EXHIBIT 10.3
SANWA BANK
CALIFORNIA
LINE OF CREDIT AGREEMENT
(REDUCING COMMITMENT)
THIS LINE OF CREDIT AGREEMENT (the "Agreement") is made and
entered into as of this 19th day of June, 1998, by and between SANWA
BANK CALIFORNIA (the "Bank") and XXXXXX VINEYARDS CALIFORNIA 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:
06/15/98 to 06/04/99 $3,600,000.00
06/05/99 to 06/04/00 $3,420,000.00
06/05/00 to 06/04/01 $3,240,000.00
06/05/01 to 06/04/02 $3,060,000.00
06/05/02 to 06/04/03 $2,880,000.00
06/05/03 to 06/04/04 $2,700,000.00
06/05/04 to 06/04/05 $2,520,000.00
06/05/05 to 06/04/06 $2,340,000.00
06/05/06 to 06/04/07 $2,160,000.00
06/05/07 to 06/04/08 $1,980,000.00
(each such dollar amount being the relative "Commitment"). Within the
foregoing limits, the Borrower may borrow, partially or wholly, prepay, and
reborrow under this Section 1.02.
A. PURPOSE. Advances made under the Line of Credit
shall be used to finance the acquisition of real estate and for general
working capital purposes.
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 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 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".
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".
1
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 September 5, 1998.
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, Borrower may borrow under the 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 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, 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 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 Borrower's election that interest
on any Fixed Rate Advance shall continue to accrue at the Fixed Rate, the
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 Borrower 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 Borrower shall, upon the Bank's request,
promptly pay to and indemnify the Bank for all costs and any loss actually
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 Borrower shall, 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 Borrower, in which
event any Fixed Rate
2
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 June 5, 1999 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 June 5, 2008 (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
REAL PROPERTY
2.01 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, 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 exceptions numbered 1-12 all as
listed on a certain Preliminary Title Report No. 97012929 (the "Permitted
Title Exceptions") dated May 26, 1887, and issued by Xxxxxxx Title.
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 $3,600,000 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
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 $9,000 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. 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.
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 FICTITIOUS 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
4
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 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.
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
5
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 100 days after
the end of each of the Borrower's fiscal years, 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.
B. OTHER INFORMATION. Promptly upon the Bank's
request, such other information pertaining to the Borrower 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 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.
5.08 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.
5.09 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.
5.10 FINANCIAL CONDITION. Maintain at all times
(a) NET WORTH. A minimum effective tangible net worth of
not less than $20,000,000.
(b) DEBT TO NET WORTH RATIO. A debt to effective
tangible net worth ratio of not more than 1 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.
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.
6
5.11 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.
5.12 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.
5.13 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 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.
5.14 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.
5.15 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 on the Real Property.
5.16 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.
7
5.17 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 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.
8
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:
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 immediately
9
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.
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
10
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.
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
11
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 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.
12
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.
BANK: BORROWER:
SANWA BANK CALIFORNIA XXXXXX VINEYARDS CALIFORNIA, INC.
By: By:
----------------------------------- ---------------------------------
Xxxxxx X. Xxxxxxxxx, Vice President Xxxxxx X. Xxxxxx, President
By:
--------------------------------
Xxxxxx X. Xxxxx, Secretary
13