CREDIT AGREEMENT
THIS AGREEMENT is entered into as of the 30th day of July, 1997, by and
between EDNA VALLEY VINEYARD ("Borrower"), a joint venture between THE CHALONE
WINE GROUP, LTD. ("Chalone") and PARAGON VINEYARD CO., INC. ("Paragon"), and
WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").
R E C I T A L
Borrower has requested from Bank the credit accommodation described
below, and Bank has agreed to provide such credit to Borrower on such terms and
conditions contained herein. As of the date first written above, this Agreement
shall cancel and supersede that certain Agreement between Borrower and Bank
dated July 31, 1995.
NOW, THEREFORE, Bank and Borrower hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including August 1, 1999, not to exceed at any time the aggregate
principal amount of FIVE MILLION FIVE HUNDRED THOUSAND AND NO/1OO DOLLARS
($5,500,000.00) ("Line of Credit"), the proceeds of which shall be used to
assist with working capital requirements. Borrower's obligation to repay
advances under the Line of Credit shall be evidenced by a promissory note
substantially in the form of Exhibit A attached
hereto ("Line of Credit Note"), all terms of which are incorporated herein by
this reference.
(b) Borrowing and Repayment. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all the limitations, terms and conditions
contained herein; provided however, that the total outstanding borrowings under
the Line of Credit shall not at any time exceed the maximum principal amount
available thereunder, as set forth above.
SECTION 1.2. INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line of Credit
shall bear interest at the rate(s) of interest set forth in the Line of Credit
Note.
(b) Computation and Payment. Interest on the Line of Credit shall be
computed on the basis of a 360-day year, actual days elapsed. Interest shall be
payable at the times and places set forth in the Line of Credit Note.
(c) Line of Credit Fees. Borrower shall pay to Bank a fee equal to
one-half percent (0.50%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a monthly basis by Bank and shall be due and
payable by Borrower in arrears.
SECTION 1.3. PAYMENT OF PRINCIPAL/INTEREST/FEES. Bank shall, and
Borrower hereby authorizes Bank to, debit any demand deposit account of Borrower
with Bank for all payments of principal, interest and fees as they become due on
any of the
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Credits. Should, for any reason whatsoever, the funds in any such demand deposit
account be insufficient to pay all principal, interest and/or fees when due,
Borrower shall immediately upon demand remit to Bank the full amount of any such
deficiency.
SECTION 1.4. COLLATERAL.
As security for all indebtedness of Borrower to Bank, Borrower grants
to Bank security interests of first priority in all Borrower's inventory,
accounts receivable, general intangibles, other rights to payment, all
Borrower's right, title and interest in and to the trade name "Edna Valley
Vineyard" and any and all trade name rights and/or proprietary labels with
respect thereto, and of second priority in equipment and fixtures, and all
proceeds of the foregoing.
As security for all indebtedness of Borrower to Bank, Borrower shall
(a) cause Paragon Vineyard Co., Inc. ("Paragon") to consent to the granting to
Bank by Borrower of a security interest of first priority in Borrower's rights
to the Edna Valley Vineyard tradename and trademark; and (b) cause Chalone Wine
Group, Limited to grant to Bank security interest of first priority all its
inventory, accounts receivable, general intangibles (including tradenames and
trademarks), other rights to payment, equipment and fixtures and liens in all
real estate securing Chalone Wine Group, Limited's obligations to Bank and of
the same priority.
All of the foregoing shall be evidenced by and subject to the terms of
such documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall
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reimburse Bank, immediately upon demand, for all costs and expenses incurred by
Bank in connection with any of the foregoing security, including without
limitation filing and recording fees and costs of audits.
SECTION 1.5. SUBORDINATION. Certain obligations of Borrower owing to
Chalone Wine Group and to Paragon Vineyard have been subordinated to the
obligations of Borrower to Bank, as evidence by subordination agreements
previously delivered to Bank.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a joint venture duly organized
and existing and in good standing under the laws of the State of California, and
is qualified or licensed to do business, and is in good standing as a foreign
corporation, if applicable, in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Line of
Credit Note, and each other document, contract and
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instrument required by or at any time delivered to Bank in connection with this
Agreement (with all of the foregoing referred to herein collectively as the
"Loan Documents") have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of its joint venture agreement, or
result in a breach of or constitute a default under any contract, obligation,
indenture or other instrument to which Borrower is a party or by which Borrower
may be bound.
