SANWA BANK
California
LINE OF CREDIT AGREEMENT
(Reducing Commitment)
THIS LINE OF CREDIT AGREEMENT (the "Agreement") is made and entered into
this 25th day of June, 1997, by and between SANWA BANK CALIFORNIA (the "Bank")
and XXXXXX VINEYARDS INC. (the "Borrower").
SECTION I
AGREEMENT TO LEND
1.01 Commitment to Lend. Subject to the terms and conditions of this
Agreement and so long as no Event of Default occurs, the Bank agrees to extend
to the Borrower the credit accommodations that follow (the "Line of Credit").
1.02 Line of Credit. The Bank agrees to make loans and advances
("Advances") to the Borrower from time to time, upon the Borrower's request
therefore, from the date hereof to the Expiration Date, provided that the
outstanding Advances under this Agreement shall not exceed the following:
Date: Amount:
06/30/97 to 06/04/98 $1,450,000.00
06/05/98 to 06/04/99 $1,354,000.00
06/05/99 to 06/04/00 $1,258,000.00
06/05/00 to 06/04/01 $1,162,000.00
06/05/01 to 06/04/02 $1,066,000.00
06/05/02 to 06/04/03 $970,000.00
06/05/03 to 06/04/04 $874,000.00
06/05/04 to 06/04/05 $778,000.00
06/05/05 to 06/04/06 $682,000.00
06/05/06 to 06/04/07 $586,000.00
(each such dollar amount being the relative "Commitment"). Within the foregoing
limit,s, the Borrower may borrow, partially of wholly, prepay, and reborrow
under this Section 1.02.
A. Purpose. Advances made under the Line of Credit shall be
used to refinance an existing real estate loan with the Bank and to increase
working capital.
B. Line Account. The Bank shall maintain on its books a record
of account in which the Bank shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the Line of Credit
(the "Line Account").
C. Interest. Interest shall accrue from the date of each
Advance under the Line of Credit at one of the following rates, as quoted by the
Bank and as elected by the relevant Borrower pursuant to paragraph 1.02D. or
paragraph 1.02E. below:
1. Variable Rate Advances: A variable rate equivalent to
an index for a variable interest rate which is quoted, published or announced
from time to time by the Bank as its reference rate and as to which loans may be
made by Bank at, below or above such reference rate, plus .25% per annum (the
"Variable Rate"). Interest shall be adjusted concurrently with any change in
the reference rate quoted by Bank. An Advance based upon the Variable Rate is
hereinafter referred to as a "Variable Rate Advance".
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2. Fixed Rate Advance: A fixed rate quoted by Bank in
its sole discretion for each Advance (the "Fixed Rate") and for such period of
time that the Bank may quote and offer, provided that any such period of time
shall be for at least 30 days and shall not extend beyond the Expiration Date
(the "Interest Period") for Advances in the minimum amount of $100,000. Advances
based upon the Fixed Rate are hereinafter referred to as "Fixed Rate Advances".
Interest on any Advance shall be computed on the basis of
360 days per year, but charged on the actual number of days elapsed.
Interest on Variable Rate and Fixed Rate Advances shall be
paid in quarterly installments on the 5th day of each quarter of each year,
commencing on October 5, 1997.
If interest is not paid as and when it is due, it shall be
added to the principal, become and be treated as a part thereof, and shall
thereafter bear like interest.
D. Notice of Borrowing. Upon telephonic notice which shall be
received by the Bank at or before 2:00 p.m. (California time) on a business day,
any Borrower may borrow under the Crop Line of Credit by requesting:
1. A Variable Rate Advance: A Variable Rate Advance may
be made on the day notice is received by the Bank; provided, however, that if
the Bank shall not have received notice at or before 2:00 p.m. on the day such
Advance is requested to be made, such Variable Rate Advance may, at the Bank's
option, be made on the next business day.
2. A Fixed Rate Advance: Notice of any Fixed Rate Advance
shall be received by the Bank no later than two business days prior to the day
(which shall be a business day) on which any Borrower requests such Fixed Rate
Advance to be made.
E. Notice of Election to Adjust Interest Rate: Upon telephonic
notice which shall be received by the Bank at or before 11:00 a.m. (California
time) on a business day, any Borrower may elect:
1. That interest on a Variable Rate Advance shall be
adjusted to accrue at the Fixed Rate; provided, however, that such notice shall
be received by the Bank no later than two business days prior to the day (which
shall be a business day) on which such Borrower requests that interest be
adjusted to accrue at the Fixed Rate.
2. That interest on a Fixed Rate Advance shall continue to
accrue at a newly quoted Fixed Rate or shall be adjusted to commence to accrue
at the Variable Rate; provided, however, that such notice shall be received by
the Bank no later than the last day of the Interest Period pertaining to such
Fixed Rate Advance. If the Bank shall not have received notice (as prescribed
herein) of such Borrower's election that interest on any Fixed Rate Advance
shall continue to accrue at the Fixed Rate, the relevant Borrower shall be
deemed to have elected that interest thereon shall be adjusted to accrue at the
Variable Rate upon the expiration of the Interest Period pertaining to such
Advance.
F. Prepayment. The Borrowers may prepay any Advance in whole
or in part, at any time and without penalty, provided, however, that: (i) any
partial prepayment shall first be applied at the Bank's option, to accrued and
unpaid interest and next to the outstanding principal balance; and (ii) during
any period of time in which interest is accruing on any Advance on the basis of
the Fixed Rate, no prepayment shall be made except on a day which is the last
day of the Interest Period pertaining thereto. If the whole or any part of any
Fixed Rate Advance is prepaid by reason of acceleration or otherwise, the
Borrowers shall,jointly and severally, upon the Bank's request, promptly pay to
and indemnify the Bank for all costs and any loss actually
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incurred by the Bank (including loss of profit resulting from the re employment
of funds) sustained by the Bank as a consequence of such prepayment.
