CREDIT AGREEMENT
This Credit Agreement ("Agreement") is made and entered into on August 2, 1999,
by and between Monterey Pasta Company, a Delaware corporation ("Borrower") and
Imperial Bank, a California banking corporation, ("Bank").
Subject to the terms and conditions of this Agreement, any security agreement(s)
executed by Borrower in favor of Bank, any note(s) executed by Borrower in favor
of Bank, or any other agreements executed in conjunction therewith
(collectively, the "Loan Documents"), Bank shall make the loans and or advances
(individually a "Loan" and collectively "Loans") referred to below to Borrower.
In consideration of mutual covenants and conditions hereof, the parties hereto
agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.01 REVOLVING CREDIT COMMITMENT.
(a) REVOLVING LINE OF CREDIT. Subject to the terms and conditions
of this Agreement, provided that no event of default then has occurred and is
continuing, Bank shall, upon Borrower's request make advances ("Revolving
Loans") to Borrower, for working capital requirements of Borrower, in an amount
not to exceed $1,500,000 (the "Revolving Line of Credit") until July 31, 2000
(the "Revolving Line of Credit Maturity Date"). Revolving Loans may be repaid
and reborrowed, provided that all outstanding principal and accrued interest on
the Revolving Loans shall be payable in full on the Revolving Credit Maturity
Date.
(b) REVOLVING NOTE. The interest rate, principal and interest
payments, maturity date and certain other terms of the Revolving Loan will be
contained in a promissory note dated the date of this agreement, as such may be
amended or replaced from time to time.
1.02
TERM LOAN COMMITMENT.
(a) TERM LOAN. Subject to the terms and conditions of this
Agreement, Bank shall make available to Borrower a term loan (the "Term Loan")
in the amount of $1,250,000, the proceeds of which shall be used only for the
payoff of Borrower's current obligations to Bank as represented by note #6 and
note #7.
(b) TERM LOAN NOTE. The interest rate, principal and interest
payments, maturity date and certain other terms of the Term Loan will be
contained in a promissory note dated the date of this agreement, as such may
be amended or replaced from time to time.
1.03 CONVERTING REVOLVING CREDIT.
(a) CONVERTING REVOLVING LINE OF CREDIT COMMITMENT. Subject to the
terms and conditions of this Agreement, between the date of this Agreement and
August 5, 2004, (the "Converting Revolving Line Termination Date"), provided
that no event of default has occurred and is continuing, Bank hereby agrees to
make advances ("Converting Revolving Loans") to Borrower from time to time not
to exceed at
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any one time the aggregate principal amount of Two Million Dollars ($2,000,000)
(the "Converting Revolving Line of Credit"), the proceeds of which shall be only
used by Borrower for major capital expenditures and approved acquisitions.
Borrower may from time to time through the Converting Revolving Termination Date
borrow, partially or wholly repay its outstanding borrowings, and reborrow any
amount of the Converting Revolving Loans repaid, subject to all of the
limitations, terms and conditions contained herein or in the promissory note
representing the Converting Revolving Line of Credit; provided however, that the
total outstanding borrowings under the Converting Revolving Line of Credit shall
not at any time exceed the maximum principal amount available thereunder, as set
forth above. After the Converting Revolving Line Termination Date any amounts
repaid may not be reborrowed. All advances outstanding on the Converting
Revolving Line Termination Date shall be repaid in forty-eight (48) equal
monthly principal payments plus interest.
(b) CONVERTING REVOLVING NOTE. The interest rate, principal and
interest payments, maturity date and certain other terms of the Converting
Revolving Loans will be contained in a promissory note dated the date of this
agreement, as such may be amended or replaced from time to time.
(c) LATE CHARGE. If any installment payment, interest payment,
principal payment or principal balance due under the Loans is delinquent twenty
(20) or more days, Borrower agrees to pay Bank a late charge in the amount of
five percent (5%) of the payment so due and unpaid, in addition to the payment;
but nothing in this paragraph is to be construed as any obligation on the part
of the Bank to accept payment of any payment past due or less than the total
unpaid principal balance after maturity. All payments, at Bank's sole
discretion, shall be applied first to any late charges owing, then to interest
and the remainder, if any, to principal.
