1
PROMISSORY NOTE
$2,750,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
PASTA ACQUISITION CO., a Texas corporation (hereinafter called
"Maker"), for value received, promises and agrees to pay in installments and
as herein provided unto the order of GHULAM M. BOMBAYWALA, a resident of Fort
Bend County, Texas, whose business address is 10777 Westheimer, Suite 1030,
Houston, Texas 77042 or at such other address as Payee shall designate, in
lawful currency of the United States of America, the principal sum of TWO
MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000.00), together with
interest thereon from and after the date hereof at the rate of ten percent
(10%) per annum until maturity. All past due principal and interest shall bear
interest until paid at twelve percent (12%) per annum (but in no event to
exceed the maximum rate of nonusurious interest allowed by law). All sums paid
hereon shall apply first to the satisfaction of accrued interest and the
balance to the unpaid principal.
INTEREST AND PRINCIPAL ON THIS NOTE is payable as follows: interest on
the outstanding principal hereof shall be payable quarterly on the 15th day of
December, March, June and September of each year in which any principal remains
outstanding hereunder; provided, however, commencing September 15, 2000, on
each quarterly interest payment date, Maker shall make quarterly payments of
principal in amount sufficient to amortize and pay all then remaining principal
in pro rata quarterly installments by September 15, 2002. Notwithstanding
anything herein to the contrary, this Note shall not accrue or bear interest
during the "Pre Effective Period" as such term is defined in the Merger
agreement (as herein after defined).
IT IS ESPECIALLY agreed between the parties hereto that time is of the
essence with respect to the payment of this Note and, if an "Event of Default"
(as defined below) occurs, the owner and holder of this Note may, at its
option, declare all sums owing hereon at once due and payable. If default is
made in the payment of this Note at maturity (regardless of how its maturity
may be brought about) and the same is placed in the hands of an attorney for
collection, or suit is filed hereon, or proceedings are had in bankruptcy,
probate, receivership, reorganization, arrangement, or other judicial
proceedings for the establishment or collection of any amount called for
hereunder, or any amount payable or to be payable hereunder is collected
through any such proceedings, Maker agrees and is also to pay to the owner and
holder of this Note all reasonable attorney's or collection fees incurred.
IT IS the intention of Maker and Payee to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under any applicable law (including the laws of the State of
Texas and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with or as security for this Note, it is agreed as follow: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under this Note or
under any of the other aforesaid agreements or otherwise in connection with this
Note shall under no circumstances exceed the maximum amount of interest allowed
by applicable law, and any excess shall be credited on this Note by the holder
hereof (or,
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$2,750,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
if this Note shall have been paid in full, refunded to Maker); (ii) in the
event that maturity of the Note is accelerated by reason of an election by the
holder hereof resulting from any default hereunder or otherwise, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest may never include more than the maximum amount allowed by
applicable law, and excess interest, if any, provided for in this Note or
otherwise shall be canceled automatically as of the date of such acceleration
or prepayment and, if theretofore prepaid, shall be credited on this Note (or
if this Note shall have been paid in full, refunded to Maker); and (iii) it is
further agreed, without limitation of the foregoing, that all calculations of
the rate of interest contracted for, charged, or received on this Note that are
made for the purpose of determining whether such rate exceeds the maximum
amount of interest allowed by applicable law, shall be made, to the extent
permitted by applicable law, by amortizing, prorating, allocating, and
spreading throughout the full stated term of this Note so that such rate of
interest on account of this Note, as so calculated, is uniform throughout the
term thereof; and (iv) that the Maker and Payee agree that for the purposes of
this paragraph, the applicable interest ceiling is the Highest Lawful Rate
under the laws of any jurisdiction which may be held to apply to this Note.
EVENT OF DEFAULT OR DEFAULT shall mean the occurrence of any of the
following events:
1. Maker's failure to pay principal of, or interest on, this Note as
and when due and payable or the failure of Maker or the Guarantor,
as defined below, to pay when due any installment or payment of
principal or interest owed by Maker or Guarantor to Payee under the
Notes as defined in Section 2.02 of the Merger Agreement;
2. Maker or Guarantor fails to perform or observe any material term,
covenant or agreement contained in the Guaranty Agreement or the
Security Documents referred to below;
3. Maker, Guarantor or any of their material subsidiaries shall
individually or collectively: (a) make an assignment for the
benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or for a
substantial part of its assets; (b) commence any proceeding under
any bankruptcy, reorganization, rearrangement, readjustment of
debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; (c) have had any
such petition or application filed or any such proceeding commenced
against it in which an order for relief is entered or an
adjudication or appointment is made, and which remains undismissed
for a period of thirty (30) days or more; (d) take any board or
shareholder action approving any such petition, application,
proceeding, or order for relief or the appointment of a custodian.