G. Indemnification for Fixed Rate Costs. During any period of
time in which interest on any Advance is accruing on the basis of the Fixed
Rate, the Borrowers shall, jointly and severally, upon the Bank's request,
promptly pay to and reimburse the Bank for all costs incurred and payments made
by the Bank by reason of any future assessment, reserve, deposit or similar
requirement or any surcharge, tax or fee imposed upon the Bank or as a result of
the Bank's compliance with any directive or requirement of any regulatory
authority pertaining or relating to funds used by the Bank in quoting and
determining the Fixed Rate.
H. Conversion from Fixed Rate to Variable Rate. In the event
that the Bank shall at any time determine that the accrual of interest on the
basis of the Fixed Rate (i) has become infeasible because the Bank is unable to
determine the Fixed Rate due to the unavailability of U.S. Dollar deposits,
contracts or certificates of deposit in an amount approximately equal to the
amount of the relevant Advance and for a period of time approximately equal to
the relevant Interest period or (ii) is or has become unlawful by reason of the
Bank's compliance with any new law, rule, regulation, guideline or order, or any
new interpretation of any present law, rule, regulation guideline or order, then
the Bank shall promptly give telephonic notice thereof (confirmed in writing) to
the Borrowers, in which event any Fixed Rate Advance shall be deemed to be a
Variable Rate Advance and interest shall thereupon immediately accrue at the
Variable Rate and shall continue at such rate until the Bank determines that the
Fixed Rate is no longer infeasible or unlawful.
I. Principal. Unless sooner due in accordance with the terms
of this Agreement:
(a) Commencing on July 5, 1998 and continuing on such date
annually thereafter, Borrower agrees to repay any outstanding Advances that
would exceed the relevant Commitment then in effect.
(b) On the Expiration Date, Borrower hereby promises and
agrees to pay to Bank in full the aggregate unpaid principal amount of the
Advances outstanding on such date plus accrued and unpaid interest thereon.
J. Expiration of Line of Credit. Unless earlier terminated in
accordance with the terms of this Agreement, the Bank's commitment to make
Advances to the Borrower hereunder shall automatically expire on July 5, 2007
(the "Expiration Date").
K. Late Payment: If any payment of principal or interest, or
any portion thereof, under this Agreement is not paid within ten (10) calendar
days after it is due, a late payment charge equal to five percent (5%) of such
past due payment may be assessed and shall be immediately payable.
1.03 Disbursement of Proceeds from Advances. Any Advance made
hereunder shall be conclusively presumed to have been made to and for the
Borrower's benefit when the proceeds of such Advance are disbursed in accordance
with the Borrower's instructions or deposited into a checking account of the
Borrower maintained at the Bank.
SECTION II
GUARANTORS; COLLATERAL; REAL PROPERTY
2.01 Guarantors. The indebtedness incurred under and pursuant to this
Agreement shall be guaranteed, in form and substance satisfactory to the Bank
("Guaranty"), by Xxxxxx X. Xxxxxx ("Guarantor").
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2.02 Collateral. To secure payment and performance of all the
Borrower's Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank, whether or
not evidenced by this or by any other agreement, absolute or contingent, due or
to become due, now existing or hereafter and howsoever created, the Borrower
hereby grants the Bank a security interest in and to all of the following
property ("Collateral") :
(a) All goods now owned or hereafter acquired by the Borrower or
in which the Borrower now has or may hereafter acquire any interest, including,
but not limited to, all machinery, equipment, furniture, furnishings, fixtures,
tools, supplies and motor vehicles of every kind and description, and all
additions, accessions, improvements, replacements and substitutions thereto and
thereof.
(b) All inventory now owned or hereafter acquired by the
Borrower, including, but not limited to, all raw materials, work in process,
finished goods, merchandise, parts and supplies of every kind and description,
including inventory temporarily out of the Borrower's custody or possession,
together with all returns on accounts.
(c) All accounts, contract rights and general intangibles now
owned or hereafter created or acquired by the Borrower, including, but not
limited to, all receivables, goodwill, trademarks, trademark applications, trade
styles, trade names, patents, patent applications, copyrights and copyright
applications, customer lists, business records and computer programs, tapes,
disks and related data processing software that at any time evidence or contain
information relating to any of the Collateral.
(d) All documents, instruments and chattel paper now owned or
hereafter acquired by the Borrower, including, but not limited to, warehouse and
other receipts, bills of sale and bills of lading.
(e) All monies, deposit accounts, certificates of deposit and
securities of the Borrower now or hereafter in the Bank's or its agents'
possession.
(f) All crops now growing or hereafter to be grown, together
with all products and proceeds thereof (the "Crops"), on that certain real
property described in the attached Exhibit "B" (the "Real Property").
(g) All farm products now owned or hereafter acquired by or for
the benefit of the Borrower consisting of supplies used or produced in the
farming operations of the Borrower.
(h) All of Borrower's now existing or hereafter acquired water
rights of every kind and description, whether appurtenant, riparian or
prescriptive or arising by virtue of any contract or other agreement.
The Bank's security interest in the Collateral shall be a continuing lien
and shall include the proceeds and products of the Collateral including, but not
limited to, the proceeds of any insurance thereon.