(d) DEFAULT RATE. If an Event of Default occurs hereunder, then
during the continuance thereof at the Bank's option, the interest rate shall be
five percent (5%) per year in excess of the rate otherwise applicable.
(e) INTEREST CALCULATIONS. The term "Prime Rate" shall mean the
rate that the Bank has announced as its prime lending rate, which shall vary
concurrently with any change in the Prime Rate. Interest based on the Prime Rate
shall vary concurrently with any change in the Prime Rate. All interest shall be
computed at the rate specified in any note on the basis of the actual number of
days during which the principal balance of the corresponding Loans are
outstanding divided by 360, which shall for interest computation purposes be
considered one (1) year.
1.04 DOCUMENTATION FEE, COSTS AND EXPENSES. In addition to any
other amounts due, or to become due, concurrently with the execution hereof,
Borrower agrees to pay to Bank a documentation fee in the amount of $750.00,
and all other costs and expenses incurred by the Bank in the preparation of this
Agreement, the other Loan Documents and the perfection of any security interest
granted to Bank by Borrower.
1.05 COLLATERAL. Borrower shall grant or cause to be granted to
Bank a first priority lien on any and all personal property assets of Borrower
which is assigned or hereafter is assigned to Bank as security or in which Bank
now has or hereafter acquires a security interest or pursuant to the terms of
any security agreement, or otherwise as security for all of Borrower's
obligations to Bank, all as may be subject to Section 5.03 herein.
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1.06 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all interest, fees, costs, and/or expenses due under this Agreement by charging
Borrower's demand deposit account number 00-000-000 with Bank, or any other
demand deposit account maintained by Borrower with Bank, for the full amount
thereof. Should there be insufficient funds in any such demand deposit account
to pay all such sums when due, the full amount of such deficiency shall be
immediately due and payable by Borrower.
2. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
2.01 EXISTENCE AND RIGHTS. Borrower is a corporation, duly
organized and existing and in good standing under the laws of the state of
California, which shall survive at least five years beyond the maturity of any
Loans hereunder Borrower is authorized and in good standing to do business in
the state of its incorporation; Borrower has the appropriate powers and adequate
authority, rights and franchises to own its property and to carry on its
business as now conducted, and is duly qualified and in good standing in each
state in which the character of the properties owned by it therein or the
conduct of its business makes such qualification necessary; and Borrower has
the power and adequate authority to make and carry out this Agreement. Borrower
has no investment in any other business entity unless specified in writing to
Bank.
2.02 AGREEMENT AUTHORIZED. The execution, delivery and performance
of this Agreement and the Loan Documents are duly authorized and do not require
the consent or approval of any governmental body or other regulatory authority;
are not in contravention of or in conflict with any law or regulation or any
term or provision of Borrower 's charter/articles of incorporation, or similar
document as the case may be, and this Agreement is the valid, binding and
legally enforceable obligation of Borrower in accordance with its terms; subject
only to bankruptcy, insolvency or similar laws affecting creditors rights
generally.
2.03 NO CONFLICT. The execution, delivery and performance of this
Agreement and the Loan Documents are not in contravention of or in conflict with
any agreement, indenture or undertaking to which Borrower is a party or by which
it or any of its property may be bound or affected, and do not cause any lien,
charge or other encumbrance to be created or imposed upon any such property by
reason thereof.
2.04 LITIGATION. Except as disclosed in writing to Bank by
Borrower, there is no litigation or other proceeding pending or threatened
against or affecting Borrower which if determined adversely to Borrower or its
interest would have a material adverse effect on the financial condition of
Borrower, and Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or other governmental or regulatory
authority.
