Exhibit 10.6
SECOND AMENDMENT TO
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
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THIS SECOND AMENDMENT TO AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT, dated as of October 31, 2003 (this "AMENDMENT"), is made by and among
OVERHILL FARMS, INC., a Nevada corporation (the "COMPANY"), XXXXX XXXXX, an
individual ("XXXXX" or the "PRINCIPAL SHAREHOLDER"), and XXXXXX XXXXXXXXX
CAPITAL PARTNERS II, L.P., a California limited partnership ("LLCP").
RECITALS
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A. The parties hereto are currently parties to that certain Amended and
Restated Investor Rights Agreement dated as of October 29, 2002, as amended by
an Amendment to Amended and Restated Investor Rights Agreement dated as of April
16, 2003 (the "FIRST XXX AMENDMENT") (as so amended, the "INVESTOR RIGHTS
AGREEMENT"). In the First XXX Amendment, among other things, Xxxxxxx was removed
as a party to the Investor Rights Agreement. Unless otherwise indicated,
capitalized terms used and not defined herein have the meanings ascribed to them
in the Investor Rights Agreement.
B. Concurrently herewith, the parties hereto are consummating the
transactions contemplated by that certain Third Amendment to Second Amended and
Restated Securities Purchase Agreement dated as of October 31, 2003 (the "THIRD
AMENDMENT"), by and among the Company, the entities from time to time parties
thereto as Guarantors and LLCP, which further amends that certain Second Amended
and Restated Securities Purchase Agreement dated as of April 16, 2003, as
amended by a First Amendment to Second Amended and Restated Securities Purchase
Agreement dated as of May 16, 2003 (the "FIRST AMENDMENT"), and a Second
Amendment to Second Amended and Restated Securities Purchase Agreement dated as
of June 19, 2003 (the "SECOND AMENDMENT"). The Second Amended and Restated
Securities Purchase Agreement, as amended by the First Amendment, the Second
Amendment and the Third Amendment, shall be referred to herein as the
"SECURITIES PURCHASE AGREEMENT."
C. In connection with the consummation of the transactions contemplated
by the Third Amendment, among other things, the Company has agreed to (i) grant
to LLCP the right to designate for nomination and election to the Board up to
three (3) members and, in addition, the right to fill the next available vacancy
created on the Board, and (ii) extend the time period during which annual
consulting fees will be payable to LLCP or its Affiliate under the Investor
Rights Agreement.
D. It is a condition precedent to the effectiveness of the Third
Amendment that the parties hereto enter into this Amendment and amend further
the Investor Rights Agreement as provided for herein.
AGREEMENT
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NOW, THEREFORE, in consideration of the promises and of the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. AMENDMENT OF SECTION 1.1. Effective on and as of the date hereof,
Section 1.1 (Election of LLCP Representative to Board) of the Investor Rights
Agreement shall be amended to read in its entirety as follows:
1.1 ELECTION OF LLCP REPRESENTATIVES TO THE BOARD.
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(a) DESIGNATION. The Company grants to LLCP the
right, exercisable from time to time, to designate up to three
(3) members (each an "LLCP REPRESENTATIVE" and collectively
the "LLCP REPRESENTATIVES") for nomination and election to the
Board of Directors of the Company (the "BOARD"). In addition,
the Company grants to LLCP the right to have an LLCP
Representative appointed to fill the next available vacancy on
the Board (whether by reason of death, disability,
resignation, removal or increase in the size of the Board) to
be filled after October 31, 2003. For purposes of
clarification, LLCP may have up to four (4) LLCP
Representatives serving on the Board at any time.
(b) PROCEDURES. If LLCP wishes to exercise its rights
under Section 1.1(a), LLCP shall deliver to the Company, with
a copy to the Principal Shareholder, a written request (an
"LLCP REPRESENTATIVE REQUEST") notifying the Company of LLCP's
election under Section 1.1(a) to have one or more LLCP
Representatives nominated and elected to the Board, or to have
an LLCP Representative appointed to fill such vacancy, and
designating the individual(s) to be so nominated and elected
or appointed, as applicable. As soon as practicable (but not
later than five (5) Business Days) after the Company receives
an LLCP Representative Request, the Company shall take (or
cause to be taken) all such actions as may be necessary or
advisable to cause the LLCP Representative(s) named in such
Request to be nominated and elected to the Board or to be
appointed to fill such vacancy, as applicable (including,
among other actions, nominating the designated LLCP
Representative(s) as part of the slate of directors nominated
and recommended for election to the Board, creating vacancies,
increasing the size of the Board or filling vacancies with the
LLCP Representative(s)).