SECTION 2.4. LITIGATION. There are no pending or threatened actions,
claims, investigations, suits or proceedings before any governmental authority,
court or administrative agency which may adversely affect the financial
condition or operation of Borrower other than those heretofore disclosed by
Borrower to Bank in writing.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial
statement of Borrower dated March 31, 1997, heretofore delivered by Borrower to
Bank is complete and correct and presents fairly the financial condition of
Borrower; discloses all liabilities of Borrower that are required to be
reflected or reserved against under generally accepted accounting principles,
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whether liquidated or unliquidated, fixed or contingent; and has been prepared
in accordance with generally accepted accounting principles consistently
applied. Since the date of such financial statement there has been no material
adverse change in the financial condition of Borrower, nor has Borrower
mortgaged, pledged or granted a security interest or encumbered any of its
assets or properties except as permitted by this Agreement.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to any
year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will
hereafter possess, all permits, memberships, franchises, contracts and licenses
required and all trademark rights, trade names, trade name rights, patents,
patent rights and fictitious name rights necessary to enable it to conduct the
business in which it is now engaged without conflict with the rights of others.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended from time to time (ERISA); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
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maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event
as defined in ERISA has occurred and/or is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable environmental, hazardous waste, health and
safety statutes and regulations governing its operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA), the Superfund Amendments and
Reauthorization Act of 1986 (SARA), the Federal Resource Conservation and
Recovery Act of 1976, the Federal Toxic Substances Control Act and the
California Health and Safety Code. None of the operations of Borrower is the
subject of any federal or state investigation evaluating whether any remedial
action involving a material expenditure is needed to respond to a release of any
toxic or hazardous waste or substance into the environment. Borrower has no
material contingent liability in
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connection with any release of any toxic or hazardous waste or substance into
the environment.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to grant the Line of Credit is subject to the fulfillment to Bank's
satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
granting of the Line of Credit shall be satisfactory to counsel of Bank.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Line of Credit Note;
(ii) Such other documents as Bank may require under any other
section of this Agreement.
(c) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as determined by Bank, in the market value
of any collateral required hereunder or a substantial or material portion of the
assets of Borrower.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
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(a) Compliance. The representations and warranties contained herein
shall be true on and as of the date of the signing of this Agreement and on the
date of each extension of credit by Bank pursuant hereto, with the same effect
as though such representations and warranties had been made on and as of each
such date, and on each such date, no Event of Default as defined herein, and no
condition, event or act which with the giving of notice or the passage of time
or both would constitute such an Event of Default, shall have occurred and be
continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as the Line of Credit remain available
or any liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain outstanding, and until
payment in full of all obligations of Borrower subject hereto. Borrower shall:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay the interest and
principal on each of the Loan Documents requiring any such payments at the times
and place and in the manner specified therein, any fees or other liabilities due
under any of the Loan Documents at the times and place and in the manner
specified therein.
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SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail satisfactory to Bank:
(a) not later than 60 days after and as of the end of each quarter, a
financial statement of Borrower, prepared by Borrower, to include balance sheet
and income statement;
(b) not later than 120 days after and as of the end of each fiscal
year, an audited financial statement of Chalone Wine Group, Ltd., prepared by a
certified public accountant, to include balance sheet, income statement,
statement of cash flows, and notes to financial statements;
(c) not later than 120 days after and as of the end of each fiscal
year, a reviewed financial statement of Borrower, prepared by a certified public
accountant, to include balance sheet, income statement, statement of cash flow
and all footnotes (may be consolidated with Chalone Wine Group statement with a
footnote containing separate financial statement);
(d) not later than 120 days after and as of the end of each fiscal
year, a reviewed financial statement of Paragon vineyard Co., Inc., prepared by
a certified public accountant to include a balance sheet, income statement,
statement of cash flow and all footnotes;
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(e) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Maintain all licenses, permits, governmental
approvals, rights, privileges and franchises necessary for the conduct of its
business; conduct its business in an orderly and regular manner; and comply with
the provisions of all documents pursuant to which Borrower is organized and/or
which govern Borrower's continued existence and with the requirements of all
laws, rules, regulations and orders of any governmental authority applicable to
Borrower or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to
Borrower's, including but not limited to fire, extended coverage, public
liability, property damage and workers' compensation, carried with companies and
in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank's
request schedules setting forth all insurance then in effect.
