EXHIBIT 10.40
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of June 1, 1997, by and between PROVENA FOODS INC., a California
corporation ("Borrower"), and XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
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WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of February 1, 1995, as amended from time to time ("Credit Agreement").
WHEREAS, Bank and Borrower have agreed to certain changes in the terms and
conditions set forth in the Credit Agreement and have agreed to amend the Credit
Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the Credit
Agreement shall be amended as follows:
1. Section 1.1(a) is hereby amended by deleting "June 1, 1997" as the last
day on which Bank will make advances under the Line of Credit, and by
substituting for said date "June 1, 1998," with such change to be effective
upon the execution and delivery to Bank of a promissory note substantially in
the form of Exhibit A attached hereto (which promissory note shall replace and
be deemed the Line of Credit Note defined in and made pursuant to the Credit
Agreement) and all other contracts, instruments and documents required by Bank
to evidence such change.
2. Section 4.9(a) is hereby deleted in its entirety, and the following
substituted therefor:
"(a) Current Ratio not at any time less than 2.00 to 1.0, with "Current
Ratio" defined as total current assets divided by total current
liabilities."
3. Section 4.9(b) is hereby deleted in its entirety, and the following
substituted therefor:
"(b) Tangible Net Worth not at any time less than $7,150,000.00, with
"Tangible Net Worth" defined as the aggregate of total stockholders' equity
plus subordinated debt less any intangible assets."
4. Section 4.9(e) is hereby deleted in its entirety, and the following
substituted therefor:
"(e) EBITDA Coverage Ratio not less than 1.75 to 1.0 as of each fiscal
year end, with "EBITDA" defined as net profit before tax plus interest
expense (net of capitalized interest expense), depreciation expense and
amortization expense, and with "EBITDA Coverage Ratio" defined as
EBITDA divided by the aggregate of total interest expense plus the
prior period current maturity of long-term debt and the prior period
current maturity of subordinated debt."
5. The following is hereby added to the Credit Agreement as Section 7.10:
"SECTION 7.10. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
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resolved by binding arbitration (except as set forth in (e) below) in
accordance with the terms of this Agreement. A "Dispute" shall mean any
action, dispute, claim or controversy of any kind, whether in contract or
tort, statutory or common law, legal or equitable, now existing or hereafter
arising under or in connection with, or in any way pertaining to, any of the
Loan Documents, or any past, present or future extensions of credit and
other activities, transactions or obligations of any kind related directly
or indirectly to any of the Loan Documents, including without limitation,
any of the foregoing arising in connection with the exercise of any self-
help, ancillary or other remedies pursuant to any of the Loan Documents. Any
party may by summary proceedings bring an action in court to compel
arbitration of a Dispute. Any party who fails or refuses to submit to
arbitration following a lawful demand by any other party shall bear all
costs and expenses incurred by such other party in compelling arbitration of
any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by
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the American Arbitration Association ("AAA") or such other administrator as
the parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved
in accordance with the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
Loan Documents. The arbitration shall be conducted at a
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location in California selected by the AAA or other administrator. If there
is any inconsistency between the terms hereof and any such rules, the
terms and procedures set forth herein shall control. All statutes of
limitation applicable to any Dispute shall apply to any arbitration
proceeding. All discovery activities shall be expressly limited to matters
directly relevant to the Dispute being arbitrated. Judgment upon any award
rendered in an arbitration may be entered in any court having jurisdiction;
provided however, that nothing contained herein shall be deemed to be a
waiver by any party that is a bank of the protections afforded to it
under 12 U.S.C. (S)91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
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provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachement,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards.
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Arbitrators must be active members of the California State Bar or retired judges
of the state or federal judiciary of California, with expertise in the
substantive laws applicable to the subject matter of the Dispute. Arbitrators
are empowered to resolve Disputes by summary rulings in response to motions
filed prior to the final arbitration hearing. Arbitrators (i) shall resolve all
Disputes in accordance with the substantive law of the state of California, (ii)
may grant any remedy or relief that a court of the state of California could
order or grant within the scope hereof and such ancillary relief as is necessary
to make effective any award, and (iii) shall have the power to award recovery of
all costs and fees, to impose sanctions and to take such other actions as they
deem necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater
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than $5,000,000 (including damages, costs, fees and expenses). By submission to
a single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary, in
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any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding anything
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herein to the contrary, no Dispute shall be submitted to arbitration if the
Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure
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Section 638 et seq., and this general reference agreement is intended to be
specifically enforceable in accordance with said Section 638. A referee
with the qualifications required herein for arbitrators shall be selected
pursuant to the AAA's selection procedures. Judgment upon the decision
rendered by a referee shall be entered in the court in which such
proceeding was commenced in accordance with California Code of Civil
Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
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arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with
the AAA. No arbitrator or other party to an arbitration proceeding may
disclose the existence, content or results thereof, except for disclosures
of information by a party required in the ordinary course of its business,
by applicable law or regulation, or to the extent necessary to exercise any
judicial review rights set forth herein. If more than one agreement for
arbitration by or between the parties potentially applies to a Dispute, the
arbitration provision most directly related to the Loan Documents or the
subject matter of the Dispute shall control. This arbitration provision
shall survive termination, amendment or expiration of any of the Loan
Documents or any relationship between the parties."