(c) REMOVAL. No individual serving as an LLCP
Representative on the Board may be removed without the prior
written approval of LLCP other than for "cause." For purposes
of this Section 1.1(c), the term "cause" shall mean (i) a
conviction (treating a NOLO CONTENDERE plea or a guilty plea
as a conviction) of a felony or of a crime of moral turpitude,
(ii) the failure or refusal of an LLCP Representative to
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attend (either in person or telephonically) at least
seventy-five percent (75.0%) of the meetings of the Board (or
of the meetings of any committee on which such LLCP
Representative is then serving) held during any Fiscal Year or
(iii) the failure of an LLCP Representative to satisfy the
requirements of any statute, rule, regulation or exchange
listing requirement applicable to members of the Board. If any
LLCP Representative shall be removed from the Board for cause,
then LLCP shall have the sole right to fill the vacancy with
another nominee to serve as the LLCP Representative, and the
Company shall, upon the request of LLCP, promptly (and in any
event within five (5) Business Days of such request) take (or
cause to be taken) any and all actions as may be necessary or
appropriate to cause such other individual to be nominated and
elected to the Board.
(d) VACANCY. In addition to the rights granted to
LLCP under Section 1.1(a) to fill the next available vacancy,
if a vacancy is created on the Board by reason of the death,
disability, resignation or removal of any LLCP Representative,
or in the event any LLCP Representative designated by LLCP
shall not be elected to the Board for any reason, LLCP, by
written notice to the Company, shall have the right to
designate a new LLCP Representative to fill such vacancy, and
the Company shall cause the remaining directors to meet
promptly (and in any event within five (5) Business Days of
receipt of such notice) for the purpose of appointing the
designated LLCP Representative to fill such vacancy.
(e) COMMITTEES. To the extent the Board delegates
from time to time any of its duties to any committee(s) of the
Board, the Company shall, upon the request of LLCP, appoint to
such committee(s) one or more LLCP Representatives
then-serving on the Board (in the same proportion as the total
number of LLCP Representatives then-serving on the Board);
PROVIDED, HOWEVER, that to the extent any qualifying criteria
for Board or committee membership is imposed by any statute,
rule, regulation or exchange listing requirement applicable to
members of the Board, each LLCP Representative shall be
required to meet such qualifying criteria. In no event shall
any LLCP Representative be required to serve as the audit
committee financial expert.
2. AMENDMENT OF SECTION 1.2(b). Effective on and as of the date hereof,
clause (b) of Section 1.2 (Agreement to Vote) of the Investor Rights Agreement
shall be amended to read in its entirety as follows:
"(b) On all matters relating to the nomination and election of
members to the Board, the Principal Shareholder agrees, on behalf of
himself and any transferee or assignee of Principal Shareholder Shares
(including Immediate Family members and other transferees contemplated
by Section 3.1(b)), to vote, or cause to be voted, all Principal
Shareholder Shares (or to consent pursuant to any action by written
consent) in favor of electing any and all LLCP Representatives
designated by LLCP from time to time to the Board. Notwithstanding the
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foregoing, the Principal Shareholder shall not be obligated to vote, or
cause to be voted, any Principal Shareholder Shares previously sold in
open market transactions permitted under Section 3.1(a)."
3. AMENDMENT OF SECTION 1.3. Effective on and as of the date hereof,
Section 1.3 (Observation Rights) of the Investor Rights Agreement shall be
amended by adding the following sentence at the end of such Section:
"Notwithstanding the foregoing, so long as LLCP owns or holds, or has
the contractual right to acquire, five percent (5.0%) or more of the
Common Stock on a Fully Diluted Basis, the Company shall deliver to
LLCP the information described in clauses (a), (b), (d), (f), (g), (h)
and (i) of Section 8.3 (Information Reporting Requirements), as such
Section is in effect on the Third Amendment Effective Date, in
accordance with the time limitations applicable thereto."