SECTION 4.6. FACILITIES. Keep all Borrower's properties useful or
necessary to Borrower's business in good repair and condition, and from time to
time make necessary repairs, renewals and replacements thereto so that
Borrower's properties shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due
any and all indebtedness, obligations, assessments and taxes, both real or
personal and including federal and state income taxes, except such as Borrower
may in
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good faith contest or as to which a bona fide dispute may arise, provided
provision is made to the satisfaction of Bank for eventual payment thereof in
the event that it is found that the same is an obligation of Borrower.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower in excess of $100,000.00.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices, except to the extent
modified by the following definitions:
(a) Ratio of Total Debt to Tangible Net Worth (defined as the aggregate
of current liabilities and non-current liabilities less subordinated debt
divided by Tangible Net Worth) not at any time greater than 1.25 to 1.0.
Tangible Net worth shall mean joint venturers' equity in Borrower plus
subordinated debt less the aggregate of any intangible assets and any
obligations due from joint venturers, employees and/or affiliates.
(b) Profitability on a year-to-date basis, determined as of each fiscal
quarter end.
(c) Inventory Turnover Ratio (defined as ending inventory divided by
cost of goods sold for the most recent four (4) fiscal quarters) not greater
than 2.0 to 1.0, determined as of each fiscal quarter end. Cost of goods sold to
include any depreciation expense allocated according to generally accepted
accounting principles, consistently applied.
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(d) EBITDA Coverage Ratio not less than 2.50 to 1.0 as of each fiscal
year end, with "EBITDA" defined as net profit before tax plus interest expense
(net of capitalized interest expense), depreciation expense and amortization
expense, and with "EBITDA Coverage Ratio" defined as EBITDA divided by the
aggregate of total interest expense plus the prior period current maturity of
long-term debt and the prior period current maturity of subordinated debt.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute such an Event of Default; (b) any change in the
name or the organizational structure of Borrower; (c) the occurrence and nature
of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or
any funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property in
excess of an aggregate of $100,000.00.
ARTICLE V
NEGATIVE COVENANTS
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Borrower further covenants that so long as the Line of Credit remains
available or any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower will not without the prior written consent of Bank:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any of the
Credits except for the purposes stated in Article I.
SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in
fixed assets in excess of an aggregate of $1,500,000.00 in fiscal year ending in
1997, and $1,000,000.00 in each fiscal year thereafter.
SECTION 5.3. LEASE EXPENDITURES. Incur new obligations for the lease or
hire of real or personal property requiring payments in any fiscal year in
excess of an aggregate of $75,000.00.
SECTION 5.4. OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except the liabilities of Borrower to Bank and
any other liabilities of Borrower existing as of the date of this Agreement and
disclosed in the financial statement delivered to Bank pursuant to Section 2.5.
SECTION 5.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any corporation or other entity; make any substantial change in
the nature of Borrower's business; acquire all or substantially all of the
assets of any corporation
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or other entity; nor sell, lease, transfer or otherwise dispose of all or a
substantial or material part of its assets except in the ordinary course of
business.
SECTION 5.6. GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the-ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity.
SECTION 5.7. NEGATIVE PLEDGE. Borrower shall not mortgage, pledge,
grant or permit to exist a security interest in, or lien upon, any asset of
Borrower, now owned or hereafter acquired, except any of the foregoing in favor
of Bank.
SECTION 5.8. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances
to or investments in any person or entity.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any representation or warranty made by Borrower hereunder shall
prove to be incorrect in any material respect when made.
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(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein (other than those
referred to in subsections (a) and (b) above), and with respect to any such
default which by its nature can be cured, such default shall continue for a
period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any joint venturer
in Borrower has incurred any debt or other liability to any person or entity,
including Bank.
(e) Any default in the payment or performance of any obligation, or any
defined event of default, under any of the Loan Documents other than this
Agreement.
(f) The filing of a notice of judgment lien against Borrower or any
joint venturer in Borrower; or the recording of any abstract of judgment against
Borrower or any joint venturer in Borrower in any county in which Borrower or
such general partner has an interest in real property; or the service of a
notice of levy and/or of a writ of attachment or execution, or other like
process, against the assets of Borrower or any joint venturer in Borrower; or
the entry of a judgment against Borrower or any joint venturer in Borrower.
(g) Borrower or any joint venturer in Borrower shall become insolvent,
or shall suffer or consent to or apply for the appointment of a receiver,
trustee, custodian or liquidator of
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itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
Borrower or any joint venturer in Borrower shall file a voluntary petition in
bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform Act,
Title 11 of the United States Code, as amended or recodified from time to time
("Bankruptcy Code"), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to said Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any joint venturer in Borrower, or
Borrower or any such joint venturer shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any such joint venturer shall be adjudicated a
bankrupt, or an order for relief shall be entered by any court of competent
jurisdiction under said Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors.
(h) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of its obligations under any of the Loan
Documents.
