ACCOUNTS RECEIVABLE CREDIT AGREEMENT
This Accounts Receivable Credit Agreement (the "Agreement") is made and
entered into as of this ____ day of April, 1998, by and between SANWA BANK
CALIFORNIA (the "Bank") and GOLDEN STATE VINTNERS (the "Borrower"), on the terms
and conditions that follow:s
SECTION 1
DEFINITIONS
1.01 CERTAIN DEFINED TERMS: Unless elsewhere defined in this Agreement,
the following terms shall have the following meanings (such meanings to be
generally applicable to the singular and plural forms of the terms defined):
(a) "ACCEPTABLE INVENTORY": shall mean inventory consisting of
bulk wine and bottled wine as cased goods, but EXCLUDING: (i) inventory which
is not owned by the Borrower free and clear of all security interests, liens,
encumbrances or claims of any third party, excluding permitted liens; (ii)
inventory which is not permanently located in the State of California; (iii)
inventory which the Bank, in its sole discretion, deems to be obsolete,
unsalable, damaged, defective or unfit for further processing; (iv) inventory
that is used in the winery tasting room; (v) inventory which consists of bottled
wine in the Borrower's possession more than 15 months from the date of bottling;
(vi) inventory which consists of bulk red wine in the Borrower's possession more
than 36 months; and (vii) inventory which consists of bulk white wine in the
Borrower's possession more than 24 months.
(b) "ACCOUNT DEBTOR": shall mean the person or entity obligated
to the Borrower upon an account.
(c) "ADVANCE": shall mean an advance to the Borrower under the
Line of Credit.
(d) "BORROWING BASE": shall mean, as determined by the Bank from
time to time, the lesser of: (i)the sum of (a) 80% of the aggregate amount of
Eligible Accounts of the Borrower, plus (b) 65% of the lesser of actual costs
incurred in connection with growing crops or projected costs of growing crops as
reflected on the Crop Budget, plus (c) 50% of the Value of Acceptable Inventory;
or (ii) $22,500,000.
(e) "BUSINESS DAY": shall mean a day other than a Saturday or
Sunday on which commercial banks are open for business in California.
(f) "COLLATERAL": shall mean the property described in Section
4.01, together with any other personal or real property in which the Bank may be
granted a lien or security interest to secure payment of the Obligations.
(g) "CROP BUDGET": shall mean the crop budget dated ________ for
the crop production year commencing on November 1, 1997and ending on October 31,
1998 (the "Current Crop Year, which budget is attached hereto as Exhibit "A"
(the "Crop Budget").
(h) "DEBT": shall mean, on a consolidated basis with Golden State
Acquisition Corp., all liabilities of the Borrower less Subordinated Debt.
(i) "EFFECTIVE TANGIBLE NET WORTH": shall mean, on a consolidated
basis with Golden State Acquisition Corp., the Borrower's stated net worth plus
Subordinated Debt but less all intangible assets (other than goodwill) of the
Borrower (i.e., trademarks, patents, copyrights, organization expense and
similar intangible items).
(j) "ELIGIBLE ACCOUNT": shall mean, at any time, the gross
amount, less returns, discounts, credits or offsets of any nature, of the trade
accounts owing to the Borrower by Account Debtors containing selling terms not
exceeding 30 days or extended selling terms not exceeding equal installments of
30, 60 and 90 days by any Account Debtor but excluding the following:
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(1) Accounts with respect to which the Account Debtor is an
officer, employee or agent of the Borrower.
(2) Accounts with respect to which goods are placed on
consignment, guarantied sale or other terms by reason of which the payment by
the Account Debtor may be conditional.
(3) Accounts with respect to which the Account Debtor is
not a resident of the United States except Cardia Brights of Canada and except
to the extent such accounts are supported by adequate Eximbank insurance or
other insurance acceptable to the Bank or by irrevocable letters of credit
issued by banks satisfactory to the Bank.
(4) Accounts with respect to which the Account Debtor is
the United States or any department or agency thereof.
(5) Accounts with respect to which the Account Debtor is a
subsidiary of, or affiliated with, the Borrower or its shareholders, officers or
directors.
(6) Accounts with respect to which the Borrower is or may
become liable to the Account Debtor for goods sold or services rendered by the
Account Debtor to the Borrower.
(7) That portion of the accounts of any single Account
Debtor that exceeds 15% of all of the Borrower's accounts, other than the
following Account Debtors: Heublein, Wine World (Xxxxxxxx), Xxxxxxxxxx, Xxxxxx
Home, Xxxxx Winery, Xxxxxxx Xxxxxxx Winery, Canandaigua Wine Company, Cardia
Brights, and Vie-Del.
(8) Accounts which have not been paid in full within 60
days from the date payment was due or 90 days from the original date of invoice,
whichever is less.
(9) All accounts of any single Account Debtor if 25% or
more of the dollar amount of all such accounts are represented by accounts which
have not been paid in full within 60 days from the date payment was due or 90
days from the original date of invoice, whichever is less.
(10) Accounts which are subject to dispute, counterclaim or
setoff.
