Document:

Prepared by MERRILL CORPORATION

EXHIBIT 10.6

 

AMENDMENT TO CREDIT AGREEMENT

[San Lucas Second]

 

                THIS AMENDMENT TO

CREDIT AGREEMENT (the "Amendment") is made and dated as of the 27th

day of August, 2001 by and between UNITED CALIFORNIA BANK, a California banking

corporation formerly known as Sanwa Bank California ("Bank") and

SCHEID VINEYARDS CALIFORNIA INC., a California corporation formerly known as

Scheid Vineyards and Management Co. (the "Borrower"), and amends that

certain Term Loan Agreement dated as of July 24, 1995 (as amended, modified or

waived from time to time, the "Agreement") between Borrower and the

Bank.

 

RECITALS

 

                                A.                The Borrower and the Bank entered into the Agreement,

pursuant to which the Bank agreed to extend certain credit accommodations to

the Borrower.  All terms used herein

which are not otherwise defined herein shall have the meanings given them in

the Agreement.

 

                                B.                Luis Echenique, a married man as his separate

property, Ricardo Echenique, a single man, and Margaret A. Echenique, Executor

of the Estate of Francis D. Echenique, deceased (collectively,

"Echenique") executed in favor of the Bank (i) that certain Deed of

Trust (Non-Construction) & Assignment of Rents in favor of the Bank dated

as of July 24, 1995, and recorded in the official records of Monterey County,

California, as Instrument No. 41820, Reel 3262, Page 3 (as amended, modified or

waived from time to time, the "Deed of Trust")  and (ii) that certain Assignment of Lessor's

Interest in Lease dated as of July 24, 1995, and recorded in the official records

of Monterey County, California, as Instrument No. 41821, Reel 3262, Page 21 (as

amended, modified or waived from time to time, the "Assignment of

Leases") encumbering the real property described therein (the

"Property").  Echenique and

Bank also executed that certain Security Agreement dated as of July 24, 1995,

pursuant to which Echenique among other things granted to Bank a security

interest in certain personal property of Echenique (as amended, modified or

waived from time to time, the "Security Agreement").  The Deed of Trust, Assignment of Leases and

Security Agreement secure the obligations of Borrower under the Agreement.

 

                                C.                Pursuant to the terms of a Subordination Agreement

(as amended, modified or waived from time to time, the "Subordination

Agreement") dated as of July 24, 1995 and recorded in the official records

of Monterey County as Document No. 41822, Reel 3262, Page 37, Borrower and

Echenique expressly subordinated the lease dated as of November 1, 1979 between

Echenique, as lessor, and Borrower, as lessee, to the lien of the Deed of

Trust.

 

                                D                The Borrower has asked the Bank to modify certain

terms of the Agreement and  the Bank has

agreed to do so on the terms and conditions contained in this Amendment.

 

                                NOW, THEREFORE, in consideration

of the above Recitals and for other good and valuable consideration, the

receipt and adequacy of which are hereby acknowledged, the parties hereby agree

that, upon the satisfaction of the conditions contained in Paragraph 2 below,

the Agreement shall be amended as set forth below:

 

AGREEMENT

 

                                1.                Amendments.

 

                                                1(a)                Amendments to Definitions.  Section 1.01 of the Credit Agreement is

modified to add or amend and restate, as the case may be, the following

definitions:

 

                                "'Advance' shall mean a

portion of the principal amount outstanding hereunder which bears interest at a

specified interest rate as elected or deemed to be elected by Borrower pursuant

to the terms of this Agreement."

 

                                "'Business Day' shall mean

a day, other than a Saturday or Sunday, on which commercial banks are open for

business in California."

 

                                "'Effective Date' shall

have the meaning given such term in that certain Amendment To Credit Agreement

dated as of August 27, 2001 between Bank and Borrower."

 

                                "'Effective Tangible Net Worth'

with respect to any entity shall mean such entity's stated net worth plus

Subordinated Debt but less all intangible assets of such entity (i.e.,

goodwill, trademarks, patents, copyrights, organization expense and similar

intangible items including, but not limited to, investments in and all amounts

due from affiliates, officers or employees)."

 

                                "'Interest Period' shall

mean a LIBOR Interest Period."

 

                                "'LIBOR Advance' shall have

the meaning given such term in Section 2 hereof."

 

                                "'LIBOR Business Day"

shall mean shall mean a Business Day upon which commercial banks in London,

England are open for domestic and international business.

 

                                "'LIBOR Interest Period'

shall have the meaning given such term in Section 2 hereof."

 

                                "'LIBOR Rate' shall have the

meaning given such term in Section 2 hereof."

 

                                "'Working Capital' shall

mean current assets as determined in accordance with generally accepted

accounting principles, less all amounts due from affiliates, officers or

employees less current liabilities as determined in accordance with

generally accepted accounting principles, including any negative cash balance.

 

                                1(b)                Amendment of Section 2.02.  Section 2.02 of the Agreement is amended to

read in its entirety as follows:

 

                "2.02       Term Loan.  The Bank has loaned the Borrower a term loan (the "Term

Loan"), the current principal amount of which is $1,050,000.00.  Interest on and principal of the Term Loan

will be payable as set forth herein.

 

                                A.                  Purpose.  The Term Loan shall be used to refinance

existing debt and for working capital of the Borrower.

 

B.               Term

Loan Account.  The Bank shall maintain

on its books a record of account in which the Bank shall make entries setting

forth all payments made, the application of such payments to interest and principal,

accrued but unpaid interest, if any, and the outstanding principal balance

under the Term Loan (the "Term Loan Account").  Any statement of the Term Loan Account

provided to Borrower shall be considered to be correct and conclusively binding

on the Borrower unless the Bank is notified by the Borrower to the contrary

within thirty (30) days after the Borrower's receipt of any such statement

which is deemed to be incorrect.

