EXHIBIT 10.1
ROYALTY TERMINATION AGREEMENT
THIS AGREEMENT, dated as of the _____ day of November, 1996, is by and
among Silverado Foods, Inc., an Oklahoma corporation ("Silverado"), Nonni's
Inc., a California corporation ("Nonni's"), and Xxxxx Xxxxxxxx, Xxx Xxxxxxx and
Xxxx Xxxxxx (collectively, the "Shareholders").
R E C I T A L S
A. Silverado and Nonni's entered into an Asset Purchase Agreement dated
December 31, 1993 (the "Asset Purchase Agreement"), which provided, in Section
7.7 thereof, for the payment of a royalty with respect to the product lines
acquired from Nonni's pursuant to the Asset Purchase Agreement.
B. Said royalty obligation of Section 7.7 of the Asset Purchase Agreement
was amended pursuant to an agreement dated March 21, 1995 (said royalty
obligation, as amended pursuant to the March 21, 1995 agreement or as otherwise
modified or amended, is hereinafter referred to as the "Royalty").
C. The Shareholders are the owners of all of the issued and outstanding
stock of Nonni's.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree as follows:
1. Termination of Royalty. The Royalty is hereby terminated as of the
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22nd day of July, 1996 (the "Termination Date"). Nonni's acknowledges that all
amounts due under the Royalty through the Termination Date have been paid in
full. Nonni's and the Shareholders hereby remise, release and forever discharge
Silverado from any and all claims, demands, obligations or liabilities, whether
known or unknown, with respect to the Royalty.
2. Issuance of Stock. Silverado shall issue to the Shareholders 700,000
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shares of Silverado's common stock (the "Primary Shares") in the following
proportions (the "Agreed Proportions"):
Xxxxx Xxxxxxxx 233,334 shares
Xxx Xxxxxxx 233,333 shares
Xxxx Xxxxxx 233,333 shares
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Total: 700,000 shares
Promptly following the execution of this Agreement, Silverado shall make
application to the American Stock Exchange for the listing of such shares and
deliver instructions to its transfer agent for the issuance of such shares.
3. Contingent Shares. In the event Silverado's net sales (as defined
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below) of the products which were subject to the Royalty (the "Royalty
Products") exceed $10,000,000 during
any of the twelve month periods (i) commencing July 22, 1996, and ending July
21, 1997, (ii) commencing July 22, 1997, and ending July 21, 1998, or (iii)
commencing July 22, 1998, and ending July 21, 1999, Silverado shall issue to the
Shareholders (in the Agreed Proportions) an additional 200,000 shares of
Silverado common stock (the "Contingent Shares"). In the event the Contingent
Shares are earned based upon sales during any of said twelve month periods, the
Shareholders will not be entitled to any further shares with respect to sales
during any subsequent period. If earned, the Contingent Shares shall be issued
within 90 days after the end of the month in which the sales level necessary to
earn the Contingent Shares is achieved. Prior to such issuance, Silverado shall
make application to the American Stock Exchange for the listing of such shares
and deliver instructions to its transfer agent for the issuance of such shares.
No right to vote or receive dividends or any other rights as a shareholder of
Silverado shall exist with respect to any of the Contingent Shares,
notwithstanding the Shareholders' rights of issuance thereof, until the issuance
to the Shareholders of stock certificates representing such shares. The
Shareholders acknowledge that there are no assurances that such target sales
level will be achieved and that all decisions regarding sales strategies,
marketing, advertising, product lines and other matters regarding the Royalty
Products shall be in the sole discretion of Silverado. "Net sales" shall be
defined as gross sales, less returns, allowances and bad debts (i.e., debts
which are uncollected after 120 days).
4. Stock Price Guarantee.
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(a) Silverado shall guarantee the stock price of the Primary Shares as
follows: In the event any of the Shareholders (a "Selling Shareholder")
sells any of the Primary Shares during the period commencing on April 1,
1997, and ending on December 31, 1997, in an Approved Transaction (as
defined below), and the Net Sales Price (as defined below) per share is
less than $5.71 per share, then Silverado shall pay to the Selling
Shareholder within 60 days after the date of such sale an amount equal to
the number of shares sold times the difference between $5.71 and the Net
Sales Price per share received by the Selling Shareholder in such sale. An
"Approved Transaction" shall be defined as (i) a sale through a broker
which is executed on any exchange, (ii) any sale directly to a market
maker, as defined in Section 3(a)(38) of the Securities Exchange Act of
1934, or (iii) any privately negotiated sale, provided that such sale is
approved in writing in advance by Silverado. "Net Sales Price" shall be
defined as the total sales price and all other consideration received by
the Selling Shareholder, less any applicable discounts and commissions,
which discounts and commissions must be reasonable in amount.