(11) Accounts with respect to which the goods have not been
shipped or delivered, or the services have not been rendered, to the Account
Debtor.
(12) Accounts with respect to which the Bank, in its sole
discretion, deems the creditworthiness or financial condition of the Account
Debtor to be unsatisfactory.
(13) Accounts of any Account Debtor who has filed or had
filed against it a petition in bankruptcy, or an application for relief under
any provision of any state or federal bankruptcy, insolvency or debtor-in-relief
acts; or who has had appointed a trustee, custodian or receiver for the assets
of such Account Debtor; or who has made an assignment for the benefit of
creditors or has become insolvent or fails generally to pay its debts (including
its payrolls) as such debts become due.
(k) "ERISA": shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, including (unless the context
otherwise requires) any rules or regulations promulgated thereunder.
(l) "EVENT OF DEFAULT": shall have the meaning set forth in
Section 8.
(m) "EXPIRATION DATE": shall mean March 5, 1999, or the date of
termination of the Bank's commitment to lend under this Agreement pursuant to
Section 8, whichever shall occur first.
(n) "INDEBTEDNESS": shall mean, with respect to the Borrower, (i)
all indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss and (ii) obligations under
leases which shall have been or should be, in accordance with generally accepted
accounting principles, reported as capital leases in respect of which the
Borrower is liable, contingently or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss.
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(o) "LINE OF CREDIT": shall mean the credit facility described in
Section 2.
(p) "OBLIGATIONS": shall mean all amounts owing by the Borrower
to the Bank pursuant to this Agreement including, but not limited to, the unpaid
principal amount of Advances.
(q) "PERMITTED LIENS": shall mean: (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 contested in
good faith; (iii) liens of materialmen, mechanics, warehousemen, carriers or
grape suppliers or other like liens arising in the ordinary course of business
and securing obligations which are not yet delinquent; (iv) 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 under Section 7.09
hereof; (v) liens and security interests which, as of the date hereof, have been
disclosed to and approved by the Bank in writing; (vi) liens and encumbrances
securing indebtedness of up to $45,000,000 owed to other financial institutions;
(vii) liens and security interests in connection with capital expenditures of up
to $6,000,000 in any one fiscal year, excluding any capital expenditures
associated with grafting and or planting programs; and (viii) 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.
(r) "REFERENCE RATE": shall mean 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 the Bank at, below or
above such reference rate.
(s) "SUBORDINATED DEBT": shall mean such liabilities of the
Borrower which have been subordinated to those owed to the Bank in a manner
acceptable to the Bank.
(t) "VALUE": shall mean the lesser of the Borrower's cost of
Acceptable Inventory or the wholesale market value thereof in such quantities
and on such terms as the Bank in its sole discretion may deem appropriate, less
any grower payables.
1.02 ACCOUNTING TERMS: All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
1.03 OTHER TERMS: Other terms not otherwise defined shall have the
meanings attributed to such terms in the California Commercial Code.
SECTION 2
THE LINE OF CREDIT
2.01 THE LINE OF CREDIT: On terms and conditions as set forth herein,
the Bank agrees to make Advances to the Borrower from time to time from the date
hereof to the Expiration Date, provided the aggregate amount of such Advances
outstanding at any time does not exceed the Borrowing Base. Within the foregoing
limits, the Borrower may borrow, partially or wholly prepay, and reborrow under
this Section 2.01.
2.02 MAKING LINE ADVANCES: Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of the Borrower (i) when
credited to any deposit account of the Borrower maintained with the Bank or (ii)
when paid in accordance with the Borrower's written instructions. Subject to
the requirements of Section 4, Advances shall be made by the Bank upon
telephonic or written request in form acceptable to the Bank received from the
Borrower, which request shall be received not later than 2:30 p.m. (California
time) on the date specified for such Advance, which date shall be a Business
Day. Requests for Advances received after such time may, at the Bank's option,
be deemed to be a request for an Advance to be made on the next succeeding
Business Day.
2.03 MANDATORY REPAYMENTS:
(a) If at any time the aggregate principal amount of the
outstanding Advances shall exceed the applicable Borrowing Base, the Borrower
hereby promises and agrees, immediately upon written or telephonic notice from
the Bank, to
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pay to the Bank an amount equal to the difference between the outstanding
principal balance of the Advances and the Borrowing Base.
(b) On the Expiration Date, the Borrower hereby promises and
agrees to pay to the Bank in full the aggregate unpaid principal amount of all
Advances then outstanding, together with all accrued and unpaid interest
thereon.
2.04 INTEREST ON ADVANCES: 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 2.05 or paragraph 2.06
below:
1. VARIABLE RATE ADVANCES: A variable rate equivalent to
the Reference Rate per annum (the "Variable Rate"). Interest shall be adjusted
concurrently with any change in the Reference Rate. An Advance based upon the
Variable Rate is hereinafter referred to as a "Variable Rate Advance".