 

                                C.                Repayment.  Unless sooner due in accordance with the

terms of this Agreement, the Borrower hereby promises and agrees to make annual

installments of principal commencing on June 30, 2002 and each anniversary

thereof (up to and including the Expiration Date) in the amount of $75,000.00

for each such installment.  Once any

amount is repaid hereunder, whether voluntarily or by acceleration or

otherwise, such amount may not be reborrowed. 

Borrower shall pay to Bank the principal amount outstanding hereunder,

together with all accrued but unpaid interest thereon, on July 5, 2005 (the

"Expiration Date").

 

                                D.                Interest. 

Interest on the Term Loan shall accrue at one of the following rates, as

quoted by the Bank and as elected by the Borrower pursuant to this Agreement:

 

                                                (i)                Variable Rate Advances:  A variable rate per annum equivalent to the

Reference Rate plus one-quarter percent (.25%) (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".

 

                                                (ii)                LIBOR Advances:  A fixed rate

quoted by the Bank for 1, 2, 3, 6, or 12 months 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 "LIBOR Interest

Period") for advances in the minimum amount of $500,000.00.  Such interest rate shall be the rate per

annum determined by the Bank to be the rate as of approximately 11:00 a.m.

(London time) on the date that is two (2) LIBOR Business Days prior to the beginning

of the relevant Interest Period quoted as the British Bankers Association

Interest Settlement Rate for deposits in dollars (as set forth in any service

selected by the Bank which has been nominated by the British Bankers’

Association as an authorized information vendor for purpose of displaying such

rates) for a period equal to such Interest Period; provided that, to the extent

that an interest rate is not ascertainable pursuant to the foregoing provisions

of this definition, the rate shall be the interest rate per annum determined by

the Bank to be the average of the rates per annum at which deposits in dollars

are offered for such relevant Interest Period to major banks in the London

interbank market in London, England by any affiliate of the Bank at

approximately 11:00 a.m. (London time) on the date that is two (2) LIBOR

Business Days prior to the beginning of such Interest Period, in either case

plus 2.25%, adjusted for any and all assessments, surcharges and reserve

requirements and rounded upward, if necessary, to the next higher 1/16 of one

percent (the "LIBOR Rate"). 

An Advance based upon the LIBOR Rate is hereinafter referred to as a

"LIBOR Advance."  There may be

no more than four (4) Interest Periods in effect at any one time for LIBOR Advances.

 

Interest on any Advance shall be computed on the basis of 360 days per

year, but charged on the actual number of days elapsed.

 

The Borrower hereby promises and agrees to pay interest quarterly in

arrears on all Variable Rate Advances and all LIBOR Advances on March 31, June

30, September 30, and December 31 of each year.

 

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.

 

                                E.                Notice

of Election to Adjust Interest Rate: 

The Borrower may elect:

 

                                                (i)                That interest on a Variable Rate

Advance shall be adjusted to accrue at the LIBOR Rate; provided, however, that

such notice to continue to accrue at the LIBOR Rate shall be received by the

Bank no later than two (2) LIBOR Business Days prior to the day (which shall be

a Business Day) on which Borrower requests that interest be adjusted to accrue

at the LIBOR Rate.

 

                                                (ii)                That interest on a LIBOR Advance

shall continue to accrue at a newly quoted LIBOR 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 (2) LIBOR Business Days prior

to the last day of the LIBOR Interest Period pertaining to such LIBOR

Advance.  If the Bank shall not have

received notice (as prescribed herein) of the Borrower's election that interest

on any LIBOR Advance shall continue to accrue at the newly quoted LIBOR Rate,

Borrower shall be deemed to have elected that interest thereon shall be

adjusted to accrue at the Variable Rate upon the expiration of the LIBOR

Interest Period pertaining to such Advance.

 

                                                F.                Prepayment. 

The Borrower may prepay any Advance in whole or in part, at any time and

without penalty, provided, however, that: 

(i) any partial prepayment shall first be applied, at the Bank's option,

to accrued and unpaid interest and next to the outstanding principal balance;

and (ii) during any period of time in which interest is accruing on any Advance

on the basis of the LIBOR Rate, no prepayment shall be made except on a day

which is the last day of the Interest Period pertaining thereto.  If the whole or any part of any LIBOR

Advance or 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,

expenses and any loss (including loss of future interest income) actually

incurred by the Bank and any loss (including loss of profit resulting from the

re-employment of funds) reasonably deemed sustained by the Bank as a

consequence of such prepayment.  The

Bank shall be entitled to fund all or any portion of its Advances in any manner

it may determine in its sole discretion, but all calculations and transactions

hereunder shall be conducted as though the Bank actually funded all Advances

through the purchase of dollar deposits bearing interest at the same rate as

U.S. Treasury securities in the amount of the relevant Advance and in

maturities corresponding to the applicable Interest Period.

 

                                                G.                Indemnification for LIBOR Costs. 

During any period of time in which interest on any Advance is

accruing on the basis of the LIBOR 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 of any regulatory authority pertaining or relating to

funds used by the Bank in quoting and determining the LIBOR Rate.

 

H.                Conversion

from LIBOR 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 LIBOR Rate (i) is infeasible because the Bank is

unable to determine the LIBOR Rate due to the unavailability of U.S. dollar

deposits, contracts or certificates of deposit in an amount approximately equal

to the amount of the relevant Advance and for a period of time approximately

equal to the relevant Interest Period or (ii) is or has become unlawful 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 any

Advance bearing interest at the LIBOR Rate, shall be deemed to be a Variable

Rate Advance and interest shall thereupon immediately accrue at the Variable

Rate.

