EXHIBIT 10.6
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SECURITIES PURCHASE AGREEMENT
by and among
OVERHILL FARMS, INC.,
as Issuer,
POLYPHASE CORPORATION
and
OVERHILL L. C. VENTURES, INC.,
as Guarantors,
and
XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P.,
as Purchaser
Dated as of November 24, 1999
_________________________________________
Secured Senior Subordinated Note Due 2004
Warrant to Purchase Common Stock
_________________________________________
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TABLE OF CONTENTS
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Page
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1. DEFINITIONS; ACCOUNTING TERMS......................................... 2
1.1 Definitions..................................................... 2
1.2 Accounting Terms and Computations............................... 24
1.3 Independence of Covenants....................................... 25
1.4 Captions; Construction and Interpretation....................... 25
1.5 Determinations.................................................. 25
1.6 Knowledge of the Company........................................ 25
1.7 Exclusion of Texas Timberjack................................... 25
2. PURCHASE AND SALE OF THE SECURITIES................................... 26
2.1 Authorization................................................... 26
2.2 Purchase of the Securities; Issue Price......................... 26
2.3 Closing......................................................... 26
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................... 26
3.1 Organization and Qualification.................................. 27
3.2 Corporate or Other Power........................................ 27
3.3 Authorization; Binding Obligations.............................. 27
3.4 Subsidiaries.................................................... 27
3.5 Conflict with Other Instruments; Existing Defaults; Ranking..... 28
3.6 Governmental and Other Third Party Consents..................... 28
3.7 Capitalization.................................................. 29
3.8 Validity and Issuance of Warrant Shares......................... 31
3.9 Corporate Separateness.......................................... 31
3.10 Parent SEC Documents............................................ 32
3.11 Financial Statements............................................ 33
3.12 Existing Indebtedness; Existing Liens; Investments; Etc......... 34
3.13 Absence of Certain Changes...................................... 35
3.14 Material Contracts.............................................. 37
3.15 [Intentionally Omitted]......................................... 39
3.16 Accounts Receivable............................................. 39
3.17 Labor Relations................................................. 40
3.18 Employee Benefit Plans; ERISA................................... 40
3.19 Taxes........................................................... 43
3.20 Litigation...................................................... 44
3.21 Transactions with Affiliates.................................... 44
3.22 Investment Company Act; Margin Stock............................ 46
3.23 Compliance with Laws; Licenses and Permits...................... 46
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TABLE OF CONTENTS
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(continued)
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3.24 Title to Property............................................... 46
3.25 Real Property................................................... 47
3.26 Environmental Matters........................................... 48
3.27 Intellectual Property........................................... 48
3.28 Nature of Business.............................................. 49
3.29 Powers of Attorney.............................................. 50
3.30 Listing of Parent Common Stock.................................. 50
3.31 Insurance....................................................... 50
3.32 Customers....................................................... 50
3.33 Suppliers....................................................... 50
3.34 Business Relationships.......................................... 50
3.35 Personal Property Leases........................................ 51
3.36 Employment Agreements........................................... 51
3.37 Solvency........................................................ 51
3.38 Use of Proceeds................................................. 52
3.39 Public Utility Holding Company Act.............................. 52
3.40 Depository and Other Accounts................................... 52
3.41 Books and Records............................................... 52
3.42 Burdensome Obligations; Future Expenditures..................... 52
3.43 Brokers; Certain Expenses....................................... 53
3.44 Due Diligence Response.......................................... 53
3.45 Disclosure...................................................... 53
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER....................... 54
4.1 Organization.................................................... 54
4.2 Authorization................................................... 54
4.3 Due Execution and Delivery; Binding Obligations................. 54
4.4 No Violation.................................................... 54
4.5 Investment Intent............................................... 54
4.6 Accredited Investor Status...................................... 54
4.7 Governmental Consents........................................... 55
5. CONDUCT PRIOR TO CLOSING.............................................. 55
5.1 Conduct of Business Prior to Closing............................ 55
5.2 Access to Information and Documents............................. 56
5.3 Non-Solicitation................................................ 56
5.4 Covenant to Close............................................... 57
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TABLE OF CONTENTS
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(continued)
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6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER........................ 57
6.1 Closing Date.................................................... 57
6.2 Representations and Warranties; No Default...................... 57
6.3 Closing Fees and Expenses....................................... 58
6.4 Purchase Permitted By Applicable Laws........................... 58
6.5 No Material Adverse Changes..................................... 58
6.6 California Permit............................................... 58
6.7 No Injunction or Order.......................................... 58
6.8 Opinions of Counsel............................................. 59
6.9 Delivery of Certain Closing Documents........................... 59
6.10 Collateral Documents............................................ 59
6.11 Amendment to Charter............................................ 61
6.12 Senior Credit Facility.......................................... 61
6.13 Delivery of Corporate Documents................................. 61
6.14 Repayment of Certain Indebtedness; Termination Statements....... 62
6.15 Employment Agreements; Non-Competition and Confidentiality
Agreements...................................................... 62
6.16 Matters Relating to LHF......................................... 62
6.17 Capital Lease Obligations; Termination of UCC Filings........... 63
6.18 Capital Structure............................................... 63
6.19 Insurance Matters............................................... 63
6.20 Completion of Due Diligence Review.............................. 63
6.21 Delivery of Financial Projections............................... 63
6.22 Compliance Certificate.......................................... 63
6.23 LLCP Representative............................................. 64
6.24 Third Party Consents............................................ 64
6.25 Proceedings Satisfactory........................................ 64
7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.......................... 64
7.1 Representations and Warranties.................................. 64
7.2 Purchase Permitted By Applicable Laws........................... 65
7.3 No Injunction or Order.......................................... 65
7.4 Payment for Securities.......................................... 65
8. INDEMNIFICATION; FEES AND EXPENSES.................................... 65
8.1 Transfer Taxes.................................................. 65
8.2 Losses.......................................................... 65
8.3 Indemnification Procedures...................................... 66
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TABLE OF CONTENTS
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(continued)
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8.4 Contribution.................................................... 67
8.5 Deal-Related Costs and Expenses................................. 67
8.6 Costs of Collection............................................. 67
9. GUARANTY.............................................................. 68
9.1 Unconditional Guaranty.......................................... 68
9.2 Continuing and Irrevocable Guaranty............................. 69
9.3 Nature of Guaranty.............................................. 69
9.4 Authorization................................................... 70
9.5 Certain Waivers................................................. 71
9.6 Subrogation; Certain Agreements................................. 72
9.7 Bankruptcy No Discharge......................................... 73
9.8 Subordination................................................... 74
9.9 Maximum Liability of Guarantors................................. 75
9.10 Financial Benefit............................................... 75
9.11 Review of Documents; Understanding with Respect to Waivers...... 75
9.12 Corporate Existence; Properties................................. 75
9.13 Guarantor Acknowledgment........................................ 75
10. DEFAULTS AND REMEDIES................................................. 76
10.1 Events of Default............................................... 76
10.2 Acceleration.................................................... 79
10.3 Other Remedies.................................................. 79
10.4 Appointment of Receiver......................................... 80
10.5 Waiver of Past Defaults......................................... 80
11. TERMINATION........................................................... 80
11.1 Termination..................................................... 80
11.2 Effect of Termination........................................... 81
11.3 Waiver.......................................................... 81
11.4 Alternative Transaction Fee..................................... 81
12. MISCELLANEOUS......................................................... 82
12.1 Survival of Representations and Warranties...................... 82
12.2 Consent to Amendments........................................... 82
12.3 Entire Agreement................................................ 82
12.4 Severability.................................................... 82
12.5 Successors and Assigns; Assignments............................. 82
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TABLE OF CONTENTS
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(continued)
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12.6 Notices........................................................ 83
12.7 Counterparts................................................... 84
12.8 Governing Law.................................................. 84
12.9 Publicity...................................................... 84
12.10 Due Diligence Investigation.................................... 85
12.11 WAIVER OF JURY TRIAL........................................... 85
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EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Warrant
Exhibit C - Form of Amended and Restated Articles of Incorporation
Exhibit D - Form of Compliance Certificate
Exhibit E - Form of Excess Cash Flow Calculation Certificate
DISCLOSURE SCHEDULES
Schedule 3.4 - Subsidiaries
Schedule 3.5(b) - Existing Defaults
Schedule 3.6 - Consents
Schedule 3.7(a) - Capitalization (Company)
Schedule 3.7(b) - Capitalization (Parent)
Schedule 3.10 - Parent SEC Documents
Schedule 3.11(c) - Closing Balance Sheet
Schedule 3.12 - Existing Indebtedness
Schedule 3.13(a) - Absence of Certain Changes
Schedule 3.13(g) - Capital Expenditures Budget
Schedule 3.14 - Material Contracts
Schedule 3.17 - Labor Relations
Schedule 3.18 - ERISA Matters
Schedule 3.19 - Taxes
Schedule 3.20 - Litigation
Schedule 3.21 - Transactions with Affiliates
Schedule 3.23 - Compliance with Laws
Schedule 3.25 - Real Property
Schedule 3.26 - Environmental Conditions
Schedule 3.27 - Intellectual Property
Schedule 3.31 - Insurance
Schedule 3.32 - Customers
Schedule 3.33 - Suppliers
Schedule 3.35 - Personal Property Leases
Schedule 3.36 - Employment Agreements
Schedule 3.38 - Use of Proceeds
Schedule 3.40 - Depository and Other Accounts
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ANNEX A
Covenants
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Section 1.A -- Affirmative Covenants
Section 1.1A -- Payment of Note
Section 1.2A -- Performance of Investment Documents
Section 1.3A -- Information Reporting Requirements
Section 1.4A -- Parent SEC Documents
Section 1.5A -- Compliance with Laws
Section 1.6A -- Legal Existence
Section 1.7A -- Books and Records; Inspections
Section 1.8A -- Maintenance of Properties
Section 1.9A -- Insurance
Section 1.10A -- Taxes
Section 1.11A -- ERISA Matters
Section 1.12A -- Communication with Accountants
Section 1.13A -- Compliance with Material Contracts
Section 1.14A -- Fiscal Year End
Section 1.15A -- Environmental Matters
Section 1.16A -- Additional Subsidiary Guaranties
Section 1.17A -- Corporate Separateness
Section 1.18A -- Year 2000 Compatibility
Section 1.19A -- AMEX Listing
Section 1.20A -- Future Information
Section 1.21A -- Further Assurances
Section 1.22A -- Appointment of Independent Director
Section 1.23A -- Tax Sharing Accounting Treatment
Section 1.24A -- Survival of Certain Affirmative Covenants
Section 2.A -- Negative Covenants
Section 2.1A -- Limitations on Indebtedness
Section 2.2A -- Limitations on Liens
Section 2.3A -- Limitations on Investments
Section 2.4A -- Limitation on Restricted Payments
Section 2.5A -- Change in Business
Section 2.6A -- Sales of Receivables
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Section 2.7A -- [Intentionally Omitted]
Section 2.8A -- Transactions with Affiliates
Section 2.9A -- Fundamental Changes
Section 1.22A -- Survival of Certain Negative Covenants
Section 2.10A -- Agreements Affecting Capital Stock and Indebtedness;
Amendments to Material Contracts
Section 2.11A -- Conditional Sales
Section 2.12A -- Payment Restrictions Affecting Certain Subsidiaries
Section 2.13A -- Parent Covenants
Section 2.14A -- Removal of Independent Director
Section 2.15A -- Margin Stock
Section 2.16A -- Survival of Certain Negative Covenants
Section 3.A -- Financial Covenants
Section 3.1A -- Minimum EBITDA
Section 3.2A -- Minimum Fixed Charge Coverage Ratio
Section 3.3A -- Maximum Leverage Ratio
Section 3.4A -- Maximum Capital Expenditures
Section 3.5A -- Minimum Tangible Net Worth
Section 3.6A -- Maximum Over 90-Day Receivables
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OVERHILL FARMS, INC.
SECURITIES PURCHASE AGREEMENT
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THIS SECURITIES PURCHASE AGREEMENT is entered into as of the 24th day of
November 1999 (this "Agreement"), by and among OVERHILL FARMS, INC., a Nevada
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corporation (the "Company"), XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P., a
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California limited partnership (the "Purchaser"), POLYPHASE CORPORATION, a
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Nevada corporation ("Parent"), and OVERHILL L. C. VENTURES, INC., a California
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corporation ("Overhill Ventures").
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R E C I T A L S
- - - - - - - -
A. The Company has authorized the issuance and sale to the Purchaser, and
the Purchaser is willing to purchase from the Company, a Secured Senior
Subordinated Note Due 2004 in the principal amount of $28,000,000, on the terms
and subject to the conditions set forth herein.
B. As an inducement to the Purchaser to purchase the Secured Senior
Subordinated Note Due 2004 being sold to the Purchaser hereunder, the Company is
willing to sell to the Purchaser a Warrant to Purchase 166.04 Shares of Common
Stock of the Company representing 17.50% of the Common Stock of the Company on a
Fully Diluted Basis (as such term is defined herein) immediately after the
closing of the transactions contemplated hereby, on the terms and subject to the
conditions set forth therein.
C. As a further inducement to the Purchaser to purchase the Secured
Senior Subordinated Note Due 2004 being sold to the Purchaser hereunder, the
Company and certain of its Affiliates (as such term is defined herein) are
willing to enter into this Agreement and the other Investment Documents (as such
term is defined herein), including, without limitation, an Investor Rights
Agreement under which the Company will grant to the Purchaser or one of its
Affiliates certain investment monitoring and other rights in connection with the
transactions contemplated by this Agreement.
D. As a further inducement to the Purchaser to purchase the Secured
Senior Subordinated Note Due 2004 being sold to the Purchaser hereunder, and in
consideration therefor, the Guarantors (as such term is defined herein) have
agreed, at the request of the Company, to guaranty absolutely and
unconditionally the Guarantied Obligations (as such term is defined herein).
E. It is the intention of the parties that, as a result of the
consummation of the transactions contemplated by this Agreement, the Company be
treated as a "bankruptcy remote entity."
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS; ACCOUNTING TERMS.
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1.1 Definitions. For purposes of this Agreement, the following terms
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shall have the following meanings (such meanings to be equally applicable to the
singular and the plural forms thereof):
"Affiliate" shall mean, with respect to any specified Person, (i) any
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other Person that, directly or indirectly, owns or controls, or has the
right to acquire, whether beneficially or of record, or as a trustee,
guardian or other fiduciary (other than a commercial bank or trust
company), five percent (5%) or more of the Capital Stock of such specified
Person, (ii) any other Person that, directly or indirectly, controls, is
controlled by, is under direct or indirect common control with, or is
included in the Immediate Family of, such specified Person or any Affiliate
of such specified Person, or (iii) any Executive Officer, director, partner
or member of such specified Person, or any Person included in the Immediate
Family of any of the foregoing. For the purposes of this definition, the
term "control," when used with respect to any specified Person, shall mean
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the power to direct or cause the direction of management or policies of
such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling"
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and "controlled" have meanings correlative of the foregoing.
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Notwithstanding anything to the contrary, for the purposes of this
Agreement and the other Investment Documents, neither the Purchaser nor any
of its Affiliates, officers, directors, partners or employees shall be
deemed to be an Affiliate of the Company.
"Agreement" shall mean this Agreement, together with the Exhibits, the
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Disclosure Schedules and Annex A, in each case as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"Alternative Transaction" shall have the meaning set forth in Section
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5.3.
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"Alternative Transaction Fee" shall have the meaning set forth in
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Section 11.4.
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2
"Amended Charter" shall mean an Amended and Restated Articles of
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Incorporation of the Company, in substantially the form of Exhibit C, duly
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authorized, executed and filed with the Secretary of State of the State of
Nevada.
"AMEX" shall mean American Stock Exchange LLC.
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"Applicable Laws" shall mean all applicable provisions of all (i)
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constitutions, treaties, statutes, laws, rules, regulations and ordinances
of any Governmental Authority, (ii) any Consent of any Governmental
Authority and (iii) any orders, decisions, rulings, judgments or decrees of
any Governmental Authority.
"Asset Sale" shall mean any sale, lease, transfer or other disposition
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(or series of related sales, leases, transfers or other dispositions) by
the Company or any of its Subsidiaries to any Person of any asset of the
Company or any such Subsidiary (other than sales, leases, transfers or
other dispositions of inventory in the ordinary course of business).
"Assignee" shall have the meaning set forth in Section 12.5.
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"Assignment" shall mean an assignment or other transfer of the Note
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pursuant to Section 11 of the Note.
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"Bankruptcy Law" shall mean Title 11 of the United States Code (11
--------------
U.S.C. Section 101 et seq.) or any similar federal or state law for the
-- ---
relief of debtors, as amended from time to time.
"Beneficiary" shall have the meaning set forth in Section 9.1.
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"Benefit Plan" shall have the meaning set forth in Section 3.18.
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"Board of Directors" shall mean, with respect to any Person, the board
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of directors (or similar governing body) of such Person.
"Business Day" shall mean any day that is not a Saturday, a Sunday or,
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in the City of New York, New York or in Los Angeles, California, a day on
which banking institutions are authorized or required by law to close.
"California Permit" shall mean a Permit dated November 8, 1999, as
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amended by a post-effective amendment dated November 23, 1999, issued by
the California Department of Corporations under Section 25130 of the
California Corporate Securities Law of 1968, as amended, and qualifying
without any restrictions or conditions the
3
issuance and sale by the Company to the Purchaser of the Securities and the
Warrant Shares.
"Capital Expenditures" shall mean, for any period, the aggregate of
--------------------
all expenditures of the Company and its Subsidiaries (whether paid in cash
or accrued or financed by the incurrence of Indebtedness) during such
period, including all Capital Leases, for any property, plant, equipment or
other fixed assets, or for improvements thereto, or for replacements,
substitutions or additions thereto, that have a useful life of more than
one (1) year or are required to be capitalized on the consolidated balance
sheet of the Company and its Subsidiaries in accordance with GAAP.
"Capital Lease" shall mean any lease or agreement of the Company or
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its Subsidiaries for property (whether real, personal or mixed) which has
been or is required to be capitalized on the consolidated balance sheet of
the Company and its Subsidiaries in accordance with GAAP.
"Capital Lease Obligations" shall mean all liabilities or other
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obligations for the payment of rent for any property (whether real,
personal or mixed) which has been or is required to be capitalized on the
consolidated balance sheet of the Company and its Subsidiaries in
accordance with GAAP with respect to a Capital Lease.
"Capital Stock" shall mean, with respect to any Person, (i) if such
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Person is a corporation, any and all shares, interests, participations in
profits or other equivalents (however designated) of capital stock or other
equity interests of such Person, (ii) if such Person is a limited liability
company, any and all membership units or interests, or (iii) if such Person
is a partnership, any and all partnership units or interests.
"Cash Interest Expense" shall mean, for any period, without
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duplication and only to the extent deducted in determining Net Income
(Loss), calculated without regard to any limitation on the payment thereof
and determined in accordance with GAAP, (i) total consolidated interest
expense of the Company and its Subsidiaries (including, without limitation,
interest paid to Affiliates and the portion of any Capitalized Lease
Obligations allocable to interest expense), whether paid or accrued, minus
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(ii) to the extent included in total consolidated interest expense, any
non-cash interest expense, including, without limitation, any payment-in-
kind interest, amortization of original issue discount, non-cash losses on
hedging agreements and amortization of capitalized up-front costs.
"Change in Control" shall mean the occurrence of one or more of the
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following events:
4
(i) any transaction (or series of transactions) or other event by
virtue of which Xxxxx Xxxxx shall cease to beneficially own and control
directly at least 500,000 shares of Parent Common Stock (without giving
effect to any stock splits, reverse stock splits, dividends or like events
after the date hereof);
(ii) any transaction (or series of transactions) or other event by
virtue of which Parent ceases to own in the aggregate, directly or
indirectly, more than ninety-nine percent (99.0%) of the Common Stock on a
Fully Diluted Basis (after giving effect to the repurchase by the Company
of the LHF Warrant as contemplated herein but without giving effect to the
issuance of the Warrant to the Purchaser as contemplated herein);
(iii) Xxxxx Xxxxx either (A) ceases to be the President and Chief
Executive Officer of the Company or (B) ceases to be the chief executive
officer of the Company, with general and active management of the business
of the Company and responsibility for overseeing that all orders and
resolutions of the Board of Directors of the Company are carried into
effect;
(iv) Xxxxxxx X. Xxxxxxx either (A) ceases to be a Senior Vice
President and the Chief Financial Officer of the Company or (B) ceases to
have significant daily senior management responsibilities, provided that
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the Company does not replace Xx. Xxxxxxx with an individual who is
reasonably acceptable to the Purchaser within ninety (90) days of Xx.
Xxxxxxx'x effective resignation or termination date;
(v) Xxxxxxx X. Xxxxxxx either (A) ceases to be the Chief Financial
Officer of Parent or (B) ceases to have significant daily senior management
responsibilities at Parent, provided that Parent does not replace Mr.
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Xxxxxxx with an individual who is reasonably acceptable to the Purchaser
within ninety (90) days of Xx. Xxxxxxx'x effective resignation or
termination date;
(vi) the sale of all or substantially all of the assets of the
Company or of a material Subsidiary of the Company, or the sale of a
material Subsidiary of the Company;
(vii) (A) the Company enters into any merger, consolidation,
reorganization or other transaction having a similar legal effect with
Parent, any other Subsidiary of Parent or any other Person and, as a result
thereof, any Person who is not an Affiliate of the Company as of the date
hereof acquires "control" (as such term is used in the definition of
Affiliate) of the Company, or (B) Parent enters into any merger,
consolidation, reorganization or other transaction having a similar legal
effect with any other Person; or
5
(viii) (A) the institution by the Company or any Guarantor of a
voluntary case under the Bankruptcy Law or any similar proceeding under any
other Applicable Laws, (B) the commencement against the Company or any
Guarantor of an involuntary case seeking liquidation or reorganization
under the Bankruptcy Law or any similar proceeding under any other
Applicable Laws, or the commencement of an involuntary case or proceeding
seeking the appointment of a custodian or to take possession of all or a
substantial portion of its property or to operate all or a substantial
portion of its business, and either (w) the Company or such Guarantor
consents to such involuntary case or proceeding, (x) the petition
commencing such involuntary case or proceeding is not timely controverted,
(y) the petition commencing such involuntary case or proceeding remains
undismissed and unstayed for a period of sixty (60) days or (z) an order
for relief shall have been issued or entered therein, or (C) the
liquidation, winding up or insolvency of the Company or any Guarantor.
"Closing" shall have the meaning specified in Section 2.3.
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"Closing Balance Sheet" shall have the meaning specified in Section
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3.11(c).
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"Closing Date" shall have the meaning specified in Section 2.3.
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"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
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of 1985, as amended, as set forth in Section 4980B of the Code and Part 6
of Title I of ERISA.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
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any successor statute, and the treasury regulations promulgated thereunder.
"Collateral" shall mean the collateral under the Collateral Documents,
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however defined.
"Collateral Documents" shall mean the Intercreditor Agreement, the
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Security Agreement (Company), the Security Agreement (Subsidiary), the
Company Pledge Agreement, the PTC Security Agreement, the Parent Pledge
Agreement, the landlord waivers and consents, the notices of security
interest in deposit accounts, the UCC financing statements and all other
agreements, instruments and documents delivered from time to time in
connection therewith or otherwise to secure the Obligations to Purchaser or
any other obligations of the Company, any Guarantor or any other Person
under this Agreement, the Note or any other Investment Document, in each
case as amended, restated, supplemental or otherwise modified from time to
time.
"Commission" shall mean the Securities and Exchange Commission, or any
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successor agency.
6
"Common Stock" shall mean the common stock, $.01 par value per share,
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of the Company.
"Company" shall have the meaning set forth in the preamble.
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"Company Pledge Agreement" shall mean a Company Pledge Agreement, in
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form and substance satisfactory to the Purchaser, executed by the Company
in favor of the Purchaser.
"Compliance Reports" shall mean, individually or collectively, any and
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all forms, reports or other documents (or any successor forms, reports or
other documents) used or issued by any Governmental Authority (including,
without limitation, the USDA Food Safety and Inspection Service, the FDA,
the State of California -- Health and Human Services Agency or any
successor Governmental Authorities) with respect to food safety and/or
health inspections of the Company's or any of its Subsidiaries' facilities
and/or compliance with or violations of Applicable Laws, including, without
limitation, the following: Application for Federal Meat, Poultry, or
Import Inspection (FSIS Form 5200-2), Grant of Inspection (FSIS Form 5200-
1), Process Deficiency Record (FSIS Form 8820-2), Non-Compliance Record
(FSIS Form 5400-4), Form FDA 483 and Report of Observations (EH 62 A).
"Consent" shall mean any consent, approval, authorization, waiver,
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permit, grant, franchise, license, exemption or order of, any registration,
certificate, qualification, declaration or filing with, or any notice to,
any Person, including, without limitation, any Government Authority.