2. FIXED RATE ADVANCES: A fixed rate quoted by the Bank
for 30, 60, 90, 120, 180 or 360 days or for such other period of time that the
Bank may quote and offer (provided that any such period of time does not extend
beyond the Expiration Date) [the "Interest Period"] for Advances in the minimum
amount of $250,000 and in $250,000 increments thereafter. Such interest rate
shall be a percentage approximately equivalent to 1.70% in excess of the rate
which the Bank determines in its sole and absolute discretion to be equal to the
Bank's cost of acquiring funds (adjusted for any and all assessments, surcharges
and reserve requirements pertaining to the Bank's borrowing or purchase of such
funds) 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
(the "Fixed Rate"). An Advance based upon the Fixed Rate is hereinafter
referred to as a "Fixed Rate Advance".
3. EURODOLLAR ADVANCES: A fixed rate quoted by the Bank
for 30, 60, 90, 120, or 180 days or for such other period of time that the Bank
may quote and offer (provided that any such period of time does not extend
beyond the Expiration Date) [the "Eurodollar Interest Period"] for Advances in
the minimum amount of $250,000 and in $250,000 increments thereafter. Such
interest rate shall be a percentage approximately equivalent to 1.70% in excess
of the Bank's Eurodollar Rate which is that rate determined by the Bank's
Treasury Desk as being the approximate rate at which the Bank could purchase
offshore U.S. dollar deposits in an amount approximately equal to the amount of
the relevant Advance and for a period of time approximately equal to the
relevant Eurodollar Interest Period (adjusted for any and all assessments,
surcharges and reserve requirements pertaining to the purchase by the Bank of
such U.S. dollar deposits) [the "Eurodollar Rate"]. An Advance based upon the
Eurodollar Rate is hereinafter referred to as the "Eurodollar Advance".
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 Advances, Eurodollar Advances and
Fixed Rate Advances shall be paid in monthly installments commencing on the
fifth day of the month following the date of the first such Advance and
continuing on the fifth day of each month thereafter.
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.
2.05 NOTICE OF ELECTION TO ADJUST INTEREST RATE: The Borrower may
elect:
1. That interest on a Variable Rate Advance shall be
adjusted to accrue at the Fixed Rate or the Eurodollar Rate; provided, however,
that such notice shall be received by the Bank no later than the same business
day as the day (which shall be a business day) on which the Borrower requests
that interest be adjusted to accrue at the Fixed Rate.
2. That interest on a Fixed Rate Advance or Eurodollar
Advance shall continue to accrue at a newly quoted Fixed Rate or Eurodollar 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 two
business days prior to 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 the Borrower's election that interest on any Fixed Rate Advance or
Eurodollar Rate shall continue to accrue at the newly quoted Fixed Rate or
Eurodollar Rate as the case may be 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 relevant Interest Period or Eurodollar Interest Period
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pertaining to such Advance.
2.06 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 or Eurodollar Rate, no prepayment shall be made except on a day which
is the last day of the Interest Period or Eurodollar Interest Period pertaining
thereto. If the whole or any part of any Fixed Rate Advance or Eurodollar
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 (including interest) actually incurred by the Bank and any loss
(including loss of profit resulting from the re-employment of funds) sustained
by the Bank as a consequence of such prepayment.
2.07 INDEMNIFICATION FOR FIXED RATE AND EURODOLLAR RATE COSTS: During
any period of time in which interest on any Advance is accruing on the basis of
the Fixed Rate or the Eurodollar 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 or Eurodollar Rate.
2.08 CONVERSION FROM FIXED RATE OR EURODOLLAR 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 or Eurodollar Rate (i) is infeasible because the
Bank is unable to determine the Fixed Rate or Eurodollar 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 Eurodollar
Interest Period or (ii) is or has become unlawful or infeasible 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 give telephonic notice thereof (confirmed in writing) to the
Borrower, in which event the relevant Fixed Rate Advance or Eurodollar Advance,
shall be deemed to be a Variable Rate Advance and interest shall thereupon
immediately accrue at the Variable Rate.
2.09 LINE ACCOUNT:
(a) 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"). The Bank shall provide the Borrower with a monthly statement of the
Borrower's Line Account, which statement shall be considered to be correct and
conclusively binding on the Borrower unless the Borrower notifies the Bank to
the contrary within 30 days after the Borrower's receipt of any such statement
which it deems to be incorrect.
(b) The Borrower hereby authorizes the Bank, if and to the extent
payment owed to the Bank under the Line of Credit is not made when due, to
charge, from time to time, against any or all of the Borrower's deposit accounts
with the Bank any amount so due.
2.10 LATE PAYMENT: If any payment of principal (other than a principal
payment due pursuant to Section 2.03(b)) 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.
SECTION 3
LETTERS OF CREDIT
3.01 LETTER OF CREDIT FACILITY: Subject to the terms of the Agreement
and those contained herein, the Bank agrees to issue stand-by letters of credit
(each a "Letter of Credit") on behalf of the Borrower. At no time, however,
shall the total face amount of all Letters of Credit outstanding, less any
partial draws paid by the Bank, exceed the sum of $3,000,000 and, together with
the total principal amount of all Advances, exceed the Borrowing Base.