2.05 FINANCIAL CONDITION. The balance sheet of Borrower as of May
23, 1999, and the related profit and loss statement for the same period ended as
of that date, a copy of which has heretofore been delivered to Bank by Borrower,
and all other statements and data submitted in writing by Borrower to Bank in
connection with this request for credit are true and correct, and said balance
sheet truly presents the financial condition of Borrower as of the date thereof,
and has been prepared in accordance with generally accepted accounting
principles on a basis consistently maintained. Since such date there have been
no material adverse changes in the financial condition or business of Borrower.
Borrower has no knowledge of any liabilities, contingent or otherwise, at such
date not reflected in said balance sheet,
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and Borrower has not entered into any special commitments or substantial
contracts which are not reflected in said balance sheet, other than in the
ordinary and normal course of its business, which may have a materially adverse
effect upon its financial condition, operations or business as now conducted.
2.06 TITLE TO ASSETS. Borrower has good title to its assets, and
the same are not subject to any liens or encumbrances other than those permitted
by Section 5.03 hereof.
2.07 TAX STATUS. Borrower has no liability for any delinquent
state, local or federal taxes, and, if Borrower has contracted with any
government agency, Borrower has no liability for renegotiation of profits.
2.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof,
possesses all necessary trademarks, trade names, copyrights, patents, patent
rights, and licenses to conduct its business as now operated, without any known
conflict with the valid trademarks, trade names, copyrights, patents and license
rights of others.
2.09 REGULATION U. None of the proceeds of any Loan shall be used
to purchase or carry margin stock (as defined within Regulation U of the Board
of Governors of the Federal Reserve system).
2.10 ERISA. All defined benefit pension plans as defined in the
Employees Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.
2.11 YEAR 2000 COMPLIANCE. Borrower and its subsidiaries, as
applicable, have reviewed the areas within their operations and business which
could be adversely affected by, and have developed or are developing a program
to address on a timely basis, the Year 2000 Problem and have made related
appropriate inquiry of material suppliers and vendors, and based on such review
and program, the Year 2000 Problem will not have a material adverse effect upon
its financial condition, operations or business as now conducted. "Year 2000
Problem" means the possibility that any computer applications or equipment used
by Borrower may be unable to recognize and properly perform date sensitive
functions involving certain dates prior to and any dates one or after December
31, 1999.
3. CONDITIONS PRECEDENT TO LOAN
Prior to Bank being obligated to make any Loan pursuant to
this Agreement, Bank must receive all of the following, each of which must be in
form and substance satisfactory to Bank:
3.01 PROMISSORY NOTE(S). Original, executed promissory note(s) as
applicable.
3.02 SECURITY AGREEMENT. Original, executed security agreement(s)
covering the personal property collateral securing the Loan(s).
3.03 FINANCING STATEMENT. Financing statement(s) executed by
Borrower and any grantor of a security interest.
3.04 INSURANCE. Borrower shall have delivered to Bank evidence
of insurance coverage required pursuant to that Agreement to Provide Insurance
executed by Borrower, in form, substance,
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amounts, covering risks and issued by companies satisfactory to Bank, and where
required by Bank, with loss payable endorsements in favor of Bank.
3.05 ORGANIZATIONAL DOCUMENTS. Copies of the articles of
incorporation or similar document as the case may be, of the any.
3.06 AUTHORIZATIONS. Certified copies of all action taken by any
Borrower to authorize the execution, delivery and performance of the Loan
Documents.
3.07 GOOD STANDING . Good standing certificates from the
appropriate secretary of state of the state in which any Borrower is organized
and in each state in which it is required to be qualified to do business.
3.08 LOAN PAY DOWN. Principal payment in the amount of $41,666.72
to be applied to note number 6, plus payment of all accrued but unpaid interest
on notes 6 and 7 to the date of disbursement hereunder.
3.09 ADDITIONAL DOCUMENTS. Such other documents as Bank may
reasonably deem necessary.
4. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under borrowings, or
other indebtedness, or so long as Bank has any obligation to extend credit to
Borrower it will, unless Bank shall otherwise consent in writing:
4.01 RIGHTS AND FACILITIES. Maintain and preserve all rights,
franchises and other authority adequate for the conduct of its business;
maintain its properties, equipment and facilities in good order and repair;
conduct its business in an orderly manner without voluntary interruption and,
if a corporation or partnership, maintain and preserve its existence.
4.02 USE OF PROCEEDS. Use the proceeds of the Loans only for
purposes specified in Section 1 of this Agreement.
4.03 INSURANCE. Maintain public liability, property damage and
workers' compensation insurance and insurance on all its insurable property
against fire and other hazards with responsible insurance carriers to the
extent usually maintained by similar businesses and/or in the exercise of good
business judgment, and as required by that Agreement to Provide Insurance
executed by Borrower, with the Bank to be shown as Lenders Loss Payee on such
policies.
4.04 TAXES AND OTHER LIABILITIES. Pay and discharge, before the
same become delinquent and before penalties accrue thereon, all taxes,
assessments and governmental charges upon or against it or any of its
properties, and all its other liabilities at any time existing, except to the
extent and so long as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse effect upon
its financial condition or the loss of any right of redemption from any sale
thereunder; and
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(b) It shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it to be adequate
with respect thereto.
4.05 RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at all reasonable times and
upon reasonable notice during normal business hours; and furnish Bank:
(a) MONTHLY FINANCIAL STATEMENT. As soon as available, and in any
event within Thirty (30) days after the close of each month, a balance sheet,
profit and loss statement and reconciliation of Borrower's capital balance
accounts as of the close of such period and covering operations for the portion
of Borrower's fiscal year ending on the last day of such period, all in
reasonable detail and reasonably acceptable to Bank, in accordance with
generally accepted accounting principles on a basis consistently maintained by
Borrower .
(b) QUARTERLY FINANCIAL STATEMENT. As soon as available, and in
any event within Forty-five (45) days after the close of each calendar quarter,
deliver to Bank a from 10Q containing a balance sheet, profit and loss statement
in form satisfactory and reasonably acceptable to Bank.
(c) ANNUAL FINANCIAL STATEMENT. As soon as available, and in any
event within Ninety (90) days after and as of the close of each fiscal year of
Borrower, a consolidated report of audit (10K) of Company, all in reasonable
detail, audited by an independent certified public accountant selected by
Borrower and reasonably acceptable to Bank, in accordance with generally
accepted accounting principles on a basis consistently maintained by Borrower.
(d) OFFICER'S CERTIFICATE. Within Thirty (30) days after the end
of each month of Borrower, a certificate of the chief financial officer of
Borrower, stating that Borrower has performed and observed each and every
covenant contained in this Agreement to be performed by it and that no event has
occurred and no condition then exists which constitutes an event of default
hereunder or would constitute such an event of default upon the lapse of time or
upon the giving of notice and the lapse of time specified herein; or, if any
such event has occurred or any such condition exists, specifying the nature
thereof in the form of exhibit 4.05 attached hereto.
(e) AUDIT REPORTS. Promptly after the receipt thereof by Borrower,
copies of any detailed audit reports submitted to Borrower by independent
accountants in connection with each annual or interim work on the accounts of
Borrower made by such accountants;
(f) STOCKHOLDER, SECURITY AND EXCHANGE COMMISSION STATEMENTS AND
REPORTS Promptly after the same are available, copies of all such proxy
statements, financial statements and reports as Borrower or any subsidiary shall
send to its members or stockholders as appropriate, if any, and copies of all
reports which Borrower or any subsidiary may file with the Securities and
Exchange Commission.
(g) OTHER INFORMATION. Such other information relating to the
affairs of Borrower as the Bank reasonably may request from time to time.
4.06 CURRENT RATIO. Maintain at all times a minimum ratio of total
current assets (excluding all amounts due from stockholders, officers and
affiliates) divided by total current liabilities (including all amounts due to
stockholders, officers and affiliates) of 1.25 to 1.00.