 

                                                I.                Late Payment. 

If any payment of principal or interest, or any portion thereof, , under

this Agreement is not paid within ten (10) calendar days after it is due, a

late payment charge equal to five percent (5%) of such past due payment may be

assessed and shall be immediately payable."

 

                                1(c)                Amendment of Section 5.06.  Section 5.06 is amended to read as follows:

 

                                                "5.06                Reporting Requirements.  Deliver or cause to be delivered to the Bank

in form and detail satisfactory to the Bank:

 

                                                A.                Annual Statements. 

Not later than 105 days after the end of each of its fiscal years, a

copy of the annual audited consolidated financial report of Scheid Vineyards

Inc., which report shall be prepared by a firm of certified public accountants

reasonably acceptable to Bank, and a copy of the Borrower's crop budget for the

next succeeding fiscal year.

 

                                                B.                Quarterly Statements.  Not later than 45 days after the end of each fiscal quarter,

Scheid Vineyards Inc.'s consolidated financial statement as of the end of such

period.

 

                                                C.                SEC Filings. 

Promptly upon filing, copies of any 10Q, 10K or other public filing made

by Scheid Vineyards Inc. with the Securities and Exchange Commission.

 

                                                D.                Other Information. 

Promptly upon the Bank's request, such other information pertaining to

the Borrower or any Guarantor as the Bank may reasonably request."

 

                                1(d)                Amendment of Section 5.13.  Section 5.13 is amended to read as follows:

 

                                                "5.13                Financial Condition.  Cause Scheid Vineyards Inc. to maintain on a

consolidated basis:

 

                                                A.                Net Worth.  A

minimum Effective Tangible Net Worth of at least $25,000,000.00 plus 100% of

its cumulative net income from and after March 31, 2001, measured as of the end

of each fiscal quarter.

 

                                                B.                Working Capital. 

A minimum Working Capital, measured as of the end of each fiscal year,

of at least $5,000,000.00.

 

C.               Debt

Service Coverage Ratio.  A ratio,

measured as of the end of each fiscal year, of (i) the sum of net income after

tax and exclusive of extraordinary gains, plus depreciation, amortization and

interest expense minus dividends and distributions to (ii) current portion of

long term debt plus interest expense of at least 1.25 to 1:00."

 

                                1(e)                Amendment of Section 5.15.  The amount "$50,000.00" in Section

5.15 is replaced with the amount "$100,000.00."

 

                                1(f)           New Section 5.16. 

The following is added as Section 5.16 of the Agreement:

 

                                                "5.16                Indebtedness.  Not create, incur or assume, directly or

indirectly, any additional Indebtedness other than (i) Indebtedness owed or to

be owed to the Bank, (ii) Indebtedness to trade creditors in the ordinary

course of business, and (iii)   other

Indebtedness (which may be secured) in an amount created, incurred or assumed

in any fiscal year in an amount which does not exceed $500,000.00."

 

                                1(g)                New Section 5.17.  The following is added as Section 5.17 of the Agreement:

 

                                                "5.17                Payment of Dividends.  Not declare or pay any dividends on any

class of the Borrower's stock now or hereafter outstanding except dividends

payable solely in the Borrower's capital stock."

 

                                1(h)                Address for Notice.  The address for notice of the Borrower is hereby amended to the

following:  Scheid Vineyards California

Inc., 305 Hilltown Road, Salinas, CA 

93908, Attention:  Heidi M.

Scheid, Senior Vice President, Tel. (831) 455-9990, Fax (831) 455-9998.

 

                                1(i)                Dispute Resolution.  Section 8.03 of the Agreement is hereby deleted from the

Agreement in its entirety, and any provision of like import in the Loan

Documents relating to dispute resolution is similarly deleted in its entirety.

 

2.                Conditions

to Effectiveness of Amendment.  This

Amendment shall not be effective until the date (the "Effective

Date") upon which all of the following conditions precedent have been

satisfied:

 

                (i)  the Borrower and Bank shall have duly

executed and delivered this Amendment and such other documents as Bank may

require with respect to the transactions described in this Amendment

(including, without limitation, UCC-1 Financing Statements);

 

                (ii)  Bank shall have received such board

resolutions, incumbency certificates opinions of Borrower's counsel and such

other additional documentation in form and substance satisfactory to Bank as it

may request in connection herewith;

 

                (iii)  all representations and warranties hereunder

and under the Agreement shall be true and correct and no Event of Default or event,

which with the passage of time, giving of notice or both, would constitute an

Event of Default, shall have occurred; and

 

(iv)  The Bank

shall have received such endorsements to the title policy issued with respect

to the Deed of Trust as it shall require, together with appraisals and flood

certifications relating to the real property encumbered thereby;

 

3.                Representations

and Warranties of the Borrower.  As

an inducement to Bank to enter into this Amendment, the Borrower represents and

warrants to Bank that:

 

3(a)           No

Change.  Since the date of the

financial statements most recently delivered to Bank pursuant to the Agreement,

there has been no material adverse change in the business, operations, assets

or financial or other condition of the Borrower.  Since such date, the Borrower has not entered into, incurred or

assumed any long-term debt, mortgages, material leases or material oral or

written commitments not disclosed to Bank prior to the date of this Amendment.

 

3(b)                Corporate

Existence; Compliance with Law.  The

Borrower (1) is duly organized, validly existing and in good standing as a

corporation under the laws of the state of its incorporation and is qualified

to do business in each jurisdiction where its ownership of property or conduct

of business requires such qualification and where failure to qualify would have

a material adverse effect on it or its property and/or business or on the

ability of the Borrower to pay or perform the Obligations, (2) has the

corporate power and authority and the legal right to own and operate its

property and to conduct business in the manner in which it does and proposes so

to do, and (3) is in compliance in all material respects with applicable

laws and contractual obligations.