(a) Upon the Bank's request, the Borrower shall promptly pay to
the Bank issuance fees of 1.5% of the face amount of each Letter of Credit
and such other fees, commissions, costs and any out-of-pocket expenses
charged or incurred by the Bank with respect to any Letter of Credit.
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(b) The commitment by the Bank to issue Letters of Credit shall,
unless earlier terminated in accordance with the terms of the Agreement,
automatically terminate on the Expiration Date and no Letter of Credit
shall expire on a date which is after the Expiration Date.
(c) Each Letter of Credit shall be in form and substance
satisfactory to the Bank and in favor of beneficiaries satisfactory to the
Bank, provided that the Bank may refuse to issue a Letter of Credit due to
the nature of the transaction or its terms or in connection with any
transaction where the Bank, due to the beneficiary or the nationality or
residence of the beneficiary, would be prohibited by any applicable law,
regulation or order from issuing such Letter of Credit.
(d) Prior to the issuance of each Letter of Credit, but in no
event later than 10:00 a.m. (California time) on the day such Letter of
Credit is to be issued (which shall be a Business Day), the Borrower shall
deliver to the Bank a duly executed form of the Bank's standard form of
application for issuance of a Letter of Credit with proper insertions.
(e) 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 any
Letter of Credit.
SECTION 4
COLLATERAL
4.01 THE 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 (the "Collateral"):
(a) 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.
(b) 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, trade styles, trade names,
patents, patent applications, software, customer lists and business records.
(c) All documents, instruments and chattel paper now owned or
hereafter acquired by the Borrower.
(d) All monies, deposit accounts, certificates of deposit and
securities of the Borrower now or hereafter in the Bank's or its agents'
possession.
(e) 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").
(f) 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.
(g) 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.
(h) All proceeds of the Collateral, including but not limited to,
all accounts, contract rights, documents, instruments and chattel paper
resulting from the sale or disposition of the Collateral.
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.
SECTION 5
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CONDITIONS OF LENDING
5.01 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE: The obligation of the
Bank to make the initial Advance and the first extension of credit to or on
account of the Borrower hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such initial Advance and such
first extension of credit all of the following, in form and substance
satisfactory to the Bank:
(a) Evidence that the execution, delivery and performance by the
Borrower of this Agreement and any document, instrument or agreement required
hereunder have been duly authorized.
(b) Continuing guaranty in favor of the Bank executed by Golden
State Acquisition Corp., together with evidence that the execution, delivery and
performance by the guarantor has been duly authorized and a subordination
agreement subordinating indebtedness of the Borrower owed to the Grape Group,
Inc. to indebtedness of the Borrower owed to the Bank and an executed UCC-1
financing statement.
(c) The Bank shall have conducted an audit of the Borrower's
books, records and operations and the Bank shall be satisfied as to the
condition thereof.
(d) Payment of all out-of-pocket expenses of Bank in connection
with the preparation and negotiation of this Agreement.
(e) Such other evidence as the Bank may request to establish the
consummation of the transaction contemplated hereunder and compliance with the
conditions of this Agreement.
5.02 CONDITIONS PRECEDENT TO ALL ADVANCES: The obligation of the Bank
to make each Advance and each other extension of credit to or on account of the
Borrower (including the initial Advance and the first extension of credit) shall
be subject to the further conditions precedent that, on the date of each Advance
or each extension of credit and after the making of such Advance or extension of
credit:
(a) The Bank shall have received the documents set forth in
Section 7.06(c).
(b) The Bank shall have received such supplemental approvals,
opinions or documents as the Bank may reasonably request.
(c) The representations contained in Section 6 and in any other
document, instrument or certificate delivered to the Bank hereunder are correct.
(d) 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.
(e) The security interest in the Collateral has been duly
authorized, created and perfected with first priority and is in full force and
effect.
The Borrower's acceptance of the proceeds of any Advance or the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall be deemed to constitute the Borrower's representation and
warranty that all of the above statements are true and correct.
SECTION 6
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:
6.01 STATUS: The Borrower is a corporation duly organized and validly
existing under the laws of the State of California and is properly licensed and
is 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
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doing business, and where the failure to so qualify or comply would have a
material adverse effect upon the Borrower or its business.
6.02 AUTHORITY: The execution, delivery and performance by the Borrower
of this Agreement and any instrument, document or agreement required hereunder
have been duly authorized and do not and will not: (i) violate any provision of
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having application to the Borrower;
(ii) result in a breach of or constitute a default under any material indenture
or loan or credit agreement or other material agreement, lease or instrument to
which the Borrower is a party or by which it or its properties may be bound or
affected; or (iii) require any consent or approval of its stockholders or
violate any provision of its articles of incorporation or by-laws.
6.03 LEGAL EFFECT: This Agreement constitutes, and any instrument,
document or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.
6.04 FICTITIOUS TRADE STYLES: All fictitious trade styles used by the
Borrower in connection with its business operations and each state in which each
such fictitious trade style is used are listed below. The Borrower shall notify
the Bank not less than 30 days prior to effecting any change in the matters
described below or prior to using any other fictitious trade style at any future
date, indicating the trade style and state(s) of its use.