"Contingent Obligations" shall mean, with respect to any Person, any
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obligation, direct or indirect, contingent or otherwise, of such Person (i)
with respect to any Indebtedness or other obligation of another Person,
including, without limitation, any direct or indirect guarantee of such
Indebtedness (other than any endorsement for collection or deposit in the
ordinary course of business) or any other direct or indirect obligation, by
agreement or otherwise, to purchase or repurchase any such Indebtedness or
obligation or any security therefor, or to provide funds for the payment or
discharge of any such Indebtedness or obligation (whether in the form of
loans, advances, stock purchases, capital contributions, dividends or
otherwise), letters of credit and reimbursement obligations for letters of
credit, (ii) to provide funds to maintain the financial condition of any
other Person, or (iii) otherwise to indemnify or hold harmless the holders
of Indebtedness or other obligations of another Person against loss in
respect thereof. The amount of any Contingent Obligation under clauses (i)
and (ii) above shall be the maximum amount guaranteed or otherwise
supported by the Contingent Obligation.
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"Convertible Securities" means, with respect to any Person, any
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securities or other obligations issued or issuable by such Person or any
other Person that are exercisable or exchangeable for, or convertible into,
any Capital Stock of such Person.
"Default" shall mean any event or condition which, with the giving of
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notice or the lapse of time or both, becomes an Event of Default.
"Disclosure Schedules" shall have the meaning specified in the
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introductory paragraph of Section 3.
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"EBITDA" shall mean, for any period, without duplication and
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determined on a consolidated basis and in accordance with GAAP:
(i) the sum of (A) Net Income (Loss), (B) interest expense
deducted in determining Net Income (Loss) (including, without
limitation, cash interest, payment-in-kind interest and amortization
of original issue discount), (C) the amount of Taxes deducted in
determining Net Income (Loss), (D) the amount of depreciation and
amortization expense deducted in determining Net Income (Loss), (E)
any extraordinary or unusual non-cash losses (provided that such
extraordinary or unusual non-cash losses do not result in any cash
outlay at any time after the Closing Date) and (F) any Withdrawn
Demand Registration Expenses incurred by the Company, in each case for
such period; minus
-----
(ii) any extraordinary or unusual income or gains for such
period.
"Environmental Conditions" shall mean any Release of any Hazardous
------------------------
Materials (whether or not such Release constituted at the time thereof a
violation of any Environmental Laws) or any violation of any Environmental
Law as a result of which any Environmental Person has or may become liable
to any Person or by reason of which the business, condition or operations
of such Environmental Person or any of its assets or properties may suffer
or be subjected to any Lien or liability.
"Environmental Laws" shall mean all Applicable Laws relating to
------------------
Hazardous Materials or the protection of human health or the environment,
including all requirements pertaining to reporting, permitting,
investigating or remediating Releases or threatened Releases of Hazardous
Materials into the environment, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials. Without limiting the generality of the foregoing, the
term "Environmental Laws" shall include the Comprehensive Environmental
------------------
Response, Compensation and Liability Act (42 U.S.C. (S)9601 et seq.)
------
("CERCLA"), the Hazardous Materials Transportation Act (49 U.S.C. (S)1801
--------
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. (S)6901 et
------ --
seq.) ("RCRA"), the Federal
8
Clean Water Act (33 U.S.C. (S)1251 et seq.), the Clean Air Act (42 U.S.C.
-- ---
(S)7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S)2601 et
-- --- --
seq.) and the Occupational Safety and Health Act (29 U.S.C. (S)651 et
--- --
seq.), as such laws may be amended from time to time, and any other present
---
or future federal, state, local or foreign statute, ordinance, rule,
regulation, order, judgment, decree, permit, license or other binding
determination of any Governmental Authority imposing liability or
establishing standards of conduct for the protection of human health or the
environment.
"Environmental Persons" shall mean, collectively, (i) the Company, any
---------------------
Guarantor and any of their respective Subsidiaries or other Affiliates,
(ii) any other Person in which any of the Persons listed in clause (i)
above was at any time, or is, a partner, joint venturer, member or other
participant, and (iii) any predecessor or former partnership, joint
venture, trust, association, corporation, limited liability company or
other Person, whether in existence as of the date hereof or at any time
prior to the date hereof, the assets, properties, liabilities or
obligations of which have been acquired or assumed by any of the Persons
listed in clause (i) above or to which any of the Persons listed in clause
(i) above has succeeded.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended, and any successor statute, including the rules and
regulations promulgated thereunder, in each case as amended from time to
time.
"Estimated FYE 1999 Financial Statements" shall have the meaning set
---------------------------------------
forth Section 3.11(a).
---------------
"Event of Default" shall have the meaning specified in Section 10.1.
---------------- ------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time, and the rules and regulations promulgated
thereunder.
"Executive Officer" shall mean, with respect to any Person, the
-----------------
president of such Person, any vice president of such Person in charge of a
principal business unit or division, any other officer who performs a
policy making function.
"Existing Indebtedness" shall have the meaning set forth in Section
--------------------- -------
3.12.
----
"Existing LHF Equity Documents" shall mean the LHF Registration Rights
-----------------------------
Agreement, the LHF Voting Rights Agreement, the LHF Warrant and any other
agreements, instruments or documents evidencing an equity or other interest
in the Company owned or held by LHF, other than the LHF Equity Rights
Agreement.
"Existing Liens" shall have the meaning set forth in Section 3.12.
-------------- ------------
9
"Existing Stock Plans" shall mean, collectively, (i) the 1994 Employee
--------------------
Stock Option Plan of Parent, as adopted by the Board of Directors of Parent
on March 3, 1994 (the "Parent Stock Option Plan"); (ii) the Stock Option
------------------------
Agreement for Xxxxx Xxxxx dated July 1993 (the "Xxxxx Stock Option Plan");
-----------------------
and (iii) the Stock Option Agreement for Xxxxxxx X. Xxxxxxx dated July 1993
(together with the Xxxxx Stock Plan, the "Executive Stock Option Plans").
----------------------------
"Financial Statements" shall have the meaning specified in Section
-------------------- -------
3.11(a).
-------
"Finova" shall mean Finova Capital Corporation, an existing lender to
------
the Company.
"Fiscal Quarter" shall mean (i) the thirteen (13) week period ending
--------------
on the last Sunday of December, March, June and September of any Fiscal
Year, except that in the event that a Fiscal Year ends on the first day of
October, then "Fiscal Quarter" shall mean the fourteen (14) week period
--------------
ending on the first Sunday of January of such Fiscal Year and on the last
Sunday of each of the three (3) thirteen (13) week periods thereafter, or
(ii) such other period as the Company may designate in writing and the
Purchaser may approve in writing.
"Fiscal Year" shall mean the fiscal year of the Company, which shall
-----------
be (i) the twelve (12) month period ending on (a) the last Sunday of
September in each calendar year, if September 30 does not fall on a
Saturday, or (b) October 1, if September 30 falls on a Saturday, or (ii)
such other period as the Company may designate in writing and the Purchaser
may approve in writing.
"Fixed Charge Coverage Ratio" shall mean, with respect to any period,
---------------------------
the ratio of (i) EBITDA for such period to (ii) Fixed Charges for such
period.
"Fixed Charges" shall mean, for any period and without duplication,
-------------
the sum of (i) Cash Interest Expense; (ii) scheduled payments of principal
on any Indebtedness of the Company and its Subsidiaries; (iii) scheduled
Capitalized Lease Obligations of the Company or any of its Subsidiaries for
such period representing principal; (iv) Taxes estimated to be paid by the
Company and its Subsidiaries, after giving effect to the net operating loss
carryforward of Parent, if any; (v) cash dividends or distributions, if
any, paid by the Company or any of its Subsidiaries; (vi) Capital
Expenditures and (vii) all Tax Sharing Cash Payments, in each case for such
period.
"Fully Diluted Basis" shall mean a basis that includes all issued and
-------------------
outstanding shares of Capital Stock of the Company and all additional
shares of Capital Stock of the Company which would be issued upon the
conversion or exercise of all Option Rights of the Company then
outstanding.
10
"GAAP" shall mean generally accepted accounting principles and
----
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be approved
by a significant segment of the accounting profession, all as of the date
hereof, applied on a basis consistent with past practices.
"Governmental Authority" shall mean any nation or government, and any
----------------------
state or political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government (including, without limitation, the Commission,
the United States Food and Drug Administration ("FDA"), the United States
---
Department of Agriculture ("USDA") and the United States Environmental
----
Protection Agency ("EPA")), and any tribunal or arbitrator(s) of competent
---
jurisdiction, and any self-regulatory organization.
"Guarantied Obligations" shall have the meaning set forth in Section
---------------------- -------
9.1.
---
"Guarantor Subordinated Debt" shall have the meaning set forth in
---------------------------
Section 9.8.
-----------
"Guarantors" shall mean, individually or collectively, Parent,
----------
Overhill Ventures and any other Person that guarantees, pursuant to Section
-------
1.16A of Annex A, all or any part of the Obligations to Purchaser.
----- -------
"Guaranty" shall mean the guaranty made by the Guarantors in favor of
--------
the Beneficiary in respect of the Guarantied Obligations, as provided in
Section 9.
---------
"Hazardous Materials" shall mean any substance (i) the presence of
-------------------
which requires investigation or remediation under any Applicable Laws; (ii)
that is defined or becomes defined as a "hazardous waste" or "hazardous
substance" under any Applicable Laws (including, without limitation, CERCLA
or RCRA); (iii) that is toxic, explosive, corrosive, inflammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and
is or become regulated by any Governmental Authority; (iv) the presence of
which on any real property causes or threatens to cause a nuisance upon the
real property or to adjacent properties or poses or threatens to pose a
hazard to any real property or to the health or safety of Persons on or
about any real property; or (v) without limitation, that contains gasoline
or other petroleum hydrocarbons, polychlorinated biphenyls or asbestos.
"Hazardous Materials Claim" shall have the meaning set forth in
-------------------------
Section 1.15A of Annex A.
------------- -------
11
"Holder" shall mean any Person (including, without limitation, the
------
initial Purchaser) in whose name the Note is registered in the register
maintained by the Company pursuant to Section 11 of the Note.
----------
"Immediate Family" of a Person includes such Person's spouse, and the
----------------
parents, children and siblings of such Person or his or her spouse and
their spouses and other Persons related to the foregoing by blood, adoption
or marriage within the second degree of kinship, and, with respect to any
officer or director of the Company, shall also include any Person who is
primarily a personal friend rather than a business associate.
"Indebtedness" shall mean, with respect to any Person, without
------------
duplication, (i) any indebtedness and other obligations, contingent or
otherwise, for borrowed money; (ii) all obligations evidenced by bonds,
notes, debentures or similar instruments; (iii) all obligations to pay the
deferred purchase price of property or services (excluding trade accounts
payable arising in the ordinary course of business that are less than sixty
(60) days from their due dates and that are not being contested in good
faith in a commercially reasonable manner) and any installment payment non-
compete agreements; (iv) all Capital Lease Obligations; (v) all obligations
of others secured by a Lien to which any property or assets owned by such
Person is subject, whether or not the obligations secured thereby have been
assumed by such Person; (vi) all obligations of such Person, contingent or
otherwise, in respect of any letters of credit or bankers' acceptances;
(vii) all obligations under facilities for the discount or sale of
receivables; (viii) the maximum fixed repurchase price of any redeemable
stock of such Person; (ix) all Contingent Obligations; and (x) all
obligations which are required to be classified on the balance sheet of
such Person as long-term liabilities under GAAP.
"Indemnified Environmental Costs" shall mean all actual or threatened
-------------------------------
liabilities, claims, actions, causes of action, judgments, orders, damages
(including foreseeable and unforeseeable consequential damages), costs,
expenses, fines, penalties and losses (including sums paid in settlement of
claims and all reasonable consultant, expert and legal fees and reasonable
expenses of counsel) incurred in connection with any Hazardous Materials
Claim, any investigation of Site conditions or any clean-up, Remedial Work
or other remedial, removal or restoration work (whether of any Real
Property or any other real property), or any resulting damages, harm or
injuries to the Person or property of any third parties or to any natural
resources.
"Indemnified Parties" shall have the meaning specified in Section 8.2.
------------------- -----------
"Independent" shall mean, with respect to any individual who has been
-----------
or will be duly appointed or elected as a member of the Board of Directors
of the Company, that such individual (i) shall not have been, at the time
of any such appointment or election or at any time during the immediately
preceding three (3) years, (a) a direct or
12
indirect legal or beneficial owner of the Capital Stock of the Company or
any of its Affiliates, (b) a creditor, supplier, employee, officer,
director, manager or contractor of the Company or any of its Affiliates, or
a member of the Immediate Family of any of the foregoing, or (c) a Person
who controls (within the meaning of such term in the definition of
Affiliate) the Company or any of its Affiliates or any creditor, supplier,
employee, officer, director, manager or contractor of the Company or any of
its Affiliates, and (ii) in the view of the Purchaser, is free of any
relationship with respect to the Company or any of its Affiliates that
would interfere with the exercise of independent business judgment.
"Independent Director" shall mean any individual who has been duly
--------------------
appointed or elected as a member of the Board of Directors of the Company
and is Independent.
"Instruments" shall have the same meaning as given to that term in the
-----------
Code, and shall include all negotiable instruments, notes secured by
mortgages or trust deeds, and any other writing which evidences a right to
the payment of money and is not itself a security agreement or lease, and
is of a type which is, in the ordinary course of business, transferred by
delivery with any necessary endorsement or assignment.
"Insurance Coverage Letter" shall mean a letter dated as of the
-------------------------
Closing Date, from the Purchaser to the Company, advising the Company of
the insurance coverages required to be maintained by the Company and its
Subsidiaries as provided therein.
"Intangible Assets" shall mean the book value of all intangible assets
-----------------
(as defined under GAAP) shown on the consolidated balance sheet of the
Company and its Subsidiaries, including, without limitation, organization
costs, securities issuance costs, goodwill (including any amounts, however
designated on such balance sheet, representing the excess of the purchase
price paid for assets or stock acquired over the value assigned thereto on
the books of the Company and its Subsidiaries), covenants not to compete,
patents, trademarks, copyrights, trade secrets, customer lists, know-how,
licenses, contracts, franchises, software costs, research and development
costs, investments in and monies from Affiliates and any other intangible
assets.
"Intellectual Property" shall mean all (i) patents, patent
---------------------
registrations, patent applications, patent disclosures and any related
continuation, continuation-in-part, divisional, reissue, reexamination,
utility, model and certificate of invention; (ii) trademarks, service
marks, trade dress, logos, trade names and corporate names, and any
registrations and applications for registration thereof; (iii) copyrights
and registrations and applications for copyrights; (iv) computer software,
data and documentation; (v) trade secrets, know-how, processes, techniques,
research and development, works, financial, marketing and business data,
pricing and cost information, business and marketing plans, customer and
supplier lists and any other
13
confidential information, including, without limitation, the Company's
proprietary food recipes, if any; (vi) all proprietary rights relating to
any of the foregoing; and (vii) copies and tangible embodiments thereof.
"Intercreditor Agreement" shall mean an Intercreditor and
-----------------------
Subordination Agreement, in form and substance satisfactory to the
Purchaser, between the Senior Lender and the Purchaser, and acknowledged by
the Company, Parent and Overhill Ventures.
"Investment Documents" shall mean, collectively, this Agreement, the
--------------------
Note, the Warrant, the Registration Rights Agreement, the Investor Rights
Agreement, the Suretyship Agreement, the Intercreditor Agreement and the
other Collateral Documents, the Amended Charter, the Insurance Coverage
Letter and all other agreements, instruments, letters and other documents
executed and/or delivered in connection herewith or therewith, in each case
as amended, restated, supplemented or otherwise modified from time to time.
"Investments" shall mean, as applied to any Person, (i) any direct or
-----------
indirect acquisition by such Person of Capital Stock, other securities or
other interests of, or investments in, any other Person, or all or any
substantial part of the business or assets of any other Person, and (ii)
any direct or indirect loan, advance or capital contribution by such Person
to any other Person (including, without limitation, any Affiliate, officer,
director or employee of the Company), including, without limitation, the
incurrence or sufferance of any Indebtedness or accounts receivable of any
other Person that are not classified as current assets under GAAP or do not
arise from sales to such other Person in the ordinary course of business.
"Investor Rights Agreement" shall mean an Investor Rights Agreement,
-------------------------
in form and substance satisfactory to the Purchaser, among the Company,
Parent and the Purchaser.
"Leverage Ratio" shall mean, with respect to any period, the ratio of
--------------
(i) the sum of (A) total Indebtedness of the Company and its Subsidiaries
at the end of such period and (B) all Capital Leases existing at the end of
such period, to (ii) EBITDA for the four (4) consecutive Fiscal Quarters
ending as of the end of such period.
"LHF" shall mean The Long Horizons Fund, L.P., a New York limited
---
partnership, or Ableco Finance LLC, a Delaware limited liability company,
as assignee of The Long Horizons Fund, L.P., as the case may be, and any
other assignees of The Long Horizons Fund, L.P. or any assignees of Ableco
Finance LLC.
14
"LHF Equity Rights Agreement" the Equity Rights Agreement dated of
---------------------------
even date herewith among Parent, LHF and the Company, in form and substance
satisfactory to the Purchaser.
"LHF Registration Rights Agreement" shall mean the Registration Rights
---------------------------------
Agreement dated as of December 4, 1997, between the Company and LHF, which
Registration Rights Agreement shall be terminated, in form and substance
satisfactory to the Purchaser, prior to or simultaneously with the Closing.
"LHF Voting Rights Agreement" shall mean the Voting Rights Agreement,
---------------------------
dated as of December 4, 1997, among Parent, LHF and the Company, which
Voting Rights Agreement shall be terminated, in form and substance
satisfactory to the Purchaser, prior to or simultaneously with the Closing.
"LHF Warrant" shall mean the Common Stock Purchase Warrant No. W-1
-----------
dated December 4, 1997, as amended, restated, supplemented or otherwise
modified from time to time, entitling LHF to purchase 232.5 shares of
Common Stock immediately prior to the Closing, which Common Stock Purchase
Warrant shall be terminated, in form and substance satisfactory to the
Purchaser, prior to or simultaneously with the Closing.
"Licenses and Permits" shall mean, collectively, all licenses,
--------------------
franchises, permits, consents, approvals, registrations, certificates and
authorizations of all Governmental Authorities necessary or advisable to
the conduct of the businesses of the Company, any Guarantor or any of their
respective Subsidiaries.
"Lien" shall mean any lien, pledge, mortgage, security interest,
----
charge or encumbrance of any kind (including, without limitation, the
interest of a lessor under a Capital Lease having substantially the same
economic effect), any agreement to give or refrain from giving any lien,
pledge, mortgage, security interest, charge or other encumbrance of any
kind, any conditional sale or other title retention agreement, any lease in
the nature thereof and the filing of any financing statement or other
similar form of notice under the laws of any jurisdiction.
"Losses" shall have the meaning specified in Section 8.2.
------ -----------
"Margin Regulations" shall mean Regulations T, U and X of the Board of
------------------
Governors of the Federal Reserve System, or any successor thereto (the
"Federal Reserve Board"), as amended from time to time.
----------------------
"Margin Stock" shall mean "margin stock" as defined in the Margin
------------
Regulations.
15
"Material Adverse Effect" or "Material Adverse Change" shall mean a
----------------------- -----------------------
material adverse effect on or adverse change in, as the case may be, (i)
the business, assets, condition (financial or otherwise), properties
(whether real, personal or otherwise), results of operations or prospects
of the Company, Parent and any of its Subsidiaries, individually or taken
as a whole, or (ii) the ability of the Company or any Guarantor to perform
its or their obligations under this Agreement or any other Investment
Document.
"Material Contracts" shall have the meaning set forth in Section 3.14.
------------------ ------------
"Xxxxxxx Indenture" shall have the meaning set forth in Section 3.12.
----------------- ------------
"Nasdaq" means The Nasdaq National Market System or The Nasdaq
------
SmallCap Market, as the case may be, or any successor reporting system
thereof.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
-----------------
sum of: (i) the net amount of cash and cash equivalent proceeds received by
or for the account of the Company or any of its Subsidiaries from such
Asset Sale, and (ii) the net amount of cash and cash equivalents received
by or for the account of the Company or any Subsidiaries upon the sale,
conversion, collection or other liquidation of any non-cash proceeds
(including notes, debt securities, other rights to payment, Capital Stock
or other consideration received from any Asset Sale) from such Asset Sale.
For this purpose, the term "net" means net of (a) the principal amount of
---
any Indebtedness secured by a Permitted Lien on the assets subject to and
required to be prepaid, and actually prepaid, upon such Asset Sale, (b) any
transfer taxes payable as a result of such Asset Sale, and any reasonable
professional fees and expenses, reasonable broker's commissions and other
reasonable out-of-pocket expenses of sale paid to any Person attributable
to such Asset Sale, and (c) any income taxes reasonably estimated by the
Company to be payable in respect of such Asset Sale.
"Net Income (Loss)" shall mean, for any period, net income (loss)
-----------------
after Taxes of the Company and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period, all computed in accordance
with GAAP.
"90-Day Receivables" shall mean, at any time, the total consolidated
------------------
trade receivables of the Company and its Subsidiaries, determined in
accordance with GAAP, that are then outstanding ninety (90) days past the
invoice date.
"Note" shall have the meaning set forth in Section 2.1, and shall also
---- -----------
include, where applicable, any additional note or notes issued by the
Company in connection with any Assignments.
16
"Obligations to Purchaser" shall mean any and all present and future
------------------------
loans, advances, Indebtedness, claims, guarantees, liabilities or
obligations of the Company or any Guarantor owing to the Purchaser, any
Affiliate of the Purchaser or any Indemnified Party (or any assignee or
transferee of the Purchaser, such Affiliate or such Indemnified Party), of
whatever nature, character or description, arising under or in connection
with this Agreement, the Note, the Warrant, the Registration Rights
Agreement, the Investor Rights Agreement (including, without limitation,
the consulting fees payable thereunder), the Collateral Documents and any
other Investment Documents or otherwise, any and all agreements,
instruments or other documents heretofore or hereafter executed or
delivered in connection with any of the foregoing, in each case whether due
or not due, direct or indirect, joint and/or several, absolute or
contingent, voluntary or involuntary, liquidated or unliquidated,
determined or undetermined, now or hereafter existing, amended, renewed,
extended, exchanged, restated, refinanced, refunded or restructured,
whether or not from time to time decreased or extinguished and later
increased, created or incurred, whether for principal, interest, premiums,
fees, costs, expenses (including, without limitation, attorneys' fees) or
other amounts incurred for administration, collection, enforcement or
otherwise, whether or not arising after the commencement of any proceeding
under the Bankruptcy Law (including, without limitation, post-petition
interest) and whether or not allowed or allowable as a claim in any such
proceeding, and whether or not recovery of any such obligation or liability
may be barred by any statute of limitations or such Indebtedness, claim,
liability or obligation may otherwise be unenforceable.
"Obligor" shall have the meaning set forth in Section 9.2.
------- -----------
"Option Rights" shall mean, with respect to any Person, any
-------------
Convertible Securities of such Person, or any warrants, options or other
rights to subscribe for or purchase, or obligations to issue, any Capital
Stock of such Person, including, without limitation, any options or similar
rights issued or issuable under any employee stock option plan, pension
plan or other employee benefit plan of such Person.
"Overhill Ventures" shall have the meaning set forth in the preamble.
-----------------
"Parent" shall have the meaning set forth in the preamble.
------
"Parent Common Stock" shall have the meaning set forth in Section
------------------- -------
3.7(b).
------
"Parent Pledge Agreement" shall mean a Parent Pledge Agreement, in
-----------------------
form and substance satisfactory to the Purchaser, executed by Parent in
favor of the Purchaser.
"Parent SEC Documents" shall mean all registration statements,
--------------------
prospectuses, reports, schedules, forms, proxy or other statements and
other documents (including all
17
exhibits, schedules and other information included or incorporated by
reference therein) which are filed or required to be filed by Parent with
the Commission under the Securities Act, the Exchange Act or the rules and
regulations promulgated thereunder, and all filings, reports and other
documents which are filed or required to be filed by Parent with AMEX.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, as defined
----
in Title IV of ERISA.
"Permitted Affiliate Transaction" shall mean any one or more of the
-------------------------------
following transactions:
(i) the payment by the Company of the salary and other
compensation of Xxxxx Xxxxx in his capacity as the President and Chief
Executive Officer of Parent, which salary and other compensation shall
be determined annually by the Boards of Directors of Parent and the
Company (or the compensation committees thereof, if any);
(ii) the existence of the intercompany accounts receivable owing
from Parent to the Company and reflected on the consolidated balance
sheet of the Company and its Subsidiaries as of September 26, 1999, in
an amount not to exceed $11,038,000; provided, however, that the
-------- -------
amount of such intercompany accounts receivable may be increased by
the one-time payment permitted under clause (iv) of this definition;
and provided further, however, that, from and after the Closing Date,
---------------- -------
the Company complies with the accounting adjustments and other
procedures set forth in Section 1.23A of Annex A with respect to such
------------- -------
intercompany accounts receivable;
(iii) Tax Sharing Cash Payments made by the Company to Parent
during each calendar quarter of each Fiscal Year set forth below not
to exceed the amount set forth opposite each such Fiscal Year:
Each Calendar Quarter Maximum Quarterly Tax
in Fiscal Year Ending in: Sharing Cash Payment
------------------------ ---------------------
September 2000............ $125,000
September 2001............ $150,000
September 2002............ $150,000
September 2003............ $150,000
18
September 2004........... $150,000
(iv) a one-time payment by the Company to Parent at or
immediately following the Closing of an amount not to exceed
$1,250,000 in the aggregate;
(v) the loan evidenced by the Xxxxxxx Note, provided that the
--------
amount of indebtedness outstanding under the Xxxxxxx Note (excluding
accrued and unpaid interest) does not exceed $14,000 in the aggregate
at any time;
(vi) any other loans or advances made by the Company to its
employees which in no event shall exceed $10,000 to any one employee
and $100,000 in the aggregate at any time outstanding; and
(vii) the payment by the Company to Parent of an amount not to
exceed an aggregate of $200,000 in each of the Fiscal Years ending
October 1, 2000 and September 29, 2001, solely to reimburse Parent for
attorneys' fees and expenses actually and reasonably incurred by
Parent with respect to litigation to which Parent is a party, provided
--------
that such payment may be made only if (A) the Company has complied
with the amounts set forth in Column (B) of each of Sections 3.1A
(Minimum EBITDA), 3.2A (Minimum Fixed Charge Coverage Ratio) and 3.3A
(Maximum Leverage Ratio) of Annex A for the Fiscal Year in which any
-------
such payments are proposed to be made and (B) the Purchaser has
approved in advance the fiscal budget of Parent with respect to the
Fiscal Year in which such attorneys' fees and expenses were incurred.