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(i) The dissolution or liquidation of Borrower or any joint venturer in
Borrower; or Borrower or any such joint venturer, or any of their directors,
stockholders or members, shall take action seeking to effect the dissolution or
liquidation of Borrower or such joint venturer; or the withdrawal from Borrower
of any joint venturer.
(j) The resignation or expulsion during the term of this Agreement of
any one or more of the joint venturers in Borrower with an aggregate ownership
interest in Borrower of twenty-five percent (25%) or more.
(k) Chalone shall cease to be the managing joint venturer of Borrower.
(1) Paragon Vineyard Company shall sell, transfer or assign, or grant,
suffer or permit to exist, a security interest in or lien upon, the "Edna
Valley" tradename or trademark, whether voluntarily or involuntarily.
(m) Borrower's right to use the "Edna Valley" tradename or trademark
shall be lost or impaired for any reason.
SECTION 6.2. REMEDIES. If an Event of Default shall occur, (a) any
indebtedness of Borrower under any of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank's option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Borrower; (b) the
obligation, if any, of Bank to permit further borrowings hereunder shall
immediately cease and terminate; and (c) Bank shall have all rights, powers and
remedies available under each
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of the Loan Documents, or accorded by law, including without limitation the
right to resort to any or all security for any of the Credits and to exercise
any or all of the rights of a beneficiary or secured party pursuant to
applicable law. All rights, powers and remedies of Bank in connection with each
of the Loan Documents may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank, of any breach of or default under any of the Loan Documents must
be in writing and shall be effective only to the extent set forth in such
writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWERS: c/o The Chalone Wine Group, Ltd.
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Managing Joint Venturer
621 Airpark Road
Napa, CA 94558-6272
EDNA VALLEY VINEYARD
c/o Paragon Vineyard Co., Inc.
Joint Venturer
5880 Edna Road
San Luis Obispo, CA 93401
BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
East Bay Regional Commercial Banking Office
One Kaiser Plaza, Suite 850
Oakland, CA 94612
Attn: Brian O'Melveny, Vice President
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or five (5) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees and all
allocated costs of Bank's in-house counsel), incurred by Bank in connection with
(a) the negotiation and preparation of this Agreement and each other of the Loan
Documents, Bank's continued administration hereof and thereof, and the
preparation of amendments and waivers hereto and thereto, (b) the enforcement of
Bank's rights and/or the collection of any amounts which become due to Bank
under any of the Loan Documents, and (c) the prosecution or defense of any
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action in any way related to any of the Loan Documents, including without
limitation any action for declaratory relief.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding on
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without the prior
written consent of Bank. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Bank's rights and benefits under each of the Loan Documents. In connection
therewith, Bank may disclose all documents and information which Bank now has or
may hereafter acquire relating to the Line of Credit, Borrower or its business,
or any collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT, AMENDMENT. This Agreement and each other
of the Loan Documents constitute the entire agreement between Borrower and Bank
with respect to the Line of Credit and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only by a written instrument
executed by each party hereto. As of the date first written above, this letter
shall cancel and supersede that certain Credit Agreement between Borrower and
Bank dated April 15, 1992.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and
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assigns, and no other person or entity shall be a third party beneficiary of, or
have any direct or indirect cause of action or claim in connection with, this
Agreement or any other of the Loan Documents to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision
of this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, except to the
extent that Bank has greater rights or remedies under Federal law, whether as a
national bank or otherwise, in which case such choice of California law shall
not be deemed to deprive Bank of such rights and remedies as may be available
under Federal law.
SECTION 7.10. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
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connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon
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any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
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effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for
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vacating, modifying or correcting an award the right to judicial review of (A)
whether the findings of fact rendered by the arbitrators are supported by
substantial evidence, and (B) whether the conclusions of law are erroneous under
the substantive law of the state of California. Judgment confirming an award in
such a proceeding may be entered only if a court determines the award is
supported by substantial evidence and not based on legal error under the
substantive law of the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators
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shall be selected pursuant to the AAA's selection procedures. Judgment upon the
decision rendered by a referee shall be entered in the court in which such
proceeding was commenced in accordance with California Code of Civil Procedure
Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
WELLS FARGO BANK,
EDNA VALLEY VINEYARD NATIONAL ASSOCIATION
By: THE CHALONE WINE GROUP, LTD. By: /s/ Brian O'Melveny
Managing Joint Venturer ------------------------
Brian O'Melveny
Vice President
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By: /s/ William L. Hamilton
-------------------------
William L. Hamilton
Chief Financial Officer/
Executive Vice President
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