EXHIBIT 10.9
EXECUTION COPY
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INVESTOR RIGHTS AGREEMENT
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THIS INVESTOR RIGHTS AGREEMENT is entered into as of the 24th day of
November 1999 (this "Agreement"), by and among OVERHILL FARMS, INC., a Nevada
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corporation (the "Company"), POLYPHASE CORPORATION, a Nevada corporation
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("Parent"), XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P., a California limited
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partnership ("LLCP").
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R E C I T A L S
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A. The parties and OVERHILL L.C. VENTURES, INC., a California
corporation, are parties to the Securities Purchase Agreement dated of even date
herewith (as amended from time to time, the "Securities Purchase Agreement")
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pursuant to which, on the date hereof, the Company is issuing to LLCP, and LLCP
is purchasing from the Company, the Securities, all on the terms and subject to
the conditions set forth in the Securities Purchase Agreement. Unless otherwise
indicated, capitalized terms used and not otherwise defined in this Agreement
shall have the meanings set forth in the Securities Purchase Agreement.
B. The execution of this Agreement by the Company and Parent is a
condition precedent to the obligation of LLCP to consummate the transactions
contemplated by the Securities Purchase Agreement.
C. In consideration of the substantial direct and indirect benefits which
the Company and the Guarantors will realize from the consummation of the
transactions contemplated by the Securities Purchase Agreement, the Company has
agreed to grant to LLCP the investment monitoring and other rights set forth in
this Agreement.
A G R E E M E N T
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NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. INVESTMENT MONITORING RIGHTS.
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1.1 Election of LLCP Representative to Board.
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(a) The Company and Parent hereby represent and warrant that they have
taken all requisite action (corporate or otherwise) to increase the authorized
number of directors of the Company to five (5) and to cause Xxxxxx X. Xxxxxx to
be duly elected to the Board of Directors of the Company (the "Board"),
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effective as of the Closing.
(b) From and at all times after the date hereof and until the
expiration of this Section 1.1 pursuant to Section 1.6, Parent agrees that it
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will vote (or cause to be voted) all shares of the Capital Stock of the Company
now owned or held or hereafter acquired by it, directly or indirectly, so that:
(i) Xxxxxx X. Xxxxxx or such other Person designated by LLCP
(Xx. Xxxxxx, together with such other designated Person, being referred to
herein as the "LLCP Representative") shall be elected to the Board at each
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election of directors; and
(ii) An individual who is Independent shall be elected to the
Board at each election of directors.
In addition, Parent shall take (or cause to be taken) all other necessary or
desirable actions to ensure that the LLCP Representative and the Independent
Director are or remain as duly elected members of the Board. In no event shall
Parent, the Board or any other Person (other than LLCP) have the power to remove
the LLCP Representative from the Board without the prior written consent of
LLCP.
(c) In the event of the death, resignation or removal of the LLCP
Representative at any time, or in the event the LLCP Representative shall not be
elected to the Board at any election of directors for any reason, the Company
shall, upon the request of LLCP, promptly (and in any event within five (5) days
of such request) take such steps as may be necessary or appropriate to cause
another Person designated by LLCP to become the LLCP Representative on the
Board, including increasing the size of the Board and/or filling the resulting
vacancy with an LLCP Representative. Such steps may include calling and
holding, in accordance with the Bylaws of the Company and Applicable Laws, a
special meeting of the Board or the shareholders of the Company or circulating a
written consent for execution by members of the Board and/or the shareholders.
To the extent that the Board delegates any of its duties to an executive
committee or other committee, the LLCP Representative shall, upon the request of
LLCP, be appointed to such committee.