(b) If the Contingent Shares are issued, Silverado shall guarantee the
stock price of the Contingent Shares as follows: Silverado shall
guarantee the stock price of the Contingent Shares in the same manner as
with respect to the Primary Shares, except that the period of time in which
sales must occur to be eligible for such guarantee shall commence on the
date of the effectiveness of the registration of the Contingent Shares on
Form S-3 by Silverado and end on the date 120 days after such commencement
date.
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(c) If Silverado fails to pay any amount under this Section 4 when
due, the Shareholders shall give written notice to Silverado of such
failure to pay. If Silverado does not cure such failure to pay within 15
days after its receipt of such notice, Silverado shall thereupon be deemed
to be in default, and such amount in default shall bear interest from the
end of the 15 day cure period until paid at the rate of 18% per annum.
(d) Notwithstanding anything contained herein to the contrary,
Silverado shall have no obligation to guarantee the stock price of the
Primary Shares or the Contingent Shares unless the Selling Shareholder
notifies Silverado of his intent to sell at least 10 days prior to the date
of the sale of the shares in question. A notice given by the Selling
Shareholder in accordance with Section 3(c) of the Registration Rights
Agreement (as hereinafter defined) shall be deemed to satisfy the notice
requirement of this Section 4(d).
(e) The period of the effectiveness of the stock price guarantees of
the Primary Shares and the Contingent Shares shall be subject to extension
pursuant to Section 4 of the Registration Rights Agreement.
(f) Notwithstanding anything contained herein to the contrary, at
Silverado's discretion, in the event Silverado becomes obligated to a
Selling Shareholder pursuant to the price guarantee provisions of this
Section 4, Silverado may satisfy such obligation by issuing to such Selling
Shareholder, within the time for payment set forth above, shares of
Silverado's common stock having a Market Value (as hereinafter defined)
equal to the amount owed by Silverado in connection with such price
guarantee. As used in this Section 4(f), "Market Value" shall mean the
average of the closing sales price of Silverado's common stock on the
American Stock Exchange (as recorded by The Wall Street Journal or, if not
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recorded thereby, by another authoritative source) over the five trading
days comprised of the four trading days immediately preceding the date on
which the Approved Transaction giving rise to the price guarantee occurs
and the trading day on which such Approved Transaction occurs.
5. Registration Rights Agreement. Silverado and the Shareholders shall
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enter into a Registration Rights Agreement (the "Registration Rights Agreement")
in substantially the form attached hereto as Exhibit A and made a part hereof.
6. Investment Representations. The Shareholders and Nonni's represent
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and warrant as follows:
(a) Access to Information. Respecting Silverado, its business, plans
---------------------
and financial condition, the terms of this transaction, and any other
matters relating to this transaction: the Shareholders have received all
materials which have been requested by the Shareholders; have had a
reasonable opportunity to ask questions of Silverado and its
representatives; and Silverado has answered all inquiries that the
Shareholders or the Shareholders' representatives have put to it. The
Shareholders have had access to all additional information necessary to
verify the accuracy of the information set forth in this
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Agreement and any other materials furnished herewith and have taken all the
steps necessary to evaluate the merits and risks of an investment as
proposed hereunder.
(b) Experience. The Shareholders or their representatives have such
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knowledge and experience in finance, securities, investments and other
business matters so as to be able to protect the interest of the
Shareholders in connection with this transaction.
(c) Risks. The Shareholders understand the various risks of an
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investment in Silverado as proposed herein and can afford to bear such
risks, including, but not limited to, the risks of losing the entire
investment.
