EXHIBIT 10.1
XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P.
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
February 24, 2005
Xxxxx Xxxxx
President and Chief Executive Officer
Overhill Farms, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Re: Overhill Farms, Inc. 2005 Stock Plan
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Dear Xx. Xxxxx:
Reference is made to that certain Second Amended and Restated
Securities Purchase Agreement dated as of April 16, 2003, as amended by a First
Amendment to Second Amended and Restated Securities Purchase Agreement dated as
of May 16, 2003, a Second Amendment to Second Amended and Restated Securities
Purchase Agreement dated as of June 19, 2003, a Third Amendment to Second
Amended and Restated Securities Purchase Agreement dated as of October 31, 2003
and a Fourth Amendment to Second Amended and Restated Securities Purchase
Agreement dated as of October 6, 2004 (but effective as of September 26, 2004)
(as so amended and as further amended from time to time, the "SECURITIES
PURCHASE AGREEMENT"), by and among Overhill Farms, Inc., a Nevada corporation
(the "COMPANY"), the entities from time to time parties thereto as Guarantors
and Xxxxxx Xxxxxxxxx Capital Partners II, L.P. (the "PURCHASER"). Unless
otherwise indicated, all capitalized terms used and not defined herein have the
meanings ascribed to them in the Securities Purchase Agreement.
Reference is further made to that certain Amended and Restated Investor
Rights Agreement dated as of October 29, 2002, as amended by an Amendment to
Amended and Restated Investor Rights Agreement dated as of April 16, 2003, and a
Second Amendment to Amended and Restated Investor Rights Agreement dated as of
October 31, 2003 (as so amended and as further amended from time to time, the
"INVESTOR RIGHTS AGREEMENT"), among the Company, Xxxxx Xxxxx, an individual, and
the Purchaser.
Xxxxx Xxxxx
Overhill Farms, Inc.
As of February 24, 2005
The Company has advised the Purchaser that the Company's Board of
Directors has adopted and approved a new stock plan entitled the Overhill Farms,
Inc. 2005 Stock Plan, substantially in the form attached as EXHIBIT A hereto
(the "2005 PLAN"), subject to receipt of various required approvals (including
the consent of the Purchaser). Section 5.2 of the Investor Rights Agreement
provides in relevant part that the Company may not adopt or approve any stock
option plan, agreement or arrangement without the prior affirmative vote or
written consent of the holders of at least a majority of the outstanding shares
of Capital Stock of the Company, including the prior affirmative vote or written
consent of the Purchaser. The Company has requested that the Purchaser furnish
its written consent to the adoption and approval of the 2005 Plan in the form
attached as EXHIBIT B hereto (the "2005 PLAN CONSENT").
This letter agreement memorializes the parties' understanding and
agreement regarding the Purchaser's agreement to deliver the 2005 Plan Consent
to the Company and, in exchange therefor, the Company's offer and agreement to
issue the Anti-Dilution Shares (as defined below) to the Purchaser as provided
below.
Concurrently herewith, and as requested by the Company, the Purchaser
is delivering the 2005 Plan Consent to the Company, duly executed on behalf of
the Purchaser. In exchange for the delivery of the 2005 Plan Consent by the
Purchaser, the Company hereby covenants and agrees as follows:
1. The Company has granted (subject to receipt of various approvals
(including the consent of the Purchaser)) Options (as defined in the 2005 Plan),
and may grant additional Options and Stock Purchase Rights (as defined in the
2005 Plan), under the 2005 Plan (collectively, "PLAN AWARDS"), subject to
Paragraphs 2 and 3 below, up to an amount representing, in the aggregate,
550,000 shares of Common Stock (the "MAXIMUM NUMBER OF SHARES"), PROVIDED that
of the Maximum Number of Shares, Plan Awards for (a) not less than 50,000 shares
must be granted at a price (whether an exercise price for Options or a purchase
price for Stock Purchase Rights) (a "Price") of not less than $1.50 per share,
(b) not less than 50,000 shares must be granted at a Price of not less than
$2.00 per share, (c) not less than 50,000 shares must be granted at a Price of
not less than $2.50 per share and (d) the remaining shares must be granted at a
Price of not less than the fair market value per share at the time of grant. In
no event shall any Plan Awards be granted at a Price that is below the fair
market value per share of Common Stock at the time of grant. The Company
acknowledges and agrees that the 2005 Plan, the Options previously granted by
the Company's Board of Directors under the 2005 Plan and any other Plan Awards
granted in the future under the 2005 Plan, are not and will not be effective
unless and until, among other things, the Company obtains the approval of its
stockholders for adoption of the 2005 Plan in accordance with the rules of the
AMEX and other Applicable Laws.
2. If the Company decides to seek such approval of its stockholders for
the adoption of the 2005 Plan, then, in consideration for the 2005 Plan Consent
and to compensate the Purchaser for the dilutive effect of the Plan Awards, the
Company shall, subject to the provisions of this Paragraph 2, issue and deliver
to the Purchaser 83,641 fully paid and non-assessable shares of Common Stock
(the "ANTI-DILUTION SHARES") in accordance with this Paragraph 2 and subject to
the other terms of this letter agreement.
