EXHIBIT 4.14
MONTEREY PASTA COMPANY
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
April , 1997 (the "Effective Date"), by and between Monterey Pasta Company, a
California corporation (the "Company"), and Xxxxxxx X. Steel ("Purchaser").
RECITALS
A. Purchaser is the Acting President and Chief Executive Officer of the
Company.
B. The Company desires to issue and the Purchaser desires to acquire stock
of the Company as herein described, on the terms and conditions hereafter set
forth.
AGREEMENT
The parties, intending to be legally bound, hereby agree as follows:
1. SHARE PURCHASE.
(a) Subject to the terms and conditions of this Agreement, Purchaser
agrees to purchase from the Company, and the Company agrees to issue and
sell to Purchaser, five hundred fifty thousand (550,000) shares (the
"Shares") of Common Stock of the Company ("Common Stock") at a purchase
price of $1.875 per Share. This Agreement, as executed and delivered by
Purchaser, shall be accompanied by payment of the aggregate purchase price
of the Shares, which shall be paid in the form of (i) a check from Purchaser
made payable to the Company, (ii) a recourse promissory note in a form
acceptable to the Company, or (iii) any combination of the foregoing.
(b) The closing of such purchase shall occur at the offices of the
Company on the date hereof.
2. UNVESTED SHARE REPURCHASE OBLIGATION.
(a) GRANT OF UNVESTED SHARE REPURCHASE OBLIGATION. In the event of the
occurrence of a "Repurchase Date" (as defined below), the Company shall,
unless otherwise mutually agreed in writing by the parties hereto,
repurchase such Unvested Shares, and only such Unvested Shares, as to which
such Repurchase Date relates (as set forth in Section 2(b)(i) below) under
the terms and subject to the conditions set forth in this Section 2 (the
"Unvested Share Repurchase Obligation").
(b) CERTAIN DEFINITIONS.
(i) "Repurchase Date" means: (1) with respect to the Shares which vest
pursuant to Section 2(b)(iii)(2), one day after the date of the public
release of the Company's financial results for the third quarter of 1997;
(2) with respect to the Shares which vest pursuant to Section 2(b)(iii)(3),
July 1, 1997; and (3) with respect to the Shares which vest pursuant to
Section 2(b)(iii)(4), October 1, 1997.
(ii) "Unvested Shares" means, on any given date, the number of Shares
which exceed the number of Vested Shares determined as of such date.
(iii) "Vested Shares" means, on any given date, the total number of
Shares, rounded down to the nearest whole number, determined as follows:
(1) On and after the Effective Date, two hundred thousand (200,000)
Shares shall be Vested Shares.
(2) One hundred thousand (100,000) Shares shall become Vested Shares
on the date that the Company publicly releases its financial results
which indicate an operating profit for a quarter
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which ends after the Effective Date, net of write-offs, write-downs,
reserves and other one-time extraordinary expenses, as determined in
accordance with generally accepted accounting principles consistently
applied; provided, however, that such quarter may be no later than the
third quarter of 1997.
(3) One hundred fifty thousand (150,000) Shares shall become Vested
Shares on the date that the closing price of the Common Stock, as
reported on the Nasdaq National Market or other principal market on which
the Common Stock is then traded, shall have equaled or exceeded four
dollars ($4.00) per share for any seven (7) consecutive trading days,
provided that such date occurs on or before June 30, 1997.
(4) One hundred thousand (100,000) Shares shall become Vested Shares
on the date that the closing stock price of the Common Stock, as reported
on the Nasdaq National Market or other principal market on which the
Common Stock is then traded, shall have equaled or exceeded five dollars
($5.00) per share for any seven (7) consecutive trading days, provided
that such date occurs on or before September 30, 1997.
(c) EFFECTING OF UNVESTED SHARE REPURCHASE OBLIGATION. Except as
otherwise mutually agreed in writing by the parties hereto, the Company
shall effect the Unvested Share Repurchase Obligation with respect to a
particular Repurchase Date by written notice delivered personally or
forwarded by certified mail, postage and certification fees prepaid, return
receipt requested, to Purchaser within thirty (30) days after the occurrence
of such Repurchase Date. If the Company has no Unvested Share Repurchase
Obligation with respect to a particular Repurchase Date, the Unvested Share
Repurchase Obligation shall terminate with respect to the Unvested Shares
associated with such Repurchase Date and such Unvested Shares shall be
deemed Vested Shares.