(d) No Registration. The Shareholders have been advised by Silverado
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that none of the shares of common stock of Silverado issuable hereunder
(collectively, the "Securities") have been registered under the Act, that
the Securities will be issued on the basis of the statutory exemption
provided by Section 4(2) of the Securities Act of 1933, as amended (the
"Act") or Regulation D promulgated thereunder, or both, relating to
transactions by an issuer not involving any public offering and under
similar exemptions under certain state securities laws, that this
transaction has not been reviewed by, passed on or submitted to any Federal
or state agency or self-regulatory organization where an exemption is being
relied upon, and that Silverado's reliance thereon is based in part upon
the representations made by the Shareholders in this Agreement. The
Shareholders acknowledge that the Shareholders have been informed by
Silverado of, or are otherwise familiar with, the nature of the limitations
imposed by the Act and the rules and regulations thereunder on the transfer
of securities. In particular, the Shareholders agree that no sale,
assignment, or transfer of any of the Securities shall be valid or
effective, and Silverado shall not be required to give any effect to any
such sale, assignment or transfer, unless (i) the sale, assignment or
transfer of such Securities is registered under the Act, it being
understood that the Securities are not currently registered for sale and
that Silverado has no obligation or intention to so register the Securities
except as contemplated in the Registration Rights Agreement or (ii) such
Securities are sold, assigned or transferred in accordance with all the
requirements and limitations of Rule 144 under the Act, it being understood
that Rule 144 is not available at the present time for the sale of the
Securities, or (iii) such sale, assignment or transfer is otherwise exempt
from registration under the Act. The Shareholders further understand that
an opinion of counsel and other documents may be required to transfer the
Securities. The Shareholders acknowledge that the Securities shall be
subject to a stop transfer order and the certificate or certificates
evidencing any Securities shall bear the following legend or a
substantially similar legend and such other legends as may be required by
state blue sky laws:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or any state securities laws and neither such securities nor any
interest therein may be offered, sold, pledged, assigned, or otherwise
transferred unless (1) a
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registration statement with respect thereto is effective under the Act
and any applicable state securities laws or (2) Silverado receives an
opinion of counsel to the holder of such securities, which counsel and
opinion are reasonably satisfactory to Silverado, that such securities
may be offered, sold, pledged, assigned, or transferred in the manner
contemplated without an effective registration statement under the Act
or applicable state securities laws."
(e) Investment Intent. The Shareholders will acquire the Securities
-----------------
for the Shareholders' own account for investment and not with a view to the
sale or distribution thereof or the granting of any participation therein,
and has no present intention of distributing or selling to others any of
such interest or granting any participation therein.
(f) Blue Sky Legends. The Shareholders understand and agree that
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certain legends required by the laws of the State of California will be
placed on certificates representing the Securities.
(g) Shareholders. The Shareholders are the owners of all of the
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issued and outstanding shares of capital stock of Nonni's.
(h) Survival. The Shareholders acknowledge that the representations,
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warranties and agreements made by the Shareholders herein shall survive the
execution and delivery of this Agreement and the issuance of the Securities
hereunder.
7. Miscellaneous.
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(a) Notices. All notices and other communications required or
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permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given, delivered and received (a) if delivered personally,
or (b) if sent by facsimile, registered or certified mail (return receipt
requested) postage prepaid, or by courier guaranteeing next day delivery,
in each case to the party to whom it is directed at the addresses set forth
below (or at such other address for any party as shall be specified by
notice given in accordance with the provisions hereof, provided that
notices of a change of address shall be effective only upon receipt
thereof). Notices delivered personally shall be effective on the day so
delivered; notices sent by registered or certified mail shall be effective
on the third day after mailing; notices sent by facsimile shall be
effective when receipt is acknowledged; and notices sent by courier
guaranteeing next day delivery shall be effective on the earlier of the
second business day after timely delivery to the courier or the day of
actual delivery by the courier:
(i) if to Silverado:
Silverado Foods, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
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Fax: (000) 000-0000
Attention: President
(ii) if to Nonni's or the Shareholders:
Nonni's, Inc.
________________________
________________________
Fax: (___) ______________
Attention: _______________
(b) Agreement Binding on Successors. This Agreement shall be binding
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upon and inure to the benefit of the parties hereto and their respective
heirs, successors and assigns.
(c) Headings. The headings in this Agreement are solely for
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convenience of reference and shall be given no effect in the construction
or interpretation of this Agreement.
(d) Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Governing Law. This Agreement shall be governed by and construed
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in accordance with the laws of the State of California, without giving
effect to conflict of laws.