 

3(c)                Corporate

Power; Authorization; Enforceable Obligations.  The Borrower has the corporate power and authority and the legal

right to execute, deliver and perform this Amendment, as amended hereby, to

which it is a party and has taken all necessary corporate action to authorize

the execution, delivery and performance of this Amendment and the

Agreement.  This Amendment has been duly

executed and delivered on behalf of the Borrower and constitutes legal, valid

and binding obligations of the Borrower enforceable against the Borrower in accordance

with its terms, subject to the effect of applicable bankruptcy and other

similar laws affecting the rights of creditors generally and the effect of

equitable principles whether applied in an action at law or a suit in equity.

 

3(d)           No

Legal Bar.  The execution, delivery

and performance of this Amendment will not violate any applicable law or any

contractual obligations of the Borrower or create or result in the creation of

any Lien on any assets of the Borrower.

 

4.                Miscellaneous

Provisions.

 

4(a)           Entire

Agreement.  This Amendment and the

documents and agreements referred to herein embody the entire agreement and

understanding between the parties hereto and supersede all prior agreements and

understandings relating to the subject matter hereof and thereof.

 

4(b)           Survival.  All representations, warranties, covenants

and agreements herein contained on the part of the Borrower shall survive the

termination of this Amendment and the Agreement and shall be effective until

the Obligations are paid and performed in full or longer as expressly provided

herein.

 

4(c)                Governing

Law.  This Amendment shall be

governed by and construed in accordance with the laws of the State of

California, without giving effect to choice of law rules.

 

4(d)                Counterparts.  This Amendment may be executed in any number

of counterparts, all of which together shall constitute one agreement.

 

4(e)                Expenses.  The Borrower agrees to pay to Bank, on

demand, all reasonable out-of-pocket expenses (including fees and disbursements

of counsel, including reasonable allocated cost of inside counsel) of Bank

incident to the preparation, negotiation, and closing of this Amendment and the

syndication and participation of the Agreement, as modified hereby.

 

5.                Reaffirmation

of Loan Documents.  The Borrower

affirms and agrees that the execution and delivery by the Borrower of and the

performance of its obligations under this Amendment shall not in any way amend,

impair, invalidate or otherwise affect any of the Obligations of the Borrower

or the rights of the Bank under the Agreement or any other document or

instrument made or given by the Borrower in connection therewith, and

specifically reaffirms and remakes all the covenants, representations,

warranties and reaffirms the security interests granted thereunder.

 

IN WITNESS WHEREOF, the parties hereto have caused

this Amendment to be executed as of the day and year first above written.

 

	

   

  	

  SCHEID VINEYARDS CALIFORNIA INC.,

  
	

   

  	

  a California corporation, as the Borrower

  
	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By

  	

       /s/

  Heidi M. Scheid

  
	

   

  	

   

  	

  Heidi M. Scheid, Senior Vice President

  

 

 

	

   

  	

   

  	

  UNITED CALIFORNIA BANK, a California banking

  corporation formerly known as  Sanwa

  Bank California, as Bank

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ John F. King

  	

   

  
	

   

  	

  Title:

  	

  John F. King, AVPPrepared by MERRILL CORPORATION

EXHIBIT 10.7

 

TERM LOAN CREDIT AGREEMENT

[Hames Loan]

 

                This Term Loan

Credit Agreement (the "Agreement") is made and entered into this 27th

day of August, 2001, by and between UNITED CALIFORNIA BANK, a California

banking corporation, formerly known as Sanwa Bank California (the

"Bank") and SCHEID VINEYARDS CALIFORNIA INC., a California

corporation (the "Borrower"), on the terms and conditions that

follow:

 

SECTION I

 

DEFINITIONS

 

1.1                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):

 

"Business Day":  shall mean a

day, other than a Saturday or Sunday, on which commercial banks are open for business

in California.

 

"Current Assets":  shall mean

current assets as determined in accordance with generally accepted accounting

principles, less all amounts due from affiliates, officers or employees.

 

"Effective Tangible Net Worth": 

with respect to any entity shall mean such entity's stated net worth

plus Subordinated Debt but less all intangible assets of such entity (i.e.,

goodwill, trademarks, patents, copyrights, organization expense and similar

intangible items including, but not limited to, investments in and all amounts

due from affiliates, officers or employees).

 

"Environmental Claims" shall mean all claims, however asserted,

by any governmental authority or other person alleging potential liability or

responsibility for violation of any Environmental Law or for release or injury

to the environment or threat to public health, personal injury (including

sickness, disease or death), property damage, natural resources damage, or

otherwise alleging liability or responsibility for damages (punitive or

otherwise), cleanup, removal, remedial or response costs, restitution, civil or

criminal penalties, injunctive relief, or other type of relief, resulting from

or based upon (a) the presence, placement, discharge, emission or release

(including intentional and unintentional, negligent and non-negligent, sudden

or non-sudden, accidental or non-accidental placement, spills, leaks,

discharges, emissions or releases) of any Hazardous Material at, in, or from

property, whether or not owned by the Borrower, or (b) any other circumstances

forming the basis of any violation, or alleged violation, of any Environmental

Law.

 

"Environmental Laws" shall mean all federal, state or local laws,

statutes, common law duties, rules, regulations, ordinances and codes, together

with all administrative orders, directed duties, requests, licenses,

authorizations and permits of, and agreements with, any Governmental

Authorities, in each case relating to environmental, health, safety and land

use matters; including the Comprehensive Environmental Response, Compensation

and Liability Act of 1980 ("CERCLA), the Clean Air Act, the Federal Water

Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal

Resource Conservation and Recovery Act, the Toxic Substances Control Act, the

Emergency Planning and Community Right-to-Know Act, the California Hazardous

Waste Control Law, the California Solid Waste Management, Resource, Recovery

and Recycling Act, the California Water Code and the California Health and

Safety Code.

