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STOCK PURCHASE AGREEMENT
GARDENBURGER, INC.
MARCH 29, 1999
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TABLE OF CONTENTS
PAGE
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1. Definitions...............................................................1
2. Authorization and Sale of Preferred Stock; Use of Proceeds................4
2.1 Authorization of the Shares......................................4
2.2 Sale of Securities...............................................5
2.3 Use of Proceeds..................................................5
3. Closing Date; Delivery....................................................5
3.1 Closing Date.....................................................5
3.2 Delivery.........................................................5
4. Representations and Warranties of the Company.............................5
4.1 Organization, Corporate Power and Licenses.......................5
4.2 Capital Stock and Related Matters................................5
4.3 Subsidiaries; Investments........................................6
4.4 Authorization; No Breach.........................................6
4.5 Financial Statements.............................................7
4.6 Absence of Undisclosed Liabilities...............................7
4.7 No Material Adverse Change.......................................8
4.8 Absence of Certain Developments..................................8
4.9 Assets...........................................................9
4.10 Tax Matters......................................................9
4.11 Contracts and Commitments.......................................10
4.12 Intellectual Property Rights....................................12
4.13 Litigation, etc.................................................13
4.14 Brokerage.......................................................14
4.15 Consents........................................................14
4.16 Insurance.......................................................14
4.17 Employees.......................................................14
4.18 ERISA...........................................................14
4.19 Compliance with Laws............................................15
4.20 Environmental and Safety Matters................................15
4.21 Affiliated Transactions.........................................17
4.22 Disclosure......................................................17
4.23 Investment Company..............................................17
4.24 Projections.....................................................17
4.25 SEC Filings.....................................................17
5. Representations and Warranties of the Purchasers.........................18
5.1 Authority of Purchasers.........................................18
5.2 Investment Representations......................................18
5.3 Legends.........................................................19
5.4 Removal of Legend and Transfer Restrictions.....................19
5.5 Confidentiality.................................................19
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TABLE OF CONTENTS
(CONTINUED)
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6. Pre-closing Covenants....................................................20
6.1 Conduct of Business.............................................20
6.2 Cooperation.....................................................20
6.3 No Solicitation of Transaction..................................20
6.4 Access to the Company...........................................20
6.5 Notification of Breach of Representations,
Warranties and Covenants........................................21
6.6 Changes in Capital Stock........................................21
6.7 Litigation Developments.........................................21
6.8 No Shopping.....................................................21
7. Conditions to Closing....................................................21
7.1 Conditions to Purchasers'Obligations............................21
7.2 Conditions to Obligations of the Company........................23
8. Termination..............................................................24
8.1 Termination.....................................................24
8.2 Effect of Termination...........................................24
9. Miscellaneous............................................................25
9.1 Governing Law...................................................25
9.2 Survival........................................................25
9.3 Successors and Assigns..........................................25
9.4 Entire Agreement; Amendment.....................................25
9.5 Notices.........................................................25
9.6 Expenses........................................................26
9.7 Delays or Omissions.............................................26
9.8 Severability of this Agreement..................................26
9.9 Finder's Fees...................................................26
9.10 Titles and Subtitles............................................27
9.11 Counterparts....................................................27
9.12 Gender..........................................................27
9.13 Public Announcement.............................................27
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TABLE OF CONTENTS
EXHIBITS
INITIAL EXHIBIT
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A Schedule of Purchasers
B Terms of Series A Stock and Series B Stock
C Schedule of Exceptions
D Restated Articles of Incorporation, as amended, of
Gardenburger, Inc. as of March 29, 1999
E Form of Investor Rights Agreement
F Form of Opinion of Company's Counsel
G Indemnification Agreement
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GARDENBURGER, INC.
2,762,500 Shares of Series A Convertible Preferred Stock
487,500 Shares of Series B Convertible Preferred Stock
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of the 29th day of March, 1999, by and among Gardenburger, Inc., an Oregon
corporation (the "Company"), and the purchasers identified on Exhibit A hereto
(collectively, the "Purchasers").
THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS. For the purposes of this Agreement, the following terms
have the meanings set forth below:
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"AFFILIATED GROUP" means any affiliated group as defined in IRC ss.
1504 that has filed a consolidated return for federal income tax purposes (or
any similar group under state, local or foreign law) for a period during which
the Company was a member.
"ANCILLARY AGREEMENTS" means all agreements and certificates provided
for herein, including those items described in Section 7 hereof.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, or any successor
federal statute.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System.
"ENVIRONMENTAL AND SAFETY LAWS" means any and all applicable present
and future federal, state, local and foreign statutes, laws, regulations,
ordinances and similar provisions having the force or effect of law, all
judicial and administrative orders and determinations, all contractual
obligations and common law concerning public health or safety, worker health or
safety or pollution or protection of the environment, including, without
limitation, those relating to any emissions, discharges or Releases of Hazardous
Materials to ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, control, cleanup or handling of Hazardous Materials.
"ENVIRONMENTAL PERMITS" means all material permits, licenses and other
authorizations which are required under Environmental and Safety Laws and
applicable to the conduct of the Company's business.
"EQUITY SECURITY" of any Person means any capital stock or other
ownership or equity interest or profit participation or similar right with
respect to such Person (including any partnership or membership interest, any
stock appreciation, phantom stock or similar right or plan, and any note or debt
security having or containing equity or profit participation features), or any
option, warrant or other security or right which is directly or indirectly
convertible into or exercisable or exchangeable for any other Equity Security of
such Person.
"HAZARDOUS MATERIAL" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Environmental and Safety Laws as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, "TLCP" toxicity or "EP" toxicity; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; (d) underground storage tanks, whether empty or containing any
substance or surface impoundments; and (e) asbestos in any form or electrical
equipment which contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls.
"INDEBTEDNESS" means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade payables
and other current liabilities incurred in the ordinary course of business), (iv)
any commitment by which a Person assures a creditor against loss (including,
without limitation, contingent reimbursement obligations with respect to letters
of credit), (v) any indebtedness guaranteed in any manner by a Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) any indebtedness secured by a Lien on a Person's
assets and (vii) any unsatisfied obligation for "withdrawal liability" to a
"multi-employer plan" as such terms are defined under ERISA (as defined in
Section 4.18 hereof); provided that "Indebtedness" does not include the Shares
or operating leases.
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
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specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
and (vii) copies and tangible embodiments thereof (in whatever form or medium).
"INVESTMENT" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person, in each case other than
investments in money market funds or similar short-term non-equity investments.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified. "IRS" means the United States Internal Revenue Service.
"LATEST BALANCE SHEET" means the unaudited consolidated balance sheet
of the Company as of February 28, 1999.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute other than to reflect ownership by a third party of property leased to
the Company under a lease which is not in the nature of a conditional sale or
title retention agreement, or any subordination arrangement in favor of another
Person (other than any subordination arising in the ordinary course of
business).
"PERMITTED LIENS" means:
(i) tax liens with respect to taxes not yet due and payable or
which are being contested in good faith by appropriate proceedings and
for which appropriate reserves have been established in accordance with
generally accepted accounting principles, consistently applied;
(ii) purchase money security interests in any property
acquired by the Company;
(iii) trust deeds or mortgages on real property acquired by
the Company;
(iv) interests or title of a lessor under any lease;
(v) mechanics', materialmen's or contractors' liens or
encumbrances or any similar lien or restriction for amounts not yet due
and payable; and
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(vi) easements, rights-of-way, restrictions and other similar
charges and encumbrances on real property not interfering with the
ordinary conduct of the business of the Company or detracting from the
value of the assets of the Company.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended.
"RELEASE" means any "release" as such term is defined in 42 U.S.C. ss.
9601(22), or any successor federal statute or analogous state law.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" means the United States Securities
and Exchange Commission, including any governmental body or agency succeeding to
the functions thereof.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"SHARES" has the meaning set forth in Section 2.2 hereof.