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4.07 WORKING CAPITAL. Maintain at all times working capital,
meaning current assets (excluding all amounts due from stockholders, officers
and affiliates) minus total current liabilities (including all amounts due to
stockholders, officers and affiliates) of not less than One Million Two Hundred
Fifty Thousand Dollars ($1,250,000).
4.08 TANGIBLE NET WORTH. Maintain at all times Tangible Net Worth
(defined as stockholder's equity less any value for goodwill, trademarks,
patents, copyrights, leaseholds, organization expense and other similar
intangible items, and any amounts due from stockholders, officers and
affiliates) plus Subordinated Debt, meaning debt subordinated to the obligations
of Borrower to Bank, in form and substance satisfactory to Bank, of not less
than Six million Two Hundred Fifty Thousand Dollars ($6,250,000). Increasing by
$300,000 as of the end of each fiscal quarter starting with the fiscal quarter
ending September 30, 1999.
4.09 DEBT TO TANGIBLE NET WORTH. Maintain at all times a ratio of
total liabilities less Subordinated Debt (as defined in 4.08) to Tangible Net
Worth (as defined in 4.08), of not greater than 1.00 to 1.00.
4.10 DEBT COVERAGE RATIO. Maintain on an annual basis a ratio EBIDA
divided by Current Portion of Long Term Debt, and capital leases plus interest
expense of not less than 1.75 to 1.00. EBIDA shall mean the sum of (a) net
income after taxes, plus (b) interest expense, plus (c) depreciation and
amortization expense (excludes slotting amortization).
4.11 ERISA. Cause all defined benefit pension plans, as defined in
ERISA, of Borrower to, at all times, meet the minimum funding standards of
Section 302 of ERISA, and ensure that no Reportable Event or Prohibited
Transaction, as defined in ERISA, will occur with respect to any such plan.
4.12 LAWS. At all times comply with, or cause to be complied with,
all laws, statues, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business.
4.13 GAAP. Compliance with all financial covenants shall be
calculated based on generally accepted accounting principles applied on a
consistent basis as maintained by Borrower.
4.14 YEAR 2000 COMPLIANT. Borrower shall perform all acts
reasonably necessary to ensure that (a) Borrower and any business in which
Borrower holds a substantial interest, and (b) all customers, suppliers and
vendors whose compliance is likely to be material to Borrower's business, become
Year 2000 Compliant in a timely manner. Such acts shall include, without
limitation, performing a comprehensive review and assessment of all Borrower's
systems and adopting a detailed plan, with itemized budget, for the remediation,
monitoring and testing of such systems. As used in this paragraph, "Year 2000
Compliant" shall mean, in regard to any entity, that all software, hardware,
firmware, equipment, goods or systems utilized by or material to the business
operations or financial condition of such entity, will properly perform date
sensitive functions before, during and after the year 2000. Borrower shall,
immediately upon request, provide to Agent such certifications or other evidence
of Borrower's compliance with the terms of this paragraph as Bank may from time
to time require.
4.15 OPERATING ACCOUNTS. Maintain all primary accounts and banking
relationship with the Bank. Maintain, or cause to be maintained, on deposit with
Bank, non-interest bearing demand deposit
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balances sufficient to compensate Bank for all services provided by Bank.
Balances shall be calculated after reduction for the reserve requirement of the
Federal Reserve Board and uncollected funds. Any deficiencies shall be charged
directly to the Borrower on a monthly basis.
4.16 NOTICES. Promptly notify Bank in writing of (i) the occurrence
of any Event of Default hereunder or any event which upon notice and lapse of
time would be an Event of Default; (ii) all litigation affecting Borrower where
the amount is $50,000 or more; any substantial dispute which may exist between
Borrower and any governmental regulatory body or law enforcement authority; any
change in Borrower's name or principal place of business; or any other matter
which has resulted or might result in a material adverse change in Borrower's
financial condition or operations.