"Permitted Investments" shall mean (i) any direct obligations of the
---------------------
United States of America (including obligations issued or held in book-
entry form on the books of the Department of the Treasury of the United
States of America) or obligations the timely payment of the principal of
and interest on which are fully guaranteed by the United States of America,
all of which mature within three (3) months from the date of acquisition
thereof; (ii) interest-bearing demand or time deposits that mature no more
than thirty (30) days from the date of creation thereof and that are either
(a) insured by the Federal Deposit Insurance Corporation or (b) held in any
United States commercial bank having general obligations rated at least
"AA" or equivalent by Standard & Poor's Rating Group Corporation or Xxxxx'x
Investors Service, Inc. and having capital and surplus of at least
$500,000,000 or the equivalent; or (iii) certificates of deposit that
mature no more than thirty (30) days from the date of creation thereof and
that are either (a) insured by the Federal Deposit Insurance Corporation or
(b) held in any United States commercial bank having general obligations
rated at least "AA" or equivalent by Standard & Poor's Corporation Rating
Group or Xxxxx'x Investors Service, Inc. and having capital and surplus of
at least $500,000,000 or the equivalent.
19
"Permitted Liens" shall mean, collectively, Liens of the Company or
---------------
any Guarantor arising by reason of (i) any attachment, judgment, decree or
order of any Governmental Authority, so long as such Lien is being
contested in good faith within thirty (30) days of such Person's knowledge
thereof and is either adequately bonded or execution thereon has been
stayed pending appeal or review, and any appropriate legal proceedings
which may have been duly initiated for the review of such attachment,
judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired; (ii) Taxes, assessments or other governmental charges that are not
yet delinquent or that are being contested in good faith; (iii) security
for payment of workers' compensation or other insurance; (iv) reasonable
security for the performance of real property leases; (v) deposits to
secure public or statutory obligations or in lieu of surety or appeal bonds
entered into in the ordinary course of business; (vi) operation of law in
favor of carriers, warehouse owners, landlords, storage facilities or
mechanics incurred in the ordinary course of business for sums that are not
yet delinquent or are being contested in good faith by negotiation or by
appropriate proceedings that suspend the collection thereof and, if
required by GAAP, are appropriately reserved for on the books of such
Person; and (vii) easements, rights-of-way, zoning and similar covenants
and restrictions and other similar encumbrances or title defects that, in
the aggregate, are not material in amount; provided, however, that each of
-------- -------
the Liens described in the foregoing clauses (i) through (vii) inclusive
shall only constitute a Permitted Lien so long as such Lien individually
does not, or so long as all such Liens do not, materially interfere with
the conduct of such Person's business or creates a Material Adverse Change.
"Person" shall mean any individual, trustee, sole proprietorship,
------
partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, limited liability
partnership and other entity or any Governmental Authority.
"PTC Security Agreement" shall mean a Patent, Trademark and Copyright
----------------------
Security Agreement, in form and substance satisfactory to the Purchaser,
among the Company, Overhill Ventures and the Purchaser.
"Purchase Price" shall have the meaning specified in Section 2.2.
-------------- -----------
"Purchaser" shall have the meaning set forth in the preamble.
---------
"Registration Rights Agreement" shall mean a Registration Rights
-----------------------------
Agreement, in form and substance satisfactory to the Purchaser, between the
Company and the Purchaser.
20
"Release" shall mean any release (whether threatened or actual),
-------
migration, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, seeping, leaching, dumping or disposing
into the environment or the workplace of any Hazardous Materials, and
otherwise as defined in any Environmental Laws.
"Remedial Work" shall have the meaning set forth in Section 1.15A of
------------- -------------
Annex A.
-------
"Restricted Payment" shall mean any one or more of the following:
------------------
(i) any dividend or other distribution or payment, direct or
indirect, on account of any Capital Stock or other securities of the
Company or any Subsidiary now or hereafter outstanding;
(ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of
any shares of any Capital Stock of the Company or any Subsidiary now or
hereafter outstanding;
(iii) any payment or prepayment of principal of, premium, if
any, or interest, fees or other charges on or with respect to, or any
redemption, purchase or other acquisition for value, retirement,
defeasance, sinking fund or similar payment with respect to, any
Indebtedness that is subordinated in any respect to the Obligations to
Purchaser;
(iv) any management, consulting or similar fees payable by the
Company or any of its Subsidiaries to Parent or any other Affiliate of the
Company;
(v) any loans or advances by the Company or any Guarantor to
any employees, directors, officers or stockholders of the Company or any
Guarantor, as the case may be, except for advances to employees for moving
or traveling expenses made in the ordinary course of business; and
(vi) any other type of payment by the Company and any of its
Subsidiaries to Parent (including, without limitation, Tax sharing
payments).
"Securities" shall have the meaning specified in Section 2.1.
---------- -----------
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and the rules and regulations promulgated thereunder, all as the same shall
be in effect at the time.
21
"Security Agreement (Company)" shall mean a Security Agreement, in
----------------------------
form and substance satisfactory to the Purchaser, between the Company and
the Purchaser.
"Security Agreement (Subsidiary)" shall mean a Security Agreement, in
-------------------------------
form and substance satisfactory to the Purchaser, between Overhill Ventures
and the Purchaser.
"Senior Availability" shall mean, at any time, the "Net Borrowing
-------------------
Availability" (as such term is defined in the Senior Credit Agreement) at
such time.
"Senior Collateral Documents" shall mean the "Collateral Documents" as
---------------------------
such term is defined in the Senior Credit Agreement.
"Senior Credit Agreement" shall mean the Loan and Security Agreement
-----------------------
dated of even date herewith among the Company, Overhill Ventures and the
Senior Lender, as amended, restated, supplemented or otherwise modified
from time to time.
"Senior Credit Documents" shall mean the "Loan Documents" as such term
-----------------------
is defined in the Senior Credit Agreement.
"Senior Indebtedness" shall mean, collectively, the Indebtedness of
-------------------
the Company outstanding from time to time under the Senior Credit
Documents.
"Senior Lender" shall mean Union Bank of California, N.A., as "Bank"
-------------
under the Senior Credit Agreement.
"Xxxxxxx Note" means the Promissory Note dated October 22, 1999, made
------------
by Xxxxxx Xxxxxxx in favor of Overhill Ventures in the original principal
amount of $14,000.
"Site" shall mean any real property previously, currently or hereafter
----
owned, leased or operated by any Environmental Person.
"60-Day Payables" shall mean, at any time, the total consolidated
---------------
trade payables and accrued expenses of the Company and its Subsidiaries,
determined in accordance with GAAP, that are then outstanding sixty (60)
days past the invoice date.
"Solvent" shall mean, with respect to any Person, that on the date of
-------
determination: (i) the present fair saleable value of the assets of such
Person will exceed the amount that will be required to pay the probable
liability on the existing debts (whether matured or unmatured, liquidated
or unliquidated, absolute, fixed or contingent) of such Person as they
become absolute and matured; (ii) the sum of the
22
debts (whether matured or unmatured, liquidated or unliquidated, absolute,
fixed or contingent) of such Person will not exceed all of the property of
such Person at a fair valuation; and (iii) the capital of such Person will
not be unreasonably small for such Person to carry on its businesses.
"Subsidiary" and "Subsidiaries" shall mean, with respect to any
---------- ------------
Person, any other Person of which more than thirty percent (30.0%) of the
total voting power of Capital Stock entitled to vote (without regard to the
occurrence of any contingency) in the election of directors (or other
Persons performing similar functions) are at the time directly or
indirectly owned by such first Person. Unless otherwise indicated, the
term "Subsidiary" refers to a Subsidiary of the Company.
----------
"Suretyship Agreement" shall mean a Suretyship Agreement, in form and
--------------------
substance satisfactory to the Purchaser, among the Company, the Debtors (as
such term is defined therein) and the Purchaser.
"Tangible Net Worth" shall mean, with respect to the Company and its
------------------
Subsidiaries on any date and without duplication, (i) the sum of (a) the
excess of the book value of assets over liabilities at such time,
determined on a consolidated basis in accordance with GAAP, (b) the amount
shown for redeemable warrants on the consolidated balance sheet of the
Company and its Subsidiaries at such time and (c) the Tax Sharing Payable
determined at such time, minus (ii) Intangible Assets at such time.
-----
"Tax" or "Taxes" shall mean any present and future income, excise,
--- -----
sales, use, stamp or franchise taxes and any other taxes, fees, duties,
levies, withholdings or other charges of any nature whatsoever imposed by
any taxing authority, whether federal, state, local or foreign, together
with any interest and penalties and additions to tax.
"Tax Sharing Cash Payments" shall mean, for any period, all cash
-------------------------
payments actually made by the Company to Parent during such period on
account of the Tax Sharing Payable.
"Tax Sharing Payable" shall mean, at any time, the total amount owed
-------------------
by the Company to Parent at such time arising from accrued payments of all
income or franchise Taxes that the Company would have incurred if the
Company had filed its income or franchise Tax returns on a stand-alone
basis.
"Tax Sharing Payable Liability Account" shall mean a liability account
-------------------------------------
shown on the consolidated balance sheet of the Company and its Subsidiaries
in respect of the Tax Sharing Payable.
23
"Texas Timberjack" shall mean Texas Timberjack, Inc., a Texas
----------------
corporation and a wholly owned Subsidiary of Parent.
"Third Party Intellectual Property Rights" shall have the meaning
----------------------------------------
specified in Section 3.26.
------------
"Total Payables" shall mean, at any time, the total consolidated trade
--------------
payables and accrued expenses of the Company and its Subsidiaries at such
time, determined in accordance with GAAP.
"Total Receivables" shall mean, at any time, the total consolidated
-----------------
trade receivables of the Company and its Subsidiaries at such time,
determined in accordance with GAAP.
"UCC" shall mean the Uniform Commercial Code, as adopted and in force
---
in the State of California as from time to time in effect, and the Uniform
Commercial Code of any other jurisdiction as required under Division 9103
of the California Commercial Code.
"Warrant" shall have the meaning set forth in Section 2.1.
------- -----------
"Warrant Shares" shall have the meaning set forth in the Warrant.
--------------
"Withdrawn Demand Registration Expenses" shall mean all costs or
--------------------------------------
expenses incurred by the Company in connection with a Demand Registration
(as such term is defined in the Registration Rights Agreement) that is
withdrawn by the Demanding Holders (as such term is defined in the
Registration Rights Agreement) solely as a result of the occurrence of any
adverse market conditions of the type that is customarily found in
underwriting or similar purchase agreements relating to public offerings
and which may be relied upon by underwriters or purchasers to terminate
such underwriting or purchase agreement.
1.2 Accounting Terms and Computations. For purposes of this Agreement,
---------------------------------
(a) all accounting terms used in this Agreement that are not expressly defined
herein have the meanings given to them under GAAP, (b) all computations made
pursuant to this Agreement or any other Investment Document shall be made in
accordance with GAAP and (c) all financial statements and other financial
information required to be delivered by the Company or any Guarantor hereunder
or under any other Investment Document shall, except as otherwise expressly
provided in this Agreement, be prepared in accordance with GAAP in the ordinary
course of business consistent with past practices, except that any such
financial statements or other financial information (a) which are unaudited may
be subject to year-end audit adjustments and may omit footnotes and (b) may be
qualified only with respect to the
24
characterization or re-characterization of the intercompany receivable owing
from the Parent to the Company and referred to in clause (ii) of the definition
of Permitted Affiliate Transaction as a dividend as opposed to an intercompany
loan.
1.3 Independence of Covenants. All covenants under this Agreement shall
-------------------------
each be given independent effect so that if a particular action or condition is
not permitted by any such covenant, the fact that it would be permitted by
another covenant, by an exception thereto, or be otherwise within the
limitations thereof, shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or condition exists.
1.4 Captions; Construction and Interpretation. The captions in this
-----------------------------------------
Agreement are for convenience of reference only, do not constitute a part of
this Agreement and are not to be considered in construing or interpreting this
Agreement. All section, preamble, recital, exhibit, schedule, disclosure
schedule, annex, clause and party references are to this Agreement unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of
this Agreement for purposes of construing the provisions of this Agreement, and
all provisions of this Agreement shall be construed in accordance with their
fair meaning, and not strictly for or against any party.
1.5 Determinations. Any determination or calculation contemplated by this
--------------
Agreement or any other Investment Document that is made by the Purchaser shall
be final and conclusive and binding upon the Company and the Guarantors in the
absence of manifest error.
1.6 Knowledge of the Company. Whenever the term "knowledge of the
------------------------
Company" or "best knowledge of the Company and the Guarantors" or words of
similar import are used in this Agreement or any other Investment Document with
respect to the existence or absence of any fact, it shall mean that any one or
more of the following Persons knows or should have known, based upon the
reasonable inquiry of such Person, of the existence or absence of such fact:
Xxxxx Xxxxx, Xxxxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxx.
1.7 Exclusion of Texas Timberjack. Whenever the phrase "Parent and its
-----------------------------
Subsidiaries (other than Texas Timberjack)," "the Company, Parent and their
respective Subsidiaries (other than Texas Timberjack)" or words of similar
import are used in any representation or warranty made by the Company and/or the
Guarantors in this Agreement, it shall mean that the Company and/or the
Guarantors are not making any representation or warranty as to Texas Timberjack
to the extent that any breach of such representation or warranty resulting from
the inclusion of Texas Timberjack would not adversely affect the business,
assets, condition (financial or otherwise), properties, results of operations or
prospects of the Company or any Guarantor or the transactions contemplated by
this Agreement or any other Investment Document.
25
2. PURCHASE AND SALE OF THE SECURITIES.
-----------------------------------
2.1 Authorization. The Company has authorized the issuance and sale to
-------------
the Purchaser of (a) a Secured Senior Subordinated Note Due 2004 in the
aggregate principal amount of $28,000,000, in substantially the form of Exhibit
-------
A (as the same may be amended, restated, supplemented, modified, renewed,
-
refinanced or restructured from time to time, the "Note"), and (b) a Warrant to
----
Purchase 166.04 Shares of Common Stock of the Company, in substantially the form
of Exhibit B (as the same may be amended, restated, supplemented or otherwise
---------
modified from time to time, the "Warrant"). The Note and the Warrant are
-------
collectively referred to herein as the "Securities."
----------
2.2 Purchase of the Securities; Issue Price. Subject to the terms and
---------------------------------------
conditions contained herein and in the other Investment Documents, and in
reliance upon the representations, warranties, covenants and agreements
contained herein, at the Closing, the Company shall issue and sell to the
Purchaser, and the Purchaser shall purchase from the Company, the Securities.
In consideration for the Securities, at the Closing, the Purchaser shall pay to
the Company the aggregate purchase price of $28,000,000 (the "Purchase Price")
--------------
as provided in Section 2.3. The Company and the Purchaser agree that, for
-----------
purposes of Section 1271 et seq. of the Code, the original issue price of the
------
Note will be 91.5357% of its principal amount and the original issue price of
the Warrant will be $2,370,000, and that this agreement is intended to
constitute an agreement as to the issue prices of the Securities for all
federal, state and local income tax purposes.
2.3 Closing. The closing of the issuance and sale of the Securities under
-------
this Agreement (the "Closing") shall take place at the offices of Xxxxxxx &
-------
XxXxxxxx, 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (or
at such other location as may be expressly agreed upon by the Purchaser), on the
date hereof or as soon as practicable thereafter immediately following the
satisfaction or waiver of the conditions precedent set forth in Section 6 and
---------
Section 7 (such date being referred to as the "Closing Date"). At the Closing,
--------- ------------
the Company shall deliver to the Purchaser, among other things, the Securities,
duly executed by the Company, against delivery by the Purchaser of the Purchase
Price (net of amounts permitted to be withheld pursuant to Sections 6.3 and
------------
8.5) by wire transfer in immediately available funds to such bank as the Company
---
may request in writing (which written request shall be made at least one (1)
Business Day prior to the Closing Date) for credit to an account designated by
the Company in such request, provided, however, that such request shall be
-------- -------
consistent with the purposes set forth in Schedule 3.38.
-------------
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To induce the Purchaser to
---------------------------------------------
purchase the Securities under this Agreement, the Company and the Guarantors
jointly and severally represent and warrant to the Purchaser that, except as
expressly set forth in the Disclosure Schedules (the "Disclosure Schedules"):
--------------------
26
3.1 Organization and Qualification. Each of the Company and Parent is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Overhill Ventures is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
Each of the Company and the Guarantors has all requisite power and authority to
own or lease and operate its properties and assets and to carry on its business
as now conducted and as proposed to be conducted, and is duly qualified or
licensed to do business in, to the extent applicable, the States of California,
Illinois, Pennsylvania, Texas, Washington and each other jurisdiction in which
the character of the properties or assets owned, leased or operated or the
nature of the activities conducted makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed in such other
jurisdictions could not have, individually or in the aggregate, a Material
Adverse Effect.
3.2 Corporate or Other Power. Each of the Company and the Guarantors has
------------------------
the requisite power and authority to execute, deliver, carry out and perform its
obligations under this Agreement and all other Investment Documents to which it
is party, including, without limitation, the power and authority to issue, sell
and deliver the Securities to be issued by it hereunder.
3.3 Authorization; Binding Obligations. The execution, delivery and
----------------------------------
performance of this Agreement and each of the other Investment Documents to
which the Company or any Guarantor is a party, the issuance, sale and delivery
by the Company of the Securities, the grant of the Liens under the Collateral
Documents and the consummation of the other transactions contemplated hereby and
thereby have been duly authorized by all requisite action on the part of the
Company and each Guarantor, as applicable. This Agreement has been duly
executed and delivered by the Company and each Guarantor and, at the Closing,
the other Investment Documents will be duly executed and delivered by the
Company and each Guarantor, respectively. This Agreement is, and at the time of
the Closing this Agreement and each of the other Investment Documents will be, a
legal, valid and binding obligation of the Company and each Guarantor,
respectively, enforceable against the Company and each Guarantor, respectively,
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
conveyance or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability and except as rights of
indemnity or contribution may be limited by federal or state securities or other
laws or the public policy underlying such laws.
3.4 Subsidiaries. Schedule 3.4 sets forth a true, complete and correct
------------ ------------
list of all (a) Subsidiaries of Parent and of the Company and (b) Subsidiaries
of Subsidiaries of Parent and the Company. Except as set forth on such
Schedule, none of the Company or any Guarantor holds or owns any Capital Stock
of any other Person.
27
3.5 Conflict with Other Instruments; Existing Defaults; Ranking.
-----------------------------------------------------------
(a) The execution, delivery and performance of this Agreement and each
of the other Investment Documents to which the Company or any Guarantor is a
party, the issuance, sale and delivery by the Company of the Securities, the
grant of the Liens in the Collateral under the Collateral Documents and the
consummation of the other transactions contemplated hereby and thereby
(including, without limitation, the closing of the transactions contemplated by
the Senior Credit Agreement), do not and will not violate (i) the charter or
bylaws of the Company or any Guarantor, in each case as in effect on the date
hereof, (ii) any term of any lease, credit agreement, indenture, note, mortgage,
instrument or other agreement to which the Company or any Guarantor is a party
or by which any of its or their properties or assets are bound (including,
without limitation, any Material Contracts) or (iii) any Applicable Laws.
(b) Except as set forth on Schedule 3.5(b), none of the Company or any
---------------
Guarantor is in default, breach or violation of (i) its charter or bylaws, as in
effect on the date hereof, (ii) any term of any lease, credit agreement,
indenture, note, mortgage, instrument or other material agreement to which it is
a party or by which any of its properties or assets are bound (including,
without limitation, any Material Contracts) or (iii) any Applicable Laws.
Without limiting the generality of the foregoing, there does not exist any
"Event of Default" (as defined in the Senior Credit Agreement) or any default or
event of default under any other credit or financing agreement to which the
Company or any Guarantor is a party or by which any of its properties or assets
are bound.
(c) Other than as provided in the LHF Voting Rights Agreement (which
shall be terminated prior to or simultaneously with the Closing), there are no
restrictions which prohibit the issuance or sale of the Securities, prohibit or
restrict any merger, sale of assets or other event which could cause a Change in
Control, or otherwise prohibit any other financings by the Company, including,
without limitation, any public or private debt or equity financings.
(d) As of the Closing Date, no Indebtedness of the Company ranks pari
----
passu with any Indebtedness evidenced by the Note or with any other Obligations
-----
to Purchaser, and payment of principal of, premium, if any, and interest on the
Indebtedness evidenced by the Note is subordinate only to the Senior
Indebtedness.
3.6 Governmental and Other Third Party Consents. Except for the Consents
-------------------------------------------
listed in Schedule 3.6 and those that have already been obtained or made
------------
(including, without limitation, the California Permit), none of the Company, any
Guarantor or any of their Affiliates is required to obtain any Consent from, or
is required to make any declaration or filing with, any Governmental Authority
or any other Person in connection with the execution, delivery and performance
of this Agreement or any other Investment Document, including, without
limitation, the issuance, sale and delivery of the Securities or the grant of
the Liens under the
28
Collateral Documents, or for the purpose of maintaining in full force and effect
any Licenses and Permits. Each of the Consents which have been obtained or made
in connection with the execution, delivery and performance of this Agreement or
any other Investment Document is in full force and effect. The California Permit
has been duly and validly issued, without any qualification or other condition,
and is in full force and effect, and no stop order or similar order has been
issued which postpones, suspends or revokes its effectiveness or otherwise
changes any of the original terms thereof. The time within which any
administrative or judicial appeal, reconsideration, rehearing or other review of
any such Consent may be taken or instituted has lapsed, and no such appeal,
reconsideration or rehearing or other review has been taken or instituted.
3.7 Capitalization.
--------------
(a) The authorized capital stock of the Company consists solely of
1,000,000 shares of Common Stock, of which 775 shares are issued and outstanding
as of the date hereof and are owned beneficially and of record by Parent. All
of the issued and outstanding shares of Capital Stock of the Company have been
duly authorized and are validly issued, fully paid and non-assessable, and are
free and clear of any Liens and other restrictions (including any restrictions
on the right to vote, sell or otherwise dispose of such Capital Stock) and of
any preemptive or other similar rights to subscribe for or to purchase any such
Capital Stock. Schedule 3.7(b) sets forth true, correct and complete tables of
---------------
the capital structure of the Company immediately prior to and after the Closing
on a Fully Diluted Basis. Except as set forth on Schedule 3.7(a) (which
---------------
Schedule sets forth, immediately prior to and after the Closing, a true, correct
and complete description of, with respect to each security, title, name of the
holder, number of shares of Common Stock underlying such security, exercise
price, expiration date and percentage of shares of such Common Stock on a Fully
Diluted Basis), there are: (i) no outstanding Option Rights of the Company; (ii)
no voting trusts or other agreements or undertakings with respect to the voting
of the Capital Stock of the Company; (iii) no obligations or rights (whether
fixed or contingent) on the part of the Company, Parent or any other Person to
purchase, repurchase, redeem or "put" any outstanding shares of the Capital
Stock of the Company or Option Rights of the Company; and (iv) no agreements
granting any Person any rights of first offer or first refusal, registration
rights or "drag-along," "tag-along" or similar rights with respect to any
transfer of any Capital Stock or Option Rights of the Company or any of its
Subsidiaries. All shares of Capital Stock and Option Rights of the Company that
have been issued by the Company have been issued and offered in compliance with
all applicable federal and state securities laws. No additional shares of
Capital Stock of the Company will become issuable to any Person pursuant to any
"anti-dilution" provisions of any such issued and outstanding securities of the
Company on account of the issuance of the Securities, the exercise of the
Warrant or the application of the "anti-dilution" provisions contained in the
Warrant. No later than the Closing, the Existing LHF Equity Documents shall be
terminated and of no further force or effect.
29
(b) (i) The authorized capital stock of Parent consists of
100,000,000 shares of common stock, $.01 par value per share ("Parent
------
Common Stock"), of which 17,812,464 shares are issued and outstanding, and
------------
50,000,000 shares of preferred stock, $.01 par value per share. Schedule
--------
3.7(b) sets forth a true, correct and complete list of each designated
------
series of preferred stock of Parent and the number of shares of each such
series that are authorized, issued and outstanding. As of the date hereof:
(A) 1,750,000 shares of Parent Common Stock are reserved for issuance under
the Parent Stock Option Plan, of which options to purchase 900,000 shares
are available for future grants, options to purchase 465,000 shares have
been exercised, options to purchase 385,000 shares are exercisable and
outstanding; (B) options to purchase an aggregate of 146,500 shares of
Parent Common Stock are reserved for issuance under each of the Executive
Stock Option Plans, all of which are exercisable; and (C) an aggregate of
710,000 shares have been reserved for issuance upon exercise of the other
options, warrants and rights set forth in Schedule 3.7(b).