"TAX" or "TAXES" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
2. AUTHORIZATION AND SALE OF PREFERRED STOCK; USE OF PROCEEDS.
2.1 AUTHORIZATION OF THE SHARES. At the Closing (as defined in
Section 3.1), the Company's Restated Articles of Incorporation, as amended (the
"Restated Articles"), will authorize two million seven hundred sixty two
thousand five hundred (2,762,500) shares of Series A Convertible Preferred
Stock, no par value ("Series A Stock"), and four hundred eighty seven thousand
five hundred (487,500) shares of Series B Convertible Preferred Stock, no par
value ("Series B Stock"). The shares of Series A Stock and Series B Stock
(collectively, the "Preferred Stock") will have the rights, privileges and
preferences set forth in Exhibit B attached hereto.
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2.2 SALE OF SECURITIES. Subject to the terms and conditions
hereof, on the Closing Date (as defined in Section 3.1) the Company will issue
and sell to the Purchasers, and the Purchasers severally and not jointly agree
to purchase on a pro rata basis from the Company, an aggregate of two million
seven hundred sixty two thousand five hundred (2,762,500) shares of Series A
Stock and four hundred eighty seven thousand five hundred (487,500) shares of
Series B Stock (collectively, the "Shares"), at a purchase price of Ten Dollars
($10.00) per Share for an aggregate purchase price of Thirty Two Million Five
Hundred Thousand ($32,500,000) in the amounts set forth on Exhibit A. The
obligation of each Purchaser to purchase the respective number of shares
assigned to it on Exhibit A is several and not joint and none of the Purchasers
shall be obligated to purchase any Shares which any other Purchaser fails to
purchase.
2.3 USE OF PROCEEDS. Twenty-Five Million Dollars ($25,000,000)
of the net proceeds from the sale of the Shares shall be used to pursue the
Company's strategic business plan, which includes a national television
advertising campaign, and the balance shall be used as working capital to be
utilized at the discretion of the Company's Board of Directors.
3. CLOSING DATE; DELIVERY.
3.1 CLOSING DATE. The closing of the purchase and sale of the
Shares (the "Closing") shall be held at the offices of Miller, Nash, Wiener,
Hager & Xxxxxxx LLP, 000 X.X. Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000-0000, at
12:00 p.m., on April 14, 1999, or at such other time and place to which the
Company and a majority of the Purchasers may agree (the "Closing Date").
3.2 DELIVERY. At the Closing, the Company shall deliver to the
Purchasers certificates representing the Shares against payment of the purchase
price therefor by a cashier's check or by wire transfer to the bank account of
the Company. The Closing is subject to the conditions set forth in Section 7 of
this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchasers as of the date hereof and as of the
Closing Date that:
4.1 ORGANIZATION, CORPORATE POWER AND LICENSES. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of Oregon and is qualified to do business in every jurisdiction in which
its ownership of property or conduct of business requires it to qualify. The
Company possesses all requisite corporate power and authority and all material
licenses, permits and authorizations necessary to own and operate its
properties, to carry on its business as now conducted and presently proposed to
be conducted and to carry out the transactions contemplated by this Agreement.
The copies of the Company's charter documents (a copy of which is attached
hereto as Exhibit D) and bylaws which have been furnished to the Purchasers
reflect all amendments made thereto at any time prior to the date of this
Agreement and are correct and complete.
4.2 CAPITAL STOCK AND RELATED MATTERS. Except as set forth in
the Schedule of Exceptions:
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(i) On the date hereof, the authorized capital stock
of the Company consists of (a) 25,000,000 shares of Common Stock, no
par value ("Common Stock"), of which 8,787,271 shares are issued and
outstanding, 4,062,500 shares are reserved for issuance upon conversion
of the Shares, 3,370,123 shares are reserved for issuance in connection
with the Company's stock option plans (which includes options to
purchase 270,000 shares granted to members of the senior management
team of the Company identified on the Schedule of Exceptions attached
hereto as Exhibit C and delivered to the Purchasers prior to the
execution of this Agreement ("Schedule of Exceptions")) of which
options for 3,189,667 shares are outstanding as of the date of this
Agreement, and options to purchase 180,456 remain available for
issuance and 1,162,790 shares are reserved for issuance in connection
with the conversion of the 7% Convertible Senior Subordinated Notes
dated March 27, 1998 (the "Notes") in the aggregate principal amount of
Fifteen Million Dollars ($15,000,000) and interest payments due on the
Notes. As of the Closing and immediately thereafter, the authorized
capital stock shall include 2,762,500 shares of Series A Stock and
487,500 shares of Series B Stock, which will be issued and outstanding.
As of the Closing, the Company shall not be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any of its Equity Securities, except as set forth on the Schedule of
Exceptions and except pursuant to this Agreement. As of the Closing,
the Company shall not have outstanding any Equity Securities, except as
set forth above or on the Schedule of Exceptions. As of the Closing,
all of the outstanding shares of the Company's capital stock shall be
validly issued, fully paid and nonassessable.
(ii) There are no statutory or contractual
shareholders preemptive rights or rights of refusal with respect to the
issuance of the Shares hereunder or the issuance of the Common Stock
upon conversion of the Shares. The Company has not violated any
applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer,
sale and issuance of the Shares hereunder do not require registration
under the Securities Act or any applicable state securities laws. To
the best of the Company's knowledge, there are no agreements between
the Company's shareholders with respect to the voting or transfer of
the Company's capital stock or with respect to any other aspect of the
Company's affairs, except as set forth in the Schedule of Exceptions or
this Agreement.
4.3 SUBSIDIARIES; INVESTMENTS. The Company has no
subsidiaries. The Company does not own or hold any Equity Security or the right
to acquire any Equity Security or other Investment in any other Person.
4.4 AUTHORIZATION; NO BREACH. Except as set forth in the
Schedule of Exceptions, the execution, delivery and performance by the Company
of this Agreement has been duly authorized by the Company and the execution,
delivery and performance by the Company of the Ancillary Agreements will at the
Closing be duly authorized by the Company. This Agreement constitutes and the
Ancillary Agreements to which the Company will be a party, upon issuance or
execution by the Company, each will constitute (assuming due execution by the
other party or parties thereto), a valid and binding obligation of the Company,
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enforceable in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy laws or other similar laws affecting creditors' rights
generally, and except insofar as the availability of equitable remedies may be
limited by applicable law from time to time. The execution and delivery by the
Company of this Agreement and the Ancillary Agreements to which the Company is a
party, the offering, sale and issuance of the Shares hereunder, the issuance of
the Common Stock upon conversion of the Shares and the fulfillment of and
compliance with the respective terms hereof and thereof by the Company, assuming
receipt of all consents listed on the Schedule of Exceptions, do not and will
not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in the creation of
any Lien upon the Company's capital stock or assets pursuant to, (iv) give any
third party the right to modify, terminate or accelerate any obligation under,
(v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any court or administrative or governmental body or agency pursuant to,
the charter or bylaws of the Company, or any law, statute, rule or regulation to
which the Company is subject, or any agreement, instrument, order, judgment or
decree to which the Company is subject.
4.5 FINANCIAL STATEMENTS. Set forth on the Schedule of
Exceptions are the following financial statements:
(i) the audited consolidated balance sheets of the
Company as of December 31, 1996 and December 31, 1997 and the related
statements of income and cash flows (or the equivalent) for the fiscal
years then ended, respectively, and the draft balance sheet dated
December 31, 1998, and the related draft statements of income and cash
flows (or the equivalent) for the fiscal year then ended (including the
notes thereto); and
(ii) the Latest Balance Sheet, and the related
statement of income (or the equivalent) for the two-month period then
ended.
Each of the foregoing financial statements (including
in all cases the notes thereto, if any) is accurate and complete in all
material respects, is consistent with the books and records of the
Company (which, in turn, are accurate and complete in all material
respects) and has been prepared in accordance with generally accepted
accounting principles, consistently applied, subject in the case of the
unaudited financial statements to the absence of footnote disclosure
and changes resulting from normal year-end adjustments (none of which
would, alone or in the aggregate, be materially adverse to the
financial condition, operating results, assets or operations of the
Company).
