**Exhibit10.18**

 

**FOURTHAMENDMENT****TO CREDIT AGREEMENT**

 

THIS FOURTH AMENDMENT TOCREDIT AGREEMENT (the “Amendment”) is made and dated as ofthe       day of October, 2003 by andbetween DIEDRICH COFFEE, INC., a Delaware corporation (the “Company”), and BANKOF THE WEST (the “Lender”).

**RECITALS**

 

A.                                   Pursuant to that certain Credit Agreementdated as of September 3, 2002 by and between the Company and the Lender (asamended, extended and replaced from time to time, the “Credit Agreement,” andwith capitalized terms used herein and not otherwise defined used with themeanings given such terms in the Credit Agreement), the Lender agreed to extendcredit to the Company on the terms and subject to the conditions set forththerein.

 

B.                                     The Company has requested the Lender to amendthe Credit Agreement in certain respects and the Lender has agreed to do so onthe terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, inconsideration of the above Recitals and for other good and valuableconsideration, the receipt and adequacy of which are hereby acknowledged, theparties hereto hereby agree as follows:

 

**AGREEMENT**

 

1.                                       Addition of Workers’ Compensation Letter ofCredit Facility.  To reflect the agreement of the partieshereto to add a letter of credit facility in support of the Company’s workers’compensation obligations, as of the Effective Date (as defined in Paragraph2 below):

 

(a)                                  Paragraph 5 of the Credit Agreement is hereby amended to read in its entirety asfollows:

 

“5.                                 Letter of Credit Facilities.

 

5(a)                            Working Capital Letter of Credit FacilitySublimit.  On the terms and subject to the conditionsset forth herein, the Lender shall from time to time from and after theEffective Date, issue standby letters of credit in support of various workingcapital obligations of the Company (each a “Working Capital Letter of Credit”and, collectively, the “Working Capital Letters of Credit”) for the account ofthe Company; provided, however that in no event shall the Lender issue anyWorking Capital Letter of Credit hereunder if after giving effect to suchissuance:

 

(1)                                  The aggregate dollar amount of OutstandingWorking Capital Letters of Credit and unrepaid L/C Drawings with respect toWorking Capital Letters of Credit would exceed the Working Capital L/C FacilitySublimit; or

 

(2)                                  The aggregate dollar amount of allOutstanding Working Capital Letters of Credit and unrepaid L/C Drawings withrespect to Working Capital Letters of Credit plus

 

1

----

 

the aggregate amount of allWorking Capital Loans outstanding would exceed $675,000.00.

 

5(b)                           Workers’ Compensation Letter of CreditFacility Credit Limit.  Subject to the terms and subject to theconditions set forth herein, including, without limitation, the terms and conditionsset forth in Paragraph 5(c) below, the Lender shall from time to timefrom and after October __, 2003, issue standby letters of credit in support ofthe Company’s workers’ compensation obligations (each a “Workers’ CompensationLetter of Credit” and, collectively, the “Workers’ Compensation Letters ofCredit”) for the account of the Company; provided, however that in no eventshall the Lender issue any Workers’ Compensation Letter of Credit hereunder ifafter giving effect to such issuance the aggregate dollar amount of OutstandingWorkers’ Compensation Letters of Credit and unrepaid L/C Drawings with respectto Workers’ Compensation Letters of Credit would exceed the Workers’Compensation L/C Facility Credit Limit.

 

5(c)                            Collateral Security for the Workers’Compensation Letters of Credit.  Prior to the issuance of the first Workers’Compensation Letter of Credit hereunder, the Company shall have opened a newno-access account with the Lender (the “Workers’ Compensation CollateralAccount”).  As an additional conditionprecedent to the issuance of any Workers’ Compensation Letter of Credit(including the first Workers’ Compensation Letter of Credit hereunder), theCompany shall deposit a dollar amount equal to the face amount of the Workers’Compensation Letter of Credit being requested. The Company hereby pledges, assigns and grants to the Lender a securityinterest in the Workers’ Compensation Collateral Account, any and all fundsfrom time to time contained therein, and all products and proceeds of theforegoing.  The Obligations secured bythe Workers’ Compensation Collateral Account shall only consist of the thatportion of the Obligations arising out of or related to the Workers’Compensation Letters of Credit.  At suchtime the Obligations with respect to any Workers’ Compensation Letter of Creditshall have been fully satisfied or otherwise terminated, the Lender shallrelease its Lien on the portion of the funds contained in the Workers’Compensation Collateral Account attributable to such Workers’ CompensationLetter of Credit and remit such funds to the Company.