---------------
(ii) All of the issued and outstanding shares of Capital Stock of
Parent have been duly authorized and are validly issued, fully paid and
non-assessable, and are free and clear of any Liens and other restrictions
(including any restrictions on the right to vote, sell or otherwise dispose
of such Capital Stock) created or imposed by Parent and of any preemptive
or other similar rights to subscribe for or to purchase any such Capital
Stock granted by Parent. Except as set forth in Schedule 3.7(b) (which
---------------
Schedule sets forth, with respect to each security, title, name of the
holder, issue date, exercise price and expiration date), there are: (i) no
outstanding Option Rights of Parent; (ii) no voting trusts or other
agreements or undertakings with respect to the voting of the Capital Stock
of Parent; (iii) no obligations or rights (whether fixed or contingent) on
the part of Parent or any other Person to purchase, repurchase, redeem or
"put" any outstanding shares of Capital Stock or Option Rights of Parent;
and (iv) no agreements granting any Person any rights of first offer or
first refusal, registration rights or "drag-along," "tag-along" or similar
rights with respect to any transfer of any Capital Stock of Parent or
Option Rights issued by Parent. All shares of Capital Stock of Parent and
Option Rights of Parent that have been issued by Parent have been issued
and offered in compliance with all applicable federal and state securities
laws. Except as disclosed in Schedule 3.7(b), no additional shares of
---------------
Capital Stock of Parent will become issuable to any Person pursuant to any
"anti-dilution" provisions of any such issued and outstanding securities of
the Company on account of the issuance of the Securities, the exercise of
the Warrant or the application of the "anti-dilution" provisions contained
in the Warrant.
(c) The authorized capital stock of Overhill Ventures consists solely
of 10,000 shares of capital stock, of which 1,000 shares are issued and
outstanding as of the date hereof. The Company beneficially owns, directly or
indirectly, all of the outstanding Capital Stock of Overhill Ventures. All of
the outstanding shares of Capital Stock of Overhill Ventures
30
have been duly authorized and are validly issued, fully paid and nonassessable,
and are free and clear of any Liens and other restrictions (including any
restrictions on the right to vote, sell or otherwise dispose of such Capital
Stock) and of any preemptive or other similar rights to subscribe for or to
purchase any such Capital Stock. There are: (i) no outstanding Option Rights of
Overhill Ventures; (ii) no voting trusts or other agreements or undertakings
with respect to the voting of the capital stock of Overhill Ventures; (iii) no
obligations or rights (whether fixed or contingent) on the part of Overhill
Ventures to purchase, repurchase, redeem or put any outstanding shares of its
Capital Stock or Option Rights of Overhill Ventures; and (iv) no agreements
granting any Person any rights of first offer or first refusal, registration
rights or "drag-along," "tag-along" or similar rights with respect to any
transfer of any Capital Stock of Overhill Ventures or Option Rights issued by
Overhill Ventures. All of the shares of Capital Stock of Overhill Ventures and
Option Rights of Overhill Ventures have been issued and offered in compliance
with all applicable federal and state securities laws. No additional shares of
Capital Stock of Overhill Ventures will become issuable to any Person pursuant
to any "anti-dilution" provisions of any such issued and outstanding securities
of the Company or of any Subsidiary on account of the issuance of the
Securities, the exercise of the Warrant or the application of the "anti-
dilution" provisions contained in the Warrant.
3.8 Validity and Issuance of Warrant Shares. The Warrant Shares have been
---------------------------------------
duly authorized and reserved and, when issued, delivered and paid for pursuant
to the terms of the Warrant, will be duly and validly issued, fully paid and
non-assessable.
3.9 Corporate Separateness.
----------------------
(a) Customary formalities regarding the corporate existence of the
Company have at all times since its formation been, and such customary
formalities will continue to be, observed.
(b) The Company has at all times since its formation accurately
maintained in all material respects, and will continue to accurately maintain,
its financial statements, accounting records and other corporate documents
separate from those of Parent and the other Subsidiaries of Parent and any other
Person. The Company has not at any time since its formation commingled, and
will not commingle, its assets with those of Parent or any other Subsidiary of
Parent, any of its other Affiliates or any other Person. The Company has at all
times since its formation accurately maintained in all material respects, and
will continue to accurately maintain, its own bank accounts and separate books
of account. Parent has not at any time, and will not, commingle any of its
assets with those of the Company or any other entity.
(c) The Company has at all times since its formation paid, and will
continue to pay, its own liabilities from its own separate assets. Parent has
at all times since its formation paid, and will continue to pay, its own
liabilities from its own separate assets (it
31
being understood that to the extent any funds in any material amount were
previously loaned or advanced by the Company to Parent, such funds were properly
recorded on the books of Parent as an asset of Parent and on the books of the
Company as an intercompany receivable owing from Parent).
(d) The Company has at all times since its formation identified
itself, and will continue to identify itself, in all dealings with the public
under its own corporate or trade names and as a separate and distinct entity.
The Company has not at any time since its formation identified itself, and will
not identify itself, as being a division or a part of Parent (other than as a
Subsidiary of Parent) or of any other Person. Parent has not at any time
identified the Company, and will not identify the Company, as being a division
or part of Parent (other than as a Subsidiary of Parent) or any of other Person
but only as a separate and distinct entity.
(e) To the best knowledge of the Company and the Guarantors, the
Company has at all times since its formation been adequately capitalized in
light of the nature of its business. The Company will continue to be adequately
capitalized in light of the nature of its business.
(f) The Company has not at any time since its formation assumed or
guaranteed any liabilities of Parent (or any predecessor entity) or any other
Person. The Company has not at any time since its formation acquired any
securities or other obligations of Parent (or any predecessor entity).
3.10 Parent SEC Documents.
--------------------
(a) Except as set forth on Schedule 3.10, Parent has timely filed
-------------
with the Commission all Parent SEC Documents which were required to be filed by
it with the Commission and AMEX since September 29, 1996. Schedule 3.10 sets
-------------
forth a true, complete and correct list of all Parent SEC Documents filed by the
Company since September 29, 1996, and the respective dates they were filed.
(b) Each Parent SEC Document previously filed by Parent complies with
all applicable requirements of the Securities Act, the Exchange Act or the AMEX
rules, as the case may be, and, when filed with the SEC, did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of Parent and its Subsidiaries included in each Parent SEC Document
filed by Parent complied as to form, as of the dates of its filing with the
Commission, with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, were prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by the
Commission) and fairly present the consolidated financial
32
position of Parent and its subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments consistent with past practices and consistently applied).
(c) All material information regarding the "Year 2000" issue is fully
and adequately disclosed in the Parent SEC Documents with respect to Parent and
its Subsidiaries.
3.11 Financial Statements.
--------------------
(a) The Company has delivered to the Purchaser, and Purchaser hereby
acknowledges receipt of, copies of (i) audited consolidated balance sheets of
the Company and its Subsidiaries as of September 29, 1996, September 28, 1997
and September 27, 1998, and audited consolidated statements of operations,
shareholders' equity and changes in financial position or cash flows for each of
the three (3) years then ended, together with a report and a qualified opinion
of Ernst & Young LLP, the Company's independent accountants, and (ii) unaudited
financial statements of the Company and its Subsidiaries (the "Estimated FYE
-------------
1999 Financial Statements") consisting of a balance sheet as of September 26,
-------------------------
1999 and a statement of operations and cash flows for the twelve (12)-month
period ended September 26, 1999 (the financial statements referred to in clauses
(i) and (ii) being collectively referred to as the "Financial Statements"). The
--------------------
Financial Statements (including, in each case, the related schedules and notes)
fairly present the consolidated financial position of the Company and its
Subsidiaries as of the respective dates of such balance sheets and the results
of operations of the Company and its Subsidiaries for the respective periods
covered by such statements of operations, shareholders' equity and changes in
financial position or cash flows, as the case may be, and have been prepared in
accordance with GAAP. Since September 27, 1998, there has not been any Material
Adverse Change.
(b) None of the Company, any Guarantor, any of their respective
Subsidiaries or other Affiliates or any of their respective officers or
directors (i) is contemplating the filing of a petition under the Bankruptcy Law
or the liquidation of all or any major portion of its assets or properties or
(ii) is aware of any Person contemplating the filing of any petition against it
under the Bankruptcy Law. Neither the Company nor any Guarantor is
contemplating changing its business, as such business is being conducted on the
date hereof.
(c) The Company has furnished to the Purchaser a consolidated balance
sheet of the Company and its Subsidiaries as of September 26, 1999, as adjusted
to give pro forma effect to the consummation of the transactions contemplated by
---------
this Agreement and the Senior Credit Agreement (the "Closing Balance Sheet").
---------------------
Schedule 3.11(c) sets forth true, correct and complete copies of the Closing
----------------
Balance Sheet, together with a list of the pro forma adjustments and the
---------
assumptions underlying the Closing Balance Sheet. The Closing Balance Sheet
presents fully and fairly in all material respects the pro forma consolidated
--- -----
financial position of the
33
Company and its Subsidiaries as of September 26, 1999, and properly gives effect
to the application of the pro forma adjustments described therein and
--- -----
contemplated herein. All assumptions underlying the Closing Balance Sheet were
made in good faith and are reasonable under the circumstances.
3.12 Existing Indebtedness; Existing Liens; Investments; Etc.
-------------------------------------------------------
(a) Schedule 3.12 sets forth a true, correct and complete list, and
-------------
describes, as of the date or dates indicated therein, as applicable:
(i) all Indebtedness of the Company, Parent and their
respective Subsidiaries on a consolidated and consolidating basis
(collectively,"Existing Indebtedness") as of the end of their respective
---------------------
Fiscal Years ended in September 1999;
(ii) all Liens as of the date hereof in respect of any property
or assets of the Company and/or any Guarantor (collectively, "Existing
--------
Liens"), showing, as to each Lien, the name of the grantor and secured
-----
party, the Indebtedness secured thereby, the name of the debtor (if
different from the grantor) and the assets or other property covered by
such Lien;
(iii) all Investments of the Company and the Guarantors as of
the date hereof;
(iv) all Contingent Obligations of the Company and the
Guarantors existing as of the date hereof;
(v) all UCC financing statements existing as of the date hereof
naming the Company, Parent or any of their respective Subsidiaries as
debtor; and
(vi) a payables aging schedule for the Company and its
Subsidiaries as of a recent practicable date.
(b) Except as set forth on Schedule 3.12, neither the Company nor any
-------------
of its Subsidiaries has any Indebtedness, liabilities or other obligations as of
the date hereof, whether accrued, absolute, contingent or otherwise, that are
required to be reflected on a balance sheet prepared in accordance with GAAP and
that are not reflected on the balance sheet of the Company included in the
Estimated FYE 1999 Financial Statements.
(c) Immediately following the Closing, neither the Company nor any of
its Subsidiaries will have any Indebtedness, whether accrued, absolute,
contingent or otherwise (whether individually or in the aggregate), except for
(i) Revolving Credit Loans (as such term
34
defined in the Senior Credit Agreement) and (ii) Indebtedness under the Note. As
of the Closing, Senior Availability will not be less than $1,750,000.
(d) All Indebtedness and other amounts of Parent and its Subsidiaries
issued under the Indenture dated as of July 5, 1994, among Parent and IBJ
Xxxxxxxx Bank & Trust Company (as amended, restated, supplemented or otherwise
modified, the "Xxxxxxx Indenture") has been fully and indefeasibly paid in full.
-----------------
The Xxxxxxx Indenture has been effectively terminated and is of no further force
and effect.
3.13 Absence of Certain Changes. Except as set forth on Schedule 3.13(a)
-------------------------- ----------------
and, with respect to Parent only, previously disclosed in the Parent SEC
Documents, since September 27, 1998, there has not been:
(a) Any transaction outside of the ordinary course of business (i)
involving the Company or Overhill Ventures or (ii) involving Parent which is in
excess of $10,000 and has not been previously disclosed in the Parent SEC
Documents;
(b) Any declaration, setting aside or payment of any dividend or
other distribution or payment (whether in cash, stock or property) with respect
to the Capital Stock of the Company or Parent, or any redemption, purchase or
other acquisition of securities of the Company or Parent (including, without
limitation, the repurchase of the LHF Warrant), or any payment to any
stockholder of the Company or to Parent not in its capacity as a stockholder;
(c) Any damage, destruction or loss, whether or not covered by
insurance, to any material assets or properties of the Company;
(d) Any material adverse change in the assets, liabilities, condition
(financial or otherwise), operations or prospects of the Company or any
Guarantor;
(e) Any loan or advance made by the Company or Overhill Ventures to
any Person (including, without limitation, Parent or any other Affiliate of the
Company), except travel advances or other reasonable business expense advances
made in the ordinary course of business to any employee of the Company;
(f) Any Indebtedness for borrowed money incurred by the Company or
Parent or any commitment to incur Indebtedness for borrowed money entered into
by the Company or any Guarantor (except as contemplated by this Agreement);
(g) Any capital expenditures or commitments to make capital
expenditures materially in excess of the amount reflected in the final budgets
for the Fiscal Years ended September 26, 1999 and ending October 1, 2000, a copy
of which final budget for the Fiscal Year ending October 1, 2000 is attached as
Schedule 3.13(g);
----------------
35
(h) Any indemnity or other claims made by or against the Company,
Parent or any of their respective Subsidiaries with respect to or in connection
with any acquisition or sale or other disposition, whether direct or indirect,
of the Capital Stock or assets of any other Person;
(i) Any amendment or other modification to the charter or bylaws of
Parent, the Company or any of their respective Subsidiaries;
(j) The formation of any Subsidiary of the Company or Parent (other
than the formation of Overhill Ventures by the Company);
(k) Any waiver by the Company or Parent of a valuable right or of
material Indebtedness owed to it;
(l) Any payment, satisfaction, discharge or cancellation of any debts
or claims of the Company or Parent other than in the ordinary course of business
consistent with past practices;
(m) Any amendment, modification or termination of any Material
Contract or any material agreement to which the Company or any Guarantor is a
party or by which the Company or Parent or any of their assets or properties may
be bound or subject or of any employment or consulting agreement;
(n) Any change in the Contingent Obligations of the Company or
Parent, by way of guarantees or otherwise;
(o) Any mortgage, pledge or subject to Lien of any of the assets or
properties of the Company or Parent, or any assumption of, or taking any assets
or properties subject to, any liability;
(p) Any resignation or termination of the employment of any director,
officer or management employee of the Company or Parent;
(q) Any Investment by the Company or any Guarantor in the Capital
Stock of any Person (other than the Investment by the Company in the Capital
Stock of Overhill Ventures);
(r) Any payment of management or other fees by the Company to Parent
or any other Affiliate of the Company;
(s) Any offer, issuance or sale of any shares of Capital Stock or
Option Rights of the Company or of any Guarantor;
36
(t) Any alteration or change in the Company's credit guidelines and
policies, charge-off policies or accounting methods, quality control procedures
or policies or manner of preparing its financial statements or maintaining its
books of account;
(u) any increase in, or commitment to increase, the salaries, wages,
bonuses or other compensation payable or to become payable to any officer or
other employee of the Company, other than (i) increases in salaries and wages in
the ordinary course of business consistent with past practices and not in excess
of fifteen percent (15.0%) for any one officer or other employee or (ii) bonuses
payable by the Company to its employees with respect to the 1999 Fiscal Year in
the aggregate amount of $135,000;
(v) Any adoption by the Company or Parent of any new Benefit Plan or
amendment to any Benefit Plan to provide any new or additional plans, programs,
contracts, benefits or arrangements involving direct or indirect compensation to
any officer, director, employee, former employee, or their dependents or
beneficiaries, of the Company or Parent;
(w) Any settlement of any litigation, entry of a consent decree or
entry of any judgment against the Company or any Guarantor with a value of
$10,000 or more;
(x) Any revaluation by the Company of any of its assets, including
without limitation, any write-offs, increases in any reserves except in the
ordinary course of business consistent with past practice or any write-up or
write-down of the value of inventory, property, plant, equipment or any other
asset; or
(y) The occurrence of any other event or the development of any other
condition which has had or could have a Material Adverse Effect.
3.14 Material Contracts.
------------------
(a) Schedule 3.14 sets forth a true, correct and complete list of all
-------------
contracts, commitments, licenses, agreements, obligations or arrangements,
whether oral or written, formal or informal, to which the Company or any
Guarantor is a party (or intend to become a party) or to which any of its assets
or properties is bound:
(i) under which the Company or any Guarantor is indemnified for
or against any liability in excess of $250,000 or under which the Company
or any Guarantor is or could be obligated to indemnify any Person in excess
of $100,000;
(ii) under which the Company or any Guarantor leases personal
property from or to third parties;
37
(iii) for the purchase or sale of products or other personal
property or for the furnishing or receipt of services by the Company or any
Guarantor (A) which calls for performance over a period of more than one
(1) year, (B) which involves payments of more than the $50,000 in the
aggregate or (C) in which the Company or any Guarantor has agreed to
purchase a minimum quantity of goods or services or has agreed to purchase
goods or services exclusively from any Person;
(iv) (A) granting representation, marketing or distribution
rights or (B) relating to Intellectual Property;
(v) regarding the financing of its business or any part of its
business or operations;
(vi) establishing any partnership, joint venture or strategic
alliance;
(vii) under which the Company or any Guarantor has created,
incurred, assumed or guaranteed (or may create, incur, assume or guarantee)
Indebtedness (including, without limitation, Capital Lease Obligations) or
under which there is imposed (or may be imposed) a security interest on any
of its assets, tangible or intangible;
(viii) concerning any confidentiality obligations entered into
outside of the ordinary course of business or any covenants or agreements
restricting it from carrying on any business or from competing in any line
of business or with any Person;
(ix) with officers, directors, employees, consultants or
independent contractors of the Company or any Guarantor;
(x) resulting in the creation of any Lien (including any lease
notifications);
(xi) involving any Affiliates of the Company or any Guarantor
(other than contracts, commitments, licenses, agreements, obligations or
arrangements involving Texas Timberjack or any of their respective
Subsidiaries, on the one hand, and any Person who is not an Affiliate of
the Company, on the other hand);
(xii) under which the consequences of a default or termination
could have a Material Adverse Effect on the Company or any Guarantor,
whether individually or in the aggregate;
(xiii) under which the Company or any Guarantor will (A) receive
aggregate payments from customers, (B) make aggregate payments to vendors
or other
38
suppliers or (C) make or receive aggregate payments to or from any other
Persons, in each case in excess of $500,000 per annum; and
(xiv) not entered into in the ordinary course of business and
described in response to any of the foregoing clauses.
All of the contracts, commitments, licenses, agreements, obligations
or arrangements described in clauses (i) through (xiv) above, together with the
real property leases and other interests described in Section 3.25, whether
------------
entered into prior to, on or after the Closing Date, are collectively referred
to herein as the "Material Contracts." Prior to the date hereof, the Company
------------------
has provided a true, correct and complete copy of each of the written Material
Contracts, and a written summary of each of the oral Material Contracts,
including all amendments, supplements or other modifications thereto.
(b) Each Material Contract existing as of the date hereof is (i) a
legal, valid and binding obligation of the Company and/or any Guarantor, as the
case may be, on the one hand, enforceable against it or them in accordance with
its terms (assuming the enforceability of such Material Contract against the
other parties thereto), (ii) to the best knowledge of the Company and the
Guarantors, a legal, valid and binding obligation of the other parties thereto,
enforceable against such other parties in accordance with its terms (assuming
the enforceability of such Material Contract against the Company and/or any
Guarantor party thereto) and (iii) in full force and effect. The Company and/or
any Guarantor, on the one hand, and, to the best knowledge of the Company and
the Guarantors, all other parties to the existing Material Contracts, on the
other hand, are in substantial compliance with the terms thereof, and no default
or event of default by the Company and/or any Guarantor, as the case may be, or,
to the best knowledge of the Company and the Guarantors, any other party thereto
exists thereunder.
(c) Neither the Company nor any of its Subsidiaries is a party to any
contract, commitment, license, agreement, obligation or arrangement that
restricts it from carrying on its business or any part thereof, or from
competing in any line of business or with any Person.
3.15 [Intentionally Omitted].
---------------------
3.16 Accounts Receivable. All accounts receivable of the Company and its
-------------------
Subsidiaries (a) to the best knowledge of the Company and the Guarantors, are
legal, valid and binding obligations of the Persons shown on the books of the
Company or such Subsidiary as the respective account debtors with respect
thereto, (b) arose out of bona fide sales actually made or services actually
performed on or prior to such date in the ordinary course of business, (c) are
not subject to any discount, rebate, offset, return privilege or claim outside
of the ordinary course of business (and are reflected in the reserves
established on the books of the Company or such Subsidiary, as the case may be,
in accordance with GAAP) and (d) to the best
39
knowledge of the Company and the Guarantors, are valid and collectible in the
ordinary course of business. To the best knowledge of the Company and the
Guarantors, no customer has indicated an unwillingness or an inability to pay
any amount included in the accounts receivables of the Company or any of its
Subsidiaries.
3.17 Labor Relations. Each of the Company and the Guarantors is in full
---------------
compliance with the Fair Labor Standards Act (29 U.S.C. (S)201 et seq.), all
------
state wage and hour laws and all worker's compensation laws and is not engaged
in any unfair labor practice which has had or could have a Material Adverse
Effect. Except as disclosed on Schedule 3.17:
-------------
(a) There is no labor strike, slowdown, work stoppage or charge of
unfair labor practice, and there are no material labor disputes, grievances,
complaints or arbitration proceedings, pending or affecting the Company, Parent
or any of their respective Subsidiaries nor, to the best knowledge of the
Company and the Guarantors, is there any basis therefor or threat thereof;
(b) None of the Company or any Guarantor is bound by or subject to
any written or oral, express or implied, contract, commitment or arrangement
with any labor union or other employee organization, and no labor union or other
employee organization has requested or sought to represent any of the employees,
representatives or agents of the Company or any such Subsidiaries;
(c) Neither the Company nor any Guarantor is aware of any labor union
or other employee organization activity involving the employees of the Company
or any of its Subsidiaries, or of any officer or key employee, or any group of
officers or key employees, that intends to terminate his or her employment with
the Company or any such Subsidiaries;
(d) To the best knowledge of the Company and the Guarantors, there
are no petitions pending before the National Labor Relations Board in connection
with any pending claim for union representation; and
(e) To the best knowledge of the Company and the Guarantors, there is
no fact or circumstance which could, with the passage of time or otherwise,
cause this representation and warranty to be no longer true and correct.
3.18 Employee Benefit Plans; ERISA. For purposes of Sections 3.18(a)
----------------------------- ----------------
through (j), the term "Company" shall include any Person (including, without
---
limitation, Parent) that is or would be aggregated with the Company under
Section 414(b), (c), (m), or (o) of the Code. However, this Section 3.18 will
------------
not apply to a "Multiemployer Plan" (as defined in Section 4001(a)(3) of ERISA),
except as expressly referred to herein.
40
(a) Schedule 3.18 sets forth a true, correct and complete list of:
-------------
(i) Each individual employment, termination, or severance
agreement since September 28, 1999, between the Company or any Guarantor,
on the one hand, and each employee whose annual compensation is or was at a
base rate equal to or exceeding $100,000, on the other hand;
(ii) All employee benefit plans, as defined in ERISA Section
3(3); and
(iii) All other profit-sharing, bonus, stock option, stock
purchase, stock bonus, restricted stock, stock appreciation right, phantom
stock, vacation pay, holiday pay, tuition reimbursement, scholarship,
severance, dependent care assistance, excess benefit, incentive
compensation, salary continuation, supplemental retirement, employee loan
or loan guarantee program, split dollar, cafeteria plan and other
compensation arrangements;
in each case maintained or contributed to by the Company or any Guarantor for
the benefit of its or their employees (or former employees) and/or their
beneficiaries. All of these types of arrangements shall be collectively
referred to as "Benefit Plans." An arrangement will not fail to be a Benefit
-------------
Plan simply because it only covers one individual, or because the Company's or
any Guarantor's obligations under the plan arise by reason of its being a
"successor employer" under Applicable Laws. Furthermore, a Voluntary Employees'
Beneficiary Association under Section 501(c)(9) of the Code will be considered a
Benefit Plan for this purpose.
(b) The Company has delivered to Buyer a true and complete copy of
the following documents, to the extent that they are applicable:
(i) Each Benefit Plan and any related funding agreements (e.g.,
----
trust agreements or insurance contracts), including all amendments (and
Schedule 3.18 includes a description of any such amendment that is not in
-------------
writing);
(ii) The current draft of the Summary Plan Description and all
subsequent Summaries of Material Modifications of each Benefit Plan;
(iii) The most recent Internal Revenue Service determination
letter for each Benefit Plan that is intended to qualify for favorable
income tax treatment under Section 401(a) or 501(c)(9) of the Code, which
determination letter reflects all amendments that have been made to the
plan (except as set forth in Schedule 3.18); and
-------------
(iv) The two (2) most recent Form 5500s (including all
applicable Schedules and the opinions of the independent accountants) that
were filed on behalf of the Benefit Plan.