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
the Schedule of Exceptions, the Company does not have and will not have as of
the Closing any obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known to the Company, whether due or
to become due and regardless of when asserted) arising out of transactions
entered into at or prior to the date of this Agreement, or any action or
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inaction at or prior to the date of this Agreement, or any state of facts
existing at or prior to the date of this Agreement other than: (i) liabilities
and obligations which have arisen after the date of the Latest Balance Sheet in
the ordinary course of business (none of which is a liability resulting from
breach of contract, breach of warranty, tort, infringement, claim or lawsuit),
(ii) other liabilities and obligations expressly disclosed in the Schedule of
Exceptions to this Agreement and (iii) liabilities which individually or in the
aggregate do not and could not reasonably be expected to have a material adverse
effect on the business, assets, operations, or financial condition of the
Company.
4.7 NO MATERIAL ADVERSE CHANGE. Except as set forth in the
Schedule of Exceptions, since December 31, 1998, there has been no material
adverse change in the financial condition, operating results, assets,
operations, business prospects, or employee, governmental, customer, provider or
supplier relations of the Company.
4.8 ABSENCE OF CERTAIN DEVELOPMENTS.
(i) Except as expressly contemplated by this
Agreement or as set forth in the attached Schedule of Exceptions, since
December 31, 1998, the Company has not:
(a) issued any notes, bonds or other debt
securities or any capital stock or other Equity Securities;
(b) borrowed any amount or incurred or
become subject to any Indebtedness or other liabilities,
except current liabilities incurred in the ordinary course of
business and liabilities under contracts entered into in the
ordinary course of business;
(c) discharged or satisfied any Lien or paid
any obligation or liability, other than current liabilities
paid in the ordinary course of business;
(d) declared or made any payment or
distribution of cash or other property to its shareholders
with respect to its capital stock or other Equity Securities
or purchased or redeemed any shares of its capital stock or
other Equity Securities;
(e) mortgaged or pledged any of its
properties or assets or subjected them to any Lien, except
Permitted Liens;
(f) sold, assigned or transferred any of its
tangible assets, except inventory or obsolete or replaced
equipment disposed of in the ordinary course of business, or
canceled any debts or claims;
(g) sold, assigned or transferred any
Intellectual Property Rights, or disclosed any proprietary
confidential information to any Person (other than the
Purchasers or any representative thereof);
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(h) suffered any extraordinary losses or
waived any material rights of value, whether or not in the
ordinary course of business or consistent with past practice;
(i) made capital expenditures or commitments
therefor that aggregate in excess of $500,000;
(j) made any loans or advances to,
guarantees for the benefit of, or any Investments in, any
Persons in excess of $100,000 in the aggregate;
(k) made any charitable contributions or
pledges in excess of $10,000 in the aggregate;
(l) suffered any damage, destruction or
casualty loss exceeding in the aggregate $100,000 whether or
not covered by insurance;
(m) made any Investment in or taken steps to
incorporate any Person;
(n) entered into any other material
transaction whether or not in the ordinary course of business;
or
(o) committed or agreed to do any of the
foregoing.
(ii) The Company has not at any time made any bribes,
kickback payments or other illegal payments.
4.9 ASSETS. Except as set forth in the Schedule of Exceptions,
the Company has good and marketable title to, or a valid leasehold interest in,
the properties and tangible assets used in and material to its business, free
and clear of all Liens, except for inventory and obsolete or replaced equipment
disposed of in the ordinary course of business since the date of the Latest
Balance Sheet and except for Liens disclosed in the Financial Statements
included in the Schedule of Exceptions (including any notes thereto) or
otherwise set forth in the Schedule of Exceptions and except for Permitted
Liens. Except as described in the Schedule of Exceptions, the Company's
buildings, equipment and other tangible assets used in and material to its
business are in good operating condition in all material respects (ordinary wear
and tear excepted) and are fit for use in the ordinary course of business. The
Company owns, or has a valid leasehold interest in, all tangible assets
necessary for the conduct of its business as presently conducted and as
presently proposed to be conducted.
4.10 TAX MATTERS. Except as set forth in the Schedule of
Exceptions:
(i) The Company, and each Affiliated Group have filed
all Tax Returns which they are required to file under applicable laws
and regulations; all such Tax Returns are complete and correct in all
material respects and have been prepared in compliance with all
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applicable laws and regulations in all material respects; the Company
and each Affiliated Group in all material respects have paid all Taxes
due and owing by them (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to the
appropriate taxing authority all Taxes which they are required to
withhold from amounts paid or owing to any employee, stockholder,
creditor or other third party; neither the Company nor any Affiliated
Group has waived any statute of limitations with respect to any
material Taxes or agreed to any extension of time with respect to any
material Tax assessment or deficiency; the accrual for Taxes on the
Latest Balance Sheet would be adequate to pay all Tax liabilities of
the Company if its current tax year were treated as ending on the date
of the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax income);
since the date of the Latest Balance Sheet, the Company has not
incurred any liability for Taxes other than in the ordinary course of
business; the assessment of any additional Taxes for periods for which
Tax Returns have been filed by the Company and each Affiliated Group
shall not exceed the recorded liability therefor on the Latest Balance
Sheet (excluding any amount recorded which is attributable solely to
timing differences between book and Tax income); no foreign, federal,
state or local tax audits or administrative or judicial proceedings are
pending or being conducted with respect to the Company or any
Affiliated Group, no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and
no written notice indicating an intent to open an audit or other review
has been received by the Company from any foreign, federal, state or
local taxing authority; and there are no material unresolved questions
or claims concerning the Company's or any Affiliated Group Tax
liability.
(ii) The Company has not made an election under IRC
ss. 341(f). The Company is not liable for the Taxes of another Person
in a material amount under (a) Treas. Reg. ss. 1.1502-6 (or comparable
provisions of state, local or foreign law), (b) as a transferee or
successor, (c) by contract or indemnity or (d) otherwise. The Company
is not a party to any tax sharing agreement. The Company and each
Affiliated Group have disclosed on their federal income Tax Returns any
position taken for which substantial authority (within the meaning of
IRC ss. 6662(d)(2)(B)(i)) did not exist at the time the return was
filed. Except as set forth on the attached Schedule of Exceptions, the
Company has not made any payments, is not obligated to make payments or
is not a party to an agreement that could obligate it to make any
payments that would not be deductible under IRC ss. 280G.
(iii) The Company is not a "United States real
property holding corporation", as defined in IRC ss. 897 and in
applicable regulations thereunder.
4.11 CONTRACTS AND COMMITMENTS.
(i) Except for this Agreement and the Ancillary
Agreements or as set forth on the attached Schedule of Exceptions, the
Company is not a party to or bound by any written or oral:
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(a) pension, profit sharing, stock option,
employee stock purchase or other plan or arrangement providing
for deferred or other compensation to employees or any other
employee benefit plan or arrangement, or any collective
bargaining agreement or any other contract with any labor
union, or any severance agreement, program, policy or
arrangement;
(b) contract for the employment of any
officer, individual employee or other Person on a full-time,
part-time, consulting or other basis providing annual
compensation in excess of $50,000 or contract relating to
loans to officers, directors or Affiliates;
(c) contract under which the Company has
advanced or loaned any other Person amounts in the aggregate
exceeding $50,000 or made any other Investment in any other
Person;
(d) agreement or indenture relating to
Indebtedness or the mortgaging, pledging or otherwise placing
a Lien on any material asset or material group of assets of
the Company;
(e) guarantee of any obligation for an
amount individually or in the aggregate in excess of $50,000;
(f) lease or agreement under which the
Company is lessee of or holds or operates any property, real
or personal, owned by any other party, except for any lease of
real or personal property under which the aggregate annual
rental payments do not exceed $100,000;
(g) lease or agreement under which the
Company is lessor of or permits any third party to hold or
operate any property, real or personal, owned or controlled by
the Company;
(h) contract or group of related contracts
with the same party or group of affiliated parties the
performance of which involves consideration in excess of
$100,000, provided that sales invoices are not required to be
listed;
(i) assignment, license, indemnification or
agreement with respect to any intangible property material to
the operation of the Company's business (including, without
limitation, any Intellectual Property Right);
(j) agreement with any federal, state or
local government or subdivision, agency or authority thereof;
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(k) agreement under which it has granted any
Person any registration rights (including, without limitation,
demand and piggyback registration rights);
(l) sales, distribution or franchise
agreement, or other agreements material to the operation of
the Company's business with a term of more than six months
which is not terminable by the Company upon less than 90 days
notice without penalty;
(m) contract or agreement prohibiting it
from freely engaging in any business or competing anywhere in
the world; or
(n) any other agreement which is material to
its operations and business prospects or involves a
consideration in excess of $100,000 annually.