4. AMENDMENT OF SECTION 1.6(a). Effective on and as of the date hereof,
clause (a) of Section 1.6 (Consulting Fees) of the Investor Rights Agreement
shall be amended to read in its entirety as follows:
"(a) In consideration of consulting services rendered and
which may be rendered by LLCP or LLCP Inc. to the Company under this
Section 1 (including in connection with the exercise of the observation
and other rights granted under Section 1.3 or during any Operating
Committee meetings) during the seven (7) twelve-month periods
immediately following the Initial Closing Date, which services are
hereby acknowledged by the Company as being substantial and valuable to
its business and operations, the Company agrees to pay to LLCP Inc. a
consulting fee in the aggregate amount of $1,260,000. The Company
agrees that the full amount of such consulting fee shall be fully
earned as of the Initial Closing Date (whether or not the Notes remain
outstanding at all times during the entire seven (7) twelve-month
period), but that such consulting fee shall be payable in seven (7)
equal installments of $180,000 each and shall be due and payable on
January 10 of each of the calendar years commencing in 2000 and ending
in 2006 (the date upon which the first installment shall be due and
payable being January 10, 2000); PROVIDED, HOWEVER, that upon the
earlier to occur of (i) a Change in Control and (ii) the date upon
which all Obligations under the Note shall have been paid in cash in
full, the portion of the aggregate consulting fee remaining unpaid
shall at such time become immediately due and payable to LLCP Inc."
5. AMENDMENT OF SECTION 1.7. Effective on and as of the date hereof,
Section 1.7 (Survival of Rights) of the Investor Rights Agreement shall be
amended to read in its entirety as follows:
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"1.7 SURVIVAL OF RIGHTS. The rights granted to LLCP
under Sections 1.1 through 1.3 shall continue for so long as
LLCP (a) owns or holds, directly or indirectly, any Note and
the outstanding principal balance of the Note or Notes is at
least $2,500,000 or (b) beneficially owns at least five
percent (5.0%) of the shares of Common Stock calculated on a
Fully Diluted Basis. The rights granted to LLCP under Section
1.4 shall continue until the principal amount of the Note has
been paid in full. Notwithstanding anything to the contrary
contained herein or otherwise, the rights granted to LLCP
under Sections 1.1 through 1.4 shall survive to the extent
that LLCP holds the Note or any Warrant Shares and informs the
Company in writing that it believes in good faith that it is
required to retain such rights to qualify as a 'venture
capital operating company' for purposes of complying with
ERISA."
6. AMENDMENT OF SECTION 3.1. Effective on and as of the date hereof,
Section 3.1 of the Investor Rights Agreement shall be amended to read in its
entirety as follows:
"3.1 If the Principal Shareholder (a "SELLING PRINCIPAL
SHAREHOLDER") proposes to sell or transfer (a "SALE") any Principal
Shareholder Shares ("CO-SALE SHARES") to a bona fide purchaser or
transferee (a "PURCHASER") in one (1) transaction or any series of
related transactions, the Selling Principal Shareholder shall promptly
give written notice (the "CO-SALE NOTICE") to the Company and LLCP at
least thirty (30) days prior to the closing of such sale. The Co-Sale
Notice shall describe in reasonable detail the terms of the proposed
sale, including the number of Co-Sale Shares to be sold, the nature of
the sale, the amount of consideration to be paid and the name and
address of the proposed purchaser. Notwithstanding the foregoing,
without complying with the procedures of this Section 3, (a) Xxxxx may
sell up to an aggregate of 50,000 Principal Shareholder Shares in open
market transactions (not in a private sale transaction) during any
Fiscal Year of the Company, it being understood that a Change in
Control shall occur if Xxxxx ceases to beneficially own or hold,
directly or indirectly, at least 300,000 shares of Common Stock
(subject to adjustment for any stock splits, reverse stock splits,
dividends or like events after the date hereof) at any time, and (b)
the Principal Shareholder may transfer his Principal Shareholder Shares
to his spouse or descendants or to a family trust or family partnership
established for the benefit of himself or such other persons, PROVIDED
that such Principal Shareholder provides to LLCP at least thirty (30)
days prior written notice of such transfer and the transferee executes
a joinder agreement, in form and substance satisfactory to LLCP,
pursuant to which such transfer becomes bound by, and agrees to comply
with, the provisions of this Agreement as if such transferee were a
Principal Shareholder."