(d) PAYMENT FOR SHARES AND RETURN OF SHARES. The purchase price per
Share being repurchased by the Company shall be an amount equal to
Purchaser's original cost per Share, as adjusted pursuant to Section 6 (the
"Repurchase Price"). The Company shall pay the aggregate Repurchase Price to
Purchaser in cash within fifteen (15) days after the date of personal
delivery or mailing of the written notice of the Company's effecting of the
Unvested Share Repurchase Obligation. At the election of Purchaser, any such
payment shall instead be made by cancellation of indebtedness of Purchaser
to the Company. For purposes of the foregoing, cancellation of any
indebtedness of Purchaser to the Company shall be treated as payment to
Purchaser in cash to the extent of the unpaid principal canceled. In the
event that the Company cancels the unpaid principal of any indebtedness of
Purchaser to the Company, the Company shall simultaneously cancel any
interest payable with respect to such cancelled unpaid principal. Any such
cancellation shall be effected by written notice to Purchaser of such
cancellation. The Shares being repurchased shall be delivered to the Company
by or on behalf of Purchaser at the same time as the delivery of the
Repurchase Price to Purchaser.
(e) EFFECT OF OWNERSHIP CHANGE. Except as otherwise provided below,
upon the occurrence of an Ownership Change, as defined in Section 3 below,
any and all new, substituted or additional securities or other property to
which Purchaser is entitled by reason of Purchaser's ownership of particular
Unvested Shares shall be immediately subject to the Unvested Share
Repurchase Obligation and included in the terms "Shares" and "Unvested
Shares" for all purposes of the Unvested Share Repurchase Obligation with
the same force and effect as applicable to such Unvested Shares immediately
prior to the Ownership Change. While the aggregate Repurchase Price shall
remain the same after such Ownership Change, the Repurchase Price per
Unvested Share upon exercise of the Unvested Share Repurchase Obligation
following such Ownership Change shall be adjusted as fair and appropriate to
reflect such Ownership Change. For purposes of determining the Vested Shares
following an Ownership Change, credited employment shall include all
employment with the Company and its successor.
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3. OWNERSHIP CHANGE. An "Ownership Change" will be deemed to have occurred
if any of the following events occur with respect to the Company:
(a) the direct or indirect sale or exchange by the shareholders of the
Company of all or substantially all of the stock of the Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially all of the
assets of the Company (other than a sale, exchange, or transfer to one or
more subsidiary corporations of the Company); or
(d) a liquidation or dissolution of the Company.
4. ESCROW. As security for his faithful performance of the terms of this
Agreement and to insure the availability for delivery of the Shares upon
exercise of the Unvested Share Repurchase Obligation herein provided for,
Purchaser agrees to deliver to and deposit with Xxxx Xxxx Xxxx & Freidenrich, A
Professional Corporation, counsel to the Company (the "Escrow Agent"), as Escrow
Agent in this transaction, two Stock Assignments duly endorsed (with date and
number of shares blank) in the form attached hereto as EXHIBIT A, together with
the certificate or certificates evidencing the Shares; such documents are to be
held by the Escrow Agent pursuant to the Joint Escrow Instructions of the
Company and Purchaser set forth in EXHIBIT B attached hereto and incorporated by
this reference, which instructions shall also be delivered to the Escrow Agent
at the closing hereunder.
5. EMPLOYMENT MATTERS. Nothing in this Agreement will create in any manner
whatsoever an employment agreement between Company and Purchaser or affect in
any manner the right or power of the Company to terminate Purchaser's service as
an employee, director or consultant, for any reason or no reason, with or
without cause, subject to any other agreements between the Company and
Purchaser.