 

5(d)                           Issuance of Letters of Credit. Each Letter of Credit, and any amendment, renewal or extension thereof,shall be requested by the Company at least thirty (30) Business Days prior tothe proposed issuance, amendment, renewal or extension date (other than in thecase of the first Workers’ Compensation Letter of Credit issued hereunder) bydelivery to the Lender of a duly executed Letter of Credit Application,accompanied by all other L/C Documents which the Lender may require as acondition to the requested action.  NoLetter of Credit shall have a stated expiration date (or provide for theextension of such stated expiration date or the issuance of any replacementtherefor) later than October 15, 2004.

 

5(e)                            Repayment of L/C Drawings. Each L/C Drawing shall be payable in full by the Company on the date ofsuch L/C Drawing.

 

2

----

 

5(f)                              Absolute Obligation to Repay.  TheCompany’s obligation to repay L/C Drawings shall be absolute, irrevocable andunconditional under any and all circumstances whatsoever and irrespective ofany set-off, counterclaim or defense to payment which the Company may have orhave had, against any Lender or any other Person, including, withoutlimitation, any set-off, counterclaim or defense based upon or arising out of:

 

(1)                                  Any lack of validity or enforceability ofthis Agreement or any of the other Loan Documents;

 

(2)                                  Any amendment or waiver of or any consent todeparture from the terms of any Letter of Credit;

 

(3)                                  The existence of any claim, setoff, defenseor other right which the Company or any other Person may have at any timeagainst any beneficiary or any transferee of any Letter of Credit (or anyPerson for whom any such beneficiary or any such transferee may be acting);

 

(4)                                  Any allegation that any demand, statement orany other document presented under any Letter of Credit is forged, fraudulent,invalid or insufficient in any respect, or that any statement therein is untrueor inaccurate in any respect whatsoever or that variations in punctuation,capitalization, spelling or format were contained in the drafts or anystatements presented in connection with any L/C Drawing;

 

(5)                                  Any payment by the Lender under any Letter ofCredit against presentation of a draft or certificate that does not strictlycomply with the terms of such Letter of Credit, or any payment made by theLender under any Letter of Credit to any Person purporting to be a trustee inbankruptcy, debtor-in-possession, assignee for the benefit of creditors,liquidator, receiver or other representative of or successor to any beneficiaryor any transferee of any Letter of Credit, including any arising in connectionwith any insolvency proceeding;

 

(6)                                  Any exchange, release or non-perfection ofany Collateral; or

 

(7)                                  Any other circumstance or happeningwhatsoever, whether or not similar to any of the foregoing, including any othercircumstance that might otherwise constitute a defense available to, or adischarge of the Company.

 

Nothing contained hereinshall constitute a waiver of any rights of the Company against the Lenderarising out of the gross negligence or willful misconduct of the Lender inconnection with any Letter of Credit issued hereunder; provided, however, thatthe exercise of such rights is subject to and conditioned upon the priorpayment in full of all Obligations, including, without limitation, unrepaid L/CDrawings, and termination of the credit facility evidenced hereby.

 

## 5(g)                           Uniform Customs and Practice.  TheUniform Customs and Practice for Documentary Credits as published by theInternational Chamber of Commerce most recently at the time of issuance of anyLetter of Credit shall 

##  

## 3

## 

##  

(unless otherwise expressly provided in such Letter ofCredit) apply to such Letter of Credit.

 

5(h)                           Relationship to Letter of Credit Applications.  Inthe event of any inconsistency between the terms and provisions of thisAgreement and the terms and provisions of the Letter of Credit Applications,the terms and provisions of this Agreement shall supersede and govern.