4.17 AUDITS. Permit representatives of Bank to conduct audits of
Borrower's books and records relating to the Accounts, Inventory and other
Collateral and make extracts therefrom, with results satisfactory to Bank,
PROVIDED that Bank shall use its best efforts to not interfere with the conduct
of Borrower's business, and to the extent possible to arrange for verification
of the Accounts directly with the account debtors obligated thereon or
otherwise, all under reasonable procedures acceptable to Bank and at Borrower's
sole expense; PROVIDED FURTHER that, prior to an Event of Default, Borrower
shall not be responsible for the expense of any such audit.
5. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, or so long as Bank has
any obligation to extend credit to Borrower, it will not, without Bank's written
consent:
5.01 TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in
the character of its business; or make any change in its executive management.
5.02 OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness for borrowed moneys other than Loans from the Bank except
obligations now existing as shown in the financial statement dated May 31, 1999,
other than those Permitted Indebtedness listed on Schedule 5.02 attached hereto
or sell or transfer, either with or without recourse, any accounts or notes
receivable or any moneys due or to become due.
5.03 LIENS AND ENCUMBRANCES. Create, incur, permit to exist, or
assume any mortgage, pledge, encumbrance, lien or charge of any kind upon any
asset now owned or hereafter acquired by it, other than liens for taxes not
delinquent and liens in Bank's favor and other than liens agreed to in writing
by Bank and other than those Permitted Liens listed in Schedule 5.03 attached
hereto.
5.04 LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or
advances to any person or other entity other than in the ordinary and normal
course of its business as now conducted or make any investment in the securities
of any person or other entity other than the United States Government; or
guarantee or otherwise become liable upon the obligation of any person or other
entity, except by endorsement of negotiable instruments for deposit or
collection in the ordinary and normal course of its business other than those
listed in Schedule 5.04 attached hereto.
5.05 ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION.
Purchase or otherwise acquire the assets or business of any person or other
entity; or liquidate, dissolve, merge or consolidate, or commence any
proceedings therefor; or sell any assets except in the ordinary and normal
course of its business as now conducted; or sell, lease, assign, or transfer
any substantial part of its business or fixed
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assets, or any property or other assets necessary for the continuance of its
business as now conducted, including without limitation the selling of any
property or other asset accompanied by the leasing back of the same.
5.06 CAPITAL EXPENDITURES. Make or incur obligations for fixed or
capital assets, which includes purchase money indebtedness or capital lease
obligations in excess of $1,500,000 in any one fiscal year.
5.07 DIVIDENDS Declare or pay any dividend or make any other
distribution on any of its capital stock now outstanding or hereafter issued or
purchase, redeem or retire any of such stock other than in dividends or
distributions payable in Borrower's capital stock, except for the repurchase of
Borrower's capital stock from officers, directors, employees or consultants of
Borrower upon termination of their employment with or rendering of service to
Borrower.
5.08 SUBORDINATED LIABILITIES. Make any payments on any Borrower's
obligation subordinated to the obligations to Bank, other than in accordance
with the provisions of any subordination agreement executed by the Bank and the
subordinated debt holder.
6. EVENTS OF DEFAULT
The occurrence of any of the following events of default ("Events of Default")
shall, at Bank's option, terminate Bank's commitment to lend and make all sums
of principal and interest then remaining unpaid on all Borrower's indebtedness
to Bank immediately due and payable, all without demand, presentment or notice,
all of which are hereby expressly waived:
6.01 FAILURE TO PAY. Failure to pay any installment of principal or
of interest on any indebtedness of Borrower to Bank within, five (5) days of its
due date.
6.02 BREACH OF COVENANT. Failure of Borrower to perform any other
term or condition of this Agreement or any Loan Document binding upon Borrower.
6.03 BREACH OF WARRANTY. Any of Borrower's representations or
warranties made herein or any statement or certificate at any time given in
writing pursuant hereto or in connection herewith shall be false or misleading
in any respect.