(ii) All of the contracts, agreements and instruments
set forth or required to be set forth on the Schedule of Exceptions are
valid, binding and enforceable in accordance with their respective
terms. The Company has performed all material obligations required to
be performed by it and is not in default under or in breach of nor in
receipt of any claim of default or breach under any contract, agreement
or instrument to which the Company is subject; no event has occurred
which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by the Company
under any contract, agreement or instrument to which the Company is
subject; the Company has no present expectation or intention of not
fully performing all such obligations; the Company has no knowledge of
any breach or anticipated breach by the other parties to any contract,
agreement, instrument or commitment to which it is a party; and the
Company is not a party to any materially adverse contract or
commitment.
(iii) Upon request, the Company will supply promptly
to the Purchasers a true and correct copy of any of the written
instruments, plans, contracts and agreements and an accurate
description of any of the oral arrangements, contracts and agreements
which are referred to on the Schedule of Exceptions, together with all
amendments, waivers or other changes thereto; provided that neither a
list of nor copies of individual option agreements under the Company's
stock option plans will be required to be supplied to the Purchasers.
4.12 INTELLECTUAL PROPERTY RIGHTS.
(i) The attached Schedule of Exceptions contains a
complete and accurate list of all (a) registered Intellectual Property
Rights owned or used by the Company, (b) pending applications for
registrations of Intellectual Property Rights filed by the Company, (c)
material unregistered trade names and corporate names owned or used by
the Company and (d) material unregistered trademarks, service marks,
copyrights, mask works and computer software owned or used by the
Company. The Schedule of Exceptions also contains a complete and
accurate list of all licenses and other rights granted by the Company
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to any third party with respect to any Intellectual Property Rights and
all licenses and other rights granted by any third party to the Company
with respect to any Intellectual Property Rights, in each case
identifying the subject Intellectual Property Rights. The Company owns
all right, title and interest to, or has the right to use pursuant to a
valid license, all Intellectual Property Rights necessary for the
operation of the businesses of the Company as presently conducted and
as presently proposed to be conducted, free and clear of all Liens. No
loss or expiration of any Intellectual Property Right or related group
of Intellectual Property Rights owned or used by the Company or any
which would reasonably be expected to have a material adverse effect on
the conduct of the Company's business is, to the best of the Company's
knowledge, threatened, pending or reasonably foreseeable. The Company
has taken all reasonably necessary actions to maintain and protect the
Intellectual Property Rights which it owns. To the best of the
Company's knowledge, the owners of any Intellectual Property Rights
licensed to the Company have taken all reasonably necessary actions to
maintain and protect the Intellectual Property Rights which are subject
to such licenses.
(ii) Except as set forth in the Schedule of
Exceptions, (a) the Company owns all right, title and interest in and
to all of the Intellectual Property Rights listed on such schedule,
free and clear of all Liens, (b) there have been no claims made against
the Company asserting the invalidity, misuse or unenforceability of any
of such Intellectual Property Rights, and, to the best of the Company's
knowledge, there are no grounds for the same, (c) the Company has not
received any notices of, or is aware of any facts which indicate a
likelihood of, any infringement or misappropriation by, or conflict
with, any third party with respect to such Intellectual Property Rights
(including, without limitation, any demand or request that the Company
license any rights from a third party), (d) the conduct of the
Company's business has not infringed, misappropriated or conflicted
with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, nor would any future
conduct as presently contemplated infringe, misappropriate or conflict
with any Intellectual Property Rights of other Persons, and (e) to the
best of the Company's knowledge, the Intellectual Property Rights owned
by or licensed to the Company has not been infringed or misappropriated
by other Persons. The transactions contemplated by this Agreement shall
not have a material adverse effect on the Company's right, title and
interest in and to the Intellectual Property Rights listed on the
Schedule of Exceptions.
4.13 LITIGATION, ETC. Except as set forth in the Schedule of
Exceptions, there are no actions, suits, proceedings, orders, investigations or
claims pending or, to the best of the Company's knowledge, threatened against or
affecting the Company (or to the best of the Company's knowledge, pending or
threatened against or affecting any of the officers, directors or employees of
the Company with respect to its business or proposed business activities), or
pending or threatened by the Company against any third party, at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality (including, without limitation, any actions, suits,
proceedings or investigations with respect to the transactions contemplated by
this Agreement); the Company is not subject to any arbitration proceedings under
collective bargaining agreements or otherwise or, to the best of the Company's
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knowledge, any governmental investigations or inquiries (including, without
limitation, inquiries as to the qualification to hold or receive any license or
permit). The Company is not subject to any judgment, order or decree of any
court or other governmental agency.
4.14 BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company, except pursuant to an engagement letter with BT Alex. Xxxxx
dated October 28, 1998.
4.15 CONSENTS. Except as set forth in the Schedule of
Exceptions, no permit, consent, approval or authorization of, or declaration to
or filing with, any governmental authority ("Governmental Authority") or any
other Person is required in connection with the execution, delivery and
performance by the Company of this Agreement or the other agreements
contemplated hereby, or the consummation by the Company of any other
transactions contemplated hereby or thereby.
4.16 INSURANCE. The Company is not in default with respect to
its obligations under any insurance policy maintained by it, and the Company has
not been denied insurance coverage. The insurance coverage of the Company is
customary for corporations of similar size engaged in similar lines of business.
The Company does not have any self-insurance or co-insurance programs.
4.17 EMPLOYEES. The Company is not aware that any executive or
key employee of the Company or any group of employees of the Company has any
plans to terminate employment with the Company. The Company has complied in all
material respects with all laws relating to the employment of labor (including,
without limitation, provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes), and the Company is not aware that it has any material labor relations
problems (including, without limitation, any union organization activities,
threatened or actual strikes or work stoppages or material grievances). To the
best of the Company's knowledge, none of the Company's employees is subject to
any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company, except for agreements between the
Company and its present and former employees.
4.18 ERISA. Except as set forth in the Schedule of
Exceptions:
(i) MULTIEMPLOYER PLANS. The Company does not have
any obligation to contribute to (or any other liability, including
current or potential withdrawal liability, with respect to) any
"multiemployer plan" (as defined in Section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")).
(ii) RETIREE WELFARE PLANS. The Company does not
maintain or have any obligation to contribute to (or any other
liability with respect to) any plan or arrangement whether or not
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terminated, which provides medical, health, life insurance or other
welfare-type benefits for current or future retired or terminated
employees (except for limited continued medical benefit coverage
required to be provided under Section 4980B of the IRC or as required
under applicable state law).
(iii) DEFINED BENEFIT PLANS. The Company does not
maintain, contribute to or have any liability under (or with respect
to) any employee plan which is a tax-qualified "defined benefit plan"
(as defined in Section 3(35) of ERISA), whether or not terminated.
(iv) DEFINED CONTRIBUTION PLANS. The Company does not
maintain, contribute to or have any liability under (or with respect
to) any employee plan which is a tax-qualified "defined contribution
plan" (as defined in Section 3(34) of ERISA), whether or not
terminated.