(d) In the event of the death or resignation of the then current
Independent Director at any time, Parent and the Company shall, as soon as
practicable (but not later than thirty (30) days following such death or
resignation), take such steps as may be necessary or appropriate to cause
another Person who is Independent to be duly elected or appointed to the Board
as the Independent Director. Such steps may include calling and holding, in
accordance with the Bylaws of the Company and Applicable Laws, a special meeting
of the Board or the shareholders of the Company or circulating a written consent
for execution by members of the Board and/or the shareholders. To the extent
that the Board delegates any of its duties to an executive committee or other
committee, the Independent Director shall be appointed to such committee. In
addition, Parent agrees that it will not remove (or take any other action to
remove) the Independent Director, unless and until an individual who is
Independent takes
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office as a replacement Independent Director as provided in Section 2.14A of
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Annex A of the Securities Purchase Agreement.
(e) The agreements set forth in this Section 1.1 are intended to
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constitute enforceable voting agreements within the scope of Section 706(a) of
the General Corporation Law of the State of California.
1.2 Observation Rights. Without limiting any of the rights of LLCP in
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Section 1, if, at any time, no LLCP Representative is serving on the Board for
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any reason, LLCP shall receive notice of and be entitled to have one (1)
representative and one (1) advisor to such representative (or, at LLCP's
election, two (2) representatives) attend as observers all meetings of the Board
and of all committees thereof and at all meetings of the shareholders of the
Company. Notice of such meetings shall be given to LLCP in the same manner and
at the same time as to the members of the Board or such committees (which in any
event shall not be less than forty-eight (48) hours prior to such meeting unless
otherwise agreed to by LLCP in advance and in writing) and at the same time as
to the shareholders of the Company, as the case may be. LLCP shall be provided
with copies of (i) a meeting agenda, if any is prepared, (ii) all information
that is provided to the members of the Board or such committees or to the
shareholders of the Company (whether prior to, at, or subsequent to any such
meetings), as the case may be, at the same time as such materials are provided
to the members of the Board or such committee or to the shareholders of the
Company, as the case may be, and (iii) copies of the minutes of all meetings of
the Board and such committees and of all meetings of shareholders concurrently
with the distribution of such minutes to one or more members of the Board or
such committees or shareholders, as the case may be, but in no event later than
forty-five (45) days after each such meeting.
1.3 Operating Committee. On the date hereof, the Company shall take all
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necessary action to establish an operating committee (the "Operating Committee")
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to, among other things, (a) review the annual operating and capital budget of
the Company and its subsidiaries; (b) compare budgeted versus actual
performance; (c) analyze working capital management; and (d) review the cash
flow performance of the Company and its subsidiaries. The Operating Committee
shall also consider such additional financial matters as the Operating Committee
shall deem advisable. The Operating Committee shall not constitute a committee
designated by the Board pursuant to the Company's Bylaws or Section 311 of the
California Corporations Code, and shall not have any authority to act in the
name of or on behalf of the Company or any of its subsidiaries, but the
Operating Committee shall have the right to make suggestions and to recommend
actions to the Board or to the Board of Directors of any subsidiary of the
Company or to any committee of any such Board of Directors, either in writing or
by attending, through a representative, a meeting of such Board of Directors or
such committee. The Operating Committee shall at all times be comprised of at
least two (2) members of senior management of the Company, who initially shall
be Xxxxx Xxxxx and Xxxxxxx Xxxxxx Xxxxxxx, and two (2) members designated by
LLCP (who shall be representatives of Xxxxxx
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Xxxxxxxxx Capital Partners, Inc. ("LLCP Inc."), an Affiliate of LLCP). The
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financial officers and other members of senior management of the Company shall
be available at each meeting of the Operating Committee to review financial
information and discuss other matters, and the Chief Financial Officer and other
members of senior management of Parent shall, at the request of LLCP furnished
two (2) days prior to such meeting, be available by telephonic conference at
each meeting of the Operating Committee to review financial information and
discuss other matters. Regular meetings of the Operating Committee shall take
place on or about the third Tuesday of each calendar month. The first meeting
of the Operating Committee shall be held on Tuesday, December 21, 1999.