 

"Environmental Permits": 

shall have the meaning provided in Section 4.10 hereof.

 

"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.

 

"Event of Default":  shall have

the meaning set forth in Section 6.

 

"Expiration Date":  shall mean

July 5, 2005 or the date of termination of the Bank's commitment to lend

under this Agreement pursuant to Section 7, whichever shall occur first.

 

"Hazardous Materials" means all those substances which are

regulated by, or which may form the basis of liability under, any Environmental

Law, including all substances identified under any Environmental Law as a

pollutant, contaminant, hazardous waste, hazardous constituent, special waste,

hazardous substance, hazardous material, or toxic substance, or petroleum or

petroleum derived substance or waste.

 

"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.

 

"LIBOR Business Day":  shall mean a

Business Day upon which commercial banks in London, England are open for

domestic and international business.

 

"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.

 

"Ordinary Course of Business": 

shall mean, with respect to any transaction involving the Borrower or

any of its subsidiaries or affiliates, the ordinary course of the Borrower's

business, as conducted by the Borrower in accordance with past practice and

undertaken by the Borrower in good faith and not for the purpose of evading any

covenant or restriction in this Agreement or in any other document, instrument

or agreement executed in connection herewith.

 

"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 not yet due; (iii)

liens of materialmen, mechanics, warehousemen, or carriers 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 5.10 hereof; (v) liens and

security interests which, as of the date hereof, have been disclosed to and

approved by the Bank in writing; and (vi) those liens and security interests

which in the aggregate constitute an immaterial and insignificant monetary

amount with respect to the net value of the Borrower's assets.

 

"Reference Rate": 

shall have

the meanings provided in Section 2.4 hereof.

 

"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.

 

"Term Loan":  shall mean

the credit facility described in Section 2.

 

"Variable Rate Balance" and "Variable Rate":  shall have the meanings provided in Section 2.4

hereof.

 

"Working Capital":  shall mean

Current Assets minus current liabilities as determined in accordance with

generally accepted accounting principles, including negative cash balances.

 

1.2                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.

 

1.3                Other Terms:  Other terms not otherwise defined shall have

the meanings attributed to such terms in the California Uniform Commercial

Code.

 

SECTION 2

 

THE TERM LOAN

 

2.1                The Term

Loan:  On terms and

conditions as set forth herein, the Bank agrees to lend to the Borrower, in one

drawing, upon the Borrower's request therefor made prior to September 30,

2001, up to the maximum amount of Two Million Two Hundred Seventy-Five Thousand

Dollars ($2,275,000.00) (the "Term Loan").

 

2.2                Making Line

Advances:  The Term Loan

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.

 

2.3                Repayment:  The Borrower hereby promises and agrees to

pay principal in annual equal installments of $113,750.00 per installment

commencing on June 30, 2002, and continuing on June 30 of each year thereafter

up to and including the Expiration Date. 

On the Expiration Date, the Borrower hereby promises and agrees to pay

to the Bank the entire unpaid principal balance, together with accrued and

unpaid interest.

 

Each payment received by the Bank shall, at the Bank's

option, be applied to pay interest then due and unpaid and the remainder

thereof (if any) shall be applied to pay principal.

 

2.4                Interest:  Interest shall accrue on the Term Loan at

one of the following rates, as quoted by the Bank and as elected by the

Borrower below:

 

(a)             Variable

Rate Balance:  A variable rate per

annum equivalent to an index for a variable interest rate which is quoted,

published or announced from time to time by the Bank as its reference rate and

as to which loans may be made by the Bank at, below or above such reference

rate (the "Reference Rate") plus .25% (the "Variable

Rate").  Interest shall be adjusted

concurrently with any change in the Reference Rate.  The Term Loan or a portion thereof based upon the Variable Rate

is hereinafter referred to as a "Variable Rate Balance".

 

(b)            LIBOR

Balance:  A fixed rate quoted by the

Bank for 1, 2, 3, 6 or 12 months 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" or the "LIBOR

Interest Period") for a drawing under the Term Loan in the minimum amount

of $500,000.00.  Such interest rate

shall be the rate per annum determined by the Bank to be the rate as of

approximately 11:00 a.m. (London time) on the date that is two LIBOR Business

Days prior to the beginning of the relevant Interest Period quoted as the

British Bankers Association Interest Settlement Rate for deposits in dollars

(as set forth in any service selected by the Bank which has been nominated by

the British Bankers’ Association as an authorized information vendor for

purpose of displaying such rates) for a period equal to such LIBOR Interest

Period; provided that, to the extent that an interest rate is not ascertainable

pursuant to the foregoing provisions of this definition, the rate shall be the

interest rate per annum determined by the Bank to be the average of the rates

per annum at which deposits in dollars are offered for such relevant Interest

Period to major banks in the London interbank market in London, England by any

affiliate of the Bank at approximately 11:00 a.m. (London time) on the date

that is two LIBOR Business Days prior to the beginning of such Interest Period,

in either case plus 2.25%, adjusted for any and all assessments, surcharges and

reserve requirements and rounded upward, if necessary, to the next higher 1/16

of one percent (the "LIBOR Rate"). 

The Term Loan or portion thereof based upon the LIBOR Rate is hereinafter

referred to as the “LIBOR Balance.” 

There may be no more than four (4) LIBOR Interest Periods in effect at

any one time for the LIBOR Balance.

 

Interest shall be computed on the basis of 360 days

per year, but charged on the actual number of days elapsed.

 

The Borrower hereby promises and agrees to pay

interest quarterly in arrears on the Variable Rate Balance and the LIBOR

Balance on March 31, June 30, September 30, December 31 of each year.

 

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.