TRADE STYLE STATE OF USE
See attached Exhibit "C" California
6.05 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 in accordance with such principals
the financial condition or, as applicable, the other information disclosed
therein. Since the most recent submission of such financial information or 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.
6.06 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 or on the Collateral.
6.07 TITLE TO ASSETS: The Borrower has good and marketable title to all
of its assets (including, but not limited to, the Collateral) and the same are
not subject to any security interest, encumbrance, lien or claim of any third
person except for Permitted Liens.
6.08 ERISA: If the Borrower has a pension, profit sharing or retirement
plan subject to 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.
6.09 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 such taxes which are currently payable without penalty or interest or
those which are being duly contested in good faith.
6.10 ACCOUNTS: Each Eligible Account represents a bona fide sale
conforming to the requirements of Section 1.01(j).
6.11 ENVIRONMENTAL COMPLIANCE: The 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 the Borrower, threatened against or affecting the 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.
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6.12 INVENTORY:
(a) The value of the inventory is, as of the date of any such
schedule of inventory, as reflected in such schedule.
(b) The value of the inventory is determined on the basis of
first-in, first-out.
(c) The Borrower keeps correct and accurate records itemizing and
describing the kind, type, quality and quantity of inventory, the Borrower's
cost therefor and selling price thereof, and the daily withdrawals therefrom and
additions thereto.
(d) All inventory is of good and merchantable quality, free from
known defects.
(e) The inventory is not stored with a bailee, warehouseman or
similar party, other than up to 10% of Borrower's inventory.
(f) The Borrower is not a "retail merchant" as defined in the
California Commercial Code.
6.13 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 Crop 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 7
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 will, unless the Bank shall otherwise consent in writing:
7.01 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 other than the merger of subsidiaries of the
Borrower or acquisitions which qualify as capital expenditures under Section
7.16 hereof; and conduct its business and operations in accordance with all
applicable laws, rules and regulations.
7.02 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, including, but not limited to key-man life
insurance in the minimum amount of $8,000,000 on the life of Xxxxxxx X. X'Xxxxx.
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.
7.03 MAINTENANCE OF COLLATERAL AND OTHER PROPERTIES: 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.
9 -
7.04 PAYMENT OF OBLIGATIONS AND TAXES: Make timely payment of all
assessments and taxes and all of its liabilities and obligations including, but
not limited to, trade payables, unless the same are being contested in good
faith by appropriate proceedings with the appropriate court or regulatory
agency. For purposes hereof, the Borrower's issuance of a check, draft or
similar instrument without delivery to the intended payee shall not constitute
payment.
7.05 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 discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower shall maintain any records (including, but not limited to, computer
generated records or 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 which it may request, all at the
Borrower's expense, the amount of which shall be payable immediately upon
demand. In addition, the Bank may, at any reasonable time and from time to
time, and upon notice to Borrower, conduct semi-annual inspections and annual
audits of the Collateral and the Borrower's accounts payable, the cost and
expenses of which shall be paid by the Borrower to the Bank upon demand.
7.06 REPORTING AND CERTIFICATION REQUIREMENTS: Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:
(a) Not later than 120 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, prepared by a firm of certified public accountants
acceptable to Bank.
(b) Not later than 45 days after the end of each month, the
Borrower's financial statement as of the end of such month and a crop position
report comparing actual expenditures on growing crops to projected expenditures
in the Crop Budget.
(c) Not later than 25 days after the end of each month (i) a
borrowing base certificate in the form acceptable to Bank ("Borrowing Base
Certificate"), executed by Borrower and certifying the value of the Borrowing
Base as of the last day of the preceding month; and, (ii) an accounts receivable
aging indicating the amount of total accounts receivable which are current, 31
to 60 days past the date of invoice, 61 to 90 days past the date of invoice, and
the amount over 90 days past the date of invoice and (iii) a schedule of actual
costs incurred in connection with growing crops; and (iv) an aging of accounts
payable specifying separately trade payables and grower payables and indicating
the amount of such payables which are current, 31 to 60 days past the date of
invoice, 61 to 90 days past the date of invoice, and the amount over 90 days
past the date of invoice; and, (v) a schedule of Acceptable Inventory specifying
the Value and aging thereof, and such other matters and information relating to
the Borrower's inventory as the Bank may request.
Notwithstanding the foregoing Section 7.06 (c) and following an
Event of Default hereunder, Bank, at its sole discretion, may require Borrower
to submit daily or at such other time as required by the Bank: (i) a
transaction report and schedule of accounts receivable which indicates all sales
made and all collections received for each such day; (ii) all remittances and
collections of accounts in kind and without commingling to be applied to the
payment of the Borrower's Obligations on the next Business Day following receipt
thereof; provided, however, that if such amounts are received in a form other
than cash or bank wire, the Bank may withhold application of such amounts for
such time to the extent permitted by law as the Bank, in its sole discretion,
deems reasonable to allow for collection and provided further that any
remittances and collections received by the Bank later than 2:00 p.m.