Meetings may be conducted by telephone so long as each of the persons attending
can hear each of the other persons attending the meeting. The Company's
financial officers shall prepare a financial package for delivery to all
Operating Committee members at least forty-eight (48) hours prior to each
regularly scheduled monthly meeting. The financial package shall include, among
other things, (i) a consolidated and consolidating balance sheet, statement of
operations and statement of cash flows for Parent and the Company and their
Subsidiaries for the most recent one-month period and for the year-to-date
period, (ii) a comparison of the actual results of operations for such periods
to the same periods in the prior year and to the budget and forecast, (iii) an
explanation of any variances in such actual results of operations from such
budget and forecast, (iv) the status of any permitted dispositions of assets by
the Company, (v) an update of the status of all litigation or similar
proceedings pending against Parent, the Company or any of their Subsidiaries and
(vii) such other information regarding Parent and the Company and the Company's
Subsidiaries as any member of the Operating Committee may from time to time
request.
1.4 Vote of Independent Director.
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(a) Notwithstanding any other provision of the Articles of
Incorporation of the Company to the contrary, or any provision of Applicable
Laws that may otherwise empower the Company, the Company shall not, without the
unanimous affirmative vote of the Board of Directors of the corporation (which
shall include the affirmative vote of an Independent Director) and the
affirmative vote of the holders holding at least ninety percent of the issued
and outstanding capital stock of the corporation entitled to vote thereon, do
any of the following after the date hereof:
(i) Engage in any business or activity other than in accordance
with Article Three of the Amended Charter;
(ii) Incur any indebtedness, or assume or guarantee any
indebtedness of any other Person, other than in connection with the
activities described in Article Three of the Amended Charter;
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(iii) Dissolve or liquidate, in whole or in part (including a
dissolution or liquidation of the Company at the request of the holders
holding at least a majority of the issued and outstanding capital stock of
the Company);
(iv) Consolidate with or merge into any other Person, or sell,
convey or transfer all or substantially all of its properties and assets to
any other person or entity or acquire all or substantially all of the
assets or Capital Stock or any other Person;
(v) Institute any proceedings to be adjudicated bankrupt or
insolvent, or consent to the institution of any bankruptcy, insolvency or
reorganization proceedings against it, or file a petition or answer or
consent to seeking or consenting to its reorganization or relief under any
applicable federal or state law relating to bankruptcy, or consent to the
appointment of, or taking possession by, a receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the corporation or any
substantial part of its assets or properties, or make any assignment for
the benefit of creditors, or admit in writing its inability to pay its
debts generally as they become due, or take any corporation action in
furtherance of any such action; or
(vi) Authorize any amendment or alteration to, or repeal of, the
Articles of Incorporation of the Company.
(b) If, at any time after the date hereof, no individual is serving
as the Independent Director on the Board of Directors of the Company, the
Company shall not, without the affirmative vote of the LLCP Representative and
the affirmative vote of the holders holding at least ninety percent of the
issued and outstanding capital stock of the corporation entitled to vote
thereon, take any of the actions enumerated in clauses (i) through (vi) above.
In addition, Parent hereby agrees that it will not vote any of the shares of the
Capital Stock of the Company now owned or held or hereafter acquired by it in
favor of any of the matters enumerated in clauses (i) through (vi) above unless
the Independent Director (or, as provided in the immediately preceding sentence,
the LLCP Representative) votes in favor of such matter.
1.5 Consulting Fees.
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(a) In consideration of the services rendered and to be rendered by
LLCP Inc. to the Company under this Section 1 within the first three (3) twelve-
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month periods immediately following the date hereof, which services are hereby
acknowledged by the Company as being substantial and valuable to its business,
the Company agrees to pay to LLCP Inc. a consulting fee in the aggregate amount
of $540,000. The Company agrees that the full amount of such consulting fee
shall be fully earned as of the date hereof (whether or not the Securities
remain outstanding at all times during the entire three (3) year period), but
that such consulting fee shall be due and payable in three (3) equal
installments as follows: (a)
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$180,000 shall be due and payable on January 10, 2000, (b) $180,000 shall be due
and payable on January 10, 2001 and (c) $180,000 shall be due and payable on
January 10, 2002; provided, however, that upon the earlier to occur of (i) a
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Change in Control and (ii) the date that all principal of, premium, if any, and
accrued and unpaid interest on the Notes shall have been paid in full, all
consulting fees remaining unpaid under this Section 1.5(a) at such time shall
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become immediately due and payable to LLCP Inc.