41
(c) All costs of administering and contributions required to be made
to each Benefit Plan under the terms of that Benefit Plan, ERISA, the Code, or
any other applicable law have been timely made, and are fully deductible in the
year for which they were paid. All other amounts that should be accrued to date
as liabilities of the Company or Parent under or with respect to each Benefit
Plan (including administrative expenses and incurred but not reported claims)
for the current plan year of the plan have been recorded on the books of the
Company and Parent. There will be no liability of the Company or Parent (i) with
respect to any Benefit Plan that has previously been terminated or (ii) under
any insurance policy or similar arrangement procured in connection with any
Benefit Plan in the nature of a retroactive rate adjustment, loss sharing
arrangement, or other liability arising wholly or partially out of events
occurring before the Closing.
(d) Each Benefit Plan at all times has been operated in accordance
with its terms, and complies currently, and has complied in the past, both in
form and in operation, with all Applicable Laws, including ERISA and the Code.
The Internal Revenue Service has issued a favorable determination letter with
respect to each Benefit Plan that is intended to qualify under Section 401(a) or
501(c)(9) of the Code, and no event has occurred (either before or after the
date of the letter) that would disqualify the plan.
(e) None of the Company or any Guarantor maintains any plan that
provides (or will provide) medical or death benefits to one or more former
employees or independent contractors (including retirees), other than benefits
that are required to be provided under COBRA and any state law continuation
coverage or conversion rights. Each of the Company and Parent have complied in
all material respects with the continuation coverage requirements of COBRA.
(f) None of the Company or any Guarantor maintains any plan
(including any Multiemployer Plan) that is subject to Section 412 of the Code.
(g) There are no investigations, proceedings, lawsuits or claims
pending or, to the best knowledge of the Company and the Guarantors, threatened
relating to any Benefit Plan.
(h) None of the Company or any Guarantor has any intention or
commitment, whether legally binding or not, to create any additional Benefit
Plan, or to modify any existing Benefit Plan so as to increase benefits to
participants or the cost of maintaining the plan. The benefits under all Benefit
Plans are as represented, and have not been, and will not be increased
subsequent to the date documents are provided to the Purchaser. No statement,
either oral or written, has been made by the Company (or any agent of the
Company) to any Person regarding any Benefit Plan that is not in accordance with
the Plan that could have adverse economic consequences to the Purchaser.
42
(i) None of the persons performing services for the Company have been
improperly classified as being independent contractors, leased employees, or as
being exempt from the payment of wages for overtime.
(j) None of the Benefit Plans provide any benefits that (i) become
payable or become vested solely as a result of the consummation of this
transaction or (ii) would result in excess parachute payments (within the
meaning of Section 280G of the Code), either (A) solely as a result of the
consummation of this transaction or (B) as a result of the consummation of this
transaction and any actions taken by the Purchaser after the Closing Date.
Furthermore, the consummation of this transaction will not require the funding
(whether formal or informal) of the benefits under any Benefit Plan (e.g.,
----
contributions to a "rabbi trust").
3.19 Taxes.
-----
(a) The Company, Parent and each of their respective Subsidiaries
have filed within the required time periods (after giving effect to any
permitted extensions) all federal, state and other Tax returns required to have
been filed by it or them and has paid all Taxes which were due and payable prior
to the date hereof, other than Taxes that are being contested in good faith and
for which reserves have been properly established on the Closing Balance Sheet.
(b) The Company, Parent and each of their respective Subsidiaries
have withheld and paid all Taxes required to be withheld and paid by it or them
in connection with amounts paid or owing to any employee, creditor, shareholder
or other third party.
(c) Except as set forth in Schedule 3.19, (i) none of the Company,
-------------
Parent or any of their respective Subsidiaries has been advised that any Tax
returns have been or are being audited by any Governmental Authority, (ii) there
are no agreements, waivers or other arrangements providing for an extension of
time with respect to the assessment of any Taxes or deficiency against the
Company, Parent or any of their respective Subsidiaries, (iii) there are no
actions, suits, proceedings or claims now pending by or against the Company,
Parent or any of their respective Subsidiaries in respect of any Taxes or
assessments, and (iv) there is no pending or, to the best knowledge of the
Company and the Guarantors, threatened audit or investigation of the Company,
Parent or any of their respective Subsidiaries by any Governmental Authority
relating to any Taxes or assessments, or any claims for additional taxes or
assessments asserted by any Governmental Authority.
(d) Except as provided in clause (iii) of the definition of Permitted
Affiliate Transactions and as may be required or permitted under the Code with
respect to the filing of consolidated Tax returns, none of the Company, Parent
or any of their respective Subsidiaries is a party to or bound by any tax
sharing, tax indemnity or tax allocation agreement or other similar arrangement.
43
3.20 Litigation. Schedule 3.20 sets forth a true, complete and correct
---------- -------------
list of all actions, suits, arbitration proceedings, investigations, inquiries
or other proceedings, whether governmental or non-governmental, before any
Governmental Authority pending or threatened on the date hereof, or at any time
during the past three (3) years, against, relating to or affecting the Company,
Parent or any of their respective Subsidiaries, or any officer, director or
employee thereof in his or her capacity as such, or any of its or their
respective assets, properties or businesses. Such Schedule sets forth, as to
each matter identified therein, the names of the parties thereto, the forum for
such matter, a summary of the details of the matter, the settlement or other
disposition of the matter (including the monetary value of such settlement or
other disposition) or, if such matter is still pending, a statement to that
effect; provided, however, that such Schedule need only include a summary of the
-------- -------
current status of any such actions, suits, arbitration proceedings,
investigations, inquiries or other proceedings pending or threatened against
Parent only to the extent that such matter has been previously disclosed in the
Parent SEC Documents. Except as set forth on Schedule 3.20:
-------------
(a) There is not in effect any order, judgment, decree, injunction or
ruling of any Governmental Authority against, relating to or affecting the
Company, Parent or any of their respective Subsidiaries, or any officer,
director or employee thereof in his or her capacity as such, enjoining, barring,
suspending, prohibiting or otherwise limiting the same from conducting or
engaging in any aspect of the Company's or Parent's business, or requiring the
Company, Parent, any such Subsidiary or any such officer, director or employee
to take certain action with respect to any aspect of the Company's business;
(b) None of the Company, Parent or any of their respective
Subsidiaries is in default under any order, judgment, decree, injunction or
ruling of any Governmental Authority, or is subject to or a party to any order,
judgment, decree or ruling arising out of any action, suit or proceeding under
any Applicable Laws, respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters; and
(c) There is no action, suit, arbitration or other proceeding,
investigation or inquiry pending or threatened before any Governmental Authority
which questions the validity of this Agreement, the Note, the Warrant or any
other Investment Document or any actions taken or to be taken pursuant hereto or
thereto, or which could, individually or in the aggregate, have a Material
Adverse Effect.
(d) The Company has furnished true, correct and complete copies of
all Compliance Reports issued by any Governmental Authority since January 1,
1997.
3.21 Transactions with Affiliates
----------------------------
(a) Except for the inter-company account receivable described in
clause (ii) of the definition of Permitted Affiliate Transaction, there is no
Indebtedness owing by the
44
Company or any of its Subsidiaries to Parent or any other Affiliate of the
Company and its Subsidiaries, or by Parent or any other Affiliate of the Company
and its Subsidiaries to the Company or any of its Subsidiaries.
(b) Except as set forth on Schedule 3.21, immediately following the
-------------
Closing Date:
(i) none of the Company, Parent or any of their respective
Subsidiaries (other than Texas Timberjack) will be indebted, directly or
indirectly, to any of its own officers, directors or employees, or any
members of the Immediate Families of such officers, directors or employees,
except for compensation payable to its own officers, directors or employees
and reasonable travel expenses accrued in the ordinary course of business;
(ii) none of the Company, Parent or any of their respective
Subsidiaries will be indebted, directly or indirectly, to any officer,
director or employee of any of its Affiliates, or any members of the
Immediate Families of such officers, directors or employees; and
(iii) none of the officers or directors of the Company, any
Guarantor or any of their respective Subsidiaries, or any members of the
Immediate Families of such officers or directors, will (A) be indebted to
the Company or any Guarantor in any amount whatsoever or (B) to the best
knowledge of the Company and the Guarantors, have any direct or indirect
ownership interests in any Person which, directly or indirectly, competes
with the Company or any Guarantor.
(c) Other than as contemplated by this Agreement, no Executive
Officer, director or direct shareholder of the Company or any of its
Subsidiaries, or any member of his or her Immediate Families, has any direct or
indirect interest in any contract, commitment, license, agreement, obligation or
arrangement to which the Company, any Guarantor or any of their respective
Subsidiaries is a party. No Executive Officer, director or, to the best
knowledge of the Company and the Guarantors, shareholder of Parent, or any
member of his or her Immediate Families, has any direct or indirect interest in
any contract, commitment, license, agreement, obligation or arrangement to which
the Company, any Guarantor or any of their respective Subsidiaries is a party.
(d) None of the Company, Parent or any of their respective
Subsidiaries is a party to any agreement relating to the voting or disposition
of the Capital Stock of the Company, Parent or any of their respective
Subsidiaries other than, with respect to the Company, the LHF Voting Rights
Agreement which shall be terminated prior to or simultaneously with the Closing.
45
(e) Except as set forth in Schedule 3.21 or as previously disclosed
-------------
in the Parent SEC Documents filed with the Commission, since January 1, 1996, no
shareholder, employee, officer, director or Affiliate of the Company or any
Guarantor, and no member of the Immediate Family of any such Person, has engaged
in any transaction or commercial relationship with the Company or any Guarantor,
other than the payment of compensation to its own officers and employees and
reasonable travel expenses accrued in the ordinary course of business.
(f) Except as set forth in Schedule 3.21, none of the Company, Parent
-------------
or any of their respective Subsidiaries (other than Texas Timberjack) has loaned
or advanced funds to any of its Affiliates, officers, directors, employees or
shareholders or to any member of the Immediate Families of any of the foregoing,
except for travel advances to its own employees made in the ordinary course of
business.
3.22 Investment Company Act; Margin Stock. Neither the Company, Parent nor
------------------------------------
any of their respective Subsidiaries is an "investment company" registered or
required to be registered under the Investment Company Act of 1940, as amended,
and neither the Company nor any of its Subsidiaries is controlled by such a
company. Neither the Company, Parent nor any of their respective Subsidiaries is
engaged in extending credit for the purposes of purchasing or carrying Margin
Stock. None of the Company, Parent or any of their respective Subsidiaries
(other than Texas Timberjack) has any Margin Stock, as determined in accordance
with the Margin Regulations.
3.23 Compliance with Laws; Licenses and Permits. The Company, Parent and
------------------------------------------
each of their respective Subsidiaries are in compliance with all Applicable Laws
(including, without limitation, the rules and regulations of the FDA and the
USDA). Schedule 3.23 sets forth a true, correct and complete list of all
-------------
Licenses and Permits held by the Company and its Subsidiaries in connection with
the ownership of their assets or the conduct of their businesses (which
Schedules shall set forth, with respect to each License or Permit, its name, the
issuing Person, the date it was issued and the date of expiration), and such
Licenses and Permits constitute all of the Licenses and Permits required under
Applicable Laws to own their respective assets or conduct their respective
businesses as now conducted and as proposed to be conducted. All of Licenses
and Permits are validly issued and in full force and effect, and the Company and
its Subsidiaries have fulfilled and performed all of their obligations with
respect thereto and have full power and authority to operate thereunder.
3.24 Title to Property; Liens. The Company, Parent and each of their
------------------------
respective Subsidiaries (other than, with respect to Parent, Texas Timberjack)
have good and marketable title to their respective real properties (or valid
leasehold interests in real property) and good and merchantable title to their
other respective properties, and none of such properties is subject to any Liens
except for Liens in favor of the Senior Lender and the Purchaser and Permitted
Liens. The Company, Parent and each of their respective Subsidiaries enjoys
quiet possession
46
under all leases to which they are parties as lessees, and all of such leases
are valid, subsisting and in full force and effect. None of such leases contains
any provision restricting the incurrence of indebtedness by the lessee or any
unusual or burdensome provision adversely affecting the current and proposed
operations of the Company, Parent or their respective Subsidiaries.
3.25 Real Property.
-------------
(a) The Company owns no fee interest in any real property.
(b) Schedule 3.25 sets forth a true, correct and complete list of all
-------------
real property leases, subleases or licenses pursuant to which the Company or any
of its Subsidiaries is a lessor, lessee, sublessor, sublessee, licensor or
licensee of real property, in each case as amended through the date hereof,
which list includes the street address, the identity of the lessors, lessees,
sublessors, sublessees, licensors or licensees, the term thereof (referencing
applicable extension or renewal periods), the rent payment terms and the current
use). The Company has delivered to the Purchaser true, correct and complete
copies of each such lease, sublease or license. The Purchaser hereby
acknowledges receipt of each lease, sublease or license listed on such Schedule.
The real property interests described or listed on Schedule 3.25 constitutes all
-------------
of the leasehold interests in real property leased or otherwise held for use by
the Company and its Subsidiaries. With respect to each such lease, sublease and
license, except as set forth on Schedule 3.25:
-------------
(i) such lease, sublease and license is legal, valid, binding
and enforceable against the parties thereto and is in full force and
effect;
(ii) no party thereto is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;
(iii) there are no disputes, oral agreements or forbearance
programs in effect as to any such lease, sublease or license; and
(iv) neither the Company nor any of its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered
any interest therein.
(c) No Consent of any party to any lease, sublease or license is
required in connection with the consummation of the transactions contemplated by
this Agreement, the Note, the Warrant or the other Investment Documents,
including, without limitation, the issuance and sale of the Securities, and the
exercise of any remedies under any of the Collateral Documents, and no such
event shall be prohibited by, or shall constitute a default under, any such
lease, sublease or license.
47
(d) All parking lots located on any real property subject thereto are
in compliance with Applicable Laws, including, without limitation, zoning
requirements, and are adequate for the employees and business operations of the
Company.
3.26 Environmental Matters. Except as set forth in Schedule 3.26:
--------------------- -------------
(a) Each Environmental Person and each Site is in compliance with
all, and no Environmental Person has any liability under, any Environmental
Laws.
(b) No Release has occurred at any Site, and there are no present or
past Environmental Conditions in any way relating to any Environmental Person,
any Site or the business or operations of any Environmental Person.
(c) The Company has delivered to the Purchaser true, correct and
complete copies of all environmental site assessments, audits, studies or
reports relating to any Environmental Condition or relating to the business,
condition or operations of all Environmental Persons.
(d) No Environmental Person is a "potentially responsible party"
within the meaning of CERCLA with respect to any federal, state, local or
foreign environmental clean-up site or with respect to investigations or
corrective actions under any Environmental Laws.
(e) No Environmental Person has received notice of any alleged,
actual or potential responsibility, inquiry, investigation or administrative or
judicial proceeding regarding (i) any Release by any Environmental Person at any
Site or other location or (ii) any violation of or non-compliance by any
Environmental Person with the conditions of any License or Permit required under
any Environmental Laws or the provisions of any Environmental Laws. No
Environmental Person has received notice of any other claim, demand or action by
any Person alleging any actual or threatened injury or damage to any Person,
property, natural resources or the environment arising from or relating to any
Release, transportation or disposal of any Hazardous Materials.
(f) Each Environmental Person has furnished all notices and warnings,
made all reports and has kept and maintained all records required by, and in
compliance with, all Environmental Laws, including, without limitation, any
notices and Consents required under any Environmental Laws in connection with
the consummation of the transactions contemplated by the Investment Documents.
3.27 Intellectual Property.
---------------------
(a) Except as set forth on Schedule 3.27, the Company and each of
-------------
its Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all
48
Intellectual Property that is used in the conduct of its business as
currently conducted and as proposed to be conducted. Schedule 3.27 lists (i) all
-------------
patents, patent applications, trademarks, servicemarks, trademark and
servicemark applications, copyrights and trade names owned or held by the
Company or any of its Subsidiaries and used in the conduct of its or their
businesses, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any such application for such
issuance or registration has been filed; (ii) all material written licenses,
sublicenses and other agreements to which the Company or any of its Subsidiaries
is a party and pursuant to which any Person (other than employees of the Company
in the course of their employment) is authorized to use any such Intellectual
Property rights; and (iii) all material written licenses, sublicenses and other
agreements to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is authorized to use
any third party patents, trademarks or copyrights, including computer software
("Third Party Intellectual Property Rights") which are used in the businesses of
----------------------------------------
the Company or the Subsidiaries or which form a part of any product or service
of the Company or its Subsidiaries, all of which are in full force and effect.
The Company has delivered to the Purchaser correct and complete copies of all
such patents, registrations, applications, licenses and agreements and related
documentation, all as amended to date. Neither the Company, Parent nor any of
their respective Subsidiaries has agreed to indemnify any Person for or against
any infringement, misappropriation or other conflict with respect to any item of
Intellectual Property that the Company owns or uses. Except as set forth on
Schedule 3.27, neither the Company nor any of its Subsidiaries is a party to any
-------------
oral license, sublicense or agreement which, if reduced to written form, would
be required to be listed in Schedule 3.27 under the terms of this Section 3.27.
------------- ------------
(b) Neither the Company nor any of its Subsidiaries will be, as a
result of the execution and delivery of this Agreement or the performance of the
Company's obligations under this Agreement, in breach of any license, sublicense
or other agreement relating to its Intellectual Property or Third Party
Intellectual Property Rights.
(c) Neither the Company, Parent nor any of their respective
Subsidiaries has been named in any suit, action or other proceeding which
involves a claim of infringement of any Intellectual Property rights of any
third party. The performance of the services offered by the Company and its
Subsidiaries do not infringe on any Intellectual Property rights of any other
Person, and to the best knowledge of the Company and the Guarantors, the
Intellectual Property rights of the Company and its Subsidiaries are not being
infringed by activities, products or services of any third party.
3.28 Nature of Business. The Company is not engaged in any business other
------------------
than the manufacture, distribution and sale of frozen food products and any
activities ancillary or related thereto.
49
3.29 Powers of Attorney. There are no outstanding powers of attorney
------------------
executed by or on behalf of the Company or any of its Subsidiaries.
3.30 Listing of Parent Common Stock. The shares of Parent Common Stock are
------------------------------
listed for trading solely on AMEX. No Capital Stock of the Company or Overhill
Ventures is listed on any securities exchange or on Nasdaq.
3.31 Insurance. Schedule 3.31 sets forth a true and complete list of all
--------- -------------
liability and other insurance policies insuring the Company and its Subsidiaries
against losses arising out of or related to the businesses of the Company and
its Subsidiaries (which list accurately describes the coverage carried and the
expiration dates of such policies). The Company and each of its Subsidiaries is
covered by insurance in scope and amount customary and reasonable for the
businesses in which it is engaged and will be so covered after consummation of
the transactions contemplated hereby. The insurance policies listed on Schedule
--------
3.31 constitute insurance protection against all liability, claims and risks
----
occurring in the ordinary course of business customarily included within
comprehensive liability coverage and at amounts and levels customarily
maintained for a business of this type. Schedule 3.31 also sets forth all
-------------
claims made by the Company or any of its Subsidiaries under such policies during
the past three (3) years. All such policies are in full force and effect.
3.32 Customers. Schedule 3.32 lists the names and addresses of the ten
--------- -------------
(10) most significant customers (by revenue) of the Company during each of the
Fiscal Years ended September 28, 1997 and September 27, 1998, and the twelve
(12) month period ended September 26, 1999, and the amount of revenues accounted
for by each such customer during each such period. No customer of the Company
accounts for more than twenty-five percent (25.0%) of the total revenues of the
Company in the twelve (12) month period ended September 26, 1999. The Company
has not received any notice, nor has the Company any reason to believe, that any
significant customer of the Company has ceased, or will cease, to use the
products or services of the Company, or has reduced, or will reduce, the use of
such products or services at any time.
3.33 Suppliers. Schedule 3.33 lists the ten (10) largest suppliers of any
--------- -------------
products or services to the Company during the twelve (12) month period ended
September 26, 1999, and the amount of purchases made by the Company from each
during such period. No material purchase order or commitment of the Company is
in excess of normal requirements, nor are prices provided therein in excess of
current market prices for the products or services to be provided thereunder.
3.34 Business Relationships. There exists no actual or threatened
----------------------
termination, cancellation or limitation of, or any modification or change in,
the business relationship between the Company or any Guarantor, on the one hand,
and any customer or group of customers whose purchases, individually or in the
aggregate, are material to the business of the
50
Company or such Guarantor, as the case may be, or with any material suppliers,
on the other hand, and there exists no present condition or state of facts or
circumstances which could materially and adversely affect the Company or any
Guarantor or prevent the Company or Parent from conducting such business after
the consummation of the transactions contemplated by this Agreement in
substantially the same manner in which it has been heretofore been conducted.
3.35 Personal Property Leases. Schedule 3.35 sets forth a true and
------------------------ -------------
complete list and description of all agreements (or group of related agreements)
for the lease of personal property, including the name of the lessor, the type
of lease (whether operating, capital or otherwise), a description of the
property and the monthly rental payments due. Neither the Company nor its
Subsidiaries has breached any agreement pertaining to, is in default with
respect to, or is overdue in payment of, any amounts owing under any lease
agreement disclosed on Schedule 3.35. No such lease agreement contains any
-------------
provisions which restrict or prohibit (a) the issuance or sale of the Securities
as contemplated herein, (b) any other financings by the Company or any
Subsidiaries, including, without limitation, any public or private debt or
equity financings or (c) other than ordinary restrictions on assignment, any
merger, sale of assets or other event which could cause a Change in Control.
3.36 Employment Agreements. Schedule 3.36 sets forth a true, correct and
--------------------- -------------
complete list of all employment, agency, independent contractor and sales
representative agreements, golden parachute agreements and employee-related non-
competition and non-solicitation agreements to which the Company or any of its
Subsidiaries is a party. The Company has previously delivered true, correct and
complete copies of all such agreements, including all amendments thereto. Each
such agreement is in writing, is a valid and binding agreement enforceable
against the respective parties thereto in accordance with its terms, and no
party to any such agreement is in breach of, or in default with respect to, any
of its obligations thereunder, nor is the Company or any of its Subsidiaries
aware of any facts or circumstances which might give rise to any breach or
default thereunder.
3.37 Solvency. Each of the Company, the Guarantors and their respective
--------
Subsidiaries is, and immediately following the consummation of the transactions
contemplated by this Agreement each of the Company, the Guarantors and their
respective Subsidiaries will be, Solvent. None of the Company, any Guarantor or
any of their respective Subsidiaries will, by virtue of the consummation of the
transactions contemplated hereby and by the other Investment Documents, incur
debts that will be beyond its ability to pay as they mature. No transfer of
property is being made and no obligation is being incurred in connection with
the transactions contemplated by this Agreement and the other Investment
Documents with the intent to hinder, delay or defraud either present or future
creditors of the Company, any Guarantors or any of their respective
Subsidiaries.
51
3.38 Use of Proceeds. The proceeds to be received by the Company from the
---------------
issuance and sale of the Securities shall be used solely for the purposes set
forth in Schedule 3.38 and applied in accordance with the uses described
-------------
therein.
3.39 Public Utility Holding Company Act. Neither the Company, Parent nor
----------------------------------
any of their respective Subsidiaries is a "holding company" or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
3.40 Depository and Other Accounts. Schedule 3.40 sets forth a true and
----------------------------- -------------
complete list of all banks and other financial institutions and depositories at
which the Company and its Subsidiaries maintains (or has caused to be
maintained) or will maintain deposit accounts, spread accounts, yield supplement
reserve accounts, operating accounts, trust accounts, trust receivable accounts
or other accounts of any kind or nature into which funds of the Company
(including funds in which the Company maintains a contingent or residual
interest) or any such Subsidiary are deposited from time to time. Such Schedule
--------
3.40 correctly identifies the name and address of each depository, the name in
----
which each account is held, the purpose of the account, the account number, the
contact person at such depository and his or her telephone number. The Company
will notify the Purchaser and supplement Schedule 3.40 as new accounts are
-------------
established within two (2) Business Days thereof.
3.41 Books and Records. The minute books and similar records of the
-----------------
Company, the Guarantors and their respective Subsidiaries (other than, with
respect to Parent, Texas Timberjack) contain true and complete records of all
actions taken at any meetings of the Company's, the Guarantor's or such
Subsidiary's shareholders, Board of Directors or any committees thereof, as the
case may be, and of all written consents executed in lieu of the holding of any
such meeting. The books and records of the Company, the Guarantors and their
respective Subsidiaries (other than Texas Timberjack) accurately reflect in all
respects the assets, liabilities, business, financial condition and results of
operations of the Company, the Guarantors or their Subsidiaries (other than
Texas Timberjack), as the case may be, and have been maintained in accordance
with good business, accounting and bookkeeping practices.
3.42 Burdensome Obligations; Future Expenditures. None of the Company or
-------------------------------------------
any Guarantor is a party to or bound by any agreement, instrument, deed, lease
or other document, or is subject to any charter, bylaw or other restriction,
commitment or requirement, which, in the opinion of its management, is so
unusual or burdensome that in the foreseeable future it could have a Material
Adverse Effect. None of the Company, any Guarantor or any of their respective
Subsidiaries (other than Texas Timberjack) anticipates that future expenditures,
if any, by the Company, such Guarantor or such Subsidiaries, as the case may be,
needed to meet the provisions of any Applicable Laws will be so burdensome as to
have or cause, or create a material risk of having or causing, a Material
Adverse Effect.