(v) OTHER PLANS. The Company does not maintain,
contribute to or have any liability under (or with respect to) any plan
or arrangement providing benefits to current or former employees,
including any bonus plan, plan for deferred compensation, employee
health or other welfare benefit plan or other arrangement, whether or
not terminated.
(vi) THE COMPANY. For purposes of this Section 4.18,
the term "Company" includes all organizations under common control with
the Company pursuant to Section 4.14(b) or (c) of the IRC.
4.19 COMPLIANCE WITH LAWS. The Company has not violated any
law or any governmental regulation or requirement which violation has had or
would reasonably be expected to have a material adverse effect upon the
financial condition, operating results, assets, operations or business prospects
of the Company, and the Company has not received notice of any such violation.
4.20 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth in
the Schedule of Exceptions:
(i) The Company has obtained the Environmental
Permits.
(ii) The Company is in material compliance with the
terms and conditions of all such Environmental Permits and is in
material compliance with all Environmental and Safety Laws.
(iii) With respect to the Company, no notice,
notification, demand, request for information, citation, summons or
order has been issued, no complaint has been filed, and no penalty has
been assessed or, to the Company's best knowledge, no investigation,
notice, notification, demand, request for information, citation,
summons or order is pending or threatened by any Person with respect to
any alleged failure to obtain any material Environmental Permits or any
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material violation of any Environmental and Safety Laws, or with
respect to the generation, treatment, storage, recycling,
transportation, discharge or disposal, or any Release or threatened
Release, of any Hazardous Materials (except in the ordinary course of
business in material compliance with all Environmental and Safety
Laws).
(iv) No property or facility now or previously owned
or operated by the Company has been or is presently operated (during
the period owned or used by the Company) in a manner which requires
permitting as a hazardous waste treatment, storage or disposal facility
for purposes of RCRA or any analogous state law.
(v) To the best of the Company's knowledge, none of
the following is present at any property or facility now owned or
operated by the Company (except to the extent such presence could not
reasonably result in a material liability): (i) polychlorinated
biphenyls contained in electrical or other equipment; (ii)
asbestos-containing insulation or building material; or (iii) active or
inactive underground storage tanks.
(vi) The Company has not transported or arranged for
the transportation of any Hazardous Material to any location which is
on the CERCLA National Priorities List (or proposed for such listing),
the CERCLIS List or any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations
which could be expected to lead to claims against the Company under any
Environmental and Safety Laws.
(vii) There has been no Release of Hazardous
Materials into the environment at or from any property or facility now
or, to the best knowledge of the Company, previously owned or operated
by the Company so as to give rise to any material present or future
liability or obligation under any Environmental and Safety Laws.
(viii) No Liens have arisen under or pursuant to any
Environmental and Safety Laws on any property or facility now or
previously owned or operated by the Company, and to the best knowledge
of the Company, no governmental actions have been taken or are in
process which could subject any such properties or facilities to such
Liens, and the Company would not be required to place any notice or
restriction relating to the presence of Hazardous Materials in any deed
to such property or facility.
(ix) The Company has not, either expressly or by
operation of law, assumed or undertaken any material liability or
corrective or remedial obligation of any other Person relating to
Environmental and Safety Laws.
(x) Without limiting the generality of the foregoing,
there are no other facts, events or conditions relating to the past
(during the period owned or used by the Company) or present operations,
properties or facilities of the Company which could reasonably be
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expected to give rise to any material liability or investigatory,
corrective or remedial obligation under any Environmental and Safety
Laws.
4.21 AFFILIATED TRANSACTIONS. Except as set forth in the
Schedule of Exceptions, no officer, director, stockholder or Affiliate of the
Company or any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
beneficial interest, is a party to any agreement, contract, commitment or
transaction with the Company or has any material interest in any material
property used by the Company.
4.22 DISCLOSURE. Neither this Agreement nor any of the
exhibits, schedules, attachments, written statements, documents, certificates or
other items supplied to the Purchasers by or on behalf of the Company with
respect to the transactions contemplated hereby contain any untrue statement of
a material fact or omit a material fact necessary to make each statement
contained herein or therein, under the circumstances in which they are made, not
misleading. There is no fact which the Company has not disclosed to the
Purchasers and of which any of its officers, directors or executive employees is
aware and which has had or would reasonably be expected to have a material
adverse effect upon the existing or expected financial condition, operating
results, assets, customer or supplier relations, employee relations or business
prospects of the Company.
4.23 INVESTMENT COMPANY. The Company is not an "investment
company" as defined under the Investment Company Act of 1940.
4.24 PROJECTIONS. All projections previously provided to the
Purchasers by authorized representatives of the Company, including the
projections of the consolidated income and cash flows of the Company for the
fiscal years ending December 31, 1999, December 31, 2000, December 31, 2001,
December 31, 2002 and December 31, 2003, were prepared in good faith and are
based on underlying assumptions of the Company which provide a reasonable basis
for the projections contained therein. Such projections have been prepared on
the basis of the assumptions set forth therein, which the Company reasonably
believes are fair and reasonable in light of the historical financial
performance of the Company. The Company does not, however, make any guaranty
that any such projections can be achieved.
4.25 SEC FILINGS. None of the Company's (1) annual report on
Form 10-K, as amended, for the fiscal year ended December 31, 1997, (2)
quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998, and (3) proxy statement for the Company's
annual meeting of shareholders held on April 21, 1998 (the "Company's SEC
Documents") contained, at the time they were filed, any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements made therein in light of the
circumstances under which they were made, not misleading. Except for certain
filings required to be filed by persons subject and pursuant to Section 16 of
the Securities Exchange Act, for the preceding 12 months the Company has timely
filed all forms, reports and exhibits thereto required under the Securities Act
and the Securities Exchange Act with the Securities and Exchange Commission.
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5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser, severally and not jointly and only with regard to
itself, hereby represents and warrants to the Company as follows:
5.1 AUTHORITY OF PURCHASERS. Such Purchaser that is an entity
(a) is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its formation; (b) has all requisite legal and corporate or
partnership power (as applicable) to enter into this Agreement and the Ancillary
Agreements, to purchase the Shares and to perform its obligations under the
terms of this Agreement and the Ancillary Agreements; and (c) has taken or will
have taken prior to the Closing Date all partnership or corporate action (as
applicable) necessary for the purchase of the Shares and the performance of the
Purchaser's obligations under this Agreement. This Agreement and the Ancillary
Agreements when executed and delivered by the Purchaser will constitute valid
and legally binding obligations of such Purchaser, enforceable in accordance
with their terms, except as enforcement may be limited by applicable bankruptcy
laws or other similar laws affecting creditors' rights generally, and except
insofar as the availability of equitable remedies may be limited by applicable
law from time to time.
5.2 INVESTMENT REPRESENTATIONS.
(a) The Shares purchased hereunder and the shares of
Common Stock issuable upon conversion of the Shares (the "Securities")
will be acquired for the Purchaser's own account, not as a nominee or
agent, and not with a view to the distribution of any part thereof.
(b) The Purchaser understands that the purchase of
the Securities represents a speculative investment, and is aware of and
has investigated the Company's business, management and financial
condition, and has had access to such other information about the
Company as such Purchaser has deemed necessary or desirable to reach an
informed and knowledgeable decision to acquire the Securities.
(c) The Purchaser understands that the Securities
have not been registered under the Securities Act or under similar
securities laws of any other jurisdiction by reason of reliance upon
certain exemptions therefrom, and that the reliance of the Company on
such exemptions is predicated upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein.
(d) The Purchaser is experienced in evaluating and
investing in securities of companies in stages of development similar
to the Company. The Purchaser is knowledgeable in business and
financial matters and is capable of evaluating the merits and risks of
an investment in the Company. The Purchaser acknowledges that it has
the ability to bear the economic risk of its investment pursuant to
this Agreement. Purchaser is an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
(e) The Purchaser has not been organized or
materially reorganized for the purpose of investing in the Securities.
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(f) The Purchaser understands that the Securities
being purchased hereunder are restricted securities within the meaning
of Rule 144 under the Securities Act and that the Securities are not
registered and must be held indefinitely unless they are subsequently
registered or an exemption from such registration is available.