 

(b)                                 Paragraph 4(a) of the Credit Agreement is hereby amended inits entirety to read as follows:

 

“4(a)                      CreditLimit.  Subject to the terms andconditions set forth herein, from and after the Effective Date, the Lenderagrees that it shall from time to time to but not including the Working CapitalFacility Maturity Date make loans (each, a “Working Capital Loan”) to theCompany in an aggregate amount not to exceed at any one time outstanding thelesser of:  (i) $500,000.00, and (ii)$675,000.00 minus the dollar amount of all Outstanding Working Capital Lettersof Credit and unrepaid L/C Drawings related to Working Capital Letters of Creditas of such date (the “Working Capital Facility Credit Limit”).  Principal amounts prepaid hereunder prior tothe Working Capital Facility Maturity Date may be reborrowed on the terms andsubject to the conditions set forth in Paragraph 10(b) below, it beingexpressly acknowledged and agreed that the credit facility provided under this Paragraph4 is a revolving credit facility.”

 

(c)                                  Paragraph 10(b)(2) of the Credit Agreement is hereby amended inits entirety to read as follows:

 

“(2)                            In thecase of the issuance of a Letter of Credit, there shall have been delivered tothe Lender a Letter of Credit Application and all required L/C Documentsrelating thereto, and the Company shall be in compliance with the limits setforth in Paragraphs 5(a) and 5(b) above, as applicable.”

 

(d)                                 The definition of the term “Letter of Credit”set forth in Paragraph 16 of the Credit Agreement is hereby amended toread in its entirety as follows:

 

“‘Letterof Credit’ or ‘Letters of Credit’ shall mean either a WorkingCapital Letter or Credit or a Workers’ Compensation Letter of Credit or allWorking Capital Letters of Credit and Workers’ Compensation Letters of Credit,collectively, as applicable.”

 

(e)                                  The definition of the term “L/C FacilitySublimit” set forth in Paragraph 16 of the Credit Agreement is herebydeleted in its entirety.

 

(f)                                    The following new definitions are herebyadded to Paragraph 16 of the Credit Agreement in correct alphabeticalorder:

 

“‘Working Capital L/C Facility Credit Limit’shall mean $250,000.00.”

 

4

----

 

“‘WorkingCapital Letter of Credit’ and ‘Working Capital Letters of Credit’shall have the meanings given such terms in Paragraph 5(a) above.”

 

“‘Workers’Compensation Cash Collateral Account’ shall have the meaning given suchterm in Paragraph 5(c) above.”

“‘Workers’Compensation L/C Facility Sublimit’ shall mean $247,500.00.”

 

“‘Workers’Compensation Letter of Credit’ and ‘Workers’ Compensation Letters ofCredit’ shall have the meaning given such terms in Paragraph 5(b)above.”

 

2.                                       Effective Date. This Amendment shall be effective as of the date first written aboveupon the date that the Lender shall have received:

 

(a)                                  This Amendment, duly executed by all partiessignatory hereto; and

 

(b)                                 Such corporate resolutions, incumbencycertificates and other authorizing documentation for the Company and theGuarantors as the Lender may request.

 

3.                                       Reaffirmation of the Loan Documents.  TheCompany and each of the Guarantors, by executing this Amendment as providedbelow, hereby affirms and agrees that: (a) the execution and delivery by it of and the performance of itsobligations under this Amendment shall not in any way amend, impair, invalidateor otherwise affect any of its obligations under the Loan Documents to which itis party except to the extent expressly amended hereby, (b) the term“Obligations” as used in the Loan Documents include, without limitation, theObligations of the Company under the Credit Agreement as amended by thisAmendment, and (c) except as expressly amended hereby, the Loan Documentsremain in full force and effect as written.

 

4.                                       Representations and Warranties.  TheCompany and each of the Guarantors by executing this Amendment as providedbelow, hereby represents and warrants to the Lender that:

 

(a)                                  It has the requisite power and authority andthe legal right to execute, deliver and perform this Amendment and has takenall necessary corporate action to authorize the execution, delivery andperformance of this Amendment.

 

(b)                                 This Amendment has been duly executed anddelivered on its behalf and constitutes its legal, valid and binding obligationenforceable against it in accordance with its terms.

 

(c)                                  There does not exist an Event of Default orPotential Default.

 

(d)                                 None of such Persons has any existing claims,counterclaims, defenses, personal or otherwise, or rights of setoff whatsoeverwith respect to any of the Loan Documents, and the Loan Documents, as amendedhereby, constitute valid, legal, binding and enforceable obligations of suchPersons, as appropriate.