2.03 The Deed of Trust. The Borrower hereby agrees that all
Indebtedness referenced in the Agreement to be paid by the Borrower to the Bank
and the Borrower's performance of each and all of the terms, covenants and
agreements contained in the Agreement shall be secured by a deed of trust in
form and substance satisfactory to the Bank (the "Deed of Trust") encumbering,
as a lien of first encumbrance, certain real property described in the attached
Exhibit "1" (the "Real Property"), located in the County of Monterey, State of
California, subject only to current taxes and assessments not yet due and
payable and [ ] no other exceptions [ ] exceptions numbered 1-7 and 10, all as
listed on a certain Preliminary Title Report No. 97012150 (the "Permitted Title
Exceptions") dated May 19, 1997 and issued byStewart Title
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SECTION III
CONDITIONS PRECEDENT
3.01 Conditions Precedent to First Advance. Prior to the first
Advance hereunder, the Borrower shall deliver or cause to be delivered to the
Bank, in form and substance satisfactory to the Bank:
A. Authority to Borrow. Evidence relating to the duly given
approval and authorization of the execution, delivery and performance of this
Agreement, all other documents, instruments and agreements required under this
Agreement and all other actions to be taken by the Borrower hereunder or
thereunder.
B. Loan Documents. The documents described in Section II
hereof, as applicable, and all other documents, instruments and agreements
required or necessary to consummate the transactions contemplated under this
Agreement (collectively the "Loan Documents"), all fully executed.
C. Real Property. The following in connection with the Real
Property:
1. An appraisal of the Real Property.
2. A title insurance policy or binder in the amount of
$1,450,000 issued by a title insurance company satisfactory to the Bank and in
such form and substance and with such endorsements as are satisfactory to the
Bank. Such title insurance policy or binder shall indicate to the Bank's
satisfaction that the Deed of Trust shall constitute a lien of first encumbrance
on the Real Property subject only to the Permitted Title Exceptions.
3. Evidence that the Deed of Trust has been recorded and
constitutes a lien on the Real Property subject only to the Permitted Title
Exceptions.
4. Evidence of flood insurance if the Real Property is
located in a flood plain.
D. Fees. A fee of $13,000 and reimbursement to the Bank in the
amount of all escrow, recordation and appraisal fees, title guaranty or
insurance premiums, closing costs and all other out-of-pocket expenses incurred
by the Bank.
E. Financing Statements. Executed UCC-1 financing statement(s)
describing the Collateral, together with evidence of the recordation of such
statement(s) as a lien of first priority.
F. Miscellaneous Documents. Such other documents and opinions
as the Bank may require with respect to the transactions described in this
Agreement.
3.02 Conditions Precedent to All Advances. The obligation of the Bank
to make each Advance (including the first Advance) is subject to the further
conditions precedent that, as of the date of each Advance and after the making
of such Advance:
A. Representations and Warranties. The representations and
warranties set forth in Section IV hereof and in any other document, instrument,
agreement or certificate delivered to the Bank hereunder are true and correct.
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B. Event of Default. No event has occurred and is continuing
which constitutes, or, with the lapse of time or giving of notice or both, would
constitute an Event of Default as defined in Section VI hereof.
C. Collateral. The security interest in the Collateral has
been duly authorized, created and perfected with first priority and is in full
force and effect.
For the purposes hereof, the Borrower's acceptance of the proceeds of any
Advance shall be deemed to constitute the Borrower's representation and warranty
that the statements set forth in sections 3.02 A. and 3.02 B above are true and
correct.
SECTION IV
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to
the Bank, which representations and warranties are continuing:
4.01 Status. The Borrower is a corporation duly organized and validly
existing under the laws of the State of California, and is properly licensed,
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which the Borrower is doing business.
4.02 Authority. The execution, delivery and performance by the
Borrower of this Agreement and the Loan Documents have been duly authorized and
do not and will not: (i) violate any provision of any law, rule, regulation,
writ, judgment or injunction presently in effect affecting the Borrower; (ii)
result in a breach of or constitute a default under any material agreement to
which the Borrower is a party or by which it or its properties may be bound of
affected; or (iii) require any consent or approval of its stockholders or
violate any provision of its articles of incorporation or by-laws.
4.03 Legal Effect. This Agreement constitutes, and any document,
instrument or agreement required hereunder when delivered will constitute,
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
4.04 Ficticious Trade Styles. There are no fictitious trade styles used by
the Borrower in connection with its business operations. The Borrower shall
notify the Bank not less than 30 days prior to effecting any change in the
matters described herein or prior to using any other fictitious trade style at
any future date, indicating the trade style and state(s) of its use.
4.05 Financial Statements. All financial statements, information and
other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent the Borrower's financial condition
or, as applicable, the other information disclosed therein. Since the most
recent submission of any such financial statement, information or other data to
the Bank, the Borrower represents and warrants that no material adverse change
in the Borrower's financial condition or operations has occurred which has not
been fully disclosed to the Bank in writing.
4.06 Litigation. Except as have been disclosed to the Bank in
writing, there are no actions, suits or proceedings pending or, to the knowledge
of the Borrower, threatened against or affecting the Borrower or the Borrower's
properties before any court or administrative agency which, if determined
adversely to the Borrower, would have a material adverse effect on the
Borrower's financial condition or operations.
