined in relation to
the
Prime Rate, each change in the rate of interest hereunder shall become effective
on the date each Prime Rate change is announced within Bank. With respect
to
each LIBOR selection hereunder, Bank is hereby authorized to note the date,
principal amount, interest rate and Fixed Rate Term applicable thereto and
any
payments made thereon on Bank’s books and records (either manually or by
electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information
noted.
(b) Selection
of Interest Rate Options.
At any
time any portion of this Note bears interest determined in relation to LIBOR,
it
may be continued by Borrower at the end the Fixed Rate Term applicable thereto
so that all or a portion thereof bears interest determined in relation to
the
Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower.
At any
time any portion of this Note bears interest determined in relation to the
Prime
Rate, Borrower may convert all or a portion thereof so that it bears interest
determined in relation to LIBOR for a Fixed Rate Term designated by Borrower.
At
the time this Note is disbursed or Borrower wishes to select a LIBOR option
for
all or a portion of the outstanding principal balance hereof, and at the
end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable
Fixed
Rate Term. Any such notice may be given by telephone (or such other electronic
method as Bank may permit) so long as, with respect to each LIBOR selection,
(A) if requested by Bank, Borrower provides to Bank written confirmation
thereof not later than three (3) Business Days after such notice is
given,
and (B) such notice is given to Bank prior to 10:00 a.m. on the first day
of the
Fixed Rate Term or at a later time during any Business Day if Bank, at its
sole
option but without obligation to do so, accepts ▇▇▇▇▇▇▇▇'s notice and quotes
a
fixed rate of Borrower. If Borrower does not immediately accept a
fixed
rate when quoted by Bank, the quoted rate shall expire and any subsequent
LIBOR request from Borrower shall be subject to a redermination by Bank of
the
applicable fixed rate. If no specific designation of interest is made at
the
time this Note is disbursed or at the end of any Fixed Rate Term, Borrower
shall
be deemed to have made a Prime Rate interest selection for this Note or the
principal amount to which such Fixed Rate Term applied.
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(c) Taxes
and Regulatory Costs.
Borrower shall pay to Bank immediately upon demand, in addition to any other
amounts due or to become due hereunder, any and all (i) withholdings, interest
equalization taxes, stamp taxes or other taxes (except income and franchise
taxes) imposed by any domestic or foreign governmental authority and related
in
any manner to LIBOR, and (ii) future, supplemental, emergency or other charges
in the LIBOR Reserve Percentage, assessment rates imposed by the Federal
Deposit
Insurance Corporation, or similar requirements or costs imposed by any domestic
or foreign govermental authority or resulting from compliance by Bank with
any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority and related in any manner to LIBOR to
the
extent they are not included in the calculation of LIBOR. In determining
which
of the foregoing are attributable to any LIBOR option available to Borrower
hereunder, any reasonable allocation made by Bank among its operations shall
be
conclusive and binding upon Borrower.
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(d) Payment
of Interest.
Interest accrued on this Note shall be payable on the first day of each month,
commencing April 1, 2004.
(e) Default
Interest.
From
and after the maturity date of this Note, or such earlier date as all principal
owing hereunder becomes due and payable by acceleration or otherwise, the
outstanding principal balance of this Note shall bear interest until paid
in
full at an increased rate per annum (computed on the basis of a 360-day year,
actual days elapsed) equal to four percent (4%) above the rate of interest
from
time to time applicable to this Note.
REPAYMENT
AND PREPAYMENT:
(a) Repayment. Principal
shall be payable on the first day of each month in installments of Four Thousand
Six Hundred Fifty and no/100 dollars ($4,650.00) each, commencing April 1,
2004,
and continuing up to and including November 1, 2005, with a final installment
consisting of all remaining unpaid pricipal due and payable in full on December
1, 2005.
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(b) Application
of Payments.