(California time) on any day shall be deemed received on the next succeeding
Business Day; and (iii) clear and legible copies of all invoices or sales
receipts evidencing the sale of goods or services by the Borrower; and (iv) a
schedule of Acceptable Inventory specifying the Value thereof, and such other
matters and information relating to the Borrower's inventory as the Bank may
request and (v) a schedule of actual costs incurred in connection with growing
crops.
(d) Promptly upon the Bank's request, such other information
pertaining to the Borrower, the Collateral or any guarantor hereunder as the
Bank may reasonably request.
7.07 PAYMENT OF DIVIDENDS: Not declare or pay any dividends on any
common stock now or hereafter outstanding except dividends payable solely in the
Borrower's capital stock and except up to $1,300,000 on preferred stock in any
one fiscal year.
7.08 REDEMPTION OR REPURCHASE OF STOCK: Not redeem or repurchase any
class of the Borrower's stock now or hereafter outstanding except that Borrower
may redeem up to 100% of its issued and outstanding senior preferred stock.
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7.09 ADDITIONAL INDEBTEDNESS: Not, and not permit any subsidiary of the
Borrower to, after the date hereof, create, incur or assume, directly or
indirectly, any additional Indebtedness other than (i) Indebtedness owed or to
be owed to the Bank or (ii) Indebtedness to trade creditors incurred in the
ordinary course of the Borrower's business or (iii) an aggregate Indebtedness of
up to $45,000,000 owed to Xxxxx Winery, Prudential Life Insurance Company and
Xxxx Xxxxxxx Mutual Life Insurance Company or (iv) Indebtedness secured by a
Permitted Lien or (v) Indebtedness in respect of deferred taxes or (vi)
Indebtedness to growers representing the deferred purchase price for inventory
or (vi) Indebtedness of up to $500,000 owed to Vintners International Company,
Inc., or (vii) Indebtedness of up to $6,000,000 in connection with capital
expenditures.
7.10 LOANS: Not make any loans or advances or extend credit to any
third person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities and subsidiaries of the Borrower,
except for credit extended in the ordinary course of the Borrower's business as
presently conducted and except up to $300,000 in any one fiscal year.
7.11 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 of such properties,
except for Permitted Liens or as otherwise provided in this Agreement.
7.12 TRANSFER ASSETS: Not, after the date hereof, sell, contract for
sale, convey, transfer, assign, lease or sublet, any of its assets (including,
but not limited to, the Collateral) except in the ordinary course of business as
presently conducted by the Borrower and, then, only for full, fair and
reasonable consideration, and except up to $250,000 of assets for any reason in
any one fiscal year.
7.13 CHANGE IN NATURE OF BUSINESS: Not make any material change in its
financial structure or the nature of its business as existing or conducted as of
the date hereof.
7.14 FINANCIAL CONDITION: Maintain at all times:
(a) A minimum net profit after tax at each fiscal year-end of at
least $1.00.
(b) A ratio of Debt to Effective Tangible Net Worth of not more
than 3.50 to 1 at each fiscal year-end.
(c) A minimum working capital of not less than $12,000,000.
(d) A ratio of the sum of net profit after tax plus depreciation,
amortization and other non-cash transactions to the current portion of long-term
Debt plus preferred stock dividends of not less than 1.25 to 1 at each fiscal
year-end.
Notwithstanding anything herein to the contrary, the consolidated financial
statements of Golden State Acquisition Corp. shall be used for purposes of
determining compliance with Section 7.14 (b) hereof.
7.15 COMPENSATION OF EMPLOYEES: 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.
7.16 CAPITAL EXPENSE: Not make any fixed capital expenditure or any
commitment therefor, including, but not limited to, incurring liability for
leases which would be, in accordance with generally accepted accounting
principles, reported as capital leases, or purchase any real or personal
property in an aggregate amount exceeding $6,000,000 in any one fiscal year,
excluding capital expenditures in connection with the Borrower's grafting and
replanting of vineyards.
7.17 RENTALS. Not incur liability (in addition to that incurred as of
the date of this Agreement) for the payment of, or pay, rentals for the renting,
leasing or use of real or personal property in an aggregate amount exceeding
$1,500,000 in any one fiscal year.
7.18 NOTICE: Give the Bank prompt written notice of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$100,000 or which affects the Collateral; and (iii) other matters which have
resulted in, or might result in a material adverse change in the Collateral or
the financial condition or business operations of the Borrower.
7.19 ENVIRONMENTAL COMPLIANCE. The Borrower shall:
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(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, except in accordance with applicable requirements of law.
(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, by Borrower.
7.20 INVENTORY:
(a) Except as provided herein below, the Borrower's inventory
shall, at all times, be in the Borrower's physical possession, shall not be held
by others on consignment, sale on approval, or sale or return and shall be kept
only at: 00000 Xx. 000, Xxxxxx, XX 00000; 0000 Xxxxx Xxx Xxx Xxx., Xxxxxxx, XX
00000; 0000 X. Xxxxxxx Xxx., Xxxxxx, XX 00000; 000 X. Xx. Xxxxxx Xxx., Xx.