6. ADJUSTMENT TO SHARES SUBJECT TO COMPANY'S RIGHTS. If, from time to time
during the term of this Agreement, there is any stock dividend or liquidating
dividend of cash and/or property, stock split, reverse stock split,
recapitalization, reclassification or other similar change in the character or
amount of any of the outstanding securities of the Company, then, in such event
any and all new, substituted or additional securities or other property to which
Purchaser is entitled by reason of his ownership of Shares will be immediately
subject to the provisions of this Agreement on the same basis as all Shares
originally purchased hereunder, and will be included in the word "Shares" for
all purposes of this Agreement with the same force and effect as the Shares
presently subject to this Agreement. The number of Shares set forth in each of
Sections 2(b)(iii)(1)-(4), and the per share stock prices set forth in Sections
2(b)(iii)(3) and (4) shall be fairly and appropriately adjusted to reflect any
such event. For purposes of Section 2 hereof, while the total price payable by
the Company to exercise the Unvested Share Repurchase Obligation provided in
such section will remain the same after each such event, the price payable per
share to exercise such Unvested Share Repurchase Obligation will be fairly and
appropriately adjusted to reflect such event.
7. LEGENDS. All certificates representing any Shares subject to the
provisions of this Agreement will bear the following legends; provided, however,
that Purchaser shall have the right after any Shares become Vested Shares, to
exchange the certificates (or portions thereof) representing such Shares for
certificates which do not bear the legend set forth in Section 7(a):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
UNVESTED SHARE REPURCHASE OBLIGATION OF THE COMPANY OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR HIS
OR HER PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY."
(b) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
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SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
(c) Any legend required under applicable state securities laws.
8. TRANSFER RESTRICTIONS. The Company will not be required (i) to transfer
on its books any Shares which will have been sold or transferred in violation of
any of the provisions set forth in this Agreement or (ii) to treat as owner of
such Shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such shares will have been so transferred.
9. RIGHTS AS SHAREHOLDER. Subject to the provisions of this Agreement,
Purchaser shall, during the term of this Agreement, exercise all rights and
privileges of a shareholder of the Company with respect to the Shares deposited
in escrow, including, without limitation, all voting rights and rights to
receive dividends declared by the Company.
10. REPRESENTATIONS AND WARRANTIES OF PURCHASER. In connection with the
purchase of the Shares, Purchaser hereby agrees, represents and warrants to the
Company as follows:
(a) INVESTMENT INTENT. Purchaser is purchasing the Shares solely for
Purchaser's own account for investment and not with a view to or for sale in
connection with any distribution of the Shares or any portion thereof and
not with any present intention of selling, offering to sell or otherwise
disposing of or distributing the Shares or any portion thereof in any
transaction other than a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"). Purchaser further
represents that the entire legal and beneficial interest of the Shares is
being purchased, for the account of Purchaser only and neither in whole nor
in part for any other person.
(b) RESIDENCE. Purchaser's principal residence is located at the
address indicated beneath Purchaser's signature below.
(c) INFORMATION CONCERNING THE COMPANY. Purchaser is aware of the
Company's business affairs and financial condition and has acquired
sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Shares. Purchaser further represents
and warrants that Purchaser has discussed the Company and its plans,
operations and financial condition with its officers, has received all such
information as Purchaser deems necessary and appropriate to enable Purchaser
to evaluate the financial risk inherent in making an investment in the
Shares and has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries
in respect thereof.
(d) ECONOMIC RISK. Purchaser realizes that this purchase of the Shares
will be a highly speculative investment and that Purchaser is able, without
impairing his or her financial condition, to hold the Shares for an
indefinite period of time and to suffer a complete loss on Purchaser's
investment.
(e) CAPACITY TO PROTECT INTERESTS. Purchaser has (i) a preexisting
personal or business relationship with the Company or any of its officers,
directors, or controlling persons, consisting of personal or business
contacts of a nature and duration to enable Purchaser to be aware of the
character, business acumen and general business and financial circumstances
of the person with whom such relationship exists, or (ii) such knowledge and
experience in financial and business matters as to make Purchaser capable of
evaluating the merits and risks of an investment in the Shares and to
protect Purchaser's own interests in the transaction, or (iii) both such
relationship and such knowledge and experience.