4.07 Title to Assets; Permitted Liens. The Borrower has good and
marketable title to all of its assets and the same are not subject to any
security interest, encumbrance, lien or claim
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of any third person other than: (i) liens and security interests securing
indebtedness owed by the Borrower to the Bank; (ii) liens for taxes, assessments
or similar charges either not yet due or being duly contested in good faith;
(iii) liens of mechanics, materialmen, warehousemen or other like liens arising
in the ordinary course of business and securing obligations which are not yet
delinquent; (iv) liens and security interests which, as of the date of this
Agreement, have been disclosed to and approved by the Bank in writing; (v)
purchase money liens or purchase money security interests upon or in any
property acquired or held by the Borrower in the ordinary course of business to
secure indebtedness outstanding on the date hereof or permitted to be incurred
hereunder; and (vi) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of the Borrower's assets (collectively "Permitted Liens").
4.08 ERISA. If the Borrower has a pension, profit sharing or
retirement plan subject to the Employee Retirement Income Security Act of 1974,
as amended from time to time, including any rules and regulations promulgated
thereunder ("ERISA"), such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.
4.09 Taxes. The Borrower has filed all tax returns required to be
filed and paid all taxes shown thereon to be due, including interest and
penalties, other than taxes which are currently payable without penalty or
interest or those which are being duly contested in good faith.
4.10 Margin Stock. The proceeds of any Advance under the Line of
Credit will not be used to purchase or carry margin stock as such term is
defined under Regulation U of the Board of Governors of the Federal Reserve
System.
4.11 Environmental Compliance. Borrower has implemented and
complied in all material respects with all applicable federal, state and
local laws, ordinances, statutes and regulations with respect to hazardous or
toxic wastes, substances or related materials, industrial hygiene or
environmental conditions. There are no suits, proceedings, claims or disputes
pending or, to the knowledge of such Borrower, threatened against or
affecting such Borrower or its property claiming violations of any federal,
state or local law, ordinance, statute or regulation relating to hazardous or
toxic wastes, substances or related materials.
4.12 Water. As of the date of this Agreement, sufficient water is
available and is projected to be available, from verifiable surface and ground
water sources, to conduct operations as described in the most recent budget
submitted by Borrower to the Bank or to conduct operations materially similar to
prior years' operations as evidenced by information provided by any Borrower to
the Bank. Borrower has filed with all governmental agencies, all notices and
other documents required under Federal, state and local laws and regulations in
connection with the supply of water to and use of water upon the Real Property.
SECTION V
COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement,
and so long thereafter as the Borrower is indebted to the Bank under this
Agreement, the Borrower shall, unless the Bank otherwise consents in writing:
5.01 Preservation of Existence; Compliance with Applicable Laws.
Maintain and preserve its existence and all rights and privileges now enjoyed;
not liquidate or dissolve, merge or consolidate with or into, or acquire any
other business organization; and conduct its business in accordance with all
applicable laws, rules and regulations.
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5.02 Maintenance of Insurance. Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates and maintain such other insurance and coverages as may be
required by the Bank. All such insurance shall be in form and amount and with
companies satisfactory to the Bank. With respect to insurance covering
properties in which the Bank maintains a security interest or lien, such
insurance shall name the Bank as loss payee pursuant to a loss payable
endorsement satisfactory to the Bank and shall not be altered or canceled except
upon 10 days' prior written notice to the Bank. Upon the Bank's request, the
Borrower shall furnish the Bank with the original policy or binder of all such
insurance.
5.03 Payment of Obligations and Taxes. Make timely payment of all
assessments and taxes and all of its liabilities and obligations unless the same
are being contested in good faith.
5.04 Inspection Rights. At any reasonable time and from time to time
permit the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and to discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower now or at any time hereafter maintains any records (including, but not
limited to, computer generated records and computer programs for the generation
of such records) in the possession of a third party, the Borrower hereby agrees
to notify such third party to permit the Bank free access to such records at all
reasonable times and to provide the Bank with copies of any records it may
request, all at the Borrower's expense, the amount of which shall be payable
immediately upon demand.
5.05 Reporting Requirements. Deliver or cause to be delivered to the
Bank in form and detail satisfactory to the Bank:
A. Annual Statements. Not later than 120 days after the end of
each of the Borrower's fiscal years, (i) a copy of the annual audited financial
report of the Borrower for such year, which report shall be prepared by a firm
of certified public accountants acceptable to Bank and (ii) a copy of the
Borrower's annual crop budget for the succeding year.
B. Other Information. Promptly upon the Bank's request, such
other information pertaining to the Borrower or any Guarantor as the Bank may
reasonably request.
5.06 Redemption or Repurchase of Stock. Not redeem or repurchase any
class of the Borrower's stock now or hereafter outstanding.
5.07 Payment of Dividends: Not declare or pay any dividends on any
class of stock now or hereafter outstanding except dividends payable solely in
the Borrower's capital stock.
5.08 Liens and Encumbrances. Not create, assume or permit to exist
any security interest, encumbrance, mortgage, deed of trust or other lien
including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any such properties,
except for Permitted Liens and as otherwise provided in this Agreement.
5.09 Transfer Assets. Not sell, contract for sale, transfer, convey,
assign, lease or sublet any of its assets except in the ordinary course of
business as presently conducted by the Borrower, and then, only for full, fair
and reasonable consideration.
5.10 Change in the Nature of Business. Not make any material change
in its financial structure or in the nature of its business as existing or
conducted as of the date of this Agreement.
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5.11 Financial Condition. Maintain at all times:
A. Net Worth. A minimum effective tangible net worth of not
less than $3,500,000.00
B. Debt to Net Worth Ratio. A debt to effective tangible net
worth ratio of not more than 1.5 to 1.
C. Current Ratio. A ratio of current assets to current
liabilities of not less than 2 to 1.