Xxxxxx, XX 00000; 0000 Xxxx Xxxx, Xxxxxxx, XX 00000; and 0000 Xxxxxx Xxxx Xxxxx,
Xxxx, XX 00000.
(b) The Borrower shall keep correct and accurate records itemizing
and describing the kind, type, quality and quantity of inventory, the Borrower's
cost therefor and selling price thereof, and the daily withdrawals therefrom and
additions thereto, all of which records shall be available to the Bank or any
representative thereof with prior notice and during normal business hours upon
demand for inspection and copying thereof at any reasonable time.
(c) All inventory shall be of good and merchantable quality, free
from defects.
(d) The inventory shall not at any time or times hereafter be
stored with a bailee, warehouseman or similar party without the Bank's prior
written consent, other than up to 10% of Borrower's inventory and, in such
event, the Borrower will concurrently therewith cause any such bailee,
warehouseman or similar party to issue and deliver to the Bank, in form
acceptable to the Bank, warehouse receipts in the Bank's name evidencing the
storage of inventory.
(e) At any reasonable time and from time to time, allow Bank to
have the right, upon demand, to inspect and examine inventory and to check and
test the same as to quality, quantity, value and condition and the Borrower
agrees to reimburse the Bank for the Bank's reasonable costs and expenses in so
doing.
7.21 CARE AND PRESERVATION OF THE CROPS.
(1) 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.
(2) Not commit or suffer to be committed any waste of or
damage to the Crops.
(3) Permit the Bank and any of its agents, employees or
representatives to enter upon the Real Property at any reasonable time and upon
prior notice and during normal business hours for the purpose of examining and
inspecting the Crops and the Real Property.
(4) Harvest and prepare the Crops for market and promptly
notify the Bank when any of the Crops are ready for market.
(5) Keep the Crops separate and always capable of
identification.
7.22 EVIDENCE OF WATER AVAILABILITY. At such times as the Bank may
request, to deliver to the Bank a certificate
12 -
stating that the amount of water available and projected to be available is
sufficient to conduct operations as described in Borrower's Crop 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 8
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:
8.01 NON-PAYMENT: The Borrower shall fail to pay any Obligations within
10 days of when due or any drawing under any Letter of Credit when due.
8.02 PERFORMANCE UNDER THIS AND OTHER AGREEMENTS: 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 evidencing or relating to any indebtedness of the Borrower greater
than $250,000.00 (whether such indebtedness is owed to the Bank or third persons
other than trade creditors), and any such failure (exclusive of the failure to
pay money to the Bank under this Agreement which results in an event of default
or under any other instrument, document or agreement with the Bank, which
failure shall constitute and be an immediate Event of Default if not paid when
due or when demanded to be due following the expiration of any applicable grace
period) shall continue for more than 30 days after written notice from the Bank
to the Borrower of the existence and character of such Event of Default.
8.03 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.
8.04 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 and 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 substantial part of its properties, assets or businesses
and shall not be discharged within 60 days after the date of such appointment.
8.05 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 60 days after the issuance or
attachment of such writ or lien.
8.06 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.
8.07 SUSPENSION: The Borrower shall voluntarily suspend the transaction
of business or allow to be suspended, terminated, revoked or expired any
material permit, license or approval of any governmental body necessary to
conduct the Borrower's business as now conducted.
8.08 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 19% 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, provided
however, that any initial publice offfering of the Borrower's capital stock
shall not be deemed to be a change in ownership hereunder.
13 -
8.10 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 Crop
Budget or projections or by information provided by Borrower to the Bank.
SECTION 9
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole and
absolute election, without demand and only upon such notice as may be required
by law:
9.01 ACCELERATION: Declare any or all of the Borrower's indebtedness
owing to the Bank, whether under this Agreement or any other document,
instrument or agreement, immediately due and payable, whether or not otherwise
due and payable.
9.02 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.
9.03 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.
9.04 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, 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.
9.05 PROTECTION OF SECURITY INTEREST: 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 reasonable attorneys' fees) incurred in connection with the
foregoing.
14 -
9.06 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.
9.07 LETTERS OF CREDIT: The Bank may, at its sole and absolute
discretion and in addition to any other remedies available to it hereunder or
otherwise, require the Borrower to pay immediately to the Bank, for application
against drawings under any outstanding Letters of Credit, the outstanding
principal amount of any such Letters of Credit which have not expired. Any
portion of the amount so paid to the Bank which is not applied to satisfy draws
under any such Letters of Credit or any other obligations of the Borrower to the
Bank shall be repaid to the Borrower without interest.
9.08 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.
9.09 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 10
MISCELLANEOUS
10.01 AMOUNTS PAYABLE ON DEMAND: If the Borrower shall fail 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 having so failed to pay such amount, create an Advance under the
Line of Credit in an amount equal to the amount so payable, which Advance shall
thereafter bear interest as provided under the Line of Credit.