(g) The Purchaser represents and agrees that the sale
of the Shares was not accomplished by the publication of any
advertisement or by any general solicitation.
5.3 LEGENDS. Each certificate representing the Securities may
be endorsed with the following legends (or substantial equivalents):
(a) Federal Legend. THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS DEFINED
IN RULE 144 PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD
OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (i) IN CONJUNCTION
WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT
OR (ii) IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN OPINION OF
COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH REGISTRATION OR
COMPLIANCE IS NOT REQUIRED AS TO SUCH SALE, OFFER OR DISTRIBUTION.
(b) Other Legends Any other legends required by
applicable state blue sky laws.
5.4 REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS. Any legend
endorsed on a certificate pursuant to subsection 4.3(a) and any stop transfer
instructions with respect to such legended Securities shall be removed, and the
Company shall issue a certificate without such legend to the holder of such
Securities if such Securities are registered and sold under the Securities Act
and a prospectus meeting the requirements of Section 10 of the Securities Act is
available or if such holder proposes to sell such Securities in compliance with
the requirements of Rule 144 and, where reasonably deemed necessary by the
Company, provides the Company with an opinion of counsel for such holder of the
Securities, reasonably satisfactory to the Company, to the effect that (i) such
proposed sale meets the requirements of Rule 144 or (ii) a public sale, transfer
or assignment of such Securities may be made without registration pursuant to
Rule 144(k).
5.5 CONFIDENTIALITY. With respect to the information and other
material furnished under or in connection with this Agreement or any Ancillary
Agreement (whether furnished before, on or after the date hereof) which
constitutes or contains non-public business, financial or other information of
the Company ("Non-Public Information"), each Purchaser covenants that it will
use due care to prevent its officers, directors, employees, counsel, accountants
and other representatives from (x) disclosing any Non-Public Information to
Persons other than Purchaser's authorized employees, counsel, accountants,
financial advisors, shareholders, members, partners and limited partners, (y)
using Non-Public Information in any manner that would constitute a violation of
federal or state securities laws; PROVIDED, however, that the Purchaser may
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disclose or deliver any Non-Public Information if the Purchaser is advised by
its counsel that such disclosure or delivery is required by law, regulation or
judicial or administrative order. The Company shall notify the Purchasers of any
restricted trading periods under the Company's xxxxxxx xxxxxxx policy in effect
from time to time. For purposes of this Section 5.5, "due care" means at least
the same level of care that the Purchaser would use to protect the
confidentiality of its own sensitive or proprietary information, and this
obligation shall survive termination of this Agreement. A Purchaser shall not be
prohibited from transferring its beneficial interest in the Shares and, after
reasonable notice to the Company, disclosing any Non-Public Information to any
Person who agrees to be bound by the provisions of this Section 5.5.
6. PRE-CLOSING COVENANTS. From the date of this Agreement up to and
including the Closing Date:
6.1 CONDUCT OF BUSINESS. The Company shall conduct its
business and operations only in the ordinary course and in a manner that is
consistent with past practice, including, without limitation: (a) performing all
of its obligations under contracts, agreements and instruments by which it and
its properties are bound; (b) using all reasonable efforts in maintaining (i)
its business organization intact, (ii) all of its properties, equipment and
other assets in good repair, working order and condition, (iii) its present
workforce, including all officers of the Company, and (iv) its current
relationships with its suppliers and customers; and (c) keeping in full force
and effect the insurance currently maintained by it.
6.2 COOPERATION. The Company shall use its reasonable efforts
to cause the transactions contemplated by this Agreement to be consummated,
including, without limitation, (a) obtaining all approvals and consents of,
making all filings with and giving all notices to, all such Governmental
Authorities and other persons as may be necessary or reasonably requested by the
Purchasers in order to consummate the transactions contemplated by this
Agreement, and all Contracts, other agreements or leases with respect to which
the obtaining of an approval or consent is necessary or advisable, and (b)
giving prompt notice to the Purchasers of any event, notice or other
communication which causes or in the reasonable judgment of the Company could
cause a material adverse effect on the Company, its assets, properties or
business, as it is presently conducted or presently proposed to be conducted.
6.3 NO SOLICITATION OF TRANSACTION. The Company shall not,
directly or indirectly, initiate, solicit or encourage any discussions or
negotiations, or enter into any agreements, with any Person other than the
Purchasers with respect to the sale of any of its capital stock or the sale of
all or any material portion of its assets or the merger or consolidation of the
Company with any other Person. The Company shall, promptly after receipt thereof
by the Company, notify the Purchasers of any offer by any Person to make any
such purchase, merger or consolidation or enter into any such agreement.
6.4 ACCESS TO THE COMPANY. The Company shall afford the
Purchasers and their representatives reasonable access, upon reasonable prior
notice and at such scheduled times and places during normal business hours as
shall be reasonably approved by the Company (but without any interference with
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the business operations of the Company), to the books, records, properties and
facilities of the Company.
6.5 NOTIFICATION OF BREACH OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. Company shall promptly give written notice to the Purchasers upon
becoming aware of the occurrence or impending or threatened occurrence of any
event which would cause or constitute a breach of any of the representations,
warranties or covenants of the Company contained or referred to in this
Agreement and shall use its best efforts to prevent the same or remedy the same
promptly.
6.6 CHANGES IN CAPITAL STOCK. At or after the date hereof and
at or prior to the Closing Date, except as contemplated by this Agreement or
with the prior written consent of the Purchasers, the Company shall not amend
its charter documents or bylaws; make any change in its authorized, issued or
outstanding capital stock or any other Equity Security; issue, sell, pledge,
assign or otherwise encumber or dispose of, or purchase, redeem or otherwise
acquire, any of its shares of capital stock or other Equity Securities or enter
into any agreement, call or commitment of any character so to do; grant or issue
any stock option relating to, right to acquire, or security convertible into,
shares of its capital stock or other Equity Security; purchase, redeem, retire
or otherwise acquire (other than in a fiduciary capacity) any shares of, or any
security convertible into, its capital stock or other Equity Securities , or
agree to do any of the foregoing.
6.7 LITIGATION DEVELOPMENTS. The Company agrees to promptly
advise the Purchasers with respect to any and all material legal actions or
other proceedings or investigations and to promptly advise the Purchasers with
respect to any significant developments arising in connection with said actions,
proceedings or investigations.
6.8 NO SHOPPING. Until the Closing or termination of this
Agreement, the Company shall not, directly or indirectly, through any officer,
director, stockholder, agent, affiliate, employee or otherwise, solicit,
initiate or encourage submission of any proposal or offer from any person, group
or entity relating to any acquisition of the assets, business or capital stock
of the Company, or other similar transaction or business combination involving
the business of the Company; shall not participate in any negotiations or
discussions regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage any effort or attempt by any other person or entity to
do or seek such acquisition or other transaction; and shall inform the
Purchasers of any such inquiry.
7. CONDITIONS TO CLOSING.
7.1 CONDITIONS TO PURCHASERS' OBLIGATIONS. The obligation of
the Purchasers to purchase the Shares at the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT;
PERFORMANCE OF OBLIGATIONS. The representations and warranties made by
the Company in Section 4 shall be true and correct in all respects when
made, and shall be true and correct on the Closing Date with the same
force and effect as if they had been made on and as of said date; and
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the Company shall have performed all obligations and conditions herein
required to be performed by them on or prior to the Closing Date.
(b) AUTHORIZATIONS. All authorizations, approvals or
permits of any Governmental Authority that are required in connection
with the lawful issuance and sale of the Shares, the conversion of the
Shares into Common Stock and the issuance of such Common Stock upon
conversion shall have been duly obtained and shall be effective on and
as of the Closing Date, including, without limitation, the filing of
Articles of Amendment in the form set forth in Exhibit D with the
Secretary of State of the State of Oregon, as well as the qualification
of the Shares under any applicable state securities laws.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been
no material adverse change in the financial condition, operating
results, assets, operations, business prospects, or employee, customer,
provider or supplier relationships of the Company since the date of
this Agreement as determined in the discretion of Rosewood Capital III,
L.P. and Farallon Capital Management LLC, acting together.