(f) Entire Agreement. This Agreement and the exhibits hereto set
----------------
forth the entire understanding of the parties with respect to the subject
matter hereof, supersede all existing agreements among them concerning such
subject matter may be modified only by a written instrument duly executed
by the party to be charged.
(g) Attorneys' Fees. In the event of any litigation arising out of
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this Agreement, the party not prevailing in such proceedings shall pay the
reasonable costs of the prevailing party in connection with such
proceedings, including but not limited to attorneys' fees and expenses,
witness fees and expenses and court costs.
(h) Authority. Silverado's Board of Directors has taken all action
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necessary to approve the execution, delivery and performance of this
Agreement, and the person signing below on behalf of Silverado is duly
authorized to execute this Agreement.
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IN WITNESS WHEREOF, this Agreement was executed by the parties as of the
date first above written.
SILVERADO FOODS, INC.
By:______________________________
Name:____________________________
Title:___________________________
NONNI'S INC.
By:______________________________
Name:____________________________
Title:___________________________
_________________________________
Xxxxx Xxxxxxxx
_________________________________
Xxx Xxxxxxx
_________________________________
Xxxx Xxxxxx
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EXHIBIT A
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of the ___ day
of November, 1996, is between SILVERADO FOODS, INC., an Oklahoma corporation
("Silverado"), and XXXXX XXXXXXXX, XXX XXXXXXX AND XXXX XXXXXX (the
"Shareholders").
WHEREAS, pursuant to and subject to the terms and conditions of a Royalty
Termination Agreement, dated as of the date hereof (the "Royalty Termination
Agreement"), the Shareholders are receiving 700,000 shares (the "Primary
Shares") of common stock, par value $.01 per share, of Silverado ("Silverado
Common Stock") which are "restricted securities" as defined in Rule 144 under
the Securities Act of 1933, as amended (the "Act"); and
WHEREAS, also pursuant to the Royalty Termination Agreement, the
Shareholders have the ability to earn, upon the occurrence of certain events,
200,000 additional shares (the "Contingent Shares") of Silverado Common Stock
which, if issued, would be "restricted securities" as defined in Rule 144 under
the Act; and
WHEREAS, Silverado has agreed, subject to the terms and conditions stated
herein to execute, deliver and perform this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
1. Registration.
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(a) In consideration of the Shareholders's willingness to accept the
Primary Shares and the Contingent Shares pursuant to the Royalty
Termination Agreement, and subject to the performance by the Shareholders
of its covenants set forth herein, Silverado (i) shall prepare and file,
within 60 days following the date of the Royalty Termination Agreement,
with the Securities and Exchange Commission (the "Commission") a
registration statement on Form S-3 with respect to the offering and sale of
the Primary Shares by the Shareholders on a delayed or continuous basis
pursuant to Rule 415 under the Act, (ii) shall prepare and file, within 60
days following the issuance of the Contingent Shares to the Shareholders,
with the Commission a registration statement on Form S-3 with respect to
the offering and sale of Contingent Shares by the Shareholders on a delayed
or continuous basis pursuant to Rule 415 under the Act, and (iii) shall use
its best efforts to cause registration statements to become effective as
soon as possible after the filing thereof so as to permit the secondary
resale of the Shares by the Shareholders. As used herein, the term
"Registration Statement" means either or both of the registration
statements required pursuant to clauses (i) and (ii) of the preceding
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sentence, as the context requires, including exhibits and financial
statements and schedules and documents incorporated by reference therein,
as amended, when they become effective under the Act and, in the case of
the references to the Registration Statement as of a date subsequent to the
effective date, as amended or supplemented as of such date. As used
herein, the term "Prospectus" means the prospectus included in the
Registration Statement as of the date it becomes effective under the Act
and, in the case of references to the Prospectus as of a date subsequent to
the effective date of the Registration Statement, as amended or
supplemented as of such date, including all documents incorporated by
reference therein, as amended, and each prospectus supplement relating to
the offering and sale of any of the Primary Shares or Contingent Shares.
As used herein, the term "Shares" means the Primary Shares and/or the
Contingent Shares, as the context requires.