 

2.5                Notice of

Borrowing:  Subject to

Section 2.1 above, upon telephonic notice which shall be received by the Bank

at or before 2:00 p.m. (California time) on a Business Day, the Borrower may

draw under the Term Loan by requesting:

 

(a)             A

Variable Rate Balance.  A Variable Rate

Balance may be made on the day notice is received by the Bank; provided,

however, that if the Bank shall not have received notice at or before 2:00 p.

m. on the day such drawing is requested to be made, such Variable Rate Balance

may, at the Bank's option, be made on the next Business Day.

 

(b)            A

LIBOR Balance.  Notice of any LIBOR

Balance shall be received by the Bank no later than two LIBOR Business Days

prior to the day (which shall be a Business Day) on which the Borrower requests

such drawing is to be made.

 

2.6                Notice of

Election to Adjust Interest Rate: 

The Borrower may elect:

 

(a)             That

interest on a Variable Rate Balance shall be adjusted to accrue at the LIBOR

Rate; provided, however, that such notice shall be received by the Bank no

later than two LIBOR Business Days prior to the day (which shall be a Business

Day) on which the Borrower requests that interest be adjusted to accrue at the

LIBOR Rate.

 

(b)            That

interest on a LIBOR Balance shall continue to accrue at a newly quoted LIBOR

Rate or shall be adjusted to commence to accrue at the Variable Rate; provided,

however, that such notice to continue to accrue at the LIBOR Rate shall be

received by the Bank no later than two LIBOR Business Days prior to the last

day of the relevant LIBOR Interest Period. If the Bank shall not have received

notice (as prescribed herein) of the Borrower's election that interest on any

LIBOR Balance shall continue to accrue at the newly quoted LIBOR Rate, the

Borrower shall be deemed to have elected that interest thereon shall be

adjusted to accrue at the Variable Rate upon the expiration of the relevant

LIBOR Interest Period.

 

2.7                Prepayment:  The Borrower may prepay the Term Loan 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 the Term Loan on the basis of the LIBOR Rate, no

prepayment shall be made except on a day which is the last day of the LIBOR

Interest Period pertaining thereto.  If

the whole or any part of the Term Loan 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, expenses and any loss (including loss of

future interest income) actually incurred by the Bank and any loss (including

loss of profit resulting from the re-employment of funds) deemed sustained by

the Bank as a consequence of such prepayment.

 

The Bank shall be entitled to fund all or any portion

of the Term Loan in any manner it may determine in its sole discretion, but all

calculations and transactions hereunder shall be conducted as though the Bank

actually funded the Term Loan through the purchase of dollar deposits bearing

interest at the same rate as U.S. Treasury securities in the amount of the

relevant Advance and in maturities corresponding to the then applicable

Interest Period.

 

2.8                Indemnification

for LIBOR Rate Costs:  During

any period of time in which interest on the Term Loan is accruing on the basis

of the LIBOR 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 LIBOR Rate.

 

2.9                Conversion

from LIBOR 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 LIBOR Rate (i) is infeasible because the Bank

is unable to determine the LIBOR 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 drawing under the Term Loan and for a period of

time approximately equal to relevant LIBOR 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 any LIBOR Balance shall be deemed to be a Variable Rate Balance and

interest shall thereupon immediately accrue at the Variable Rate.

 

2.10                Term

Loan Account:

 

(a)             The

Bank may 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 Term Loan (the "Term Loan

Account").  The Bank may provide

the Borrower with a periodic statement of the Borrower's Term Loan  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 Term Loan 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.

 

(c)             If

any payment required to be made by the Borrower hereunder becomes due and

payable on a day other than a Business Day, the due date thereof shall be

extended to the next succeeding Business Day and interest thereon shall be

payable at the then applicable rate during such extension. All payments

required to be made hereunder shall be made to the office of the Bank

designated for the receipt of notices herein or such other office as Bank shall

from time to time designate.

 

2.11                Late Payment:  In addition to any other rights the Bank may

have hereunder, if any payment of principal (other than a principal payment due

on the Expiration Date pursuant to Section 2.3) or interest, or any portion

thereof, under this Agreement is not paid within ten (10) days of the date 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

 

CONDITIONS OF LENDING

 

3.1                Conditions

Precedent:  The obligation of

the Bank to make 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 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(ies) in favor of the Bank executed by Scheid Vineyards, Inc., together

with evidence that the execution, delivery and performance by an guarantor has

been duly authorized.

 

(c)             Deed(s)

of Trust and Security agreement(s) and ground lease estoppel executed by the

Borrower and by the fee owner of the real property commonly known as the Hames

Ranch, together with evidence that the execution, delivery and performance by

each such party has been duly authorized.

 

(d)            A

loan fee as may be agreed in writing by Bank and Borrower.

 

(e)             Payment

of all of the Bank's reasonable out-of-pocket expenses in connection with the

preparation, negotiation, syndication and participation of this Agreement.

 

(f)             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.

 

The Borrower's acceptance of the proceeds of the Term

Loan 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 4

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower hereby makes the following representations and warranties

to the Bank, which representations and warranties are continuing:

 

4.1                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

doing business.

 

4.2                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.

 

4.3                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.

 

4.4                Fictitious

Trade Styles:  There are no

fictitious trade styles used by the Borrower in connection with its business

operations. The Borrower shall notify the Bank not less than 30 days prior to

effecting any change in the matters described herein or prior to using any

other fictitious trade style at any future date, indicating the trade style and

state(s) of its use.

 

4.5                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 in all material respects and have been or will be prepared in

accordance with generally accepted accounting principles consistently applied

and accurately represent the financial condition or, as applicable, the other

information disclosed therein in all material respects.  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.

 

4.6                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.

 

4.7                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.

 

4.8                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.

 

4.9                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.