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(f) NO QUALIFICATION; RELIANCE BY COMPANY. Purchaser understands that
the Shares have not been qualified under the Corporate Securities Law of
1968, as amended, of the State of California by reason of a specific
exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser's representations as expressed herein.
Purchaser understands that the Company is relying on Purchaser's
representations and warrants that the Company is entitled to rely on such
representations and that such reliance is reasonable.
(g) RESTRICTED SECURITIES. Purchaser understands and acknowledges
that:
(i) The sale of the Shares has not been registered under the
Securities Act, and the Shares must be held indefinitely unless a
transfer of it is subsequently registered under the Securities Act or an
exemption from such registration is available.
(ii) The Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(h) DISPOSITION UNDER RULE 144. Purchaser understands that the Shares
are restricted securities within the meaning of Rule 144 promulgated under
the Securities Act and any future disposition of the Shares in accordance
with the exemption provided by Rule 144 (other than paragraph (k) thereof)
must be made only in limited amounts pursuant to the terms and conditions of
Rule 144.
(i) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
Purchaser's representations and warranties set forth above, Purchaser
further agrees that Purchaser will in no event make any disposition of all
or any portion of the Shares which Purchaser is purchasing unless:
(i) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with said Registration Statement; or
(ii) Purchaser shall have notified the Company of the proposed
disposition and furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and either:
(1) Purchaser shall have furnished the Company with an opinion of
Purchaser's own counsel to the effect that such disposition will not
require registration of such shares under the Securities Act, and
such opinion of Purchaser's counsel shall have been concurred in by
counsel for the Company and the Company shall have advised Purchaser
of such concurrence; or
(2) The disposition is made in compliance with Rule 144 after
Purchaser has furnished the Company such detailed statement and after
the Company has had a reasonable opportunity to discuss the matter
with Purchaser.
(j) ELECTION UNDER SECTION 83(B) OF THE CODE.
(i) Purchaser understands that Section 83 of the Internal Revenue
Code of 1986, as amended (the "Code") taxes as ordinary income the
difference between the amount paid for the Shares and the fair market
value of the Shares as of the date any restrictions on the Shares lapse.
In this context, "restriction" includes the obligation of the Company to
buy back the stock pursuant to the Unvested Share Repurchase Obligation
contained in this Agreement. Purchaser understands that he may elect to
be taxed at the time the Shares are purchased rather than when and as the
Unvested Share Repurchase Obligation expires by filing an election under
Section 83(b) of the Code with the IRS within thirty (30) days from the
date of purchase. Even if the fair market value of the Shares equals the
amount paid for the Shares, the election must be made to avoid adverse
tax consequences in the future. The form for making this election is
attached as EXHIBIT C hereto. Purchaser understands that failure to make
this filing timely may result in the
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recognition of ordinary income by Purchaser, as the Unvested Share
Repurchase Obligation lapses on the difference between the purchase price
and the fair market value of the Shares at the time such restriction
lapses.
(ii) Purchaser understands that he should consult with the his tax
advisor regarding the advisability of filing with the IRS an election
under Section 83(b) of the Code, which must be filed no later than thirty
(30) days after the date of this Agreement. Failure to file an election
under Section 83(b), if appropriate, may result in adverse tax
consequences to Purchaser. Purchaser acknowledges that he has been
advised to consult with a tax advisor regarding the tax consequences to
Purchaser of the purchase of Shares hereunder. AN ELECTION UNDER SECTION
83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH PURCHASER
ACQUIRES THE SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. PURCHASER
ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS
PURCHASER'S SOLE RESPONSIBILITY, EVEN IF PURCHASER REQUESTS THE COMPANY
OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS BEHALF.
11. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In connection with the
sale of the Shares, the Company hereby agrees, represents and warrants to
Purchaser as follows:
(a) ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, and
has the requisite legal power and authority, corporate and other, to own its
properties and assets and to carry on its business as now conducted and as
proposed to be conducted by it. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure
to do so would have a material adverse effect on its business or properties.
The Company has made available to Purchaser or his counsel copies of the
Articles of Incorporation and By-laws of the Company. Said copies are true,
correct, and complete and contain all amendments through the date hereof.