(b) Once filed, Silverado will use its best efforts to cause the
Registration Statement to remain effective, and to file with the Commission
such amendments and supplements as may be necessary to keep the Prospectus
current and in compliance in all material respects with the Act, until the
earlier to occur of the following: (i) the date on which restrictions on
sales of the Shares by the Shareholders would otherwise terminate pursuant
to Rule 144(k) under the Act (as such rule or any successor rule shall be
amended from time to time); or (ii) the sale of all of the Shares covered
by the Registration Statement, whether pursuant to the Registration
Statement or otherwise. Notwithstanding the foregoing, Silverado shall not
be required to keep the Registration Statement effective, and the
Shareholders shall not distribute any Shares pursuant thereto if, in the
written opinion of counsel to Silverado addressed to the Shareholders, the
Shares may be sold by the Shareholders without registration or restriction.
(c) Silverado shall furnish to the Shareholders a conformed copy of
the Registration Statement as declared effective by the Commission and of
each post-effective amendment thereto, and such number of copies of the
final Prospectus and of each post-effective amendment or supplement thereto
as may reasonably be required to facilitate the distribution of the Shares.
Promptly after the Registration Statement has been declared effective by
the Commission, Silverado shall so notify the Shareholders. Thereafter, in
the event that any stop order suspending the effectiveness of the
Registration Statement is issued or any proceedings for that purpose are
instituted or threatened by the Commission, Silverado will promptly so
notify the Shareholders.
(d) The Registration Statement shall be prepared by Silverado in
accordance with the Act and the rules and regulations promulgated
thereunder. The section of the Prospectus entitled "Selling Stockholder"
shall be prepared in accordance with the requirements of Item 507 of
Regulation S-K promulgated by the Commission and shall be based upon the
information provided by the Shareholders to Silverado pursuant to Section
3(a).
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(e) Promptly after having been notified by the Shareholders of their
intention to distribute Shares in a manner described by the Registration
Statement in the section entitled "Plan of Distribution" and after having
received the information required to be delivered to Silverado as provided
in Section 3(c), Silverado will, if necessary, (i) prepare a supplement to
the Prospectus based upon the information so provided and file the same
with the Commission pursuant to Rule 424(b) under the Act and (ii) register
or qualify the Shares to be sold under the securities or blue sky laws of
such jurisdictions in the United States as the Shareholders shall
reasonably request; provided, however, that Silverado shall in no event be
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required to qualify to do business as a foreign corporation or as a dealer
in any jurisdiction where it is not so qualified, to conform its
capitalization or the composition of its assets at the time to the
securities or blue sky laws of any such jurisdiction, to execute or file
any general consent to service of process under the laws of any
jurisdiction, to take any action that would subject it to service of
process in suits other than those arising out of the offer and sale of
Shares, or to subject itself to taxation in any jurisdiction where it has
not therefore done so.
2. Expenses of Registration. All expenses in connection with the
------------------------
Registration Statement, any qualification or compliance with federal or state
laws required in connection therewith, and the distribution of the Shares shall,
as between the Shareholders and Silverado, be borne as follows:
(a) Silverado shall pay and be responsible for the registration fee
payable under the Act, blue sky fees and expenses, if applicable (subject
to the limitations set forth in Section 1(e)), all fees and disbursements
of Silverado's counsel and accountants, and the cost of printing or
photocopying the Registration Statement and the Prospectus. Silverado will
not be required to engage the services of a printer with respect to the
Registration Statement or the Prospectus, but may elect to do so.
(b) The Shareholders shall pay all fees and disbursements of its own
counsel and advisers, all stock transfer fees (including the cost of all
transfer tax stamps) or expenses, if any, and all other expenses (including
brokerage discounts, commissions and fees) related to the distribution of
the Shares that have not expressly been assumed by Silverado.
3. The Shareholders' Covenants Regarding the Shares. The Shareholders
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covenant and agree with Silverado that:
(a) The Shareholders will cooperate with Silverado in connection
with the preparation of the Registration Statement, and for so long as
Silverado is obligated to keep the Registration Statement effective, the
Shareholders will provide to Silverado, in writing, for use in the
Registration Statement, all information regarding the Shareholders as may
be necessary to enable Silverado to prepare the Registration Statement and
Prospectus covering the Shares and to maintain the effectiveness thereof.