(b) In addition, the Company agrees to pay to LLCP Inc. additional
consulting fees in consideration of services to be rendered by LLCP Inc. to the
Company under this Section 1 within each of the two (2) twelve-month periods
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ending on the fourth and fifth anniversaries of the date hereof. The amount of
such additional consulting fee shall be $180,000 for each such twelve month
period and shall be due and payable, with respect to the first such twelve month
period, on January 10, 2003, and with respect to the second such twelve month
period, on January 10, 2004; provided, however, that upon the occurrence of a
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Change in Control, all consulting fees remaining unpaid under this Section
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1.5(b) at such time shall become immediately due and payable to LLCP Inc.
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(c) The consulting fees payable to LLCP Inc. under this Section 1.5
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shall be paid by wire transfer in immediately available funds to a bank account
designated by LLCP Inc. In no event shall LLCP Inc. be obligated to refund or
waive its receipt of all or any portion of the consulting fees payable to it
hereunder for any reason.
1.6 Survival of Rights. The rights granted to LLCP under Section 1.1
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(Election of LLCP Representative to Board) and Section 1.2 (Observation Rights)
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shall be effective as of the date hereof and shall continue for so long as LLCP
continues to hold, directly or indirectly, at least $2,500,000 in outstanding
principal amount of the Note, or LLCP continues to hold (or is deemed to hold),
directly or indirectly, 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 1.3 (Operating Committee) shall be effective as of the date hereof and
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shall continue for so long as any principal of the Note remains outstanding.
Notwithstanding anything to the contrary contained herein or otherwise, the
rights granted to LLCP under Section 1.1 (Election of LLCP Representative to
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Board), Section 1.2 (Observation Rights) and Section 1.3 (Operating Committee)
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shall continue to survive to the extent that LLCP holds any portion of the
Indebtedness evidenced by 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.
2. INDEMNIFICATION AND INSURANCE.
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2.1 The Company shall, to the maximum extent permitted by law, indemnify,
defend and hold harmless the LLCP Representative, any LLCP representative on the
Operating Committee, LLCP and the employees, partners, principals, agents,
attorneys, accountants, representatives and Affiliates of LLCP (including,
without limitation, LLCP Inc.)
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(collectively, the "LLCP Parties"), from and against all costs, expenses,
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liabilities, claims, judgments, damages and losses, including, without
limitation, all attorneys' fees and the cost of any investigation and
preparation incurred in connection therewith, incurred in connection with any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative (collectively, "Liabilities and Costs"), arising
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out of or in any way related to the fact that any LLCP Party is or was a
director, officer, employee or other agent of the Company or any subsidiary of
the Company, is or was serving on the Operating Committee, is or was serving as
an observer of the Board, or is or was serving at the request of the Company as
a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise.