(b) AUTHORITY: NO CONFLICT. The Company has all requisite power and
authority, corporate and other, to enter into this Agreement and the other
documents and instruments contemplated hereby (collectively, the
"Agreements"), to carry out the terms of the Agreements and to perform all
of its obligations under the Agreements. None of the execution, delivery and
performance of the Agreements and the consummation of the transactions
provided for, or contemplated by, the Agreements, the fulfillment by the
Company of the terms of the Agreements and the issuance and delivery of the
Shares will (with or without notice or passage of time or both) (i) conflict
with or result in the breach of any provision of the Company's Articles of
Incorporation or By-laws, (ii) result in a default, give rise to any right
of termination, cancellation or acceleration or require any consent or
approval, under any of the terms, conditions or provisions of any agreement
or instrument to which it is a party or by which it or any of its assets is
bound or (iii) violate any law, judgment, order, writ, injunction, decree,
statute, rule or regulation of any court, administrative agency or other
governmental entity applicable to the Company or any of its assets. Each of
the Agreements constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms.
(c) NO PERMITS. No permit, consent, approval or authorization of, or
declaration to or filing with, any governmental authority is required in
connection with the execution, delivery and performance by the Company of
the Agreements or the consummation by the Company of the transactions
contemplated by the Agreements.
(d) CORPORATE ACTION. All corporate and other action on the part of
the Company necessary for the authorization, execution, issuance, delivery
and performance by the Company of the Agreements and the consummation of the
transactions contemplated by the Agreements has been taken.
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(e) VALIDITY OF SHARES. The Shares have been authorized by all
necessary action, corporate and other, and when issued and sold in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable, free from any preemptive or similar rights and free
and clear from all liens, claims, charges or encumbrances whatsoever.
12. REGISTRATION RIGHTS. Purchaser shall be entitled to have the Company
register the Shares on the same terms and conditions as the investors
participating in the Company's recently concluded private placement pursuant to
Regulation D under the Securities Act.
13. MISCELLANEOUS.
(a) The parties agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent
of this Agreement.
(b) Any notice required or permitted hereunder will be given in writing
and will be deemed effectively given upon personal delivery or three (3)
days after deposit with a United States Post Office, by registered or
certified mail with postage and fees prepaid, return receipt requested,
addressed to the other party hereto at the address shown below that party's
signature or at such other address as such party may designate by ten days'
advance written notice to the other party hereto.
(c) This Agreement will inure to the benefit of the successors and
assigns of the Company and, subject to the restrictions on transfer herein
set forth, be binding upon Purchaser and Purchaser's heirs, executors,
administrators, successors and assigns; provided, however, that neither
party may assign its rights or obligations under this Agreement without the
other party's prior written consent.
(d) This Agreement, together with the exhibits hereto, will be construed
under the laws of the State of California and constitutes the entire
agreement of the parties with respect to the subject matter hereof,
superseding all prior written or oral agreements with respect to the subject
matter hereof, and no amendment or addition hereto will be deemed effective
unless agreed to in writing by the parties hereto.
(e) No failure on the part of any party to exercise or delay in
exercising any right hereunder will be deemed a waiver thereof, nor will any
such failure or delay, or any single or partial exercise of any such right,
preclude any further or other exercise of such right or any other right.
(f) If any provision of this Agreement, or the application thereof, is
for any reason and to any extent determined by a court of competent
jurisdiction to be invalid or unenforceable, the remainder of this Agreement
and the application of such provision to other persons or circumstances will
be interpreted so as best to reasonably effect the intent of the parties
hereto. The parties agree to use their best efforts to replace such void or
unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve, to the extent greatest possible, the economic,
business and other purposes of the void or unenforceable provision.
(g) This Agreement may be executed in counterparts, each of which will
be an original and all of which together will constitute one and the same
agreement.