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(b) During such time as the Shareholders may be engaged in a
distribution of the Shares, the Shareholders will comply with Rules 10b-2,
10b-6 and 10b-7 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and pursuant thereto will, among other things:
(i) not engage in any stabilization activity in connection with the
securities of Silverado in contravention of such Rules; (ii) distribute the
Shares solely in the manner described in the Prospectus; (iii) cause to be
furnished to each agent or broker-dealer to or through whom the Shares may
be offered, or to the offeree if an offer is made directly by the
Shareholders, such copies of the Prospectus (as amended and supplemented to
such date) and documents incorporated by reference therein as may be
required by such agent, broker-dealer or offeree or applicable law; and
(iv) not bid for or purchase any securities of Silverado or attempt to
induce any person to purchase any securities of Silverado other than as
permitted under the Exchange Act.
(c) At least 10 days prior to any distribution of the Shares, the
Shareholders will advise Silverado in writing of the dates on which the
distribution will commence and terminate, the number of the Shares to be
sold, the name of any agent or broker-dealer to or through whom such
distribution is being made, the selling commission or other compensation to
such agent or broker-dealer and the number of Shares of Silverado Common
Stock that will be owned beneficially by the Shareholders after giving
effect to such sale.
(d) Upon notice from Silverado that it requires the suspension of
the distribution of any of the Shares pursuant to the provisions of Section
4, then the Shareholders shall cease distributing the Shares until such
time as Silverado notifies the Shareholders that distribution of the Shares
may recommence.
(e) The Shareholders will not sell, transfer or dispose of any of
the Shares, or enter into any agreements or understandings with third
parties respecting the sale, transfer or disposition of any of the Shares,
except as described in the section of the Prospectus entitled "Plan of
Distribution" so long as Silverado maintains the effectiveness of the
Registration Statement.
(f) The Shareholders will not sell, transfer or dispose of any of
the Shares until on or after January 1, 1997.
4. Suspension of the Distribution of the Shares.
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(a) If Silverado determines in good faith that the distribution of
any of the Shares would interfere with any pending financing, acquisition,
corporate reorganization or any other corporate development involving
Silverado or any of its subsidiaries or would require premature disclosure
thereof, and promptly give the Shareholders written notice of such
determination, Silverado shall be entitled to require the Shareholders to
suspend its distribution of the Shares for a reasonable period of time
which, for purposes of this Section 4(a), shall not exceed 90 days;
provided, in the event of such a suspension
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during the effectiveness of any of the stock price guarantees set forth in
Section 4 of the Royalty Termination Agreement, then the period of the
effectiveness of any stock price guarantee which is so affected shall be
extended by the amount of time of such suspension. Such written notice
shall contain a general statement of the reasons for such suspension and an
estimate of the anticipated period of suspension, and Silverado shall
promptly notify the Shareholders of the expiration or earlier termination
of such suspension.
(b) If Silverado shall file a registration statement (other than in
connection with the registration of securities issuable pursuant to a
continuous "at the market offering" pursuant to Rule 415(a)(4) under the
Act, an employee stock option, stock purchase, dividend reinvestment or
similar plan or pursuant to a merger, exchange offer or transaction of the
type specified in Rule 145(a) under the Act) with respect to Silverado
Common Stock or securities convertible into or exchangeable or exercisable
for Silverado Common Stock, and Silverado reasonably determines (in the
case of a non-underwritten offering) or the managing underwriter or
underwriters advise Silverado (in the case of an underwritten offering)
that a sale or distribution of the Shares would adversely affect such
offering, then upon written notice by Silverado, the Shareholders shall, to
the extent not inconsistent with applicable law, suspend the distribution
of any of the Shares or any sale of the Shares pursuant to Rule 144 under
the Act during the 10-day period prior to and the 90-day period following
the effective date of such registration statement, with such 90-day period
being subject to early termination by Silverado with the approval of the
managing underwriter or underwriters. Without limiting the rights of
Silverado under Section 4(a), during any suspension period initiated
pursuant to this Section 4(b), Silverado shall not file or cause to become
effective an additional registration statement of the type for which it
would be entitled to suspend the distribution of the Shares pursuant to
this Section 4(b). In the event any such suspension pursuant to this
Section 4(b) occurs during the effectiveness of any of the stock price
guarantees set forth in Section 4 of the Royalty Termination Agreement,
then the period of the effectiveness of any stock price guarantee which is
so affected shall be extended by the amount of time of such suspension.