(d) OPINION OF COMPANY'S COUNSEL. The Purchasers
shall have received from counsel to the Company, an opinion addressed
to the Purchasers, dated the Closing Date, substantially in the form of
Exhibit F attached hereto.
(e) INVESTOR RIGHTS AGREEMENT. The Company shall have
entered into the Investor Rights Agreement, substantially in the form
attached hereto as Exhibit E.
(f) CERTIFICATES. The Company shall have delivered to
the Purchasers the certificates representing the Shares to be purchased
by the Purchasers which shall be issued in each Purchaser's name.
(g) BOARD OF DIRECTORS. Xxxx X. Xxxxxxxx and Xxxxx
Xxxx shall have been appointed as members of the Company's Board of
Directors as the director designees of the Series A Stock effective as
of the Closing Date and the Company and Messrs. Xxxxxxxx and Fish shall
have entered into the Indemnification Agreement in the form attached
hereto as Exhibit G. Rosewood Capital III, L.P. shall have received
irrevocable proxies from Purchasers holding a number of shares of
Series A Stock which together with the shares of Series A Stock held by
it constitute 75% of such shares, to vote such shares for the election
of the director designee of the Series A Stock.
(h) COMPLIANCE CERTIFICATE. The Company shall have
delivered to the Purchasers a certificate, executed by the President of
the Company, dated the Closing Date, certifying to the fulfillment of
the conditions specified in subparagraphs (a), (b) and (c) of this
Section 7.1.
(i) SUBSCRIPTIONS. The Company shall have received an
aggregate gross proceeds of not less than Thirty Two Million Dollars
($32,000,000) for the purchase of the Shares.
-22-
(j) PROCEEDINGS AND DOCUMENTS. All corporate and
other proceedings in connection with the transactions contemplated
hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in form and substance to the
Purchasers and its counsel.
(k) CONSENTS. The Company shall have received, or the
Purchasers shall have been satisfied that the Company will receive, all
consents of other parties to the issuance and sale of the Shares
required by material mortgages, notes, leases, franchises, agreements,
licenses and permits applicable to the Company, including but not
limited to the Notes, in each case in form and substance reasonably
satisfactory to the Purchasers, and no such consent or license or
permit shall have been withdrawn or suspended.
(l) RENEWAL OF CREDIT FACILITY. On or prior to the
Closing Date, the term of the Company's credit facility with Bank of
America NT&SA with an aggregate maximum borrowing limit of at least
$19.5 million shall be extended to a date at least one year from the
Closing Date.
(m) WAIVERS OF EVENTS OF DEFAULT. The Company shall
have received waivers of all events of default that exist as of the
Closing Date and agreements to forebear from exercising any rights or
remedies resulting from future events of defaults until December 31,
1999 (other than those arising from a failure to make an agreed
payment) all in a form satisfactory to the Purchasers from (a) Bank of
America NT & SA with respect to the Business Loan Agreement dated June
26, 1997, as amended, by and between the Company and Bank of America NT
& SA; (b) Dresdner Kleinwort Xxxxxx Private Equity Partners LP with
respect to the Note Purchase Agreement dated March 27, 1998, and the
related Notes; and (c) Lease Agreements dated as of December 17, 1997
and May 28, 1998 by and between the Company and BA Leasing & Capital
Corporation.
(n) RIGHTS AGREEMENT. The Company will have amended
the Rights Agreement date as of April 25, 1996 between the Company and
First Chicago Trust Company of New York, as amended, to include under
the term "Exempt Person" under Section 1.1 of such Rights Agreement the
Purchasers and their affiliates.
7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to sell and issue the Shares at the Closing is subject to the
fulfillment on or prior to the Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT;
PERFORMANCE OF OBLIGATIONS. The representations and warranties of the
Purchasers in Section 5 hereof shall be true and correct when made, and
shall be true and correct on the Closing Date with the same force and
effect as if they had been made on and as of said date, subject to the
changes contemplated by this Agreement and the Related Documents; and
the Purchasers shall have performed all obligations and conditions
herein required to be performed by them on or prior to the Closing
Date.
-23-
(b) AUTHORIZATIONS. All authorizations, approvals or
permits of any other Governmental Authority that are required in
connection with the lawful issuance and sale of the Shares shall have
been duly obtained and shall be effective on and as of the Closing
Date.
(c) PAYMENT OF PURCHASE PRICE. The Purchasers shall
have delivered the purchase price specified in Section 2.2 to the
Company.
(d) INVESTOR RIGHTS AGREEMENT. The Purchasers shall
have entered into the Investor Rights Agreement.
8. TERMINATION.
8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of the Company and
a majority of the Purchasers;
(b) as to any Single Purchaser, by such Purchaser
with the written consent of the Company and all of the other
Purchasers;
(c) by either any Purchaser or the Company, upon
prior written notice, if there shall have been a breach by the other
party of any of the terms or provisions of this Agreement which shall
not have been waived in writing by the non-breaching party and such
breach cannot be cured by April 30, 1999; provided that the breach by
any Purchaser, shall not give rise to the right of the Company to
terminate this Agreement as to the other Purchasers;
(d) by either a majority of the Purchasers or the
Company, upon written notice, if the Closing shall not have occurred on
or before April 30, 1999 for any reason other than the failure or
refusal of the party seeking to terminate to perform any of its
obligations hereunder; or
(e) by either any of the Purchasers or the Company if
any court having competent jurisdiction or other Governmental Authority
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable.
(f) by any Purchaser if any Person, except for Xxxx
X. Xxxxxx, shall have acquired beneficial ownership or the right to
acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Securities Exchange Act and the
regulations promulgated thereunder) shall have been formed which
beneficially owns, or has the right to acquire beneficial ownership of,
twenty percent (20%) or more of the then outstanding shares of the
Company's capital stock.
8.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 8.1 hereof, such termination shall be the
sole remedy, and, except with respect to Sections 5.5 (Confidentiality), 9.6
(Expenses), 9.9 (Finder's Fees) and 9.13 (Public Announcement) hereof, (a) this
-24-
Agreement shall forthwith become void, and (b) there shall be no liability on
the part of the Company or any Purchaser; provided, however, that if such
termination shall result from the breach by a party hereto of any of its
obligations under this Agreement, such party shall be fully liable for any and
all damages sustained or incurred by the other party hereto, its Affiliates or
any of the representatives of any of them as a result of or arising from such
breach and such other party shall be entitled to seek any remedies available to
it at law or in equity. No Purchaser shall be liable for any damages resulting
from the breach of any other Purchaser of its obligations hereunder.
9. MISCELLANEOUS.
9.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Oregon without application of principles of
conflicts of law.
9.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchasers
and the closing of the transactions contemplated hereby.
9.3 SUCCESSORS AND ASSIGNS. Each Purchaser may assign its
interest in this Agreement in connection with the transfer of its Shares as long
as such Shares are Registrable Securities as provided under the Investor Rights
Agreement. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto.
9.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the
Ancillary Agreement to be delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. Except as provided in Section 8 hereof, any term of
this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and a majority of the Purchasers.