6. Except as specifically provided herein, all terms and conditions of
the Credit Agreement remain in full force and effect, without waiver or
modification. All terms defined in the Credit Agreement shall have the same
meaning when used in this Amendment. This Amendment and the Credit Agreement
shall be read together, as one document.
7. Borrower hereby remakes all representations and warranties contained
in the Credit Agreement and reaffirms all covenants set forth therein. Borrower
further certifies that as of the date of this Amendment there exists no Event of
Default as defined in the Credit Agreement, nor any condition, act or event
which with the giving of notice or the passage of time or both would constitute
any such Event of Default.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
XXXXX FARGO BANK,
PROVENA FOODS INC. NATIONAL ASSOCIATION
By: /s/ Xxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxx
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Title: Chairman of the Board Xxxxxx X. Xxxxxx
--------------------------- Vice President
and Chief Executive Officer
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XXXXX FARGO BANK REVOLVING LINE OF CREDIT NOTE
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$2,000,000.00 Irvine, California
June 1, 1997
FOR VALUE RECEIVED, the undersigned PROVENA FOODS INC. ("Borrower")
promises to pay to the order of XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at ORANGE COAST RCBO, 0000 XXXX XXXXXX XXXXX 000, XXXXXX, XX
00000, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of $2,000,000.00, or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement as set forth herein.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall bear
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interest (computed on the basis of a 360-day year, actual days elapsed) at a
rate per annum .37500% above the Prime Rate in effect from time to time. The
"Prime Rate" is a base rate that Bank from time to time establishes and which
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto. Each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is announced
within Bank.
(b) Payment of Interest. Interest accrued on this Note shall be payable on
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the 1ST day of each MONTH, commencing JULY 1, 1997.
(c) Default Interest. From and after the maturity date of this Note, or
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such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to 4% above the rate of
interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during the
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term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of the Credit Agreement between Borrower and Bank defined below;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
hereunder by the holder hereof less the amount of principal payments made hereon
by or for any Borrower, which balance may be endorsed hereon from time to time
by the holder. The outstanding principal balance of this Note shall be due and
payable in full on JUNE 1, 1998.
(b) Advances. Advances hereunder, to the total amount of the principal sum
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available hereunder, may be made by the holder at the oral or written request of
(i) XXXXXX X. XXXXXXXX OR XXXX X. XXXXXXXX, any one acting alone, who are
authorized to request advances and direct the disposition of any advances until
written notice of the revocation of such authority is received by the holder at
the office designated above, or (ii) any person, with respect to advances
deposited to the credit of any account of any Borrower with the holder, which
advances, when so deposited, shall be conclusively presumed to have been made to
or for the benefit of each Borrower regardless of the fact that persons other
than those authorized to request advances may have authority to draw against
such account. The holder shall have no obligation to determine whether any
person requesting an advance is or has been authorized by any Borrower.
(c) Application of Payments. Each payment made on this Note shall be
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credited first, to any interest then due and second, to the outstanding
principal balance hereof.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of
that certain Credit Agreement between Borrower and Bank dated as of FEBRUARY 1,
1995, as amended from time to time (the "Credit Agreement"). Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an "Event of Default"
under this NOte.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default as defined in
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the Credit Agreement, the holder of this Note, at the holder's option, may
declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, notice or
nonperformance, notice of protest, protest or notice of dishonor, all of which
are expressly waived by each Borrower, and the obligation, if any, of the holder
to extend any further credit hereunder shall immediately cease and terminate.
Each Borrower shall pay to the holder immediately upon demand the full amount of
all payments, advances, charges, costs and expenses, including reasonable
attorneys' fees (to include outside counsel fees and all allocated costs of the
holder's in-house counsel), expended or incurred by the holder in connection
with the enforcement of the holder's rights and/or the collection of any amounts
which become due to the holder under this Note, and the prosecution or defense
of any action in any
REVOLVING LINE OF CREDIT NOTE (08/96), PAGE 1
way related to this Note, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity.
(b) Obligations Joint and Several. Should more than one person or entity
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sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
(c) Governing Law. This Note shall be governed by and construed in
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accordance with the laws of the state of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
PROVENA FOODS, INC.
By: /s/ Xxxx X. Xxxxxxxx
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Title: Chairman of the Board
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and Chief Executive Officer