D. Debt Service Coverage Ratio. A ratio of the sum of net
profit after tax, plus depreciation, amortization and interest expense minus
dividends to the current portion of long-term debt plus interest expense of not
less than 1.25 to 1.
E. Working Capital. A minimum working capital of not less
than $3,000,000.
For purposes of the foregoing, the term "effective tangible net worth"
shall mean the Borrower's stated net worth less all its intangible assets (i.e.,
goodwill, trademarks, patents, copyrights, organization expense and similar
intangible items) but including leaseholds and leasehold improvements and plus
indebtedness subordinated (by its terms or by written agreement) to indebtedness
owed by the Borrower to the Bank and the term "debt" shall mean all of the
Borrower's liabilities excluding indebtedness subordinated (by its terms or by
written agreement) to indebtedness owed by the Borrower to the Bank.
5.12 Notices. Give prompt written notice to the Bank of any and all
Events of Default and litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$50,000.00.
5.13 Environmental Compliance. Borrower shall:
A. Implement and comply in all material respects with all
applicable federal, state and local laws, ordinances, statutes and regulations
with respect to hazardous or toxic wastes, substances or related materials,
industrial hygiene or to environmental conditions.
B. Not own, use, generate, manufacture, store, handle, treat,
release or dispose of any hazardous or toxic wastes, substances or related
materials.
C. Give prompt written notice of any discovery of or suit,
proceeding, claim, dispute, threat, inquiry or filing respecting hazardous or
toxic wastes, substances or related materials.
D. At all times indemnify and hold harmless Bank from and
against any and all liability arising out of the use, generation, manufacture,
storage, handling, treatment, disposal or presence of hazardous or toxic wastes,
substances or related materials.
5.14 Maintenance of Collateral: Except for Permitted Liens, keep and
maintain the Collateral free and clear of all levies, liens, encumbrances and
security interests (including, but not limited to, any lien of attachment,
judgment or execution) and defend the Collateral against any such levy, lien,
encumbrance or security interest; comply with all laws, statutes and regulations
pertaining to the Collateral and its use and operation; execute, file and record
such statements, notices and agreements, take such actions and obtain such
certificates and other documents as necessary to perfect, evidence and continue
the Bank's security interest in the Collateral and the priority thereof;
maintain accurate and complete records of the Collateral which show all sales,
claims and allowances; and properly care for, house, store and maintain
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the Collateral in good condition, free of misuse, abuse and deterioration, other
than normal wear and tear. The Borrower shall also maintain and preserve all
its properties in good working order and condition in accordance with the
general practice of other businesses of similar character and size, ordinary
wear and tear excepted.
5.15 Compensation: Compensate its employees for services rendered at
an hourly rate at least equal to the minimum hourly rate prescribed by any
applicable federal or state law or regulation.
5.16 Location of Harvested Crops. Any Crops now or hereafter
harvested or removed from the Real Property shall not be stored with a bailee,
warehouseman or similar party without the Bank's prior written consent. and
shall be kept only at the following location(s):
________________________________________________________________________________
________________________________________________________________________________
____________.
5.17 Care and Preservation of Crops..
(a) Attend to and care for the Crops and do or cause to be done
any and all acts that may at any time be appropriate or necessary to grow, farm,
cultivate, irrigate, fertilize, fumigate, prune, harvest, pick, clean, preserve
and protect the Crops.
(b) Not commit or suffer to be committed any waste of or damage
to the Crops
(c) Permit the Bank and any of its agents, employees or
representatives to enter upon the Real Property at any reasonable time and from
time to time for the purpose of examining and inspecting the Crops and the Real
Property.
(d) Harvest and prepare the Crops for market and promptly notify
the Bank when any of the Crops are ready for market.
(e) Keep the Crops separate and always capable of
identification.
(f) Comply with any requirements or instructions of the Bank
with respect to hauling, shipping, storing, marketing and otherwise preparing,
handling and disposing of the Crops.
5.18 Evidence of Water Availability. At such times as the Bank may
request, to deliver to the Bank a certificate stating that the amount of water
available and projected to be available is sufficient to conduct operations as
described in Borrower's Development Budget or operations materially similar to
prior years' operations, as evidenced by information provided by the Borrower to
the Bank. Such certificate shall be signed, at the Bank's option, either by the
Borrower or by an independent third party, such as an officer of the Borrower's
water district or other supplier of water.
SECTION VI
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an event
of default (an "Event of Default") under this Agreement:
6.01 Non-Payment. The Borrower shall fail to pay any payment of
principal or interest or any other sum referred to in this Agreement within 10
days of when due.
6.02 Performance Under This Agreement: The Borrower shall fail in any
material respect to perform or observe any term, covenant or agreement contained
in this Agreement or
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in any document, instrument or agreement relating to this Agreement and any such
failure shall continue unremedied for more than 30 days after the occurrence
thereof.
6.03 Other Agreements: If there is a default under any agreement to
which Borrower is a party with a third party or parties resulting in a right
by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness.
6.04 Representations and Warranties; Financial Statements. Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any Guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.
6.05 Insolvency. The Borrower or any Guarantor shall: (i) become
insolvent or be unable to pay its debts as they mature; (ii) make an assignment
for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its properties or assets; (iii) file a voluntary petition
in bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or a substantial part of its properties, assets or businesses
and shall not be discharged within 30 days after the date of such appointment.
6.06 Execution. Any writ of execution or attachment or any judgment
lien shall be issued against any property of the Borrower and shall not be
discharged or bonded against or released within 30 days after the issuance or
attachment of such writ or lien.