(h) Any officer of the Company will have the authority to act on behalf
of the Company with respect to any matter, right, obligation, or election
which is the responsibility of or which is allocated
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to the Company herein, provided the officer has apparent authority with
respect to such matter, right, obligation, or election.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MONTEREY PASTA COMPANY
By:
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Title:
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Address:
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PURCHASER
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Address:
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EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, hereby sells, assigns and transfers
unto ( ) shares of the Common Stock of Monterey Pasta
Company, a California corporation, standing in the undersigned's name on the
books of said corporation represented by Certificate No. herewith, and
does hereby irrevocably constitute and appoint my attorney to
transfer the said stock on the books of the said corporation with full power of
substitution in the premises.
Dated: , 199 By:
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EXHIBIT B
JOINT ESCROW INSTRUCTIONS
April , 1997
Xxxx Xxxx Xxxx & Freidenrich
A Professional Corporation
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Gentlemen:
As Escrow Agent for both Monterey Pasta Company, a California corporation
("Company"), and the undersigned purchaser of Stock (the "Stock") of the Company
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement"), dated as of the date hereof, to which a copy of these
Joint Escrow Instructions is attached as Exhibit B, and the Promissory Note and
Pledge Agreement (the "Note") attached hereto as Exhibit A, in accordance with
the following instructions:
1. In the event the Company shall effect the Unvested Share Repurchase
Obligation set forth in the Agreement in accordance with the terms thereof,
the Company shall give to Purchaser and you a written notice specifying the
number of shares of Stock to be purchased, the purchase price, and the time
for a closing hereunder at the principal office of the Company. Purchaser
and the Company hereby irrevocably authorize and direct you to close the
transaction contemplated by such notice in accordance with the terms of such
notice.
2. At the closing of a transaction pursuant to Paragraph 1, you are
directed (a) to date the stock assignments necessary for the transfer in
question, (b) to fill in the number of shares of Stock being transferred,
(c) to deliver same, together with the certificates evidencing the shares of
Stock to be transferred, to the Company against the simultaneous delivery to
you of the purchase price (by check or by written notice of cancellation of
the applicable principal amount of the Note, and related interest) for the
number of shares of Stock being purchased pursuant to the exercise of the
Unvested Share Repurchase Obligation, and (d) to forward any purchase price
received from the Company to Purchaser.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of Stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his or her
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities all stock certificates, stock assignments, or
other documents necessary or appropriate to make such securities negotiable
and complete any transaction herein contemplated. Subject to the provisions
of this paragraph 3, Purchaser shall exercise all rights and privileges of a
shareholder of the Company while the Stock is held by you.
4. This escrow shall terminate at such time as there are no longer any
shares of Stock subject to the Unvested Share Repurchase Obligation or
securing repayment of the Note.
5. As security for full repayment of the Note, the Purchaser has
granted to the Company a security interest in the Stock. Notwithstanding
anything herein to the contrary, you hold the certificate(s) representing
the Stock as the Company's agent to perfect the Company's security interest
in the Stock and not as an escrow holder for the Company and the Purchaser.
In the event that the Purchaser fails to make payment under the Note, or
otherwise defaults in any obligation due the
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Company, you shall deliver the certificate(s) to the Company, or take such
other action as the Company, as a secured creditor under the California
Commercial Code, shall direct.
6. If at the time of termination of this escrow you should have in your
possession any shares of Stock or any other documents, securities, or other
property belonging to Purchaser, you shall deliver all of same to Purchaser
and shall be discharged of all further obligations hereunder.
7. Your duties hereunder may be altered, amended, modified or revoked
only by writing signed by all of the parties hereto.
8. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party
or parties. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser
while acting in good faith and in the exercise of your own good judgment,
and any act done or omitted by you pursuant to the advice of your own
attorneys shall be conclusive evidence of such good faith.
9. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case you obey or comply with any such order,
judgment or decree of any court, you shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
10. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting
to execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
11. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
12. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary or proper to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
13. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be counsel to the Company or if you shall resign by
written notice to each party. In the event of any such termination, the
Company and Purchaser shall jointly appoint a successor Escrow Agent.
14. If you reasonably require other or further instructions in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
15. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or rights of possession of the
securities held by you hereunder, you are authorized and directed to retain
in your possession, without liability to anyone, all or any part of said
securities until such dispute shall have been settled either by mutual
written agreement of the parties concerned or by a final order, decree, or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
16. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or three (3)
days after deposit with a United States Post Office, by registered or
certified mail with postage and fees prepaid, return receipt requested,
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addressed to each of the other parties thereunto entitled at the following
address, or at such other addresses as a party may designate by ten (10)
days' advance written notice to each of the other parties hereto.