10.02 DEFAULT INTEREST RATE: The Borrower shall pay the Bank interest on
any indebtedness or amount payable under this Agreement, if an Event of Default
has occurred or is continuing, at a rate which is 3% in excess of the rate
otherwise provided under this Agreement.
10.03 DISPOSAL OF INVOICES: All documents, schedules, invoices or other
papers received by the Bank from the Borrower may be destroyed or disposed of 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.
10.04 RIGHTS OF THE BANK WITH OR WITHOUT DEFAULT: The Borrower agrees
that the Bank may at any time and at its option, whether or not the Borrower is
in default:
(a) Send verification requests to any Account Debtor;
(b) Make inquiries of the Borrower's trade vendors;
and, upon the occurrence of an Event of Default:
(c) Require the Borrower to direct all Account Debtors 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;
and
(d) 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.
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10.05 INDEMNIFICATION: The Borrower agrees to hold the Bank harmless
from and indemnify and defend the Bank from any liability, claim, loss or
expense (including, but not limited to, reasonable attorneys' fees) arising from
any transaction between the Borrower and any Account Debtor, other than caused
by the Bank's gross negligence or willful misconduct, including, but not limited
to, any loss, claim or liability arising from:
(a) Any violation of any federal or state consumer protection law
(including, but not limited to, the federal Truth-In-Lending Act) and
regulations promulgated thereunder.
(b) Improper collection practices or procedures of the Borrower.
(c) Any unlawful acts taken by the Borrower in connection with the
collection of any account(s).
(d) Any suit by any person against the Bank resulting or arising
from such person's dealings with the Borrower.
10.06 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 - CONTRACTS SECURED BY REAL ESTATE - TRIAL BY COURT
REFERENCE [Section 638 (1)] CODE OF CIVIL PROCEDURE): If the dispute,
claim or controversy has not been resolved by Step I mediation, them any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired judge
or justice from the panel of J-A-M-S appointed pursuant to the provisions
of California Code of Civil Procedure Section 638(1) or any amendment,
addition or successor section thereto to hear the case and report a
statement of decision thereon. The parties intend this general reference
agreement to be specifically enforceable in accordance with said section.
If this parties are unable to agree upon a member of the J-A-M-S panel to
act as referee then one shall be appointed by the Presiding Judge of the
county wherein the hearing is to be held. The parties shall pay in
advance, to the referee, the estimated reasonable fees and costs of the
reference, as may be specified in advance by the referee. The parties
shall initially share equally, by paying their proportionate amount of the
estimated fees and costs of the reference. Failure of any party to make
such a fee deposit shall result in a forfeiture by the non-depositing party
of the right to prosecute or defend the cause(s) of action which is(are)
the subject of the reference, but shall not otherwise serve to xxxxx, stay
or suspend the reference proceeding.
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 mediation or trial on Order of Reference. 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 mediation or trial on Order of Reference.
10.07 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
16 -
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.
10.08 RELIANCE: Each warranty, representation, covenant, obligation 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 and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank.
10.09 ATTORNEYS' 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, or any refinancing or
restructuring in the nature of a "work-out", of this Agreement or any document,
instrument or agreement executed with respect to, evidencing or securing the
indebtedness hereunder.
10.10 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 hereto, shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, rapifax, Federal
Express or other national overnight carrier or by Western Union telegram,
addressed as set forth below or to such other address as may be specified from
time to time in writing by either party to the other.
TO THE BORROWER: TO THE BANK:
GOLDEN STATE VINTNERS SANWA BANK CALIFORNIA
0000 X. Xxx Xxx Xxx. 0000 Xxxxxx Xx., 0xx xxxxx
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
With a copy to:
FORREST, BINKLEY & XXXXX SANWA BANK CALIFORNIA
000 Xxxxxxx Xxxxxx Xxxxx, Xxx. 000 Asset Based Finance Department
Xxxxxxx Xxxxx, XX 00000 000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
10.11 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 other 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.
10.12 CONFLICTING PROVISIONS: To the extent the 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.
10.13 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 prior written
consent of the Bank. The Bank may sell, assign or grant participation in all or
any portion of its rights and benefits hereunder, with the prior written consent
of the Borrower, which consent shall not be unreasonably withheld. 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 and any guarantor.
17 -
10.14 JURISDICTION: This Agreement, any notes issued hereunder, the
rights of the parties hereunder to and concerning the Collateral, 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.
10.15 HEADINGS: The headings herein set forth are solely for the purpose
of identification and have no legal significance.
10.16 ENTIRE AGREEMENT: This Agreement and all documents, instruments
and agreements mentioned herein 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 pertaining to
the transactions contemplated hereunder not incorporated or referenced in this
Agreement or in such documents, instruments and agreements, including without
limitation, that certain Accounts Receivable Credit Agreement dated April 21,
1995 by and between Bank and Borrower, are superseded hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA GOLDEN STATE VINTNERS
By: By:
------------------------------------ -----------------------------------
XXXXXX X. XXXXXXX, VICE PRESIDENT --------------------------------------
(Name/Title) (Name/Title)
By:
-----------------------------------
--------------------------------------
(Name/Title)
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