52
3.43 Brokers; Certain Expenses. None of the Company, Parent or any of
-------------------------
their respective Subsidiaries or Affiliates has paid or is obligated to pay any
fee or commission to any broker, finder, investment banker or other intermediary
in connection with this Agreement, any other Investment Document or any of the
transactions contemplated hereby or thereby. None of the Company, Parent or any
of their respective Subsidiaries or Affiliates is bound by any agreement or
commitment for the provision of investment banking or financial advisory
services with respect to any recapitalization, issuance of debt or equity
securities or other capital or financing transactions involving the Company or
any Guarantor.
3.44 Due Diligence Response. The Company and Parent have delivered to the
----------------------
Purchaser true, correct and complete copies of each of the documents and other
materials requested in the Due Diligence Checklist which was furnished to the
Company on or about August 5, 1999, to the extent such documents or other
materials exist with respect to the Company or any Guarantor. Without in any way
limiting the generality of the foregoing, (a) there have been no material
communications between AMEX and Parent since October 1, 1995; (b) there are no
management letters issued by the Company's (or, with respect to the Company,
Parent's) independent certified public accountants, other than the letter dated
December 18, 1998, from Ernst & Young to the audit committee of Parent; (c)
neither Parent nor any of its Subsidiaries or other Affiliates is required to
make any payments or is otherwise indebted to Xxxxx X. Xxxxxxx or any of his
Affiliates, other than as provided in the Summary Judgment dated June 26, 1998,
as modified by a letter agreement dated November 2, 1998, between Parent and
Xxxxx X. Xxxxxxx, and a letter agreement dated November 4, 1998, between Xxxxx
X. Xxxxxxx and Parent; and (d) the Company has furnished true, correct and
complete copies of all credit, loan or other financing agreements to which the
Company, Parent or any of their respective Subsidiaries is a party or by which
any of them is bound.
3.45 Disclosure. After due inquiry of the directors, officers and
----------
employees of the Company and the Guarantors having knowledge of the matters
represented, warranted or stated herein, neither this Agreement, the Disclosure
Schedules nor any other Investment Document, nor any certificate, report,
questionnaire, statement or document furnished by or on behalf of the Company,
Parent or any of their respective Subsidiaries, whether included in any
materials provided to the Purchaser prior to the date hereof or included in this
Agreement or any other Investment Document or in any Exhibit or Disclosure
Schedule or in any other document or instrument delivered at any time prior to
the Closing, is, or will be, untrue with respect to any material fact or omits,
or will omit, to state a material fact necessary in order to make the statement
made herein or therein, in light of the circumstances in which such statement
was made, not misleading. To the best knowledge of the Company and the
Guarantors, there are not facts or circumstances existing which could have a
Material Adverse Effect, either individually or in the aggregate. The
information contained in each of the management questionnaires completed by
certain officers, directors and employees of the Company and Parent and the
corporate questionnaire dated August 23, 1999, prepared by the Company and
delivered to the Purchaser prior to the date of this Agreement is true and
correct.
53
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
-----------------------------------------------
represents and warrants to the Company as follows:
4.1 Organization. The Purchaser is a limited partnership formed and
------------
validly existing under the laws of the State of California, and has all
requisite power and authority to enter into this Agreement and each other
Investment Document to which it is a party and to consummate the transactions
contemplated hereby.
4.2 Authorization. The execution, delivery and performance of this
-------------
Agreement and of each of the other Investment Documents to which the Purchaser
is a party, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary action on the part of the
Purchaser.
4.3 Due Execution and Delivery; Binding Obligations. This Agreement has
-----------------------------------------------
been duly executed and delivered by the Purchaser. This Agreement is, and at the
time of the Closing each of the other Investment Documents to which the
Purchaser is a party will be, a legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or conveyance or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability and except as rights of indemnity or contribution may be limited
by federal or state securities or other laws or the public policy underlying
such laws.
4.4 No Violation. The execution, delivery and performance by the
------------
Purchaser of this Agreement and each of the other Investment Documents to which
the Purchaser is a party, and the consummation of the transactions contemplated
hereby, do not violate (a) the limited partnership agreement of the Purchaser as
in effect on the date hereof, (b) any law, statute, rule or regulation
applicable to the Purchaser, (c) any order, ruling, judgment or decree of any
Governmental Authority binding on the Purchaser or (d) any term of any material
indenture, mortgage, lease, agreement or instrument to which the Purchaser is a
party.
4.5 Investment Intent. The Purchaser is acquiring the Securities for its
-----------------
own account, for investment purposes, and not with a view to or for sale in
connection with any distribution thereof. The Purchaser understands that the
Securities have not been registered under the Securities Act or registered or
qualified under any state securities law in reliance upon specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein.
4.6 Accredited Investor Status. The Purchaser is an "accredited investor"
--------------------------
(as such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act). By reason of its business and financial experience, the
Purchaser has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
54
risks of the investment in the Securities, has the capacity to protect its own
interests and is able to bear the economic risk of such investment. The
Purchaser has had an opportunity to review the books and records of the Company
and to ask questions of representatives of the Company concerning the terms and
conditions of the transactions contemplated by this Agreement.
4.7 Governmental Consents. The execution and delivery by the Purchaser of
---------------------
this Agreement and each of the other Investment Documents to which it is a
party, and the consummation by the Purchaser of the transactions contemplated
hereby, do not and will not require any Consent of any Governmental Authority,
other than the California Permit.
5. CONDUCT PRIOR TO CLOSING.
------------------------
5.1 Conduct of Business Prior to Closing. Without the prior written
------------------------------------
consent of the Purchaser, from and after the date of this Agreement until the
Closing, the Company and Parent shall, and shall cause each of their respective
Subsidiaries to, conduct its business in the ordinary course. Notwithstanding
the foregoing and except as contemplated hereby, neither the Company nor any
Guarantor shall, nor shall they permit any of their respective Subsidiaries to:
(a) waive or release any material right or benefit or any
indebtedness owed to it;
(b) amend or otherwise modify any Material Contract on terms less
favorable than those that exist on the date hereof;
(c) change or amend its charter or bylaws;
(d) effect any act or omission which could have a Material Adverse
Effect;
(e) create any Contingent Obligation, by way of guarantees or
otherwise;
(f) declare or pay any dividend or other distribution or payment in
cash, stock or property in respect of shares of its Capital Stock, or adopt or
consider any plan or arrangement with respect thereto or make any direct or
indirect redemption, retirement, purchase or other acquisition of any of its
Capital Stock or split, combine or reclassify its outstanding shares of Capital
Stock;
(g) issue any shares of Capital Stock or any Option Rights of the
Company or Overhill Ventures (other than (i) shares of Common Stock issued upon
the exercise of Option Rights set forth on Schedule 3.7(a)) and (ii) Parent
---------------
Common Stock issued in settlement of litigation identified on Schedule 3.20
-------------
consistent with past practices);
55
(h) (i) increase the compensation of any officer or key employee,
except as otherwise permitted under Section 3.13(u); (ii) amend any existing
---------------
Benefit Plan or adopt any new Benefit Plan; or (iii) enter into any new
employment or consulting agreement;
(i) (i) incur any Indebtedness; (ii) transfer, lease, license, sell,
mortgage, pledge, dispose of, or encumber any asset of the Company with a value
exceeding $10,000 individually and $50,000 in the aggregate; (iii) purchase or
acquire any business or any securities or assets of any business; (iv) enter
into any partnership, joint venture or strategic alliance; (v) settle any
material litigation in an amount in excess of $50,000; or (vi) accelerate
payment on any Indebtedness;
(j) make any Capital Expenditures in excess of $100,000 in the
aggregate;
(k) fail to preserve intact the business organization of the Company
and each of its Subsidiaries, fail to keep available the services of their
operating personnel, or fail to preserve the goodwill of those having business
relationships with the Company or its Subsidiaries, including, without
limitation, customers;
(l) fail to maintain its books and records in accordance with past
practices and in conformity with GAAP;
(m) take any action enumerated in Section 3.13 or which would be
------------
prohibited by any other Investment Document determined as if the transactions
contemplated by this Agreement had been consummated; or
(n) take, or fail to take, any action so that any of the
representations or warranties by the Company or any Guarantor contained in this
Agreement ceases to be true and correct in all respects.
The Company shall notify the Purchaser in writing of the occurrence of any
Material Adverse Effect or breach of the representations and warranties of the
Company under this Agreement within one (1) day following the occurrence
thereof.
5.2 Access to Information and Documents. From and after the date of this
-----------------------------------
Agreement and until the Closing, the Company and each of its Subsidiaries shall
give the Purchaser and its representatives and agents, upon one (1) Business
Day's prior notice, full access during normal business hours to the properties,
documents, books and records of the Company and each of its Subsidiaries, and
shall furnish the Purchaser with such information concerning the Company and
each of its Subsidiaries as the Purchaser may request.
5.3 Non-Solicitation. In consideration of the capital and other resources
----------------
(human or otherwise) committed to the Purchaser's due diligence investigation of
the Company, Parent
56
and their respective Subsidiaries and other Affiliates and the preparation and
negotiation of this Agreement and the other Investment Documents, the Company
and Parent shall not, nor will they permit their respective Affiliates,
Subsidiaries, shareholders, directors, officers, employees, attorneys,
accountants, investment bankers, representatives or agents to, directly or
indirectly, initiate contact with, make, solicit or encourage any inquiries or
proposals from, furnish any information regarding the Company or its businesses
or assets to, or engage or participate in any discussions or negotiations with
any Person with respect to any proposal pursuant to which the Company or Parent
would (i) obtain any debt or equity financing (other than (A) with respect to
Parent and Texas Timberjack, any debt or equity financing; provided, however,
-------- -------
that the proceeds of any such financing are not, directly or indirectly,
invested in or used to fund the Company or to defease any indebtedness,
obligation or any other security of the Company or (B) with respect to the
Company, a senior asset-based working capital facility) or (ii) enter into an
agreement to be acquired by, sold to, merged into or combined with any such
person or entity (other than with respect to Texas Timberjack; provided,
--------
however, that the proceeds of any such transaction are not, directly or
-------
indirectly, invested in or used to fund the Company or to defease any
indebtedness, obligation or any other security of the Company). Any transaction
referred to in clauses (i) or (ii) above is referred to as an "Alternative
-----------
Transaction." The Company will promptly communicate to the Purchaser in writing
-----------
the fact that it has received any proposal or inquiry regarding any Alternative
Transaction.
5.4 Covenant to Close. Each of the Company, the Guarantors and the
-----------------
Purchaser shall use its best efforts to satisfy the conditions precedent
applicable to it to consummate the transactions contemplated by this Agreement
in accordance with the terms, and subject to the conditions of, this Agreement.
Without limiting the generality of the foregoing, the Company and the Guarantors
shall use its reasonable best efforts to obtain all Consents from third parties
which are required to be obtained in connection with the consummation of each of
the transactions contemplated by this Agreement, including, without limitation,
any Consents of the holders of any Indebtedness of the Company or the Guarantors
for the purpose of ensuring the incurrence by the Company of the Indebtedness
evidenced by the Note.
6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligations of the
----------------------------------------------
Purchaser to consummate the transactions contemplated hereby, including, without
limitation, the obligation to purchase the Note as provided herein, is subject
to the satisfaction, prior to or at the Closing, of the conditions set forth in
this Section 6; provided, however, that any or all of such conditions may be
--------- -------- -------
waived, in whole or in part, by the Purchaser in its sole and absolute
discretion:
6.1 Closing Date. The Closing Date shall occur on or before November 24,
------------
1999.
6.2 Representations and Warranties; No Default. Each of the
------------------------------------------
representations and warranties made by the Company and the Guarantors contained
in this Agreement shall be true and correct in all respects as of the date made,
and shall be true and correct in all respects as of
57
the Closing Date, with the same effect as if made on and as of the Closing Date;
each of the covenants, agreements and obligations of the Company and the
Guarantors under this Agreement to be performed or satisfied by it or them on or
prior to the Closing Date have been performed or satisfied by it or them on or
before the date hereof; and no Default or Event of Default shall exist or result
from the issuance and sale of the Securities or the other transactions
contemplated by this Agreement. The Company and the Guarantors shall have
delivered to the Purchaser an officers' certificate, signed by the President and
Chief Executive Officer and the Chief Financial Officer of each of the Company
and the Guarantors, dated as of the Closing Date, to such effect and to the
effect that each of the other conditions set forth in this Section 6 has been
---------
satisfied and fulfilled.
6.3 Closing Fees and Expenses. The Company shall have paid to the
-------------------------
Purchaser, in immediately available funds to a bank account designated by the
Purchaser, a non-refundable, non-accountable closing fee of $1,120,000.00 (which
closing fee may be withheld by the Purchaser from the proceeds to be delivered
by the Purchaser at the Closing and which withholding shall constitute payment
in full of the Company's obligation to pay such closing fee), and the Company
shall have paid all costs and expenses (or the Purchaser shall have withheld the
same from the proceeds of the Securities) as provided for in Section 8.5.
-----------
6.4 Purchase Permitted By Applicable Laws. The consummation of the
-------------------------------------
transactions contemplated by this Agreement shall not be prohibited by or
violate any Applicable Laws and shall not subject any party to any Tax, penalty
or liability, under or pursuant to any Applicable Laws, and shall not be
enjoined (temporarily or permanently) under, or prohibited by or contrary to,
any injunction, order, decree or ruling. Without limiting the generality of the
foregoing, the consummation of the transactions contemplated hereby shall
otherwise comply with all applicable requirements of federal securities and
state securities or "blue sky" laws.
6.5 No Material Adverse Changes. No Material Adverse Change shall have
---------------------------
occurred since September 27, 1998, and the Company and the Guarantors shall have
delivered to the Purchaser an officers' certificate, signed by the President and
Chief Executive Officer and the Chief Financial Officer of each of the Company
and the Guarantors, dated as of the Closing Date, to such effect.
6.6 California Permit. The Company shall have obtained and delivered to
-----------------
the Purchaser the California Permit which shall continue in full force and
effect.
6.7 No Injunction or Order. There shall not have been issued any
----------------------
injunction, order, decree or ruling that prohibits or limits any of the
transactions contemplated by this Agreement or the other Investment Documents,
and there shall not be any action, suit, proceeding or investigation pending or,
to the best knowledge of the Company and the Guarantors, threatened against the
Company or any of its Subsidiaries that (a) draws into question the validity,
legality or enforceability of this Agreement or the other Investment Documents
or the consummation of
58
the transactions contemplated hereby or thereby or (b) might result, in the
judgment of the Purchaser, in the imposition of a penalty if the Securities were
delivered as contemplated hereunder or in any Material Adverse Change.
6.8 Opinions of Counsel. The Purchaser shall have received (a) an opinion
-------------------
letter of Xxxxxxx, Xxxxxxx & Xxxxxx LLP, counsel to the Company and the
Guarantors, dated as of the Closing Date and addressed to the Purchaser, in form
and substance satisfactory to the Purchaser and its counsel, (b) an opinion
letter of Xxxxx Xxxxxx, Nevada counsel to the Company and Parent, dated as of
the Closing Date and addressed to the Purchaser, in form and substance
satisfactory to the Purchaser and its counsel, and (c) an opinion letter of
Xxxxxx X. Xxxxx, Xx., Texas counsel to Parent, dated as of the Closing Date and
addressed to the Purchaser, in form and substance satisfactory to the Purchaser
and its counsel.
6.9 Delivery of Certain Closing Documents. The Company shall have
-------------------------------------
delivered to the Purchaser the following closing documents, each dated as of the
Closing Date:
(a) This Agreement, duly executed by the Company and the Guarantors,
together with the Exhibits, Disclosure Schedules and Annex A;
-------
(b) The Note, duly executed by the Company;
(c) The Warrant, duly executed by the Company;
(d) The Registration Rights Agreement, duly executed by the Company;
(e) The Investor Rights Agreement, duly executed by the Company and
Parent;
(f) The Suretyship Agreement, duly executed by the Company and the
Guarantors;
(g) A side letter, in form and substance satisfactory to the
Purchaser, duly executed by Parent, the Company and Overhill Ventures.
6.1 Collateral Documents. The Company shall have delivered to the
--------------------
Purchaser the following Collateral Documents, each dated as of the Closing Date:
(a) The Intercreditor Agreement, duly executed by the Senior Lender
and acknowledged by the Company and the Guarantors;
(b) The Security Agreement (Company), duly executed by the Company;
59
(c) The PTC Security Agreement, duly executed by the Company and
Overhill Ventures;
(d) UCC-1 Financing Statements, in form and substance satisfactory of
the Purchaser, duly executed by the Company, as debtor, to be filed with the
Secretary of State of the State of California, the County Recorder's Office of
the County of Los Angeles and such other states and counties as the Purchaser
may reasonably request;
(e) The Parent Pledge Agreement, duly executed by Parent;
(f) UCC-1 Financing Statement, in form and substance satisfactory of
the Purchaser, duly executed by Parent, as debtor, to be filed with the
Secretary of State of the State of Texas;
(g) Original stock certificate representing the shares of Capital
Stock of the Company to be pledged under the Parent Pledge Agreement, together
with stock powers duly executed in blank;
(h) The Company Pledge Agreement, duly executed by the Company;
(i) Original stock certificate representing the shares of Capital
Stock of Overhill Ventures to be pledged under the Company Pledge Agreement,
together with stock powers duly executed in blank;
(j) The Security Agreement (Subsidiary), duly executed by Overhill
Ventures;
(k) UCC-1 Financing Statement, in form and substance satisfactory of
the Purchaser, duly executed by Overhill Ventures, as debtor, to be filed with
the Secretary of State of the State of California and the County Recorder's
Office of the County of Los Angeles;
(l) Notices of Security Interests in Deposit Accounts, in form and
substance satisfactory to the Purchaser and with respect to the deposit accounts
selected by the Purchaser, duly executed by the Company and the respective banks
or other financial institutions;
(m) Landlord Consents and Waivers, in form and substance satisfactory
to the Purchaser, duly executed by the Company and the respective
landlords/lessors designated by the Purchaser; and
(n) Letters notifying the Company's insurance companies of the
collateral assignment of the Company's insurance policies, in form and substance
satisfactory to the Purchaser, duly executed by the Company; and
60
(o) Warehouse Bailment Agreements, in form and substance
satisfactory to the Purchaser, duly executed by the Company, the Senior Lender
and the respective bailees designated by the Purchaser.
6.11 Amendment to Charter and Bylaws.
-------------------------------
(a) On or prior to the Closing Date, the Company shall have duly and
validly amended and restated its existing Articles of Incorporation, in
substantially the form of the Amended Charter, and filed the Amended Charter
with the Secretary of State of the State of Nevada in accordance with the
General Corporation Law of the State of Nevada.
(b) On or prior to the Closing Date, the Company shall have duly and
validly amended its Bylaws, in form and substance satisfactory to the Purchaser.
6.12 Senior Credit Facility. The Company shall have delivered copies of
----------------------
all of the Senior Credit Documents, certified by the Assistant Secretary of the
Company, in form acceptable to the Purchaser.
6.13 Delivery of Corporate Documents. The Company shall have delivered to
-------------------------------
the Purchaser the following for each of the Company and the Guarantors:
(a) Certified copies of its charter or similar organizational
document, together with a good standing certificate and a good standing tax
certificate, if available, from the Secretary of State of its state of
incorporation or organization and the Franchise Tax Board of the State of
California or similar state taxing authority, and good standing certificates
from each jurisdiction in which it is required to be qualified to transact
business as a foreign corporation or other entity (including, without
limitation, with respect to the Company, California, Illinois, Pennsylvania,
Texas and Washington), in each case dated as of a recent practicable date prior
to the Closing Date;
(b) Copies of its bylaws or similar governing document as in effect
on the Closing Date, certified by its Secretary as being in full force and
effect as of the Closing Date;
(c) Resolutions of the Board of Directors (or similar governing
body) approving and authorizing the execution, delivery and performance of this
Agreement, the Note, the Warrant and the other Investment Documents to which it
is a party, and, in the case of the Company, approving and authorizing the
execution, issuance, sale and delivery of the Securities, certified by its
Secretary as being in full force and effect through the Closing Date;
(d) With respect to the Company only, resolutions of the
shareholders of the Company authorizing and approving the Amended Charter, the
filing thereof with the Secretary of State of the State of Nevada and the
amendments to the Bylaws of the Company;
61
(e) Signature and incumbency certificates of its officers executing
the documents referred to in clause (c) above and any other agreements,
instruments, certificate or other documents required to be executed by it in
connection herewith; and
(f) Such other documents as the Purchaser may request.
6.14 Repayment of Certain Indebtedness; Termination Statements. Prior to
---------------------------------------------------------
or simultaneously with the Closing, the Company shall have paid in full all
liabilities and other obligations owing to Finova, LHF and any affiliates or
assignees thereof, and the Company shall have delivered to the Purchaser
originally executed UCC termination statements (or evidence satisfactory to the
Purchaser that such UCC termination statements have been executed and will be
delivered to the Purchaser within one (1) day following the Closing) releasing
any and all Liens securing such liabilities and obligations.
6.15 Employment Agreements; Non-Competition and Confidentiality
----------------------------------------------------------
Agreements.
-----------
The Company shall have delivered to the Purchaser the following:
(a) (i) An Employment Agreement, in form and substance satisfactory
to the Purchaser, duly executed by Parent, the Company and Xxxxx Xxxxx, and (ii)
a Non-Competition and Confidentiality Agreement, in form and substance
satisfactory to the Purchaser, duly executed by Parent, the Company and Xx.
Xxxxx;
(b) (i) An Employment Agreement, in form and substance satisfactory
to the Purchaser, duly executed by Parent, the Company and Xxxxxxx X. Xxxxxxx,
and (ii) a Non-Competition and Confidentiality Agreement, in form and substance
satisfactory to the Purchaser, duly executed by Parent, the Company and Xx.
Xxxxxxx;
(c) An Employment Agreement, in form and substance satisfactory to
the Purchaser, duly executed by the Company and Xxxxxxx X. Xxxxxxx, and (ii) a
Non-Competition and Confidentiality Agreement, in form and substance
satisfactory to the Purchaser, duly executed by the Company and Xx. Xxxxxxx.
6.16 Matters Relating to LHF.
-----------------------
(a) The Company shall have delivered to the Purchaser documentation,
in form and substance satisfactory to the Purchaser, duly executed by the
Company, Parent and LHF (including, without limitation, any assignees of LHF),
fully and effectively terminating the Existing LHF Equity Documents prior to or
simultaneously with the Closing, with no actual, threatened or potential legal
challenges thereto.
(b) The LHF representative on the Board of Directors of the Company
shall have resigned, effective prior to or simultaneously with the Closing.
62
6.17 Capital Lease Obligations; Termination of UCC Filings.
-----------------------------------------------------
(a) The Company shall have delivered to the Purchaser at or prior to
the Closing written evidence, in form and substance satisfactory to the
Purchaser, that all Capital Lease Obligations, if any, have been paid in full.
(b) The Company shall have delivered to the Purchaser at or prior to
the Closing termination statements with respect to the UCC-1 financing
statements designated by the Purchaser for termination.
6.18 Capital Structure. The Purchaser shall have approved the form and
-----------------
substance of the capital structure of the Company and its Subsidiaries as of the
Closing Date.
6.19 Insurance Matters. The Company shall delivered to the Purchaser (a)
-----------------
the Insurance Coverage Letter, in form and substance satisfactory to the
Purchaser, duly executed by the Company and acknowledged by Parent and Overhill
Ventures, and (b) certificates or insurance and policies or binders of insurance
covering the Company and its Subsidiaries which are required to be maintained by
the Company and its Subsidiaries as of the Closing Date, together with
additional insured and lender's loss payable endorsements in favor of the
Purchaser, all in form and substance satisfactory to the Purchaser.
6.20 Completion of Due Diligence Review. The Purchaser shall have
----------------------------------
completed its due diligence review of the matters set forth in items (1), (3)
and (7) of Schedule A of the notification letter dated September 13, 1999, all
to the sole satisfaction of the Purchaser and its legal counsel.
6.21 Delivery of Financial Projections. Prior to the Closing Date, the
---------------------------------
Company shall have finalized and delivered to the Purchaser, and the Purchaser
shall have approved, the financial projections of the Company and its
Subsidiaries for the three (3) Fiscal Years ending in September 2002. Such
financial projections shall specify the assumptions on which they are based and
shall be made in good faith. The financial projections shall be accompanied by
an Officer's Certificate, in form and substance satisfactory to the Purchaser,
duly executed by the Chief Financial Officer of the Company, specifying, among
other things, the assumptions on which such financial projections are based.
6.22 Compliance Certificate. The Company shall have prepared and delivered
----------------------
to the Purchaser at the Closing a Compliance Certificate, in substantially the
form of Exhibit D, signed by the President and Chief Executive Officer and the
---------
Chief Financial Officer of the Company, stating that each of them has reviewed
this Agreement and the other Investment Documents and the financial condition
and results of operations of the Company and its Subsidiaries for purposes of
delivering such Compliance Certificate and certifying (i) as to the accuracy and
completeness of the financial covenant calculations set forth therein, which
63
financial covenant calculations shall be made as of the Closing Date and shall
give effect to the transactions contemplated by this Agreement, the other
Investment Documents and the Senior Loan Documents, and (ii) whether any
Defaults or Events of Default, or any "Events of Default" (as such term is
defined in the Senior Loan Agreement), have occurred or are continuing or will
occur as a result of such transactions.