Company: Monterey Pasta Company
------------------------------------------
------------------------------------------
PURCHASER: Xxxxxxx X. Steel
------------------------------------------
------------------------------------------
ESCROW AGENT: Xxxx Xxxx Xxxx & Freidenrich
A Professional Corporation
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxx
17. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
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18. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
Very truly yours,
Monterey Pasta Company,
a California corporation
By:
PURCHASER:
---------------------------------
Xxxxxxx X. Steel
Agreed to and accepted as of the date set forth
above:
ESCROW AGENT:
XXXX XXXX XXXX & FREIDENRICH
A Professional Corporation
By:
-----------------------------
Xxxx X. Xxxx
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EXHIBIT C
April , 1997
Internal Revenue Service
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Re: Election Under Section 83(b) of the Internal Revenue Code of 1986, as
Amended
Gentlemen:
The following information is submitted pursuant to Treas. Reg. 1.83-2 in
connection with this election by the undersigned under section 83(b) of the
Internal Revenue Code of 1986, as amended.
1. The name and address of the taxpayer are:
Name: Xxxxxxx X. Steel
Address:
-------------------------------------------------
-------------------------------------------------
Taxpayer ID:
-------------------------------------------------
2. The following is a description of each item of property with respect to
which the election is made:
Three hundred fifty thousand (350,000) shares of Common Stock of
Monterey Pasta Company (the "Shares")
3. The property was transferred to the undersigned on:
April , 1997
The taxable year for which the election is made is:
Calendar, 1997.
4. The nature of the restriction to which the property is subject:
See ATTACHMENT A.
5. The following is the fair market value at the time of transfer
(determined without regard to any restriction other than a restriction
which by its terms will never lapse) of each property with respect to
which the election is made:
$656,250.00 (350,000 shares at $1.875 per share)
6. The following is the amount paid for the property:
$656,250.00
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7. A copy of this election has been furnished to Monterey Pasta Company,
the corporation for which services are performed by the undersigned.
Please acknowledge receipt of this election by signing or stamping the
enclosed copy of this letter and returning it to the undersigned in the enclosed
envelope.
Very truly yours,
Xxxxxxx X. Steel
Enclosures
cc: Monterey Pasta Company
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ATTACHMENT A
Pursuant to the terms of my Restricted Stock Purchase Agreement with
Monterey Pasta Company (the "Company"), dated April , 1997 (the "Agreement"),
the Company shall have the obligation at any time within thirty (30) days after
a "Repurchase Date" (as defined in the Agreement) to purchase from me or my
personal representative, as the case may be, for a price of $1.875 per share,
subject to adjustment pursuant to Section 6 of the Agreement (the "Repurchase
Price"), a portion of the Shares which are unvested. Shares will vest pursuant
to the following schedule:
(i) One hundred thousand (100,000) Shares shall become Vested Shares on
the date that the Company publicly releases its financial results which
indicate an operating profit for a quarter which ends after the Effective
Date, net of write-offs, write-downs, reserves and other one-time
extraordinary expenses, as determined in accordance with generally accepted
accounting principles consistently applied; provided, however, that such
quarter may be no later than the third quarter of 1997.
(ii) One hundred fifty thousand (150,000) Shares shall become Vested
Shares on the date that the closing price of the Common Stock, as reported
on the Nasdaq National Market or other principal market on which the Common
Stock is then traded, shall have equaled or exceeded four dollars ($4.00)
per share for any seven (7) consecutive trading days, provided that such
date occurs on or before June 30, 1997.
(iii) One hundred thousand (100,000) Shares shall become Vested Shares on
the date that the closing stock price of the Common Stock, as reported on
the Nasdaq National Market or other principal market on which the Common
Stock is then traded, shall have equaled or exceeded five dollars ($5.00)
per share for any seven (7) consecutive trading days, provided that such
date occurs on or before September 30, 1997.
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