 

4.10                Environmental

Compliance.   The operations

of the Borrower comply, and during the term of this Agreement will at all times

comply, in all respects with all Environmental Laws; the Borrower has obtained

all licenses, permits, authorizations and registrations required under any

Environmental Law ("Environmental Permits") and necessary for

its ordinary course operations, all such Environmental Permits are in good

standing, and the Borrower is in compliance with all material terms and

conditions of such Environmental Permits; neither the Borrower nor any of its

present property or operations is subject to any outstanding written order from

or agreement with any governmental authority nor subject to any judicial or

docketed administrative proceeding, respecting any Environmental Law,

Environmental Claim or Hazardous Material; there are no Hazardous Materials or

other conditions or circumstances existing, or arising from operations prior to

the date of this Agreement, with respect to any property of the Borrower that

would reasonably be expected to give rise to Environmental Claims; provided,

however, that with respect to property leased from an unrelated third party,

the foregoing representation is made to the best knowledge of the

Borrower.  In addition, (i) the Borrower

does not have any underground storage tanks (x) that are not properly

registered or permitted under applicable Environmental Laws, or (y) that are

leaking or disposing of Hazardous Materials off-site, and (ii) the Borrower has

notified all of its employees of the existence, if any, of any health hazard

arising from the conditions of their employment, and have met all notification

requirements under, Title III of CERCLA and all other applicable Environmental

Laws.

 

SECTION 5

 

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:

 

5.1                Reporting

and Certification Requirements: 

Deliver or cause to be delivered to the Bank in form and detail

satisfactory to the Bank:

 

                                a)                Annual Statements. 

Not later than 105 days after the end of each of its fiscal years, a

copy of the annual audited consolidated financial report of Scheid Vineyards

Inc., which report shall be prepared by a firm of certified public accountants

reasonably acceptable to Bank.

 

                                b)                Quarterly Statements.  Not later than 45 days after the end of each fiscal quarter,

Scheid Vineyards Inc.'s consolidated financial statement as of the end of such

period.

 

                                c)                SEC Filings. 

Promptly upon filing, copies of any 10Q, 10K or other public filing made

by Scheid Vineyards Inc. with the Securities and Exchange Commission.

 

                                d)                Other Information. 

Promptly upon the Bank's request, such other information pertaining to

the Borrower or any Guarantor as the Bank may reasonably request.

 

5.2                Financial

Condition:  The Borrower

promises and agrees, during the term of this Agreement and until payment in

full of all of the Borrower's Obligations, the Borrower will cause Scheid

Vineyards, Inc. to maintain on a consolidated basis:

 

(a)             A

minimum Effective Tangible Net Worth of at least $25,000,000.00 plus 100% of

its cumulative net income from and after March 31, 2001, measured as of the end

of each fiscal quarter.

 

(b)            A

minimum Working Capital, measured as of the end of each fiscal year, of at

least $5,000,000.00.

 

(c)             A

ratio, measured as of the end of each fiscal year, of (i) the sum of net income

after tax and exclusive of extraordinary gains, plus depreciation, amortization

and interest expense minus dividends and distributions to (ii) current portion

of long term debt plus interest expense of at least 1.25 to 1:00.

 

5.3                Preservation

of Existence; Compliance with Applicable Laws:  Maintain and preserve its existence and all

rights and privileges now enjoyed; and conduct its business and operations in

accordance in all material respects with all applicable laws, rules and

regulations.

 

5.4                Merge or

Consolidate:  Not liquidate

or dissolve, merge or consolidate with or into, or acquire any other business

organization.

 

5.5                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 reasonably required by the Bank.  All such insurance shall be in form and

amount and with companies satisfactory to the Bank.  With respect to insurance covering properties in which the Bank

maintains a security interest or lien, such insurance shall name the Bank as

loss payee pursuant to a loss payable endorsement satisfactory to the Bank and

shall not be altered or canceled except upon 10 days' prior written notice to

the Bank.  Upon the Bank's request, the

Borrower shall furnish the Bank with the original policy or binder of all such

insurance.

 

5.6                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.

 

5.7                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.

 

5.8                Inspection

Rights and Accounting Records: 

The Borrower will maintain adequate books and records in accordance with

generally accepted accounting principals consistently applied and in a manner

otherwise reasonably acceptable to Bank, and, 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 officer or any other

representative designated by the Borrower. 

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, conduct

inspections and audits of the Collateral and the Borrower's accounts payable,

the reasonable costs and expenses of which shall be paid by the Borrower to the

Bank upon demand.

 

5.9                Payment of

Dividends:  Not declare or

pay any dividends on any class of stock now or hereafter outstanding except

dividends payable solely in the Borrower's capital stock.

 

5.10                Redemption

or Repurchase of Stock:  Not

redeem or repurchase any class of the Borrower's stock now or hereafter

outstanding.

 

5.10                Additional

Indebtedness:  Not, 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) Indebtedness of up to $500,000.00 in any one

fiscal year (which may be secured).

 

5.11                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.

 

5.12                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.

 

5.13                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.

 

5.14                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.

 

5.15                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 $100,000.00 or which

affects the Collateral; (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 (iv) any enforcement, cleanup,

removal or other governmental or regulatory actions instituted, completed or

threatened against the Borrower or any of its properties.

 

5.16                Environmental

Compliance.  The Borrower

shall conduct its operations and keep and maintain all of its property in

compliance with all Environmental Laws and, upon the written request of the

Bank, the Borrower shall submit to the Bank, at the Borrower's sole cost and

expense, at reasonable intervals, a report providing the status of any

environmental, health or safety compliance, hazard or liability.

 

SECTION 6

 

EVENTS OF DEFAULT

 

                Any one or more of

the following described events shall constitute an event of default (an

"Event of Default") under this Agreement:

 

6.1                Non-Payment:  The Borrower shall fail to pay the principal

amount of any Obligations or interest on the Obligations within ten (10) days

of the date due.