2.2 Upon request by any LLCP Party, the Company, shall advance (within
five (5) Business Days of such request) any and all expenses, including, without
limitation, any and all attorneys' fees and the cost of any investigation and
preparation incurred in connection with any matter for which such LLCP Party is
or may be entitled to indemnification hereunder; provided, however, that if and
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to the extent that a court of competent jurisdiction finally determines that
such LLCP Party is not permitted to be indemnified with respect to such matter
under applicable law, the Company shall be entitled to be reimbursed for any
expenses so advanced. The Company shall also indemnify each LLCP Party from and
against any and all Liabilities and Costs incurred in connection with any claim
or action brought to enforce such LLCP Party's rights under this Section 2, or
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under Applicable Law or the Company's charter or bylaws now or hereafter in
effect relating to indemnification, or for recovery under directors' and
officers' liability insurance policies maintained by the Company, regardless of
whether such LLCP Party is ultimately determined to be entitled to such
indemnification or insurance recovery, as the case may be. If, for any reason,
the foregoing indemnification is not available for any reason or is not
sufficient to indemnify and hold the LLCP Parties harmless from all such
Liabilities and Costs, then the Company shall contribute to the amount of all
such Liabilities and Costs paid or payable by any LLCP Party in such proportion
as is appropriate to reflect not only the relative benefits received by the
Company, on the one hand, and LLCP, on the other hand, but also the relative
fault of each, as well as any other equitable considerations. The Company's
reimbursement, indemnity and contribution obligations shall be in addition to
any liability the Company may otherwise have at law or under any other
agreement, including, without limitation, the Securities Purchase Agreement, and
such obligations shall extend, upon the same terms, to all LLCP Parties. This
Section 2 shall survive indefinitely the termination of this Agreement.
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2.3 At any time that an LLCP Representative is serving on the Board, the
Company shall maintain in force and effect one or more directors and officers
liability insurance policies providing at least $5,000,000 in insurance coverage
for director liability, including coverage for claims under federal and state
securities laws.
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3. CO-SALE AGREEMENT.
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3.1 If Parent proposes to sell or transfer any shares of Common Stock now
owned or held by Parent ("Co-Sale Shares") in one (1) transaction or any series
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of related transactions, then Parent shall promptly give written notice (the
"Co-Sale Notice") to the Company and to LLCP at least thirty (30) days prior to
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the closing of such sale or transfer. The Co-Sale Notice shall describe in
reasonable detail the proposed sale or transfer, including, without limitation,
the number of Co-Sale Shares to be sold or transferred, the nature of such sale
or transfer, the consideration to be paid and the name and address of each
prospective purchaser or transferee. In the event that the sale or transfer is
being made pursuant to the provisions of Section 3.8, the Notice shall state
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under which paragraph and subparagraph the sale or transfer is being made.
3.2 LLCP shall have the right, exercisable upon written notice to Parent
within twenty (20) days after receipt of the Co-Sale Notice, to participate in
such sale on the same terms and conditions as specified in the Co-Sale Notice.
To the extent that LLCP exercises such right of participation in accordance with
the terms and conditions set forth in this Section 3, the number of Co-Sale
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Shares that Parent may sell in the transaction(s) shall be correspondingly
reduced.
3.3 If there shall be a decrease in the price to be paid by the proposed
purchaser for the Co-Sale Shares to be purchased from the price set forth in the
Co-Sale Notice, which decrease is acceptable to Parent, or any other material
change in the terms or conditions set forth in the Co-Sale Notice which are less
favorable to Parent but which are acceptable to Parent, Parent shall immediately
notify LLCP in writing of such decrease or other change, and LLCP shall have ten
(10) Business Days from the date of receipt of such written notice to modify the
number of shares of Common Stock it will sell to the purchaser, as previously
indicated in the written notice delivered by LLCP pursuant to Section 3.2.
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3.4 LLCP may sell all or any part of that number of shares of Common Stock
equal to the product of (a) the aggregate number of shares of Common Stock
covered by the Co-Sale Notice, multiplied by (ii) a fraction, the numerator of
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shares of Common Stock or Warrant Shares, as applicable, held by LLCP at the
time of the sale or transfer (collectively, the "LLCP Shares") and the
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denominator of which is the total number of shares of Common Stock held by
Parent and any other shareholder of the Company, plus the number of LLCP Shares
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at the time of the sale or transfer. In no event shall LLCP be required to make
any representation or warranty in connection with the sale to any prospective
purchase other than as to the organization and authority of LLCP, title to the
shares of Common Stock to be sold by LLCP and the absence of conflict with laws
or material agreements of LLCP.