6.07 Revocation or Limitation of Guaranty. Any Guaranty shall be
revoked or limited or its enforceability or validity shall be contested by any
Guarantor, by operation of law, legal proceeding or otherwise or any Guarantor
who is a natural person shall die.
6.08 Suspension. The Borrower shall voluntarily suspend the
transaction of business or allow to be suspended, terminated, revoked or expired
any permit, license or approval of any governmental body necessary to conduct
the Borrower's business as now conducted.
6.09 Change in Ownership: There shall occur a sale, transfer,
disposition or encumbrance (whether voluntary or involuntary to), or an
agreement shall be entered into to do so with, any Person or group of Persons
(as such terms are defined pursuant to Federal securities laws) with respect to
more than 20% of the issued and outstanding capital stock of the Borrower and,
as a result thereof, such Person or group of Persons has the ability to direct
or cause the direction of the management and policies of the Borrower.
6.10 Impairment of Collateral. There shall occur any injury or damage
to all or any part of the Collateral or all or any part of the Collateral shall
be lost, stolen or destroyed.
6.11 Water Quality/Amount. The Borrower's water is or is projected to
be insufficient in amount or unsuitable in quality, as determined by the Bank in
either case, to conduct operations as described in Borrower's most recent budget
or projections or by information provided by Borrower to the Bank.
SECTION VII
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole
election, without demand and upon only such notice as may be required by law:
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7.01 Acceleration. Declare any or all of the Borrower's indebtedness
owing to the Bank, whether under this Agreement or under any other document,
instrument or agreement, immediately due and payable, whether or not otherwise
due and payable.
7.02 Cease Extending Credit. Cease making Advances or otherwise
extending credit to or for the account of the Borrower under this Agreement or
under any other agreement now existing or hereafter entered into between the
Borrower and the Bank.
7.03 Termination. Terminate this Agreement as to any future
obligation of the Bank without affecting the Borrower's obligations to the Bank
or the Bank's rights and remedies under this Agreement or under any other
document, instrument or agreement.
7.04 Notification of Account Debtors:
(a) Notify any account debtor, any buyers or transferee of the
Collateral or any other persons of the Bank's interest in the Collateral and the
proceeds thereof.
(b) Sign the Borrower's name (which authority the Borrower
hereby irrevocably and unconditionally grants to the Bank) on any invoice or
xxxx of lading relating to accounts or other drafts against the account
debtors, buyers or transferees, notify post office authorities to change the
address for delivery of mail addressed to the Borrower to such address as the
Bank may designate and take possession of and open mail addressed to the
Borrower and remove therefrom, proceeds of and payments on the Collateral,
and demand, receive and endorse payment and give receipts, releases and
satisfactions for and xxx for all money payable to the Borrower.
(c) Require the Borrower to indicate on the face of all
invoices (or such other documentation as may be specified by the Bank
relating to the sale, delivery or shipment of goods giving rise to the
account) that the account has been assigned to the Bank and that all payments
are to be made directly to the Bank at such address as the Bank may designate.
(d) Require the Borrower to direct all account debtors, buyers
or transferees to forward all remittances, payments and proceeds of the
Collateral directly to the Bank at such address as the Bank may designate.
In connection therewith, the Borrower hereby irrevocably constitutes and
appoints the Bank as its attorney-in-fact to endorse the Borrower's name on
any notes, acceptances, checks, drafts, money orders or other evidence of
payment that may come into the Bank's possession.
(e) Require the Borrower to deliver to the Bank, at such times
designated by the Bank, records and schedules which show the status and
condition of the Collateral, where it is located and such contracts or other
matters which affect the Collateral.
(f) Send verification requests to any account debtor, buyer or
transferee.
(g) Make inquiries of the Borrower's trade vendors.
7.05 Care and Possession of the Crops. Enter upon the Real Property
and, using any and all of the Borrower's equipment, machinery, tools, farming
implements and supplies, and improvements located on the Real Property: (i)
farm, cultivate, irrigate, fertilize, fumigate, prune and perform any other
act of acts appropriate or necessary to grow, care for, maintain, preserve
and protect the Crops (using any water located in, on or adjacent to the Real
Property); (ii) harvest, pick, clean and remove the Crops from the Real
Property; and (iii) appraise, store, prepare for public or private sale,
exhibit, market and sell the Crops and the products thereof; provided that
the Borrower hereby agrees that, if the Borrower is the owner of the Real
Property, the Bank shall not be responsible or liable for returning the Real
Property to its condition
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immediately preceding the use of the Real Property as provided herein or for
doing such acts as may be necessary to permit future crops to be grown on the
Real Property.
7.06 Protection of Security Interests: Make such payments and do
such acts as the Bank, in its sole judgment, considers necessary and
reasonable to protect its security interest or lien in the Collateral. The
Borrower hereby irrevocably authorizes the Bank to pay, purchase, contest or
compromise any encumbrance, lien or claim which the Bank, in its sole
judgment, deems to be prior or superior to its security interest. Further,
the Borrower hereby agrees to pay to the Bank, upon demand therefor, all
expenses and expenditures (including attorneys' fees) incurred in connection
with the foregoing.