5. Indemnification.
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(a) Silverado will indemnify and hold harmless the Shareholders,
their estate, heirs and personal representatives, and each person (if any)
who controls the Shareholders within the meaning of either Section 15 of
the Act or Section 20 of the Exchange Act (collectively, the "Shareholder
Indemnified Parties") from and against any losses, claims, damages or
liabilities, joint or several, to which the Shareholder Indemnified Parties
may become subject, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) are based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
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were made, not misleading, or upon any violation by Silverado of the Act or
blue sky laws of any state or any rules under those laws, or any other laws
applicable to Silverado in connection with the registration or listing of
the Shares; and, subject to Section 5(c), Silverado will reimburse the
Shareholder Indemnified Parties for any legal or other expense reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage or liability; provided, however, that Silverado will
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not indemnify or hold harmless any of the Shareholder Indemnified Party
from or against any such loss, claim, damage, liability or person (i) that
arises out of or is based upon any violation of the Shareholders' covenants
in Section 3 or of any federal or state securities laws, rules or
regulations committed by any of the Shareholder Indemnified Parties (or any
agent, broker-dealer or underwriter engaged by them) or (ii) if the untrue
statement, omission or allegation thereof upon which such losses, claims,
damages, liabilities or expenses are based (x) was made in reliance upon
and in conformity with the information provided by the Shareholders
specifically for use or inclusion in the Registration Statement, or (y) was
made in any Prospectus used after such time as Silverado advised the
Shareholders that the filing of a post-effective amendment or supplement
thereto was required, except the Prospectus as so amended or supplemented,
or (z) was made in any Prospectus used after such time as the obligation of
Silverado hereunder to keep the Registration Statement effective and
current has expired.
(b) The Shareholders will indemnify and hold harmless Silverado, its
directors and officers and each person, if any, who controls Silverado
within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act (the "Silverado Indemnified Parties"), from and against any
losses, claims, damages or liabilities, joint or several, to which the
Silverado Indemnified Parties may become subject, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or
any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, if the
statement or omission was made in reliance upon and in conformity with the
information provided by the Shareholders specifically for use or inclusion
in the Registration Statement, or (ii) the use of any Prospectus after such
time as Silverado has advised the Shareholders that the filing of a post-
effective amendment or supplement thereto is required, except the
Prospectus as so amended or supplemented, or (iii) the use of any
Prospectus after such time as the obligation of Silverado hereunder to keep
the Registration Statement effective and current has expired, or (iv) any
violation by the Shareholders or any person who controls the Shareholders
within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act (or any agent, broker-dealer or underwriter engaged by the
Shareholders or any such controlling person) of the Shareholders's
covenants in Section 3 or of any federal or state securities law or rule or
regulation thereunder; and, subject to Section 5(c), the Shareholders will
reimburse the Silverado Indemnified Parties for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage or
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liability. In no event shall the liability of a Shareholder for
indemnification under this Section 5(b) exceed the proceeds received by
such Shareholder from his sale of Shares under the Registration Statement.
(c) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be
sought, and the Indemnifying Party may participate at its own expense in
the defense, or if it so elects, to assume the defense of any such claim
and any action or proceeding resulting therefrom, including the employment
of counsel and the payment of all expenses. The failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party from its obligations to indemnify such Indemnified Party, except to
the extent that the Indemnified Party's failure to so notify actually
prejudices the Indemnifying Party's ability to defend against such claim,
action or proceeding; it being understood and agreed that the failure to so
notify the Indemnifying Party prior to the execution of a binding
settlement agreement or the entry of a judgment or issuance of an award
with respect to a claim, action or proceeding shall constitute actual
prejudice to the Indemnifying Party's ability to defend against such claim,
action or proceeding. In the event that the Indemnifying Party elects to
assume the defense in any action or proceeding, the Indemnified Party shall
have the right to employ separate counsel in any such action or proceeding
and to participate in the defense thereof, but the fees and expenses of
such separate counsel shall be such Indemnified Party's expense unless (i)
the Indemnifying Party has agreed to pay such fees and expenses or (ii) the
named parties to any such action or proceeding (including any impleaded
parties) include an Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that there may be a
conflict of interest between such indemnified Party and the Indemnifying
Party in the conduct of the defense of such action (in which case, if such
Indemnified Party notifies the Indemnifying Party that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not assume the defense of such action or proceeding on such
Indemnified Party's behalf, it being understood, however, that the
Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings arising out of the same general allegations or circumstance,s
be liable for the reasonable fees and expenses of more than one separate
firm of attorneys at any time for all Indemnified Parties, which firm shall
be designated in writing by the Shareholders or Silverado as the case may
be). No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of the Indemnified Party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected without
its written consent, but if settled with its written consent or, if there
be a final judgment for the plaintiff in any such action or
A-7
proceeding, the Indemnifying Party shall indemnify and hold harmless the
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment.