6.23 LLCP Representative. The Board of Directors and the shareholders of
-------------------
the Company shall have taken all requisite action (corporate or otherwise) to
have caused a representative of the Purchaser, who shall be designated by the
Purchaser at its sole discretion, to have been duly elected or appointed as a
member of the Board of Directors of the Company, effective as of the Closing.
6.24 Third Party Consents. The Company and each Guarantor shall have
--------------------
obtained all other Consents required to be obtained from any Governmental
Authorities and other Persons in connection with the transactions contemplated
by this Agreement (including, without limitation, the Consents listed on
Schedule 3.6), and the Purchaser shall have approved the terms and conditions
------------
thereof.
6.25 Proceedings Satisfactory. All proceedings taken prior to or at the
------------------------
Closing in connection with the issuance and sale of the Securities and the
consummation of the other transactions contemplated hereby, and all papers and
other documents relating thereto, shall be in form and substance satisfactory to
the Purchaser and its counsel, and the Purchaser shall have received copies of
such documents and papers, all in form and substance satisfactory to the
Purchaser and its counsel, all such documents, where appropriate, to be
counterpart originals and/ or certified by proper authorities, corporate
officials and other Persons. Without limiting the generality of the foregoing,
the Company shall have made such arrangements as may be requested by the
Purchaser to ensure that the proceeds from the issuance and sale of the
Securities are applied in the manner set forth in Schedule 3.38, including,
-------------
without limitation, provision for the direct payment of the obligations of the
Company to be paid from such proceeds as provided in Section 8.5, the
-----------
withholding of fees payable to the Purchaser as provided in Section 8.5 and the
-----------
segregation of funds to be paid to third parties concurrent with or following
the Closing.
7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
--------------------------------------------
Company to consummate the transactions contemplated hereby is subject to the
satisfaction, prior to the Closing, of the conditions set forth in this Section
-------
7; provided, however, that any or all of such conditions may be waived, in whole
- -------- -------
or in part, by the Company in its sole and absolute discretion:
7.1 Representations and Warranties. The representations and warranties of
------------------------------
the Purchaser contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date after giving effect to the
transactions contemplated by this Agreement, as if
64
made on and as of such date, and the Purchaser shall have performed or satisfied
all of its covenants and agreements hereunder to be performed or satisfied on or
prior to the Closing Date.
7.2 Purchase Permitted By Applicable Laws. The consummation of the
-------------------------------------
transactions contemplated by this Agreement shall not be prohibited by or
violate any Applicable Laws and shall not subject any party to any Tax, penalty
or liability, under or pursuant to any Applicable Laws, and shall not be
enjoined (temporarily or permanently) under, or prohibited by or contrary to,
any injunction, order, decree or ruling. Without limiting the generality of the
foregoing, the consummation of the transactions contemplated hereby shall
otherwise comply with all applicable requirements of federal and state
securities laws.
7.3 No Injunction or Order. There shall not have been issued any
----------------------
injunction, order, decree or ruling that prohibits or limits any of the
transactions contemplated by this Agreement or the other Investment Documents.
7.4 Payment for Securities. The Purchaser shall have delivered to the
----------------------
Company the Purchase Price required to be paid by Section 2.3, less the amounts
----------- ----
provided for in Section 6.3.
-----------
8. INDEMNIFICATION; FEES AND EXPENSES.
----------------------------------
8.1 Transfer Taxes. The Company shall pay all stamp, transfer and other
--------------
similar Taxes (together in each case with interest and penalties, if any)
payable or determined to be payable in connection with the execution and
delivery of this Agreement or the issuance and sale of the Securities and shall
hold harmless the Purchaser from and against any and all liabilities with
respect to or resulting from any delay in paying, or omission to pay, such
Taxes.
8.2 Losses. Whether or not the transactions contemplated by this
------
Agreement are consummated, the Company shall indemnify and hold harmless the
Purchaser, its successors and assigns, and its Affiliates, employees, partners,
officers, directors, representatives, agents, attorneys, successors and assigns
(the "Indemnified Parties"), from and against any and all losses, claims,
-------------------
damages, liabilities, judgments, Indemnified Environmental Costs, expenses and
costs, including, without limitation, attorneys' fees and other fees and
expenses incurred in, and the costs of preparing for, investigating or defending
any matter (collectively, "Losses"), incurred by such Indemnified Party in
------
connection with or arising from (a) any breach of any warranty or the inaccuracy
of any representation made by the Company or any Guarantor, (b) the failure of
the Company or any Guarantor to fulfill any of its covenants, agreements or
undertakings under this Agreement or any other Investment Document (or any other
document or instrument executed herewith or pursuant hereto), or (c) any third
party actions, suits, proceedings or claims brought against any Indemnified
Party with respect to (i) any other matters arising out of or in connection with
the transactions contemplated by this Agreement or any other Investment Document
or (ii) the business, operations or affairs of the Company, any
65
Guarantor or any of their respective Subsidiaries. The Company shall either pay
directly all Losses which it is required to pay hereunder or reimburse any
Indemnified Party within ten (10) days after any request for such payment. The
obligations of the Company to the Indemnified Parties under this Section 8 shall
---------
be separate obligations to each Indemnified Party, and the liability of the
Company to such Indemnified Parties hereunder shall not be extinguished solely
because any Indemnified Party is not entitled to indemnity hereunder. In
addition, notwithstanding anything in this Agreement or any other Investment
Document to the contrary, in the event of a breach of the representation and
warranty set forth in Section 3.7(a) (including, without limitation, Schedule
-------------- --------
3.7(a)), to the extent that the number of Warrant Shares evidenced by the
-------
Warrant immediately after the Closing represent, as calculated therein, a
percentage of the outstanding shares of Common Stock on a Fully Diluted Basis
that is less than 17.500%, then the Company shall immediately issue to the
Purchaser, at no cost to the Purchaser, an additional warrant, in form and
substance satisfactory to the Purchaser, representing an additional number of
Warrant Shares such that, if such additional Warrant Shares had been included in
the Warrant immediately after the Closing, such representation and warranty
would have been true and accurate in all respects when made.
The obligations of the Company to the Indemnified Parties under this
Section 8 shall survive (A) the payment of the Note (whether at maturity, by
---------
prepayment or acceleration or otherwise), (B) any transfer of the Note or any
interest therein, (C) the termination of this Agreement or any other Investment
Document and (D) the issuance, exercise and/or sale of the Warrant (or any
interest therein) or the sale of the Warrant Shares.
8.3 Indemnification Procedures. Any Person entitled to indemnification
--------------------------
under this Section 8 shall (a) give prompt written notice to the Company of any
---------
claim with respect to which it seeks indemnification and (b) permit the Company
to assume the defense of such claim with counsel selected by the Company and
reasonably acceptable to such Person; provided, however, that any Person
-------- -------
entitled to indemnification hereunder shall first have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (i)
the Company has agreed to pay such fees or expenses of such counsel; (ii) the
Company has failed to notify such Person in writing within ten (10) days of its
receipt of such written notice of claim that it will assume the defense of such
claim and employ counsel reasonably satisfactory to such Person; or (iii) in the
judgment of any such Person, based upon the advice of counsel, a conflict of
interest may exist between such Person and the Company with respect to such
claims (in which case, if the Person notifies the Company in writing that such
Person elects to employ separate counsel at the expense of the Company, the
Company shall not have the right to assume the defense of such claim on behalf
of such Person). The Company will not be subject to any liability for any
settlement made without its consent (but such consent may not be unreasonably
withheld). No Indemnified Party may, without the consent of the Company (which
consent will not be unreasonably withheld), consent to entry of any judgment or
enter into any settlement which
66
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to the Company of a release from all liability in respect of such
claim or litigation.
8.4 Contribution. If the indemnification provided for in this Section 8
------------ ---------
is unavailable to the Purchaser or any other Indemnified Party in respect of any
Losses, then the Company, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such Losses, in such proportion as is appropriate to reflect the relative fault
of the Company, on the one hand, and such Indemnified Party on the other hand,
in connection with the actions, statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault of the Company, on the one hand, and such Indemnified Party on the other
hand, shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
taken by, or relates to information supplied by, either the Company or such
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or
omission. The parties agree that it would not be just and equitable if
contribution pursuant to this Section 8.4 were determined by pro rata allocation
----------- --- ----
or by any other method of allocation which does not take account of the
equitable considerations referred to above. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
8.5 Deal-Related Costs and Expenses. The Company shall be responsible
-------------------------------
for, and shall pay, all out-of-pocket costs and expenses of every type and
nature (including, without limitation, all fees and expenses of counsel,
accounting fees and expenses and other deal-related costs and expenses) incurred
by or on behalf of the Purchaser, in an aggregate amount not to exceed $350,000,
in connection with the Purchaser's due diligence investigation of the Company,
the Guarantors and their respective Affiliates and the preparation, negotiation,
execution and delivery of this Agreement, the Note, the Warrant and the other
Investment Documents and the consummation of the transactions contemplated
hereby and thereby (which costs and expenses may be withheld by the Purchaser
from the proceeds to be delivered by the Purchaser at the Closing) and, at the
Purchaser's request and direction, the Company shall reimburse third party
providers directly for all of such costs and expenses (which withholding and, as
the case may be, such direct reimbursement, shall constitute payment in full of
the Company's obligation with respect to such costs and expenses).
8.6 Costs of Collection. The Company and the Guarantors jointly and
-------------------
severally agree to pay all costs and expenses, including the fees and expenses
of all attorneys, accountants and other experts retained by the Purchaser, which
are expended or incurred by or on behalf of the Purchaser in connection with (a)
the collection and enforcement of the Obligations to Purchaser, whether or not
any action, suit or other proceeding is commenced; (b) any actions for
declaratory relief in any way related to the Obligations to Purchaser; (c) the
protection or
67
preservation of any rights or remedies of the Purchaser under this Agreement or
any other Investment Document; (d) any actions taken by the Purchaser in
negotiating any amendment, waiver, consent or release of or under this
Agreement, the Note or any other Investment Document; (e) any actions taken in
reviewing the Company's, Parent's or any of their respective Subsidiaries'
financial affairs if any Event of Default has occurred or the Purchaser has
determined in good faith that an Event of Default may likely occur, which
actions shall include, but not be limited to the following: (i) inspect the
facilities of the Company, Parent and any of their respective Subsidiaries or
conduct audits or appraisals of the financial condition of the Company, Parent
and any of their respective Subsidiaries; (ii) have an accounting or other firm
selected by the Purchaser review the books and records of the Company, Parent
and any of their respective Subsidiaries (other than Texas Timerjack) and
perform a thorough and complete examination thereof; (iii) interview the
Company's, Parent's and any of their respective Subsidiaries' employees,
attorneys, accountants, customers and any other Persons related to the Company,
Parent or such Subsidiaries which the Purchaser believes may have relevant
information concerning the business, condition (financial or otherwise), results
of operations or prospects of the Company, Parent and such Subsidiaries; and
(iv) undertake any other action which the Purchaser believes is necessary to
assess accurately the financial condition and prospects of the Company, Parent
and any of their respective Subsidiaries; (f) any refinancing, restructuring
(whether in the nature of a "work out" or otherwise), bankruptcy or insolvency
proceeding involving the Company, Parent or any of their respective Subsidiaries
or other Affiliates, including, without limitation, any refinancing or
restructuring of this Agreement, the Note or any other Investment Documents; (g)
any actions taken to verify, maintain, perfect and protect any Lien granted to
the Purchaser by the Company or any Guarantor or other Person under the
Investment Documents; or (h) any effort by the Purchaser to protect, assemble,
complete, collect, sell, liquidate or otherwise dispose of any Collateral,
including in connection with any case under Bankruptcy Law. The Company and the
Guarantors hereby consent to the taking of the foregoing actions by the
Purchaser (provided, however, that, with respect to clause (e)(iii) above,
-------- -------
neither the Company nor any Guarantor will be required to produce any document
or disclose material to the Purchaser which would otherwise be expressly
protected from production or disclosure by any attorney-client or accountant-
client privilege existing under Applicable Law, unless waived by the Company or
such Guarantor).
9. GUARANTY.
--------
9.1 Unconditional Guaranty.
----------------------
(a) The Guarantors hereby absolutely, unconditionally and irrevocably
guaranty and promise to pay to the order of the Purchaser and its successors and
assigns (collectively, the "Beneficiary"), on demand, in lawful money of the
-----------
United States of America, any and all Obligations to Purchaser from time to time
owed by the Company and any other Person to the Beneficiary (collectively, the
"Guarantied Obligations"). All of the Guarantied
----------------------
68
Obligations shall be conclusively presumed to have been created in reliance of
this Guaranty. In addition, the Guarantors hereby agree to pay any and all costs
and expenses (including, without limitation, attorneys' fees and expenses)
incurred by the Beneficiary in connection with (a) the collection of all sums
guaranteed hereunder and (b) the exercise or enforcement of any rights, powers
or remedies of the Beneficiary under this Guaranty or Applicable Laws.
(b) All payments under this Guaranty shall be made free and clear of
any and all deductions, withholdings and setoffs, including withholding on
account of Taxes. If any deduction or withholding shall be required by
Applicable Laws, each Guarantor shall be required to pay such additional amounts
as may be required so that the net amount received by the Beneficiary, after
such deduction or withholding (including with respect to such additional
amounts), shall be equal to the amount otherwise required to be paid under this
Guaranty.
9.2 Continuing and Irrevocable Guaranty. This Guaranty is a continuing
-----------------------------------
guaranty of the Guarantied Obligations and may not be revoked and shall not
otherwise terminate unless and until all Guarantied Obligations have been
indefeasibly paid and performed in full. If, notwithstanding the foregoing, any
Guarantor shall have any right under Applicable Laws to terminate this Guaranty
prior to indefeasible payment in full of the Guarantied Obligations, no such
termination shall be effective until noon the next Business Day after the
Beneficiary shall receive written notice thereof, signed by such Guarantor. Any
such termination shall not affect this Guaranty in relation to (a) any
Guarantied Obligation that was incurred or arose prior to the effective time of
such notice, (b) any Guarantied Obligation incurred or arising after such
effective time where such Guarantied Obligation is incurred or arises either
pursuant to commitments existing at such effective time or incurred for the
purpose of protecting or enforcing rights against the Company, any Guarantor or
other guarantor of or other Person directly or indirectly liable on the
Guarantied Obligations or any portion thereof (each of the Company, the
Guarantors and any such other guarantor or Person is referred to herein as an
"Obligor") or any Collateral given for the Guarantied Obligations or any other
--------
guaranties of the Guarantied Obligations or any portion thereof, (c) any
renewals, extensions, readvances, modifications or rearrangements of any of the
foregoing or (d) the liability of any other Guarantor hereunder.
9.3 Nature of Guaranty. The liability of each Guarantor hereunder is
------------------
independent of and not in consideration of or contingent upon the liability of
the Company or any other Obligor, and a separate action or actions may be
brought or prosecuted against any Guarantor, whether or not any action is
brought or prosecuted against the Company or any other Obligor or whether the
Company or any other Obligor is joined in any such action or actions. This
Guaranty shall be construed as a continuing, absolute and unconditional guaranty
of payment (and not merely of collection), and the liability of each Guarantor
under this Guaranty shall be irrevocable, absolute and unconditional, without
regard to (and each Guarantor irrevocably waives):
69
(a) the legality, validity or enforceability of this Agreement, the
Note or any other Investment Document, any of the Guarantied Obligations, any
Lien or any Collateral;
(b) any defense (other than payment), set-off or counterclaim that may
at any time be available to the Company or any other Obligor against, and any
right of setoff at any time held by, the Beneficiary;
(c) any acts of commission or omission of any kind (other than gross
negligence) at any time on the part of the Beneficiary with respect to any
matter whatsoever;
(d) the liquidation or dissolution of the Company or any other
Obligor, any bankruptcy, insolvency, reorganization, arrangement, assignment for
the benefit of creditors, receivership or similar event or proceeding with
respect to the Company or any other Obligor, or any action taken by any trustee
or receiver of the Company or any other Obligor or by any court or any
proceeding with respect to the Company or any other Obligor;
(e) any change of ownership of the Capital Stock of the Company or any
other Obligor, or any change in the relationship between any Guarantor and the
Company (including, without limitation, the termination of such relationship);
or
(f) any other circumstance whatsoever (with or without notice to or
knowledge of any Guarantor or any other Obligor), whether or not similar to any
of the foregoing, that constitutes, or might be construed to constitute, an
equitable or legal discharge of the Company or any other Obligor, in bankruptcy
or in any other instance.
Any payment by any Obligor or other circumstance that operates to toll
any statue of limitations applicable to such Obligor shall also operate to toll
the statute of limitations applicable to each Guarantor. When making any demand
hereunder (including by commencement or continuance of any legal proceeding),
the Beneficiary may, but shall be under no obligation to, make a similar demand
on all or any of the other Obligors, and any failure by the Beneficiary to make
any such demand shall not relieve any Guarantor of its obligations hereunder.
9.4 Authorization. Each Guarantor authorizes the Beneficiary, without
-------------
notice to or further assent by such Guarantor, and without affecting such
Guarantor's liability hereunder (regardless of whether any subrogation or
similar right that such Guarantor may have or any other right or remedy of such
Guarantor is extinguished or impaired), from time to time to:
(a) permit the Company to increase or create Guarantied Obligations,
or terminate, release, compromise, subordinate, extend, accelerate or otherwise
change the amount or time, manner or place of payment of, or rescind any demand
for payment or acceleration of,
70
the Guarantied Obligations or any part thereof, or otherwise amend the terms and
conditions of this Agreement, the Note or any other Investment Document or any
provision thereof;
(b) take and hold Collateral from the Company or any other Person,
perfect or refrain from perfecting a Lien on such Collateral, and exchange,
enforce, subordinate, release (whether intentionally or unintentionally), or
take or fail to take any other action in respect of, any such Collateral or Lien
or any part thereof;
(c) exercise in such manner and order as it elects in its sole
discretion (including any judicial or non-judicial foreclosure of any real
estate Collateral), fail to exercise, waive, suspend, terminate or suffer
expiration of, any of the remedies or rights of the Beneficiary against the
Company or any other Obligor in respect of any Guarantied Obligations or any
Collateral;
(d) release, add or settle with any other Obligor in respect of this
Guaranty, this Agreement, the Note, the other Investment Documents or the
Guarantied Obligations;
(e) accept partial payments on the Guarantied Obligations and apply
any and all payments or recoveries from any Obligor or Collateral to such of the
Guarantied Obligations as the Beneficiary may elect in its sole discretion,
whether or not such Guarantied Obligations are secured or guaranteed;
(f) refund at any time, at the Beneficiary's sole discretion, any
payments or recoveries received by the Beneficiary in respect of any Guarantied
Obligations or any Collateral; and
(g) otherwise deal with the Company, any other Obligor and any
Collateral as the Beneficiary may elect in its sole discretion.
9.5 Certain Waivers. Each Guarantor waives:
---------------
(a) the right to require the Beneficiary to proceed against the
Company or any other Obligor, to proceed against or exhaust any Collateral or to
pursue any other remedy in the Beneficiary's power whatsoever, and the right to
have the property of the Company or any other Obligor first applied to the
discharge of the Guarantied Obligations;
(b) all rights and benefits under Section 2809 of the California Civil
Code and any other Applicable Laws purporting to reduce a guarantor's
obligations in proportion to the obligation of the principal or providing that
the obligation of a surety or guarantor must neither be larger nor in other
respects more burdensome than that of the principal;
71
(c) the benefit of any statute of limitations affecting the Guarantied
Obligations or such Guarantor's liability hereunder and under Section 359.5 of
the California Code of Civil Procedure;
(d) any requirement of marshaling or any other principle of election
of remedies and all rights and defenses arising out of an election of remedies
by the Beneficiary, even though that election of remedies, such as non-judicial
foreclosure with respect to the security for a guarantied obligation, has
destroyed such Guarantor's rights of subrogation and reimbursement against the
Company;
(e) any right to assert against the Beneficiary any defense (legal or
equitable), set-off, counterclaim and other right that any Guarantor may now or
any time hereafter have against the Company or any other Obligor;
(f) presentment, demand for payment or performance (including
diligence in making demands hereunder), notice of dishonor or nonperformance,
protest, acceptance and notice of acceptance of this Guaranty, and all other
notices of any kind;
(g) any rights, defenses and other benefits that any Guarantor may
have by reason of any failure of the Beneficiary to hold a commercially
reasonable public or private foreclosure sale or otherwise to comply with
Applicable Laws in connection with a disposition of Collateral;
(h) all defenses that at any time may be available to any Guarantor by
virtue of any valuation, stay, moratorium or other law now or hereafter in
effect, and ALL RIGHTS AND DEFENSES THAT ARE OR MAY BECOME AVAILABLE TO SUCH
GUARANTOR BY REASON OF SECTIONS 2787 TO 2855, INCLUSIVE, AND SECTION 3433 OF THE
CALIFORNIA CIVIL CODE OR OTHER SIMILAR APPLICABLE LAW; or
(i) any failure, omission, delay or lack of diligence on the part of
the Beneficiary to enforce, assert or exercise any right, power or remedy
conferred on the Beneficiary in respect of the Guarantied Obligations.
9.6 Subrogation; Certain Agreements.
-------------------------------
(a) No Guarantor will exercise any rights that it may now or hereafter
have against the Company or any other Guarantor that arise from the existence,
payment, performance or enforcement of any Guarantor's obligations under this
Guaranty, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Beneficiary against the Company or any
other Guarantor or any Collateral, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, including, without
limitation,
72
the right to take or receive from the Company or any other Guarantor, directly
or indirectly, in cash or other property or by set-off or in any other manner,
payment or security solely on account of such claim, remedy or right, unless and
until all of the Guarantied Obligations and all other amounts payable under this
Guaranty shall have been paid in full in cash. If any amount shall be paid to
any Guarantor in violation of the immediately preceding sentence at any time
prior to the payment in full in cash of the Guarantied Obligations and all other
amounts payable under this Guaranty, such amount shall be held in trust for the
benefit of the Beneficiary and shall forthwith be paid to the Beneficiary to be
credited and applied to the Guarantied Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of this Agreement, or to be held as collateral for any Guarantied Obligations or
other amounts payable under this Guaranty thereafter arising. If (i) any
Guarantor shall make a payment to the Beneficiary of all of the Guarantied
Obligations or (ii) all of the Guarantied Obligations and all other amounts
payable under this Guaranty shall be paid in full in cash, the Beneficiary will,
at the Guarantor's request and expense, execute and deliver to the Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Guarantied Obligations resulting from such payment by the
Guarantor.
(b) Each Guarantor assumes the responsibility for being and keeping
itself informed of the financial condition of the Company and each other Obligor
and of all other circumstances bearing upon the risk of non-payment of the
Guarantied Obligations that diligent inquiry would reveal, and agrees that the
Beneficiary shall have no duty to advise any Guarantor of information regarding
such condition or any such circumstances.
9.7 Bankruptcy No Discharge.
-----------------------
(a) Without limiting Section 9.3, this Guaranty shall not be
-----------
discharged or otherwise affected by any bankruptcy, reorganization, liquidation,
dissolution or similar proceeding commenced by or against the Company or any
other Obligor, including (i) any discharge of, or bar or stay against
collecting, all or any part of the Guarantied Obligations in or as a result of
any such proceeding, whether or not assented to by the Beneficiary, and (ii) any
disallowance of all or any portion of the Beneficiary's claim for repayment of
the Guarantied Obligations. Each Guarantor understands and acknowledges that by
virtue of this Guaranty, it has specifically assumed any and all risks of any
such proceeding with respect to the Company and each other Obligor.
(b) Any Event of Default under Section 10.1(h) or Section 10.1 (i)
-------------- ----------------
that has not been cured or waived shall render all Guarantied Obligations
automatically due and payable for purposes of this Guaranty, notwithstanding any
stay of the right of the Beneficiary to accelerate the Guarantied Obligations.
73
(c) Notwithstanding anything to the contrary herein contained, this
Guaranty (and any Lien on the Collateral securing this Guaranty or the
Guarantied Obligations) shall continue to be effective or be reinstated, as the
case may be, if at any time any payment, or any part thereof, of any or all of
the Guarantied Obligations is rescinded, invalidated, declared to be fraudulent
or voidable as a preference or otherwise required to be restored or returned by
the Beneficiary in connection with any bankruptcy, reorganization, liquidation,
dissolution or similar proceeding involving the Company, any other Obligor or
otherwise, if the proceeds of any Collateral are required to be returned by the
Beneficiary under any such circumstances, or if the Beneficiary elects to return
any such payment or proceeds or any part thereof in its sole discretion, all as
though such payment had not been made or such proceeds not been received.