7.07 Foreclosure: Enforce any security interest or lien given or
provided for under this Agreement or under any security agreement, mortgage,
deed of trust or other document, in such manner and such order, as to all or
any part of the properties subject to such security interest or lien, as the
Bank, in its sole judgment, deems to be necessary or appropriate and the
Borrower hereby waives any and all rights, obligations or defenses now or
hereafter established by law relating to the foregoing. In the enforcement
of its security interest or lien, the Bank is authorized to enter upon the
premises where any Collateral is located and take possession of the
Collateral or any part thereof, together with the Borrower's records
pertaining thereto, or the Bank may require the Borrower to assemble the
Collateral and records pertaining thereto and make such Collateral and
records available to the Bank at a place designated by the Bank. The Bank
may sell the Collateral or any portions thereof, together with all additions,
accessions and accessories thereto, giving only such notices and following
only such procedures as are required by law, at either a public or private
sale, or both, with or without having the Collateral present at the time of
the sale, which sale shall be on such terms and conditions and conducted in
such manner as the Bank determines in its sole judgment to be commercially
reasonable. Any deficiency which exists after the disposition or liquidation
of the Collateral shall be a continuing liability of the Borrower to the Bank
and shall be immediately paid by the Borrower to the Bank.
7.08 Non-Exclusivity of Remedies: Exercise one or more of the
Bank's rights set forth herein or seek such other rights or pursue such other
remedies as may be provided by law, in equity or in any other agreement now
existing or hereafter entered into between the Borrower and the Bank, or
otherwise.
7.09 Application of Proceeds: All amounts received by the Bank as
proceeds from the disposition or liquidation of the Collateral shall be
applied to the Borrower's indebtedness to the Bank as follows: first, to the
costs and expenses of collection, enforcement, protection and preservation of
the Bank's lien in the Collateral, including court costs and reasonable
attorneys' fees, whether or not suit is commenced by the Bank; next, to those
costs and expenses incurred by the Bank in protecting, preserving, enforcing,
collecting, liquidating, selling or disposing of the Collateral; next, to the
payment of accrued and unpaid interest on all of the Obligations; next, to
the payment of the outstanding principal balance of the Obligations; and
last, to the payment of any other indebtedness owed by the Borrower to the
Bank. Any excess Collateral or excess proceeds existing after the
disposition or liquidation of the Collateral will be returned or paid by the
Bank to the Borrower.
SECTION VIII
MISCELLANEOUS PROVISIONS
8.01 Amounts Payable on Demand. If the Borrower fails to pay on
demand any amount so payable under this Agreement, the Bank may, at its option
and without any obligation to do so and without waiving any default occasioned
by the Borrower's failure to pay such amount, create an Advance in an amount
equal to the amount so payable, which Advance shall thereafter bear interest as
provided under the Line of Credit.
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8.02 Default Interest Rate: If an Event of Default, or an event
which, with notice or passage of time could become an Event of Default, has
occurred or is continuing, the Borrower shall pay to the Bank interest on any
Indebtedness or amount payable under this Agreement at a rate which is 3% in
excess of the rate or rates then in effect under this Agreement.
8.03 Disposal of Invoices: All documents, schedules, invoices or
other papers received by the Bank from the Borrower may be destroyed or disposed
of six (6) months after receipt by the Bank, unless the Borrower requests in
writing the return thereof, which shall be done at the Borrower's expense.
8.04 Assignment of Borrower's Rights:
(a) If the Crops or any portion or portions thereof become
infected by disease or are destroyed by order of any local, state or federal
authority, and, by reason thereof, the Borrower is entitled to be indemnified by
such authority, the Borrower hereby assigns to the Bank any and all such sums
due from such authority, and the Bank is hereby authorized to receive, collect
and xxx for the same, and the Borrower hereby orders and directs that any such
sums be paid directly to the Bank.
(b) In addition, the Borrower hereby assigns and transfers to
the Bank all of the Borrower's rights and interests in and to any monies now or
hereafter placed in any funds of any marketing association, corporation,
cooperative, partnership, firm or individual now, heretofore or hereafter
handling or having to do with any of the Crops now growing or heretofore or
hereafter grown on the Real Property or connected with the growing, marketing,
farming or other handling of such Crops and the Borrower hereby assigns and
transfers to the Bank all stock and all other interests, benefits and rights of
the Borrower in any such marketing association, corporation, cooperative,
partnership, firm or individual having anything to do with such Crops and all
monies due or becoming due to the Borrower from any one or more of them.
8.05 Accounting and Other Terms. All references to financial
statements, assets, liabilities and similar accounting terms not specifically
defined in this Agreement shall mean such financial statements prepared and such
terms determined in accordance with generally accepted accounting principles
consistently applied. Except where otherwise specified in this Agreement, all
financial data submitted or to be submitted to the Bank pursuant to this
Agreement shall be prepared in accordance with generally accepted accounting
principles consistently applied. Terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the California Uniform
Commercial Code.
8.06 Reliance. Each warranty, representation, covenant and
agreement contained in this Agreement shall be conclusively presumed to have
been relied upon by the Bank regardless of any investigation made or
information possessed by the Bank and shall be cumulative and in addition to
any other warranties, representations, covenants or agreements which the
Borrower shall now or hereafter give, or cause to be given, to the Bank.
8.07 Attorney's Fees: Borrower shall pay to the Bank all costs and
expenses, including but not limited to reasonable attorneys fees, incurred by
Bank in connection with the administration, enforcement, including any
bankruptcy, appeal or the enforcement of any judgment or any refinancing or
restructuring of this Agreement or any document, instrument or agreement
executed with respect to, evidencing or securing the indebtedness hereunder.
8.08 Notices. All notices, payments, requests, information and
demands which either party hereto may desire, or may be required to give or make
to the other party shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, or by Western Union
telegram, addressed to the address set forth below such party's signature to
this Agreement or to such other address as may be specified from time to time in
writing by either party to the other.