(d) If the indemnification provided for under this Section 5 is
unavailable to or insufficient to hold the Indemnified Party harmless under
subparagraphs (a) or (b) above in respect of any losses, claims, damages or
liabilities referred to therein for any reason other than as specified
therein, then the Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and such
Indemnified Party on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by (or
omitted to be supplied by) Silverado or the Shareholders, the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, the relative benefits
received by each party from the sale of the Shares and any other equitable
considerations appropriate under the circumstances. The amount paid or
payable by an Indemnified Party as a result of the losses, claims, damages
or liabilities referred to above in this subsection (d) shall be deemed to
include any legal or other expense reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or
claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
6. No Third-Party Beneficiaries. NOTHING CONTAINED IN THIS AGREEMENT,
----------------------------
EXPRESS OR IMPLIED IS INTENDED TO CONFER UPON ANY PERSON, OTHER THAN THE PARTIES
AND THEIR RESPECTIVE SUCCESSORS, HEIRS AND PERMITTED ASSIGNS, ANY RIGHTS,
REMEDIES OR OBLIGATIONS UNDER, OR BY REASON OF, THIS AGREEMENT.
7. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior understandings and agreements with
respect to the subject matter hereof or thereof.
8. Notices. All notices and other communications under this Agreement
-------
shall be in writing and sent by (i) personal delivery (including courier
service), (ii) telecopier during normal business hours to the number indicated
below, or (iii) first class or registered or certified mail, postage prepaid and
addressed as follows (or to such other addresses and telecopier numbers as
either party may designate by notice to the other party) (any communication
being deemed given upon receipt);
A-8
If to the Shareholders at:
Xxxxx Xxxxxxxx, Xxx Xxxxxxx and Xxxx Xxxxxx
-----------------------------
-----------------------------
Attention:
-----------------
Telecopier No.:
If to Silverado at:
Silverado Foods, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Chief Financial Officer
Telecopier No.: (000) 000-0000
9. Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be set forth in an instruction in
writing signed by each party. Each of the parties may waive compliance by such
other party with any agreements of such party or the fulfillment of any of the
conditions to its own obligations set forth herein. Any agreement on the part
of any party to any such waiver shall be valid only if set forth in an
instrument in writing signed by such party. No waiver by either party or any
default, misrepresentation, or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default, misrepresentation,
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence. Neither the failure nor
any delay by any party in exercising any right, power or privilege under this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power or privilege will preclude
any other or further exercise of any other right, power or privilege.
10. Assignment; Successors and Assigns. This Agreement shall be binding
----------------------------------
upon, and inure to the benefit of, the parties and their respective successors
and permitted assigns, but neither this Agreement nor any of the right,s
interests or obligations hereunder shall be assigned, by operation of law or
otherwise, by any party without the prior written consent of the other party.
This Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and
assigns.
11. Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
12. Headings. The descriptive headings of the several Sections of this
--------
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
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13. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of California, without regard to
principles of conflicts of law.
14. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which when so executed shall be deemed an original, but
all of which together shall constitute one and the same instrument.
15. Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event any ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring either party by virtue of the authorship of
any of the provisions of this Agreement. Any reference in this Agreement to any
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean "including without limitation".
16. Attorneys' Fees. In the event of any litigation arising out of this
---------------
Agreement, the party not prevailing in such proceedings shall pay the reasonable
costs of the prevailing party in connection with such proceedings, including but
not limited to attorneys' fees and expenses, witness fees and expenses and court
costs.
17. Authority. Silverado's Board of Directors has taken all action
---------
necessary to approve the execution, delivery and performance of this Agreement,
and the person signing below on behalf of Silverado is duly authorized to
execute this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
---------------------------------------
Xxxxx Xxxxxxxx
---------------------------------------
Xxx Xxxxxxx
---------------------------------------
Xxxx Xxxxxx
A-10
SILVERADO FOODS, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
A-11