9.8 Subordination.
-------------
(a) Except as expressly provided for herein, each Guarantor hereby
absolutely subordinates, both in right of payment and in time of payment, any
and all present or future obligations and liabilities of the Company and each
other Obligor to such Guarantor ("Guarantor Subordinated Debt"), to the prior
---------------------------
payment in full in cash of the Guarantied Obligations, whether or not such
Guarantor Subordinated Debt constitutes or arises out of any subrogation,
reimbursement, contribution, indemnity or similar right attributable to this
Guaranty. Without limitation, no payment or distribution of assets of any
Obligor of any kind or character, whether in cash, securities or other property,
shall be made on or with respect to the Guarantor Subordinated Debt prior to the
payment in full in cash of the Guarantied Obligations. If, whether or not at
the Beneficiary's request, any Guarantor shall receive, prior to payment in full
in cash of all Guarantied Obligations, payment of any sum from the Company or
any other Obligor upon any Guarantor Subordinated Debt, any such sum shall be
received by such Guarantor as trustee for the Beneficiary and shall forthwith be
paid over to the Beneficiary on account of the Guarantied Obligations, without
reducing or affecting in any manner the liability of any Guarantor under this
Guaranty.
(b) Each Guarantor shall file in any bankruptcy or reorganization or
similar proceeding in which the filing of claims is required by Applicable Laws,
all claims that such Guarantor may have against the Company or other Obligor (or
its nominee) relating to any Guarantor Subordinated Debt. If the Guarantor does
not file any such claim, the Beneficiary (or its nominee) as attorney-in-fact
for the Guarantor is hereby authorized to do so in the name of such Guarantor.
Each Guarantor agrees that, in connection with any such proceeding, it shall not
contest or oppose the treatment of claims of the Beneficiary in any plan of
reorganization or otherwise and it shall vote any claims that exist by virtue of
this Guaranty or the Guarantor Subordinated Debt in connection with any plans of
reorganization or otherwise, as may be requested by the Beneficiary.
74
(c) Each Guarantor hereby grants the Beneficiary a power of attorney
for the purposes set forth in this Section 9.8. Such power of attorney is
-----------
coupled with an interest and cannot be revoked.
9.9 Maximum Liability of Guarantors. If the obligations of any Guarantor
-------------------------------
hereunder otherwise would be subject to avoidance under Section 548 of the
Bankruptcy Law or any applicable state law relating to fraudulent conveyances or
fraudulent transfers, taking into consideration such Guarantor's (a) rights of
reimbursement and indemnity from the Company with respect to amounts paid by
such Guarantor, (b) rights of subrogation to the rights of the Beneficiary and
(c) rights of contribution from each other Obligor, then such obligations hereby
are reduced to the largest amount that would make them not subject to such
avoidance. Any Person asserting that such Guarantor's obligations are so
avoidable shall have the burden (including the burden of production and of
persuasion) of proving (i) that, without giving effect to this Section 9.9, such
-----------
Guarantor's obligations hereunder would be avoidable and (ii) the extent to
which such obligations are reduced by operation of this Section 9.9.
-----------
9.10 Financial Benefit. Each Guarantor hereby acknowledges and warrants it
-----------------
has derived or expects to derive substantial economic benefits, directly and
indirectly, from the consummation of the transactions contemplated by this
Agreement and the other Investment Documents.
9.11 Review of Documents; Understanding with Respect to Waivers. Each
----------------------------------------------------------
Guarantor hereby acknowledges that it has copies of and is fully familiar with
this Agreement and each of the other Investment Documents executed and delivered
(or to be executed and delivered) to the Company in connection herewith. Each
Guarantor warrants and agrees that each waiver set forth in this Section 9 is
made with such Guarantor's full knowledge of its significance and consequences
and after opportunity to consult with counsel of its own choosing and that,
under the circumstances, each such waiver is reasonable and should not be found
contrary to public policy or law.
9.12 Corporate Existence; Properties. Each Guarantor covenants that it
-------------------------------
will at all times preserve and maintain its corporate existence and any rights
and franchises material to its business and maintain in good repair, working
order and condition (ordinary wear and tear excepted), all of the material
properties useful or necessary to its business, and from time to time such
Guarantor will make or cause to be made all appropriate repairs, renewals and
replacements thereto.
9.13 Guarantor Acknowledgment. Each Guarantor hereby acknowledges that the
------------------------
Purchaser would not have entered into this Agreement or any other Investment
Documents or agreed to consummate the transactions contemplated hereby and
thereby but for the delivery by the Guarantors of this Guaranty and other
covenants and agreements set forth in this Section 9.
---------
75
10. DEFAULTS AND REMEDIES.
---------------------
10. Events of Default. An "Event of Default" occurs if:
-----------------
(a) The Company shall (i) fail to pay as and when due (whether at
stated maturity, upon acceleration or required prepayment or otherwise) any
principal on the Note, or (ii) fail to pay any interest, premium, if any, fees,
costs, expenses or other amounts payable under this Agreement, the Note or any
other Investment Document on the due date hereunder or thereunder; or
(b) (i) The Company or any Guarantor shall breach or fail to perform,
comply with or observe any agreement, covenant or obligation required to be
performed by it under (A) Sections 1.3A (Information Reporting
Requirements), 1.4A (Parent SEC Documents), 1.9A (Insurance), 1.10A
(Taxes), 1.11A (ERISA Matters), 1.15A (Environmental Matters), 1.17A
(Corporate Separateness), 1.18A (Year 2000 Compatibility) and 1.22A
(Appointment of Independent Director) of Section 1.A of Annex A or (B)
----------- -------
Sections 2.1A (Limitations on Indebtedness), 2.3A (Limitations on
Investments), 2.4A (Limitations on Restricted Payments), 2.5A (Change in
Business), 2.8A (Transactions with Affiliates), 2.9A (Fundamental Changes),
2.13A (Parent Covenant) and 2.14A (Removal of Independent Director) of
Section 2.A of Annex A; or
----------- -------
(ii) The Company shall fail to achieve (w) the minimum EBITDA
amount set forth in Column (C) of Section 3.1A of Annex A for the
------------ -------
corresponding four (4) consecutive Fiscal Quarter period, (x) the minimum
Fixed Charge Coverage Ratio set forth in Column (C) of Section 3.2A of
------------
Annex A for the corresponding four (4) consecutive Fiscal Quarter period,
-------
(y) the maximum Leverage Ratio set forth in Column (C) of Section 3.3A as
------------
of the last day of the corresponding Fiscal Quarter of Annex A or (z) any
-------
other covenant set forth in Section 3.A of Annex A; or
----------- -------
(c) The Company or any Guarantor shall breach or fail to perform,
comply with or observe any agreement, covenant or obligation required to be
performed by it under this Agreement or any other Investment Document (other
than the agreements, covenants and other obligations covered by Section 10.1(a)
---------------
and Section 10.1(b)) and, if such breach or failure may be cured, such breach or
---------------
failure shall not have been remedied within ten (10) Business Days after any
officer of the Company or any of its Subsidiaries becomes aware or should have
become aware of such failure or breach; or
(d) Any representation or warranty made by the Company or any
Guarantor under, relating to or in connection with this Agreement or any other
Investment Document shall be false or misleading when made; or
76
(e) Any "Event of Default" (as defined in the Senior Credit
Agreement) shall have occurred and be continuing;
(f) The Company or any Guarantor (i) shall default in the payment
(whether at stated maturity, upon acceleration or required prepayment or
otherwise), beyond any period of grace provided therefor, of any principal of or
interest on any other Indebtedness with a principal amount in excess of
$100,000, or (ii) shall commit any breach of or default under any term of any
agreement, indenture or instrument evidencing or governing any other
Indebtedness, if the effect of such breach or default is to cause, or to permit
the holder or holders of such other Indebtedness to cause (upon the giving of
notice or the passage of time or both), such other Indebtedness to become or be
declared due and payable, or required to be prepaid, redeemed, purchased or
defeased (or an offer of prepayment, redemption, purchase or defeasance is made)
prior to its stated maturity, unless such breach or default has been waived
within ten (10) days following such breach or default by the Person or Persons
entitled to give such waiver; or
(g) Any Investment Document, or any material provision thereof, shall
cease to be of full force and effect for any reason, or the Company or any
Guarantor shall contest or purport to repudiate or disavow any of its
obligations under or the validity or enforceability of any Investment Document
or any material provision thereof, including by operation of law; or
(h) There shall be commenced against the Company, Parent or any of
their respective Subsidiaries an involuntary case seeking the liquidation or
reorganization of such Person under the Bankruptcy Law or any similar proceeding
under any other Applicable Laws or an involuntary case or proceeding seeking the
appointment of a custodian or to take possession of all or a substantial portion
of its property or to operate all or a substantial portion of its business, and
any of the following events occur: (i) any such Person consents to such
involuntary case or proceeding; (ii) the petition commencing the involuntary
case or proceeding is not timely controverted; (iii) the petition commencing the
involuntary case or proceeding remains undismissed and unstayed for a period of
sixty (60) days; or (iv) an order for relief shall have been issued or entered
therein; or
(i) The Company, Parent or any of their respective Subsidiaries shall
institute a voluntary case seeking liquidation or reorganization under the
Bankruptcy Law or any similar proceeding under any other Applicable Laws, or
shall consent thereto; or shall consent to the conversion of an involuntary case
to a voluntary case; or shall file a petition, answer a complaint or otherwise
institute any proceeding seeking, or shall consent or acquiesce to the
appointment of, a custodian or to take possession of all or a substantial
portion of its property or to operate all or a substantial portion of its
business; or shall make a general assignment for the benefit of creditors; or
shall generally not pay its debts as they become due; or the Board of Directors
of any such Person (or any committee thereof) adopts any resolution or otherwise
authorizes action to approve any of the foregoing; or
77
(j) The Company, any Guarantor or any of their respective
Subsidiaries (other than Texas Timberjack) shall suffer any money judgment,
writ, warrant of attachment or other order that involves an amount or value in
excess of the sum of (i) $250,000, plus (ii) the amount of any applicable
deductible under any insurance policies insuring the Company, any Guarantor or
any such Subsidiary against such money judgment, writ, warrant or other order,
provided that (A) such excess amount or value shall not be fully covered by
--------
insurance (and, if requested by the Purchaser, the Company shall cause a letter
to be furnished to the Purchaser from the relevant insurance company confirming
that such excess amount or value is fully covered by insurance) and (B) such
judgment, writ, warrant or other order shall continue unsatisfied and unstayed
for a period of thirty (30) days; or
(k) There shall occur any Material Adverse Change; or
(l) There shall occur any Change in Control; or
(m) The LLCP Representative (as such term is defined in the Investor
Rights Agreement) shall be removed from the Board of Directors of the Company,
or the LLCP Representative shall not be elected or appointed to such Board at
any future election of directors, and, in each such case, the Company shall not
have caused any other individual designed by the Purchaser as the LLCP
Representative to have been elected or appointed as a member of such Board
within five (5) days after the Purchaser shall have designated such other LLCP
Representative (provided, however, that the removal by the Purchaser of the LLCP
-------- -------
Representative shall not be deemed to constitute an Event of Default under this
clause (m)); or
(n) (i) The shareholders of the Company shall not have caused an
individual who is Independent to have been duly elected or appointed to the
Board of Directors of the Company within thirty (30) days after the resignation
or death of the then current Independent Director, or (ii) any individual who is
Independent shall not have been duly elected or appointed to the Board of
Directors of the Company at any future election of directors, or (iii) any
individual who is Independent shall not have been duly elected or appointed to
the Board of Directors of the Company on or within five (5) days following the
effective date of the removal of the then current Independent Director.
The foregoing Events of Default shall be deemed to have occurred,
respectively, and any adjustments in the interest rate under the Note or other
remedies available to the Purchaser hereunder or thereunder shall begin to
apply, at the following times: (i) in the case of the clause (a) above, as of
12:00 p.m. (noon) (Los Angeles time) on the day on which such payment is due but
has not been paid; (ii) in the case of clause (b) above, immediately upon the
occurrence of such breach or failure; (iii) in the case of clause (c) above, as
of the close of business on such tenth (10th) Business Day, if such breach or
failure shall not have been cured, or as of the close of business on the day on
which such breach or violation occurs, if such breach or failure cannot be
cured; (iv) in the case of clause (d) above, as of the close of business on the
day on
78
which the Company first became aware, or should have become aware, that such
representation or warranty was false or misleading when made; (v) in the case of
clause (e) above, as of the occurrence of such "Event of Default"; (vi) in the
case of clause (f)(i) above, as of the close of business on the day on which
such payment of principal or interest is due, or in the case of clause (f)(ii),
as of the close of business on the tenth (10th) day following such breach or
default if such breach or default has not been waived by the Person or Persons
entitled to give such waiver; (vii) in the case of clause (g) above, as of the
close of business on the day such provision ceases to be enforceable or is
repudiated, revoked, renounced or terminated; (viii) in the case of clause (j)
above, as of the close of business on the last day of such thirty (30) day
period if such judgment, writ, warrant or other order remains unsatisfied or
unstayed; (ix) in the case of clauses (h) and (i) above, immediately prior to
the occurrence of any of the events enumerated therein; (x) in the case of
clause (k) above, immediately upon the occurrence of the Material Adverse
Change; (xi) in the case of clause (l) above, immediately upon the occurrence of
the Change in Control; (xii) in the case of clause (m) above, as of the close of
business on the last day of such five (5) day period if the Board of Directors
of the Company shall not have duly elected or appointed such other LLCP
Representative to such Board; and (xiii) in the case of clause (n)(i) above, as
of the close of business on the thirtieth day if the shareholders of the Company
shall not have duly elected or appointed such individual as the Independent
Director, or in the case of clause (n)(ii) above, immediately after any such
future election of directors, or in the case of clause (n)(iii) above, as of the
close of business on the fifth day following the effective date of the removal
of the then current Independent Director.
10.2 Acceleration. If any Event of Default (other than an Event of Default
------------
specified in clause (h) or (i) of Section 10.1) occurs and is continuing, the
------------
Purchaser may, by written notice to the Company, declare all outstanding
principal of, premium, if any, accrued and unpaid interest on, and all other
amounts under the Note, and all other Obligations to Purchaser, to be due and
payable. Upon any such declaration of acceleration, such principal, premium, if
any, interest and other amounts shall become immediately due and payable. If an
Event of Default specified in clause (h) or (i) of Section 10.1 occurs, all
------------
outstanding principal of, premium, if any, accrued and unpaid interest on, and
all other amounts under the Note, and all other Obligations to Purchaser, shall
become immediately due and payable without any declaration or other act on the
part of the Purchaser. The Company hereby waives all presentment for payment,
demand, protest, notice of protest and notice of dishonor, and all other notices
of any kind to which it may be entitled under Applicable Laws or otherwise.
10.3 Other Remedies. If any Default or Event of Default shall occur and be
--------------
continuing, the Purchaser may proceed to protect and enforce its rights and
remedies under this Agreement and any other Investment Document by exercising
all rights and remedies available under this Agreement, any other Investment
Document or Applicable Laws (including, without limitation, the Code), either by
suit in equity or by action at law, or both, whether for the collection of
principal of or interest on the Note, to enforce the specific performance of any
covenant or other term contained in this Agreement or any other Investment
Document. No
79
remedy conferred in this Agreement upon the Purchaser is intended
to be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
10.4 Appointment of Receiver. In addition to all other rights, powers and
-----------------------
remedies that the Purchaser has under this Agreement, any other Investment
Document or Applicable Laws, the Purchaser shall, upon the occurrence of an
Event of Default, be entitled to, and the Company and the Guarantors hereby
consent in advance to, the appointment of a receiver by any court of competent
jurisdiction to take possession of the Collateral and to take control of the
Company for the purpose of operating and thereafter selling the Company to
satisfy its obligations to its creditors, including the Purchaser.
10.5 Waiver of Past Defaults. The Purchaser may, by written notice to the
-----------------------
Company, waive any Default or Event of Default and its consequences with respect
to this Agreement, the Note or any other Investment Document; provided, however,
-------- -------
that no such waiver will extend to any subsequent or other Default or Event of
Default or impair any rights of the Purchaser which may arise as a result of
such Default or Event of Default.
11. TERMINATION.
-----------
11.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing:
(a) By the Purchaser if, between the date hereof and the Closing
Date: (i) any event or condition occurs that has resulted in or would result in
a Material Adverse Change; (ii) any representation or warranty of the Company
and the Guarantors contained in this Agreement shall have been breached such
that the conditions set forth in Section 6 would not or could not be satisfied
---------
on the earlier of (A) the Closing Date and (B) December 3, 1999; (iii) the
Company or any Guarantor shall not have complied with any covenant or other
agreement to be complied with by it and contained in this Agreement; or (iv) the
Company or any Guarantor makes a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against the Company or
any Guarantor seeking to adjudicate any of them a bankrupt or insolvent, or
seeking liquidation, winding up or reorganization, arrangement, adjustment,
protection, relief or composition of its debts under any Applicable Laws
relating to bankruptcy, insolvency or reorganization;
(b) By the Purchaser, on the one hand, or the Company or any
Guarantor, on the other hand, if the Closing Date shall not have occurred on or
before December 3, 1999; provided, however, that the right to terminate this
-------- -------
Agreement under this Section 11.1(b) shall not be available to any party whose
---------------
failure to fulfill any obligation under this Agreement shall
80
have been the cause of, or shall have resulted in, the failure of the Closing
Date to occur on or prior to such date;
(c) By the Purchaser, on the one hand, or the Company or any
Guarantor, on the other hand, if there shall have been issued any injunction,
order, decree or ruling that prohibits or limits any of the transactions
contemplated by this Agreement or the other Investment Documents and such
injunction, order, decree or ruling shall have become final and non-appealable;
or
(d) By the mutual written consent of the Company and the Guarantors.
11.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 11.1, this Agreement shall forthwith become void and
------------
there shall be no liability on the part of any party, except (a) for Sections 1,
-----------
8, 11 and 12 and any other Sections or provisions which survive the termination
------------
of this Agreement by their terms and (b) that nothing herein shall relieve any
party from liability for any breach or violation of this Agreement or payment of
any obligations hereunder.
11.3 Waiver. The Purchaser may (a) extend the time for the performance of
------
any of the obligations or other acts of the Company or any Guarantor, (b) waive
any inaccuracies in the representations or warranties of the Company or any
Guarantor or (c) waive compliance with any of the conditions, covenants or
agreements of the Company or any Guarantor contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument signed by the
Purchaser. Any waiver of the breach of any term or condition shall not be
construed as a waiver of any other breach or subsequent waiver of the same term
or condition, or a waiver of any other term or condition of this Agreement. The
failure of by the Purchaser to assert any of its rights hereunder shall not
constitute a waiver of any such rights.
11.4 Alternative Transaction Fee. If the transactions contemplated by this
---------------------------
Agreement are not consummated for any reason and this Agreement is terminated,
and, within six (6) months after such termination, the Company enters into any
agreement, transaction or understanding with any other Person relating to an
Alternative Transaction, then, in addition to any damages due to the Purchaser
for breach or violation of this Agreement or any other Investment Document by
the Company or any Guarantor, the Company shall pay to the Purchaser the amount
of $300,000 (the "Alternative Transaction Fee"), which Alternative Transaction
---------------------------
Fee shall compensate the Purchaser for the loss of opportunity in connection
with the transactions contemplated by this Agreement and shall be due and
payable to the Purchaser immediately upon the entering into of such agreement,
transaction or understanding.
81
12. MISCELLANEOUS.
-------------
12.1 Survival of Representations and Warranties. All representations,
------------------------------------------
warranties, covenants and agreements contained herein, or made in writing by or
on behalf of the Company pursuant to or in connection herewith, shall survive
the execution and delivery of this Agreement, the issuance, sale and delivery of
the Securities, the repayment of the Note and the exercise of the Warrant, and
any due diligence or other investigation made by or on behalf of the Purchaser.
12.2 Consent to Amendments. No amendment, supplement or other modification
---------------------
to this Agreement or any other Investment Document shall be effective unless the
same shall be in writing and signed by the Purchaser, and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, if, and only if, the Company shall have obtained the prior
written consent of the Purchaser to such action or omission. No course of
dealing between the Company, Parent or their respective Subsidiaries, on the one
hand, and the Purchaser (or any other Holder), on the other hand, nor any delay
in exercising any rights hereunder or under the Note or any other Investment
Document shall operate as a waiver of any rights of the Purchaser (or any other
Holder).
12.3 Entire Agreement. This Agreement, together with the Exhibits,
----------------
Disclosure Schedules and Annex A which are all incorporated herein by this
-------
reference and are an integral part of this Agreement, the Note, the Warrant and
the other Investment Document constitute the full and entire agreement and
understanding between the Purchaser and the Company relating to the subject
matter hereof and thereof, and supersede all prior oral and written, and all
contemporaneous oral, agreements and understandings relating to the subject
matter hereof, including, without limitation, the investment proposal letter
agreement dated July 21, 1999, as amended by a letter agreement dated November
2, 1999, the notification letter dated September 13, 1999, and the
Confidentiality and Non-Disclosure Agreement dated April 28, 1999, among the
Company, the Senior Lender and an Affiliate of the Purchaser.
12.4 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 un enforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
12.5 Successors and Assigns; Assignments. This Agreement shall inure to
-----------------------------------
the benefit of, and be binding upon, the parties and their respective successors
and permitted assigns. The Purchaser may, without the consent of the Company or
any Guarantor, sell, assign or delegate to one or more Persons (each an
"Assignee") all, or any part, of the Obligations to Purchaser and the other
--------
rights and obligations of the Purchaser under this Agreement and the other
Investment Documents; provided, however, that the Company and the Guarantors may
-------- -------
continue to deal solely and directly with the Purchaser in connection with the
interest so assigned to the
82
Assignee until written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee
shall have been given to the Company. If the Purchaser assigns to any Assignee a
fifty percent (50.0%) or lesser interest in and to the then outstanding
principal amount of the Note, any decisions that the Purchaser is entitled to
make under this Agreement, the Note and the other Investment Documents shall be
made by the Purchaser, and the Company may continue to deal solely and directly
with respect to the Purchaser in connection with the interests so assigned to
the Assignee. If the Purchaser assigns to any Assignee more than a fifty percent
(50.0%) interest in and to the then outstanding principal amount of the Note,
any decisions that the Purchaser is entitled to make under this Agreement, the
Note and the other Investment Documents shall be made by the Holders of a
majority of the principal amount of the Note outstanding at the time such
decision is made.
12.6 Notices. All notices, requests, demands and other communications
-------
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if transmitted by telecopier with
receipt acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of 72 hours
after mailing, if mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(i) If to the Purchaser, to:
Xxxxxx Xxxxxxxxx Capital Partners II, L.P.
c/o Levine Xxxxxxxxx Capital Partners, Inc.
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
--------------
Xxxxxxx & XxXxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
83
(ii) If to the Company or Overhill Ventures, at:
Overhill Farms, Inc.
0000 Xxxxxxxx Xxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
--------------
Xxxxxxx, Xxxxxxx & Smiley, LLP
0000 Xxxxxxxxx Xxxx. Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Arbiter, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(ii) If to Parent, at:
Polyphase Corporation
0000 Xxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or at such other address or addresses as the Purchaser or the Company, as the
case may be, may specify by written notice given in accordance with this Section
-------
12.6.
----
12.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one instrument.
12.8 Governing Law. In all respects, including all matters of
-------------
construction, validity and performance, this Agreement and the rights and
obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of California applicable to contracts
made and performed in such state, without regard to the choice of law or
conflicts of law principles thereof.
12.9 Publicity. The Company and the Guarantors (including their
---------
Affiliates), on the one hand, and the Purchaser (including its Affiliates), on
the other hand, will consult with the
84
other before issuing, and provide each other the opportunity to review, comment
upon and concur with and use reasonable efforts to agree on, any press release
or other public statement with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make such other public
announcement prior to such consultation, except as required under Applicable
Laws. The parties agree that the initial press release to be issued with respect
to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties. Notwithstanding anything to the contrary,
the Company hereby consents to the preparation and publication by the Purchaser
of an advertisement "tombstone" publicly disclosing the closing of the
transactions contemplated by this Agreement.
12.10 Due Diligence Investigation. The Company and the Guarantors hereby
---------------------------
acknowledge and agree that neither the Purchaser's review of the books and
records or condition (financial or otherwise) of the Company or any Guarantor
nor any other due diligence investigation conducted by or on behalf of the
Purchaser shall be deemed to constitute knowledge by the Purchaser of any facts
or other matters so as so reduce the Purchaser's right to rely on the accuracy
of the representations and warranties of the Company and the Guarantors under
this Agreement or any other Investment Document.
12.11 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
--------------------
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, AND
UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, THE PARTIES WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO, THIS SECURITIES PURCHASE AGREEMENT, ANY
OTHER INVESTMENT DOCUMENT OR THE TRANSACTIONS COMPLETED HEREBY OR THEREBY.
85
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized representatives as of the date first
written above.
COMPANY PARENT
------- ------
OVERHILL FARMS, INC., a Nevada POLYPHASE CORPORATION, a Nevada
corporation corporation
By:_______________________________ By:__________________________________
Xxxxx Xxxxx Xxxxx Xxxxx
President and Chief Executive President and Chief Executive
Officer Officer
By:__________________________________
By:________________________________ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx Senior Vice President and
Vice President and Chief Financial Chief Financial Officer
Officer
OVERHILL VENTURES PURCHASER
----------------- ---------
OVERHILL L. C. VENTURES, INC., a XXXXXX XXXXXXXXX CAPITAL
California corporation PARTNERS, INC., a California corporation
On behalf of XXXXXX XXXXXXXXX
By:______________________________ CAPITAL PARTNERS II, L.P., a
Xxxxx Xxxxx California limited partnership
President and Chief Executive
Officer
By:__________________________
By:______________________________ Xxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxx Chief Executive Officer
Vice President and Chief Financial
Officer
86