9.5 NOTICES. All notices, requests, demands and other
communications required to or permitted to be given under this Agreement shall
be in writing and shall be conclusively deemed to have been duly given when hand
delivered to the other party; when received when sent by facsimile; PROVIDED,
HOWEVER, that notices given by facsimile shall not be effective unless either a
duplicate copy of such facsimile notice is promptly given by depositing same in
a United States post office with first-class postage prepaid, or the receiving
party delivers a written confirmation of receipt for such notice either by
facsimile or any other method permitted under this paragraph; ADDITIONALLY, any
notice given by facsimile shall be deemed received on the next business day if
such notice is received after 5:00 p.m. (recipient's time) or on a non-business
day; three (3) business days after the same has been deposited in a United
States post office with first class or certified mail return receipt requested
postage prepaid; or the next business day after same has been deposited with a
national overnight delivery service, postage prepaid with next-business-day
delivery guaranteed; PROVIDED that the sending party receives a confirmation of
delivery from the delivery service provider. If notice is to be given to the
Purchasers, such notice will be given, delivered or sent to the address
-25-
appearing on EXHIBIT A, and if notice is to be given to the Company, such notice
will be given to Gardenburger, Inc., 0000 X.X. Xxxxxxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxx 00000, telephone number: (000) 000-0000, facsimile number: (503)
205-1650, Attention:
President.
Each party shall make an ordinary, good faith effort to ensure that it
will accept or receive notices that are given in accordance with this Section
and that any person to be given notice actually receives such notice. A party
may change or supplement its address for notice, or designate additional
addresses, for purposes of this Section by giving the other party written notice
of the new address in the manner set forth above.
9.6 EXPENSES.
(a) Each party shall bear its own expenses incurred
in connection with the transactions contemplated by the Agreement,
except that at the Closing the Company will reimburse the Purchasers
their reasonable and actual expenses and disbursements, including,
without limitation, the legal fees of Rosewood Capital III, L.P. and
Farallon Capital Management LLC, up to a maximum of Seventy-Five
Thousand Dollars ($75,000).
(b) If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, at trial and on appeal, in addition to any other relief
to which each party may be entitled.
9.7 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach or default of
another party under this Agreement, shall impair any such right, power or remedy
of such non-breaching party, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, of any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party under this Agreement, or any waiver on the
part of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies either under this Agreement, or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
9.8 SEVERABILITY OF THIS AGREEMENT. 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.
9.9 FINDER'S FEES.
(a) The Company agrees to indemnify and to hold the
Purchasers harmless against and from any liability for commission or
compensation in the nature of a finder's fee to any broker or other
person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which the Company, or any of its
employees or representatives, is responsible, including any owed to BT
Alex. Xxxxx ( the "BT Fee").
-26-
(b) The Purchasers hereby agree to indemnify and to
hold the Company harmless against and from any liability for any
commission or compensation in the nature of a finder's fee to any
broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which the Purchasers,
or any of their employees or representatives, are responsible. The
parties hereto acknowledge that the Purchasers bear no responsibility
for the BT Fee.
9.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
9.12 GENDER. The use of the neuter gender herein shall be
deemed to include the masculine and feminine gender, if the context so requires.
9.13 PUBLIC ANNOUNCEMENT. The Company shall not disclose any
Purchaser's name or identity as an investor in the Company in any press release
or other public announcement or in any document or material filed with any
governmental entity, without the prior written consent of the Purchaser, unless
such disclosure is required by applicable law or governmental regulations or by
order of a court of competent jurisdiction, in which case prior to making such
disclosure the Company shall give written notice to the Purchaser describing in
reasonable detail the proposed content of such disclosure and shall permit the
Purchaser to review and comment upon the form and substance of such disclosure.
Notwithstanding the foregoing, the Purchasers hereby acknowledge that, after the
date hereof, the Company may attach this Agreement and any of the Ancillary
Agreements as an exhibit to reports filed by the Company with the Securities and
Exchange Commission.
-27-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year set forth in the heading hereof.
"THE COMPANY"
GARDENBURGER, INC.
By /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Xxxxxxx X. Xxxxx, Executive Vice
President and Chief Financial Officer
"INVESTORS"
ROSEWOOD CAPITAL III, L.P.
By: Rosewood Capital Associates, LLC, General
Partner
By /s/ Xxxx X. Xxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxx, Principal
FARALLON CAPITAL PARTNERS, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P.
TINICUM PARTNERS, L.P.
FARALLON CAPITAL (CP) INVESTORS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Xxxxx X. Xxxx
--------------------------------------
Managing Member
Signature Page for Stock Purchase Agreement
FARALLON CAPITAL OFFSHORE INVESTORS, INC.
THE COMMON FUND
By: Farallon Capital Management, L.L.C., its
Agent and Attorney-in-Fact
By: /s/ Xxxxx X. Xxxx
----------------------------------
Managing Member
U.S. Development Capital Investment Company
By: /s/ Xxx Xxxx
------------------------------------------
Xxx Xxxx, Secretary
Xxxxxx & XxXxxxx Capital Management, L.L.C.
By: /s/ J. Xxxxxxx XxXxxxx
------------------------------------------
Xxx XxXxxxx, Manager Member
BT Capital Investors, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxx, Xx., Principal
/s/ Xxxxx X. Xxxx
------------------------------------------
Xxxxx X. Xxxx
/s/ Xxxxxxx X. Xxxxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxxxx
Signature Page for Stock Purchase Agreement
(continued)
EXHIBIT A
SCHEDULE OF PURCHASERS
PURCHASER NAME, NO. OF SHARES NO. OF SHARES
ADDRESS, FAX NO. OF SERIES A STOCK OF SERIES B STOCK
------------------------------ ----------------- -----------------
Rosewood Capital III, L.P. 850,000 150,000
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
(000) 000-0000
Farallon Capital Partners, L.P* 238,000 42,000
Farallon Capital Institutional
Partners, L.P.* 255,000 45,000
Farallon Capital Institutional
Partners II, L.P.* 42,500 7,500
Farallon Capital Offshore Investors, Inc.* 212,500 37,500
The Common Fund* 8,500 1,500
Farallon Capital (CP) Investors, L.P.* 25,500 4,500
Farallon Capital Institutional
Partners III, L.P.* 51,000 9,000
Tinicum Partners, L.P.* 17,000 3,000
BT Capital Investors, L.P. 552,500 97,500
Attn: Xxxxxx X. Xxxxxxx, Xx.
130 Liberty Street, Mailstop 2255
Xxx Xxxx, XX 00000
Ph: 000-000-0000
Fax: 000-000-0000
U.S. Development Capital Investment Company 127,500 22,500
Attn: Xxx Xxxx, Secretary
000 Xxxxxxxxx Xxxx Xxxxxx, Xxxxx 000
1000 Xxxxxxxxx Road, N.E.
Xxxxxxx, XX 00000
Ph: 000-000-0000
Fax: 000-000-0000
------------------------------
* *c/o Farallon Capital Management LLC, Xxx Xxxxxxxx Xxxxx, Xxxxx 0000, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000, Attn: Xxxxx Xxxx and Xxxxx Xxxxx, Facsimile: (415)
421-2133.
A-1
PURCHASER NAME, NO. OF SHARES NO. OF SHARES
ADDRESS, FAX NO. OF SERIES A STOCK OF SERIES B STOCK
------------------------------ ----------------- -----------------
Xxxxxx & McBaine Capital Management 340,000 60,000
Attn: X. Xxxxxxxxx XxXxxxx, Member Manager
00 Xxxxxx Xxxxx, Xxxxxxxxx
Xxx Xxxxxxxxx, XX 00000
Ph: 000-000-0000
Fax: 000-000-0000
Xxxxx X. Xxxx 21,250 3,750
00 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Ph: 000- 000-0000
Fax: 000-000-0000
Xxxxxxx X. Xxxxxxxxx 21,250 3,750
000 X. Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Ph: 000- 000-0000
Fax: 000- 000-0000
Total 2,762,500 487,500
A-2
EXHIBIT B
TERMS OF SERIES A STOCK AND SERIES B STOCK
B-1
EXHIBIT C
SCHEDULE OF EXCEPTIONS
C-1
EXHIBIT D
RESTATED ARTICLES OF INCORPORATION, AS AMENDED,
OF GARDENBURGER, INC.
AS XX XXXXX 00, 0000
X-0
EXHIBIT E
FORM OF INVESTOR RIGHTS AGREEMENT
E-1
EXHIBIT F
FORM OF OPINION OF COMPANY'S COUNSEL
F-1
EXHIBIT G
INDEMNIFICATION AGREEMENT
G-1