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3.5 LLCP shall effect its participation in the sale by promptly delivering
to Parent for transfer to the prospective purchaser one or more certificates,
properly endorsed for transfer, which represent:
(a) the type and number of shares of Common Stock which LLCP elects to
sell; or
(b) that number of Warrant Shares which is at such time convertible
into the number of shares of Common Stock which LLCP elects to sell; provided,
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however, that if the prospective purchaser objects to the delivery of Warrant
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Shares in lieu of Common Stock, LLCP shall convert such Warrant Shares into
Common Stock and deliver Common Stock as provided in Section 3.4(a). The
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Company agrees to make any such conversion concurrent with the actual transfer
of such shares to the purchaser.
3.6 The stock certificate or certificates that LLCP delivers to Parent
pursuant to Section 3.4 shall be transferred to the prospective purchaser in
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consummation of the sale of the Common Stock pursuant to the terms and
conditions specified in the Co-Sale Notice, and Parent shall concurrently
therewith remit to LLCP that portion of the sale proceeds to which LLCP is
entitled by reason of LLCP's participation in such sale in immediately available
funds. To the extent that any prospective purchaser prohibits such assignment
or otherwise refuses to purchase shares or other securities from LLCP, Parent
shall not sell to such prospective purchaser any shares of Common Stock unless
and until, simultaneously with such sale, Parent shall purchase such shares or
other securities from LLCP. Subject to the foregoing sentence, if Parent does
not complete the proposed sale or transfer for any reason, Parent shall
immediately return to LLCP all documents (including, without limitation, the
Warrant and all stock certificates, stock assignments and/or powers of attorney)
which LLCP delivered to Parent pursuant to this Section 3 or otherwise in
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connection with such sale or other transfer.
3.7 The exercise or non-exercise of the rights of LLCP hereunder to
participate in one or more sales of Co-Sale Shares by Parent shall not adversely
affect its rights to participate in subsequent sales of Co-Sale Shares by
Parent.
3.8 Exempt Transfers. The provisions of Section 3 shall not apply to the
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sale of any Co-Sale Shares (a) to the public pursuant to a registration
statement filed with, and declared effective by, the Commission under the
Securities Act of 1933, as amended (the "Securities Act") or (b) to the Company.
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3.9 Prohibited Transfers.
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(a) If Parent sells (or enters into any agreement, arrangement or
understanding to sell) any Co-Sale Shares in contravention of the co-sale rights
of LLCP hereunder (a "Prohibited Transfer"), LLCP shall have, in addition to all
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other rights, powers
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or remedies available at law, in equity, under this Agreement or any other
Investment Document or under Applicable Law, the right to exercise the
Prohibited Transfer Put (as such term is defined below), and Parent shall be
bound by the applicable provisions hereof.
(b) In the event of a Prohibited Transfer, LLCP shall have the right
to sell to Parent (the "Prohibited Transfer Put") the type and number of shares
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of Common Stock equal to the number of shares LLCP would have been entitled to
transfer to the purchaser under Section 3.2 had the Prohibited Transfer been
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effected pursuant to and in compliance with the terms hereof. Such sale shall
be made on the following terms and conditions:
(i) The price per share at which shares are to be sold to
Parent shall be equal to the price per share paid by the purchaser to
Parent in the Prohibited Transfer. Parent shall also reimburse LLCP for any
and all fees and expenses, including attorneys, accountants and other
expenses, incurred pursuant to the exercise or attempted exercise of LLCP's
rights under Section 3;
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(ii) Within thirty (30) days after the later of the dates on
which LLCP (A) received notice of the Prohibited Transfer or (B) otherwise
became aware of the Prohibited Transfer, LLCP shall, if exercising the
Prohibited Transfer Put, deliver to Parent the certificate or certificates
representing the shares to be sold, each certificate to be properly
endorsed for transfer;
(iii) Parent shall, upon receipt of the certificate or
certificates representing the shares to be sold by LLCP, pay the aggregate
purchase price therefor and the amount of reimbursable fees and expenses,
as specified in Section 3.9(b)(i), by wire transfer in immediately
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available funds; and
(iv) Notwithstanding the foregoing, any attempt by Parent to
transfer any Co-Sale Shares in violation of Section 3 shall be void and the
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Company agrees that it will not effect such a transfer nor will it treat
any alleged transferee as the holder of such shares without the written
consent of LLCP.