6.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become
insolvent; or admit its inability to pay its debts as they mature; or make an
assignment for the benefit of creditors; or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business.
6.05 JUDGMENTS, ATTACHMENTS. Any money judgment in excess of
$50,000, writ or warrant of attachment, or similar process shall be entered or
filed against Borrower or any of its assets and shall remain unvacated, unbonded
or unstayed for a period of ten (10) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder.
6.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against Borrower
and, if instituted against it, shall not be dismissed within thirty (30) days
thereafter.
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6.07 REVOCATION OF SUBORDINATION AGREEMENT. Any subordination
agreement required hereunder is breached or becomes ineffective; or any
Guarantor or subordination creditor disavows or attempts to revoke or terminate
such guarantee or subordination agreement.
6.08 CESSATION OF BUSINESS. Borrower shall voluntarily suspend its
business.
6.09 ADVERSE CHANGE. Any change which, in the opinion of Bank, is
materially adverse to the financial condition of Borrower or any Guarantor; or
should Bank, for any reason, believe that the prospect of Borrower's payment or
performance hereunder or under any other agreement or instrument with Bank be
impaired.
6.10 OTHER DEFAULTS. Borrower, or any Guarantor of Borrower's
obligations to Bank, shall commit or do or fail to commit or do any act or thing
which would constitute an event of default under any of the terms of any other
agreement, document or instrument executed or to be executed by it concerning
the obligation to pay money.
6.11 ADVANCES. Notwithstanding anything to the contrary contained
herein, Bank shall have no duty to make advances while any event of default
exists notwithstanding any cure period provided for herein.
7. MISCELLANEOUS PROVISIONS
7.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of Bank or any holder of notes issued hereunder, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement or any note(s) issued in
connection with a Loan that Bank may make hereunder, are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
7.02 COUNTERPARTS; ENTIRE AGREEMENT. This Agreement may be executed
by the parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall constitute together but one and the same
agreement. This Agreement, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any prior agreements, written or oral, with respect thereto.
7.03 ATTORNEY'S FEES. Borrower will pay promptly to Bank without
demand after notice, with interest thereon from the date of expenditure at the
rate applicable to the Loan, reasonable attorneys' fees and all costs and
expenses paid or incurred by Bank in collecting or compromising the Loan after
the occurrence of an Event of Default, whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
7.04 ADDITIONAL REMEDIES. The rights, powers and remedies given to
Bank hereunder shall be cumulative and not alternative and shall be in addition
to all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.05 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.
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7.06 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the state of California, to the jurisdiction
of whose courts the parties hereby agree to submit.
7.07 OFFSET. In addition to and not in limitation of all rights of
offset that Bank or other holder of the Loan may have under applicable law, Bank
or other holder of any note issued hereunder shall, upon the occurrence of any
Event of Default or any event which with the passage of time or notice would
constitute such an Event of Default, have the right to appropriate and apply to
the payment of the Loan any and all balances, credits, deposits, accounts or
monies of Borrower then or thereafter with Bank or other holder, within ten (10)
days after the Event of Default, and notice of the occurrence of any Event of
Default by Bank to Borrower.
7.08 SEVERABILITY. Should any one or more provisions of the
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective.
7.09 TIME OF THE ESSENCE. Time is hereby declared to be of the
essence of this Agreement and of every part hereof.
7.10 ACCOUNTING. All accounting terms shall have the meanings
applied under generally accepted accounting principles unless otherwise
specified.