Each
payment made on this Note shall be credited first, to any interest then due
and
second, to the outstanding principal balance hereof. All payments credited
to
principal shall be applied first, to the outstanding principal balance of
this
Note which bears interest determined in relation to the Prime Rate, if any,
and
second, to the outstanding principal balance of this Note which bears interest
determined in relation to LIBOR, with such payments applied to the oldest
Fixed
Rate Term first.
(c) Prepayment.
Prime
Rate.
Borrower may prepay principal on any portion of this Note which bears interest
determined in relation to the Prime Rate at any time, in any amount and without
penalty.
LIBOR.
Borrower
may prepay principal on any portion of this Note which bears interest determined
in relation to LIBOR at any time and in the minimum amount of Five Hundred
Thousand Dollars ($500,000.00); provided however, that if the outstanding
principal balance of such portion of this Note is less than said amount,
the
minimum prepayment amount shall be the entire outstanding principal balance
thereof. In consideration of Bank providing this prepayment option to Borrower,
or if any such portion of this Note shall become due and payable at any time
prior to the last day of the Fixed Rate Term applicable thereto by acceleration
or otherwise, Borrower shall pay to Bank immediately upon demand a fee which
is
the sum of the discounted monthly differences for each month from the month
of
prepayment through the month in which such fixed Rate Term matures, calculated
as follows for each such month:
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(i)
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Determine
the amount of interest which would have accrued each month on the
amount
prepaid at the interest rate applicable to such amount had it remained
outstanding until the last day of the Fixed Rate Term applicable
thereto.
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(ii)
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Subtract
from the amount determined in (i) above the amount of interest
which would
have accrued for the same month on the amount prepaid for the remaining
term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment
for new loans made for such term and in a principal amount equal
to the
amount prepaid.
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(iii)
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If
the result obtained in (ii) for any month is greater than zero,
discount
that difference by LIBOR used in (ii)
above.
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Each
Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to a certain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate
of
the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails
to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum two percent (2%)
above
the Prime Rate in effect from time to time (computed on the basis of a 360-day
year, actual days elapsed).
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All
prepayments of principal shall be applied on the most remote principal
installment or installments then unpaid.
EVENTS
OF
DEFAULT:
This
Note
is made pursuant to and is subject to the terms and conditions of that certain
Credit Agreement between Borrower and Bank dated as of March 1, 2004, as
amended
form time to time (the “Credit Agreement”). Any default in the payment or
performance of any obligation under this Note, or any defined event of default
under the Credit Agreement, shall constitute an “Event of Default” under this
Note.
MISCELLANEOUS:
(a) Remedies.
Upon
the sale, transfer, hypothecation, assignment or other encumbrance, whether
voluntary, involuntary or by operation of law, of all or any interest in
any
real property securing this Note, or upon] the occurrence of any Event of
Default, the holder of this Note, at the holder’s option, may declare all sums
of principal and interest outstanding hereunder to be immediately due and
payable without presentment, demand, notice of nonperformance, notice of
protest, protest or notice of dishonor, all of which are expressly waived
by
each Borrower. Each Borrowers shall pay to the holder immediately upon demand
the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys’ fees (to include outside counsel fees and all
allocated costs of the holder’s in-house counsel), expended or incurred by the
holder in connection with the enforcement of the holder’s rights and/or the
collection of any amounts which become due to the holder under this Note,
and
the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with
any
bankruptcy proceeding (including without limitation, any adversary proceedings,
contested matter or motion brought by Bank or any other person) relating
to any
Borrower or any other person or entity.
(b) Obligations
Joint and Several.
Should
more than one person or entity sign this Note as a Borrower, the obligations
of
each such Borrower shall be joint and several.
(c) Governing
Law.
This
Note shall be governed by and construed in accordance with the laws of the
State
of California.
This
Note
is secured by a Deed of Trust dated November 17, 1998.
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IN
WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.
SONOMAWEST
HOLDINGS, INC.
By: /s/ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇
Chairman
of the Board
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