-2-
Xxxxx Xxxxx
Overhill Farms, Inc.
As of February 24, 2005
(a) The Company shall file with the AMEX, in accordance with
the applicable rules of the AMEX, an application for the listing (the
"LISTING APPLICATION") of (i) the maximum number of shares of Common
Stock issuable under the 2005 Plan and (ii) the Anti-Dilution Shares.
(b) If, with respect to the Anti-Dilution Shares, the AMEX
conditions its approval of the Listing Application on the Company
obtaining the approval of its stockholders to the issuance of the
Anti-Dilution Shares to the Purchaser, then the Company shall (i)
include in any proxy or information statement filed with the SEC in
connection with stockholder approval of the 2005 Plan a proposal to
issue the Anti-Dilution Shares to the Purchaser, (ii) through its Board
of Directors, recommend to its stockholders approval of the issuance of
the Anti-Dilution Shares to the Purchaser, (iii) use its best efforts
to solicit and obtain such approval by its stockholders after such
proxy or information statement has been distributed to stockholders,
(iv) not withdraw or modify, or propose to withdraw or modify, such
recommendation (unless the Company decides to withdraw the 2005 Plan
from stockholder consideration) and (v) ensure that all proxies or
consents solicited in connection with stockholder approval are
solicited in compliance with all Applicable Laws.
(c) Without limiting the generality of clause (b) above, in
connection with any proxy or information statement filed with the SEC
in connection with stockholder approval, the Company shall use its best
efforts to respond to any comments of the SEC. The Company and its
counsel shall notify the Purchaser within one (1) Business Day of
receipt of any comments from the SEC and of any request by the SEC for
any amendments or supplements to such proxy or information statement or
for additional information and will supply the Purchaser with copies of
all correspondence between the Company and any of its representatives,
on the one hand, and the SEC, on the other. The Company shall give the
Purchaser an opportunity to comment on any correspondence with the SEC
and shall not transmit any such material to which the Purchaser
reasonably objects. If at any time prior to the meeting of stockholders
there shall occur any event that should be set forth in an amendment or
supplement to such proxy or information statement, the Company shall
promptly prepare such amendment or supplement and after obtaining the
consent of the Purchaser to such amendment or supplement, shall
promptly transmit such amendment or supplement to the Company's
stockholders.
(d) On the Business Day immediately following the date upon
which the AMEX shall have approved the Listing Application with respect
to the issuance of the Anti-Dilution Shares and the maximum number of
shares of Common Stock issuable under the 2005 Plan, the Company shall
instruct its transfer agent to issue and deliver to the Purchaser, via
overnight delivery service, an original stock certificate, registered
in the name of the Purchaser, representing the Anti-Dilution Shares.
-3-
Xxxxx Xxxxx
Overhill Farms, Inc.
As of February 24, 2005
3. The Company acknowledges and agrees that the Company has not
granted, and may not grant, any Plan Awards other than Options, and no such
Options shall vest or otherwise become exercisable under any circumstances,
unless the Purchaser shall have received the Anti-Dilution Shares. The parties
agree that if the Purchaser shall have actually received the Anti-Dilution
Shares pursuant to Section 2(d) above, then Options outstanding as of the date
of AMEX approval of the Listing Application shall be permitted to vest and
become exercisable as of (but not earlier than) the date of AMEX approval of the
Listing Application or thereafter, all in accordance with their respective
terms.
4. The Company acknowledges and agrees that the Anti-Dilution Shares
constitute "Registrable Securities" for purposes of the Registration Rights
Agreement.
5. In addition, simultaneously with the issuance of the Anti-Dilution
Shares to the Purchaser, the Company shall cause Xxxxx & Xxxxxx LLP and/or
Xxxxxx Xxxxxxxx Xxxxxx & Xxxxxxx, in each case special counsel to the Company
(or such other counsel as may be reasonably acceptable to the Purchaser), to
deliver to the Purchaser a legal opinion letter, in form and substance
satisfactory to the Purchaser, dated as of such date and addressed to the
Purchaser, to the effect that (and the Company shall also represent and warrant
in writing at such time that):
(a) This letter agreement constitutes a legal, valid and
binding obligation of the Company, enforceable against it in accordance
with its terms;
(b) All corporate action necessary to be taken by the Company
in connection with the issuance of the Anti-Dilution Shares to the
Purchaser as provided herein have been duly and validly taken;
(c) The Anti-Dilution Shares have been duly authorized and
validly issued and are fully paid and non-assessable, free and clear of
any liens, claims or encumbrances imposed under Nevada law (PROVIDED
that, for purposes of the Company's representations and warranties, the
Company shall also represent that the Anti-Dilution Shares are free and
clear of any Liens, claims or encumbrances other than restrictions
under applicable securities laws and those, if any, created by the
Purchaser);
(d) The offer, issuance and sale of the Anti-Dilution Shares
is exempt from the registration requirements of Section 5 of the
Securities Act and any registration or qualification requirements of
applicable California or Nevada state securities or "blue sky" laws;
and
(e) No Consent of any Governmental Authority (including the
AMEX) or other Person is required to be obtained or made in connection
with the issuance of the Anti-Dilution Shares other than those that
have been obtained or made.