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8.09 Waiver. Neither the failure nor delay by the Bank in exercising
any right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any document, instrument or agreement
mentioned herein preclude other or further exercise thereof or the exercise of
any other right; nor shall any waiver of any right or default hereunder or under
any other document, instrument or agreement mentioned herein constitute a waiver
of any other right or default or constitute a waiver of any other default of the
same or any other term or provision.
8.10 Conflicting Provisions. To the extent that any of the terms or
provisions contained in this Agreement are inconsistent with those contained in
any other document, instrument or agreement executed pursuant hereto, the terms
and provisions contained herein shall control. Otherwise, such provisions shall
be considered cumulative.
8.11 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the Bank's prior
written consent. The Bank may sell, assign or grant participations in all or
any portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower.
8.12 Jurisdiction. This Agreement, any notes issued hereunder, and
any documents, instruments or agreements mentioned or referred to herein shall
be governed by and construed according to the laws of the State of California,
to the jurisdiction of whose courts the parties hereby submit.
8.13 Dispute Resolution. It is understood and agreed that upon the
request of any party to this agreement any dispute, claim, or controversy of any
kind, whether in contract or in tort, statutory or common law, legal or
equitable now existing or hereinafter arising between the parties in any way
arising out of, pertaining to or in connection with: (1) this Agreement, or
any related agreements, documents, or instruments, (2) all past and present
loans, credits, accounts, deposit accounts (whether demand deposits or time
deposits), safe deposit boxes, safekeeping agreements, guarantees, letters of
credit, goods or services, or other transactions, contracts or agreements of any
kind, (3) any incidents, omissions, acts, practices, or occurrences causing
injury to either party whereby the other party or its agents, employees or
representatives may be liable, in whole or in part, or (4) any aspect of the
past or present relationships of the parties, shall be resolved through a two
step dispute resolution process administered by Judicial Arbitration & Mediation
Services, Inc. ("J-A-M-S") as follows:
a) Step I - Mediation: At the request of any party to the
dispute, claim or controversy of the matter shall be referred to the nearest
office of J-A-M-S for mediation, that is, an informal, non binding conference or
conferences between the parties in which a retired judge or justice for the
J-A-M-S panel will seek to guide the parties to a resolution of the case.
b) Step II - Unsecured Contracts - Arbitration: Should any
dispute, claim or controversy remain unresolved at the conclusion of the Step I
Mediation Phase then all such remaining matters shall be resolved by final and
binding arbitration before a different judicial panelist, unless the parties
shall agree to have the mediator panelist act as arbitrator. The hearing shall
be conducted at a location determined by the arbitrator in Los Angeles County
and shall be administered by and in accordance with the then existing Rules of
Practice and Procedure of Judicial Arbitration & Mediation Services, Inc., and
judgement upon any award rendered by the arbitrator may be entered by any State
or Federal Court having jurisdiction
15
thereof. The arbitrator shall determine which is the prevailing party and shall
include in the award that party's reasonable attorneys fees and costs. This
subparagraph (b) shall apply only if, at the time of the submission of the
matter to J-A-M-S, the dispute(s) or issue(s) do(es) not arise out of a
transaction(s) which is/are secured by real property collateral or, if so
secured, all parties consent to such submission.
As soon as practicable after selection of the arbitrator, the arbitrator or
his/her designated representative shall determine a reasonable estimate of
anticipated fees and costs of the Arbitrator, and render a statement to each
party setting forth that party's pro rata share of said fees and costs.
Thereafter each party shall, within 10 days of receipt of said statement,
deposit said sum with the Arbitrator. Failure of any party to make such a
deposit shall result in a forfeiture by the non depositing party of the right to
prosecute or defend the claim which is the subject of the arbitration, but shall
not otherwise serve to xxxxx, stay or suspend the arbitration proceedings.
c) Provisional Remedies, Self Help and Foreclosure: No
provision of, or the exercise of any right(s) under subparagraph (b), nor any
other provision of this Dispute Resolution Provision, shall limit the right of
any party to exercise self help remedies such as set off, to foreclose against
any real or personal property collateral, or obtain provisional or ancillary
remedies such as injunctive relief or the appointment of a receiver from any
court having jurisdiction before, during or after the pendency of any
arbitration. At Bank's option, foreclosure under a deed of trust or mortgage
may be accomplished either by exercise of power of sale under the deed of trust
or mortgage, or by judicial foreclosure. The institution and maintenance of an
action for provisional remedies pursuit of provisional or ancillary remedies or
exercise of self help remedies shall not constitute a waiver of the right of any
party, including the plaintiff, to submit the controversy or claim to
arbitration.
8.14 Waiver of Jury Trial. THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING,
THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
8.15 Headings. The headings set forth herein are solely for the
purpose of identification and have no legal significance.
8.16 Entire Agreement. This Agreement and the Loan Documents shall
constitute the entire and complete understanding of the parties with respect to
the transactions contemplated hereunder. All previous conversations, memoranda
and writings between the parties or pertaining to the transactions contemplated
hereunder that are not incorporate or referenced in this Agreement or the Loan
Documents are superseded hereby.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first hereinabove written.
16
BANK: BORROWER:
SANWA BANK CALIFORNIA XXXXXX VINEYARDS INC.
By: /s/ Xxxxxx X. Xxxxxxxxx By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxxxxx Name: Xxxxxx X. Xxxxxx
Title: Vice President Title: President
By: By: /s/ Xxxxxx X. Xxxxx
Name: Name: Xxxxxx X. Xxxxx
Title: Title:Secretary
17