4. RIGHT OF FIRST REFUSAL.
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4.1 The Company hereby grants to LLCP the right of first refusal to
purchase a pro rata share of New Securities (as such term in defined below)
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which the Company may, from time to time, propose to sell and issue, and the
Company shall not issue any New Securities without complying with the provisions
of this Section 4. For purposes of this right of first refusal, LLCP's pro rata
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share shall be equal to the percentage equal to a fraction, the numerator of
which is the number of shares of Common Stock held by LLCP or issuable upon the
exercise of the Warrant or other Option Rights of the Company held by LLCP
immediately prior to the issuance of the New Securities, and the denominator of
which is the sum of (a) the total number of shares of Common Stock outstanding
immediately prior to the issuance of the
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New Securities, assuming the exercise of all Option Rights of the Company
outstanding immediately prior to the issuance of the New Securities.
4.2 The term "New Securities" shall mean any capital stock (including
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Common Stock or preferred stock) of the Company whether now authorized or not,
and any Option Rights of the Company; provided, however, that the term New
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Securities does not include any securities issued in a public offering pursuant
to a registration under the Securities Act with an aggregate offering price to
the public of at least $10,000,000.
4.3 If the Company proposes to undertake an issuance of New Securities, it
shall give LLCP written notice (an "Issuance Notice") of its intention,
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describing the type of New Securities, and their price and the general terms
upon which the Company proposes to issue the same. LLCP shall have thirty (30)
days after its receipt of the Issuance Notice to agree to purchase LLCP's pro
rata share of such New Securities for the price and upon the terms specified in
the notice by giving written notice to the Company and indicating therein the
quantity of New Securities to be purchased.
4.4 The right of first refusal granted under this Section 4 shall expire
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on the earlier to occur of (a) the tenth anniversary of the date of this
Agreement and (ii) the date upon which the number of Warrant Shares held by
LLCP, directly or indirectly, is less than five percent (5.0%) of the number of
shares of Common Stock calculated on a Fully Diluted Basis.
5. MISCELLANEOUS.
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5.1 Legends. All certificates representing shares of Capital Stock of the
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Company now owned or held or hereafter acquired by Parent shall have stamped or
endorsed thereon a legend substantially in the following form (in addition to
any legends required under applicable state securities laws):
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS
OF AN INVESTOR RIGHTS AGREEMENT DATED AS OF NOVEMBER 24, 1999, BY AND
AMONG THE HOLDER, THE COMPANY AND CERTAIN OTHER PERSONS. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED FROM THE COMPANY UPON WRITTEN REQUEST.
5.2 Stock Transfer Records. The Company shall make appropriate notations
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in its stock transfer records of the restrictions on transfer provided for in
this Agreement and shall not record any transfers of capital stock not made in
strict compliance with the terms of this Agreement. The Company acknowledges
that any such transfer shall constitute an Event of Default under Section 10.1
of the Securities Purchase Agreement.
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5.3 Successors and Assigns. The rights and obligations of LLCP under this
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Agreement shall be freely assignable in connection with any transfer of the
Warrant or any portion thereof or of any shares of Common Stock issued upon the
exercise thereof in whole or in part; provided, however, that the rights of LLCP
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under Section 1 may not be assigned except in connection with any such transfer
---------
to an Affiliate of LLCP. Any assignee of such rights shall be entitled to all
of the benefits of this Agreement as if such assignee were an original party
hereto.
5.4 Entire Agreement. This Agreement constitutes the full and entire
----------------
agreement and understanding among the parties with respect to the subject matter
hereof and supersedes all prior oral and written, and all contemporaneous oral,
agreements and understandings relating to the subject matter hereof.