 

5.                                       No Other Amendment. Except as expressly amended hereby, the Credit Agreement and other LoanDocuments shall remain in full force and effect as written.

 

5

----

 

6.                                       Counterparts. This Amendment may be executed in any number of counterparts, each ofwhich when so executed shall be deemed to be an original and all of which whentaken together shall constitute one and the same agreement.

 

[SignaturesPage Following]

 

6

----

 

IN WITNESS WHEREOF, theparties hereto have caused this Amendment to be executed as of the day and yearfirst above written.

 
|                                                    | DIEDRICH COFFEE, INC.,  a Delaware corporation |
|---------------------------------------------------------|------------------------------------------------|
|                                                    |                                           |
|                                                    |                                           |
|                                                    | By:                                            |  /s/ Roger Laverty |
|                                                    | Name:                                          | Roger Laverty, President  and Chief Executive Officer |
|                                                    |                                           |
|                                                    |                                           |
|                                                    | By:                                            |  /s/ Matthew C. McGuinness |
|                                                    | Name:                                          | Matthew C. McGuinness,  Executive Vice President and Chief Financial Officer |
|                                                    |                                           |
|                                                    | BANK OF THE WEST                               |
|                                                    |                                           |
|                                                    |                                           |
|                                                    | By:                                            | /s/ Bruce Young |
|                                                    |                                           | Bruce Young, Vice  President |
|                                                    |                                           |
| ACKNOWLEDGED AND AGREED  TO:                            |                                           |
|                                                    |                                           |
|                                                    |                                           |
| COFFEE PEOPLE WORLDWIDE,  INC.,  a Delaware corporation |                                           |
|                                                    |                                           |
|                                                    |                                           |
| By:                                                     | /s/ Matthew C. McGuinness                      |   |
| Name: Matthew C.  McGuinness, President                 |                                           |
|                                                    |                                           |
| By:                                                     | /s/ Matt Kimble                                |   |
| Name: Matt Kimble,  Assistant Secretary                 |                                           |
|                                                         |                                                |  |  |  |  |

 

7

----

 
| COFFEE PEOPLE, INC.,  an Oregon corporation       |
|---------------------------------------------------|
|                                              |
|                                              |
| By:                                               | /s/ Matthew C. McGuinness |   |
| Name: Matthew C.  McGuinness, President           |
|                                              |
|                                              |
| By:                                               | /s/ Matt Kimble |   |
| Name: Matt Kimble,  Assistant Secretary           |
|                                              |
|                                              |
| GLORIA JEAN’S, INC.,                         |
| a Delaware corporation                            |
|                                              |
|                                              |
| By:                                               | /s/ Matthew C. McGuinness |   |
| Name: Matthew C.  McGuinness, President           |
|                                              |
|                                              |
| By:                                               | /s/ Matt Kimble |   |
| Name: Matt Kimble,  Assistant Secretary           |
|                                              |
|                                              |
| EDGLO ENTERPRISES, INC.,  an Illinois corporation |
|                                              |
|                                              |
| By:                                               | /s/ Matthew C. McGuinness |   |
| Name: Matthew C.  McGuinness, President           |
|                                              |
|                                              |
| By:                                               | /s/ Matt Kimble |   |
| Name: Matt Kimble,  Assistant Secretary           |

 

8

----

 
| GLORIA JEAN’S GOURMET  COFFEES CORP.,  an Illinois corporation             |
|---------------------------------------------------------------------------------|
|                                                                            |
|                                                                            |
| By:                                                                             | /s/ Matthew C. McGuinness |   |
| Name: Matthew C.  McGuinness, President                                         |
|                                                                            |
|                                                                            |
| By:                                                                             | /s/ Matt Kimble |   |
| Name: Matt Kimble,  Assistant Secretary                                         |
|                                                                            |
|                                                                            |
| GLORIA JEAN’S GOURMET  COFFEES FRANCHISING CORP.,  an Illinois corporation |
|                                                                            |
|                                                                            |
| By:                                                                             | /s/ Matthew C. McGuinness |   |
| Name: Matthew C.  McGuinness, President                                         |
|                                                                            |
|                                                                            |
| By:                                                                             | /s/ Matt Kimble |   |
| Name: Matt Kimble,  Assistant Secretary                                         |

 

9

----