7.11 REFERENCE PROVISION.
(a) Other than (i) nonjudicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this Credit
Agreement, any security agreement executed by Borrower in favor of Bank or any
note executed by Borrower in favor of Bank or any other agreement or instrument
issued in favor of Bank by Borrower (collectively in this Section, the
"Agreement") which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "CLAIM DATE" (defined as the date on which a
party subject to this Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 ET SEQ. of the
California Code of Civil Procedure, or their successor section ("CCP"), which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as set forth
above, the parties waive their rights to initiate any legal proceedings against
each other in any court or jurisdiction other than the Superior Court in the
County where the Real Property, if any, is located or Los Angeles County if none
(the "COURT"). The referee shall be a retired Judge of the Court selected by
mutual agreement of the parties, and if they cannot so agree within forty-five
(45) days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP Section170.6. The referee shall (a) be requested to set the
matter for hearing within sixty (60) days after the date of selection of the
referee and (b) try any and all issues of law or fact and report a statement of
decision upon them, if possible, within ninety (90) days of the Claim Date. Any
decision rendered by the referee will be final, binding and conclusive and
judgment shall be entered pursuant to CCP Section644 in any court in the state
of
11
California having jurisdiction. Any party may apply for a reference proceeding
at any time after thirty (30) days following notice to any other party of the
nature of the controversy, dispute or claim, by filing a petition for a hearing
and/or trial. All discovery permitted by this Agreement shall be completed no
later than fifteen (15) days before the first hearing date established by the
referee. The referee may extend such period in the event of a party's refusal to
provide requested discovery for any reason whatsoever, including, without
limitation, legal objections raised to such discovery or unavailability of a
witness due to absence or illness. No party shall be entitled to "priority" in
conducting discovery. Depositions may be taken by either party upon seven (7)
days written notice, and request for production or inspection of documents shall
be responded to within ten (10) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Superior Court is empowered
to issue temporary and/or provisional remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in accordance
with existing case law and the statutory laws of the state of California. The
rules of evidence applicable to proceedings at law in the state of California
will be applicable to the reference proceeding. The referee shall be empowered
to enter equitable as well as legal relief, to provide all temporary and/or
provisional remedies and to enter equitable orders that will be binding upon the
parties. The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of laws, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section1280 through Section1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
7.12 This Agreement may be modified only by a writing signed by all parties
hereto.
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This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
IMPERIAL BANK MONTEREY PASTA COMPANY, A
("BANK") DELAWARE CORPORATION
("BORROWER")
By: By:
------------------------------- ---------------------------------
Xxxxx X. Xxxxxx R. Xxxxx Xxxxxx
Senior Vice President Chief Executive Officer
Its: Its:
------------------------------ --------------------------------
By:
---------------------------------
Xxxxxxx X. Xxxxxxxx
Chief Financial Officer
Its:
--------------------------------
13
Exhibit "4.05"
COMPLIANCE CERTIFICATE
The financial statement of MONTEREY PASTA COMPANY (Borrower) attached hereto
dated as of 6/27/99, and submitted to Imperial Bank pursuant to the
Credit Agreement between us dated 8/2/99, shows compliance with all
financial covenants (unless otherwise noted, below) as specified therein, as
follows:
COVENANT: ACTUAL:
4.06 Minimum Current Ratio 1.25:1.00 1.50
----------
4.07 Minimum Working Capital $1,250,000 1,853,654
----------
4.08 Minimum Tangible Net Worth: $6,250,000 7,337,189
----------
4.09 Debt/TNW 1.00:1.00 53
----------
4.10 Minimum EBIDA Coverage Ratio (Annual): 1.75:1.0 Annual
----------
Exceptions: (If none, so state) None
------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The undersigned authorized officer of MONTEREY PASTA COMPANY. hereby certifies
that Borrower is in complete compliance with the terms and conditions of the
Credit Agreement for the period ending 6/27/99, except as noted above. I know of
no pending conditions which may cause an Event of Default to exist in the next
thirty (30) days. The required support documents for this certification are
attached and prepared in accordance with generally accepted accounting
principles, consistently applied.
DATE: 8/5/99
-------------------------------------------- ------------------------------
Signed Xxxxxxx X. Xxxxxxxx
Authorized Officer of MONTEREY PASTA COMPANY
Name: Xxxxxxx X. Xxxxxxxx
----------------------------------------
Title: Chief Financial Officer ( Please Print)
-----------------------------------------------------