5.5 Notices. All notices, requests, demands and other communications
-------
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if transmitted by telecopier with
receipt acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of 72 hours
after mailing, if mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(1) If to LLCP, to:
Xxxxxx Xxxxxxxxx Capital Partners II, L.P.
c/o Levine Xxxxxxxxx Capital Partners, Inc.
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
--------------
Xxxxxxx & XxXxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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(2) If to the Company, at:
Overhill Farms, Inc.
0000 Xxxxxxxx Xxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
--------------
Xxxxxxx, Xxxxxxx & Smiley, LLP
0000 Xxxxxxxxx Xxxx. Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Arbiter, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(3) If to Parent, at:
Polyphase Corporation
0000 Xxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or at such other address or addresses as LLCP, such assignee, the Company or
Parent, as the case may be, may specify by written notice given in accordance
with this Section 5.5.
-----------
5.6 Severability. In case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
5.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts and by facsimile, each of which shall be an original, but all of
which together shall constitute one instrument.
5.8 Descriptive Headings, Construction and Interpretation. The
-----------------------------------------------------
descriptive headings of the several paragraphs of this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
are not to be considered in construing or interpreting this Agreement. All
section, preamble, recital and party references are to this Agreement unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of
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this Agreement for purposes of construing the provisions of this Agreement, and
all provisions of this Agreement shall be construed in accordance with their
fair meaning, and not strictly for or against any party.
5.9 Waivers and Amendments. Neither this Agreement nor any provision
----------------------
hereof may be changed, waived, discharged or terminated orally or by course of
dealing, but only by a statement in writing signed by all of the parties.
5.1 Remedies. In the event that the Company or Parent fails to observe or
--------
perform any covenant or agreement to be observed or performed under this
Agreement, LLCP may proceed to protect and enforce its rights by suit in equity
or action at law, whether for specific performance of any term contained in this
Agreement or for an injunction against the breach of any such term or in aid of
the exercise of any power granted in this Agreement or to enforce any other
legal or equitable right of LLCP, or to take any one or more of such actions.
The Company agrees to pay all fees, costs, and expenses, including, without
limitation, fees and expenses of attorneys, accountants and other experts
retained by LLCP, and all fees, costs and expenses of appeals, incurred or
expended by LLCP in connection with the enforcement of this Agreement or the
collection of any sums due hereunder, whether or not suit is commenced. None of
the rights, powers or remedies conferred under this Agreement shall be mutually
exclusive, and each such right, power or remedy shall be cumulative and in
addition to any other right, power or remedy whether conferred by this Agreement
or now or hereafter available at law, in equity, by statute or otherwise.
5.1 Governing Law. In all respects, including all matters of
-------------
construction, validity and performance, this Agreement and the rights and
obligations arising hereunder 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.
5.1 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
--------------------
COMPLEX COMMERCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSONS AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT, ANY OTHER INVESTMENT DOCUMENT OR THE TRANSACTIONS COMPLETED HEREBY
AND THEREBY.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized representatives as of the date first
written above.
COMPANY LLCP
------- ----
OVERHILL FARMS, INC., a Nevada XXXXXX XXXXXXXXX CAPITAL
corporation PARTNERS, INC., a California corporation
On behalf of XXXXXX XXXXXXXXX
By:_____________________________ CAPITAL PARTNERS II, L.P., a
Xxxxx Xxxxx California limited partnership
President and Chief Executive
Officer By:__________________________
Xxxxxx X. Xxxxxxxxx
Chief Executive Officer
By:_____________________________
Xxxxxxx Xxxxxx Xxxxxxx
Vice President and Chief
Financial Officer
PARENT
------
POLYPHASE CORPORATION, a
Nevada corporation
By:_____________________________
Xxxxx Xxxxx
President and Chief Executive
Officer
By:_____________________________
Xxxxxxx Xxxxxxx
Senior Vice President and
Chief Financial Officer
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