7. AMENDMENT OF SECTION 3.10. Effective on and as of the date hereof,
Section 3.10 (Termination) of the Investor Rights Agreement shall be amended to
read in its entirety as follows:
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"3.10 TERMINATION. The rights granted to LLCP under this
Section 3 shall expire on the earliest to occur of (a) November 24,
2009, (b) the date upon which the number of shares of Common Stock
(calculated on an "as-if-converted" basis) beneficially owned by LLCP
at any time is less than five percent (5.0%) of the number of shares of
Common Stock on a Fully Diluted Basis at such time and (c) the date
upon which the number of shares of Common Stock beneficially owned by
the Principal Shareholder equals or exceeds the number of shares of
Common Stock beneficially owned by LLCP."
8. AMENDMENT TO SECTION 7.3. Effective on and as of the date hereof,
the last sentence of Section 7.3 (Assignments) of the Investor Rights Agreement
shall be amended to read in its entirety as follows:
"The rights and obligations of the Company and the Principal
Shareholder may not be assigned or delegated, as the case may
be, without LLCP's prior written consent, except that the
Principal Shareholder may, without LLCP's consent, assign his
rights, but not delegate his obligations, to any transferee
under SECTION 3.1."
9. AMENDMENT OF ARTICLE 7. Effective on and as of the date hereof,
Article 7 (Miscellaneous) of the Investor Rights Agreement shall be amended to
add the following new Sections at the end of such Article:
"Section 7.16 LIABILITIES OF CERTAIN PARTIES. In no event
shall the Principal Shareholder be responsible or otherwise liable for
the liabilities or obligations of the Company under this Agreement, but
the Company shall be responsible and liable for the liabilities and
obligations of the Principal Shareholder under this Agreement (whether
arising as a result of the Principal Shareholder's failure to perform
or otherwise)."
"Section 7.17 XXXXX RESIGNATION FROM TREECON. As soon as
practicable, but not later than December 31, 2003, the Principal
Shareholder shall resign from all of his positions at TreeCon,
including, without limitation, as the Chairman, President and Chief
Executive Officer, and as a director, of TreeCon."
10. AMENDMENT TO DEFINITION OF PRINCIPAL SHAREHOLDER. Effective on and
as of the date hereof, the last sentence of the preamble to the Investor Rights
Agreement shall be amended to read in its entirety as follows:
"Xxxxx may also be referred to herein as the 'PRINCIPAL
SHAREHOLDER' or the 'PRINCIPAL SHAREHOLDERS'."
11. CONFIRMATION; FULL FORCE AND EFFECT. The amendments set forth above
shall amend the Investor Rights Agreement on and as of the date hereof, and the
Investor Rights Agreement shall thereafter remain in full force and effect, as
amended hereby, in accordance with its terms. Each of the Company and Xxxxx
expressly ratifies and reaffirms their respective obligations under the Investor
Rights Agreement, as amended hereby.
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12. MISCELLANEOUS.
12.1 GOVERNING LAW. This Amendment shall be governed by, and
construed and enforced in accordance with, the laws of the State of California
applicable to contracts made and performed in such state, without regard to
principles regarding choice of law or conflicts of laws, except to the extent
that the Nevada Revised Statutes exclusively governs any provision in this
Amendment, in which case such provision shall be governed by, and construed and
enforced in accordance with, the Nevada Revised Statutes.
12.2 ENTIRE AGREEMENT. The Investor Rights Agreement, as
amended hereby, constitutes the entire understanding agreement among the parties
with respect to the subject matter hereof and supersedes any prior written or
oral agreements or understandings of the parties with respect to such matter.
12.3 COUNTERPARTS. This Amendment may be executed in one or
more counterparts and by facsimile transmission, each of which shall be deemed
an original but all of which taken together shall constitute one and the same
instrument.
12.4 SUCCESSORS AND ASSIGNS. The Investor Rights Agreement, as
amended hereby, shall inure to the benefit of, and binding upon, the parties
hereto and their respective successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.
COMPANY
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OVERHILL FARMS, INC., a Nevada corporation
By: /S/ Xxxxx Xxxxx
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Xxxxx Xxxxx
President and Chief Executive Officer
By: /S/ Xxxx Steinbrun
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Xxxx Steinbrun
Senior Vice President and
Chief Financial Officer
XXXXX OR PRINCIPAL SHAREHOLDER
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/S/ Xxxxx Xxxxx
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Xxxxx Xxxxx
LLCP
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XXXXXX XXXXXXXXX CAPITAL PARTNERS II,
L.P., a California limited partnership
By: LLCP California Equity Partners II,
L.P.,
a California limited partnership, its
General Partner
By: Xxxxxx Xxxxxxxxx Capital Partners,
Inc., its General Partner
By: /S/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
Vice President
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