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$2,750,000 HOUSTON, TEXAS SEPTEMBER 14, 1995
receiver or trustee for all or any substantial part of its properties; or
(e) suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of thirty (30) days or more; or
4. The Guaranty Agreement or Security Documents shall at any time after
execution and delivery thereof and for any reason cease to be in full force
and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by the Guarantor or Maker or if
Guarantor or Maker shall deny that it or they have any liability or
obligation under, or shall fail to perform their respective obligations
under, the Guaranty Agreement or Security Agreements.
IF ANY EVENT OF DEFAULT shall occur and be continuing under this Note,
Payee or any owner and holder of this Note agrees to provide Maker and the
Guarantor hereof thirty (30) days prior written notice specifying such default
and providing Maker an opportunity to cure such default within such period
prior to any acceleration of this Note; provided, however, no notice shall be
required upon the occurrence of the Events of Default set forth in clauses (a),
(b) or (d) of number subparagraph 3 of this Note above and sixty (60) days
prior written notice shall be provided upon the occurrence of the Events of
Default set forth in numbered subparagraphs 2 and 4 above. Following such
written notice, if required, and the failure of Maker to cure such default in
every respect all indebtedness represented by this Note shall be immediately
due and payable without further action or notice by Payee or any holder hereof
to Maker. If Maker cures such default after receiving notice thereof, Maker
shall provide written notice to Payee or the owner and holder hereof stating
the steps taken to cure such default and stating that the default is cured
within the specified notice period.
MAKER reserves the option of prepaying the principal of this Note, in
whole or in part, at any time after the date hereof without penalty. Accrued
and unpaid interest with respect to such principal amount prepaid is due and
payable on the date of such prepayment. Maker shall be required to prepay the
Note to the extent and in the circumstances set forth in Section 2.02 of the
Plan and Agreement of Merger by and among Maker, Guarantor, Payee and The
Original Pasta Company dated effective as of September 14, 1995 (the "Merger
Agreement"). Payment of this Note is subordinated in the circumstances set
forth in Section 2.02 of the Merger Agreement.
THIS NOTE is entitled to the benefits of and the security afforded by (i)
that certain Security Agreement between Maker and Payee dated September 14,
1995; (ii) Pledge and Security Agreement dated September 14, 1995 between
Watermarc Food Management Co. ("Guarantor") and Payee dated September 14, 1995;
(iii) the Guaranty Agreement executed by the Guarantor in favor of the Payee
dated September 14, 1995; and (iv) any other agreements, instruments or filings
intended to provide security for this Note as provided for in Section 2.02 of
the Merger Agreement (collectively, the "Security Documents").
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$2,750,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
IN THE EVENT OF ANY DISPUTE or litigation between the Payee and the
Maker or Guarantor or any other person or party with respect to this Note, the
Merger Agreement or the Security Documents or with respect to any other matter,
thing, event or occurrence, whether past, present or arising in the future, the
Maker waives all rights of set off, offset and the right to interpose make any
legal claims or counterclaims, the effect of which would be to delay, reduce,
deny, limit or offset its obligations under this Note.
IF THE EVENT OF ANY CONFLICT between the terms and provisions of this
Note, the Security Documents or the Merger Agreement or any other agreement
relating hereto or thereto, the terms and provisions of this Note shall control.
EXCEPT AS EXPRESSLY SET FORTH TO THE CONTRARY HEREIN, Maker and any
endorsers or guarantors of this Note severally waive notice, grace,
presentment and demand for payment, notice of dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity, protest and notice of
protest and non-payment, bringing of suit, and diligence in taking any action
to collect any sums owing under Note or in proceeding against any of the rights
and properties securing payment of this Note, and indulgences of every kind.
Maker and any endorsers or guarantors of this Note agree that, from time to
time, both before and after the maturity date of this Note and without notice,
Payee may renew the indebtedness evidenced by this Note, extend the time for
any payments on the Note, consent to the substitution of security, accept
additional security, or release any existing security for this Note and accept
partial payments of this Note without in any manner effecting the liability of
maker or any endorser or guarantor under or with respect to this Note, even
though Maker or such endorser or guarantor is not a party to any agreement
regarding such actions.
NEITHER THE Payee's acceptance of partial or delinquent performance or
payment nor any forbearance, failure or delay by Payee or any holder hereof in
exercising any right, power or remedy shall be deemed a waiver of any
obligation of the Maker or any endorser, guarantor or other party liable for
payment of this Note or of any right, power or remedy of the Payee or any
holder hereof or preclude any other or further exercise thereof; and no single
or partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
THE PROVISIONS OF THIS NOTE may not be changed, modified or terminated
orally, but only by an agreement in writing, signed by the Maker and Payee or
any holder hereof. If any term or provision of this Note shall be held invalid,
illegal or unenforceability, the validity of all other terms and provisions
shall in no way be effected thereby. Any waiver or forbearance must be in
writing to be effective against the Payee or any holder hereof and shall only
be applicable in the specific instance for which it is given.
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Texas and of the
United States of America.
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$2,750,000.00 HOUSTON, TEXAS SEPTEMBER 14, 1995
PASTA ACQUISITION CO.
By: /s/ ANGELO PITILLO
___________________________
Angelo Pitillo, President
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