 

6.2                Performance

Under This Agreement:  The

Borrower shall fail in any material respect to perform or observe any term,

covenant or agreement contained in this Agreement or in any document,

instrument or agreement relating to this Agreement any such failure shall

continue unremedied for more than 30 days after the occurrence thereof.

 

6.3                Representations

and Warranties; Financial Statements:  Any representation or warranty made by the Borrower under or in

connection with this Agreement or any financial statement given by the Borrower

or any guarantor shall prove to have been incorrect in any material respect

when made or given or when deemed to have been made or given.

 

6.4                Other

Agreements:  If there is a

default under any other agreement to which Borrower is a party with a Bank or a

third party or parties resulting in a right by Bank or such third party or

parties, whether or not exercised, to accelerate the maturity of any

Indebtedness.

 

6.5                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 30 days after the date of such appointment.

 

6.7                Execution:  Any writ of execution or attachment or any

judgment lien shall be issued against any property of the Borrower and shall

not be discharged or bonded against or released within 30 days after the

issuance or attachment of such writ or lien.

 

6.8                Suspension:  The Borrower shall voluntarily suspend the

transaction of business or allow to be suspended, terminated, revoked or

expired any permit, license or approval of any governmental body necessary to

conduct the Borrower's business as now conducted.

 

6.9                Change in

Ownership:  There shall occur

a sale, transfer, disposition or encumbrance (whether voluntary or

involuntary), or an agreement shall be entered into to do so, with respect to

more than 10% of the issued and outstanding capital stock of the Borrower.

 

SECTION 7

 

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:

 

7.1                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.

 

7.2                Cease

Extending Credit:  Cease

extending credit to or for the account of the Borrower under this Agreement or

under any other agreement now existing or hereafter entered into between the

Borrower and the Bank.

 

7.3                Termination:  Terminate this Agreement as to any future

obligation of the Bank without affecting the Borrower's obligations to the Bank

or the Bank's rights and remedies under this Agreement or under any other

document, instrument or agreement.

 

7.4                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.

 

SECTION 8

 

MISCELLANEOUS

 

8.1                Default

Interest Rate:  If an Event

of Default, or an event which, with notice or passage of time could become an

Event of Default, has occurred or is continuing, the Borrower shall pay to the

Bank interest on any Indebtedness or amount payable under this Agreement at a

rate which is 3% in excess of the rate or rates then in effect under this

Agreement.

 

8.2                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.

 

8.3                Expenses:  Borrower shall pay to the Bank all costs and

expenses, including but not limited to reasonable attorneys fees and costs of

syndication and participation, incurred by Bank in connection with the

preparation, negotiation, closing, administration, enforcement, including any

bankruptcy, appeal or the enforcement of any judgment or any refinancing or

restructuring of this Agreement or any document, instrument or agreement

executed with respect to, evidencing or securing the indebtedness hereunder.

 

8.4                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, or by

facsimile delivery, 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:

  
	

   

  	

   

  	

   

  
	

  SCHEID

  VINEYARDS CALIFORNIA INC. 

  305 Hilltown

  Road

  Salinas, CA  93908

  	

   

  	

  UNITED

  CALIFORNIA BANK 

  Fresno

  CBC/Agribusiness Office

  2035 Fresno Street, 2nd Floor

  Fresno, California 93721

  
	

   

  	

   

  	

   

  
	

  FAX: (831) 455-9998

  	

   

  	

  FAX:  (559)

  487-2157

  

 

8.5                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.

 

8.6                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.

 

8.7                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 or assign all or any portion of its rights and

benefits hereunder with the written consent of the Borrower prior to the

occurrence and continuance of an Event of Default, which consent shall not be

unreasonably withheld; upon the occurrence and continuance of an Event of

Default, no consent by Borrower shall be required to any sale or

assignment.  The Bank may grant

participations in all or any portion of its rights and benefits hereunder at

any time without the consent of the Borrower. 

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, provided that such party executes a commercially

reasonable confidentiality agreement with respect to such information.

 

8.8                Jurisdiction:  This Agreement, any notes issued hereunder,

and any documents, instruments or agreements mentioned or referred to herein

shall be governed by and construed according to the laws of the State of

California, to the jurisdiction of whose courts the parties hereby submit.

 

8.9                Waiver of

Jury Trial:  THE BORROWER AND

THE BANK EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR

CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE

OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN

ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE

PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT

CLAIMS, TORT CLAIMS, OR OTHERWISE, THE BORROWER AND THE BANK EACH AGREED THAT

ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A

JURY.  WITHOUT LIMITING THE FOREGOING,

THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS

WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER

PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR

ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION

HEREOF OR THEREOF.  THIS WAIVER SHALL

APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

 

8.10                Counterparts:  This Agreement may be executed in any number

of counterparts and all such counterparts taken together shall be deemed to

constitute on and the same instrument.

 

8.11                Headings:  The headings herein set forth are solely for

the purpose of identification and have no legal significance.

 

8.12                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

are superseded hereby.

 

IN WITNESS WHEREOF, the

parties hereto have caused this Agreement to be executed as of the date first

hereinabove written.

 

	

   

  	

  BORROWER:

  
	

   

  	

   

  	

   

  
	

   

  	

  SCHEID VINEYARDS CALIFORNIA INC.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By 

  	

          /s/

  Heidi M. Scheid

  
	

   

  	

   

  	

  Heidi M. Scheid, Senior Vice President

  

 

 

	

   

  	

  BANK:

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  UNITED CALIFORNIA BANK, formerly known as Sanwa Bank

  California

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ John F. King

  	

   

  
	

   

  	

  Title:

  	

  John F. King, AVP

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00031-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00031-of-00352.parquet"}]]