In order to induce the Purchaser to deliver the 2005 Plan Consent, the
Company hereby represents and warrants to the Purchaser that (i) the Board of
Directors of the Company has duly authorized and approved this letter agreement
-4-
Xxxxx Xxxxx
Overhill Farms, Inc.
As of February 24, 2005
and the issuance of the Anti-Dilution Shares, (ii) this letter agreement
constitutes a legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, and (iii) no Default or Event of
Default has occurred and is continuing as of the date hereof.
In consideration for the Company's covenants and agreements made
herein, the Purchaser hereby covenants and agrees as follows:
A. The issuance of the Anti-Dilution Shares will not have been
registered under the Securities Act at the time of issuance and will be
"restricted securities" for purposes thereof, including Rule 144 thereunder, and
appropriately legended. At the time of issuance of the Anti-Dilution Shares, the
Purchaser will execute and deliver to the Company an investment representation
statement in customary form and content and containing representations that the
Purchaser has made before in respect of similar issuances of securities.
B. This letter constitutes a legal, valid and binding obligation of the
Purchaser, enforceable against it in accordance with its terms.
C. The Purchaser shall, if permitted to do so, vote all shares of the
Company's voting capital stock held by it in favor of approval of the 2005 Plan
and the issuance of the Anti-Dilution Shares at the meeting of stockholders held
for such purpose.
D. If the Company's stockholders do not approve the 2005 Plan or if
AMEX does not approve the Listing Application covering the maximum number of
shares of Common Stock under the 2005 Plan and the Anti-Dilution Shares, such
that none of the Options (or any other Plan Awards) granted thereunder vests or
otherwise becomes exercisable, then the Purchaser shall not be entitled to
receive the Anti-Dilution Shares. If the Company's stockholders approve the 2005
Plan but do not approve the issuance of the Anti-Dilution Shares, or if the AMEX
approves the Listing Application solely with respect to the shares of Common
Stock issuable under the 2005 Plan and not the Anti-Dilution Shares, then none
of the Options (or any other Plan Awards) granted thereunder shall vest or
otherwise become exercisable.
Furthermore, pursuant to the Securities Purchase Agreement, the
Purchaser requests that the Company reimburse the Purchaser for all fees and
expenses incurred by or on behalf of the Purchaser that remain unpaid, including
an estimate of the fees and expenses incurred in connection with this letter
agreement, in the amount of $7,500. This letter agreement shall not be effective
unless and until the Purchaser receives payment of such reimbursement amount.
This letter agreement constitutes an Investment Document.
-5-
Xxxxx Xxxxx
Overhill Farms, Inc.
As of February 24, 2005
Please acknowledge your agreement with the foregoing by signing this
letter agreement in the space indicated below and returning a signed copy to us
as soon as possible.
Sincerely yours,
/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Vice President
Xxxxxx Xxxxxxxxx Capital Partners, Inc.
ACKNOWLEDGED AND AGREED:
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OVERHILL FARMS, INC., a Nevada
corporation
By: /s/ Xxxxx Xxxxx
-------------------------------------
Xxxxx Xxxxx
President and Chief Executive Officer
cc: Xxxxx X. Amber, Esq.
Xxxxxx Xxxxxx, Esq.
Xxxxxxxx X. Xxxxx, Esq.
Xxxxxx X. Xxxxx, Xx., Esq.
-6-
EXHIBIT A
Form of 2005 Stock Plan
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(A copy of the 2005 Stock Plan that was filed as Exhibit 10.1 to the Company's
Form 8-K for February 1, 2005 is attached as Exhibit A to the original copy of
this agreement.)
EXHIBIT B
Form of
2005 Plan Consent
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CONSENT TO ADOPTION OF 2005 STOCK PLAN
Pursuant to Section 5.2 of the Amended and Restated Investor Rights
Agreement dated as of October 29, 2002, as amended by an Amendment to Amended
and Restated Investor Rights Agreement dated as of April 16, 2003, and a Second
Amendment to Amended and Restated Investor Rights Agreement dated as of October
31, 2003, among Overhill Farms, Inc., a Nevada corporation (the "CORPORATION"),
Xxxxx Xxxxx, an individual, and the undersigned, the undersigned hereby
consents, effective as of February 1, 2005, to the adoption and approval by the
Corporation of the 2005 Stock Plan of the Corporation, in the form attached as
EXHIBIT A hereto, providing for the grant of options and other awards to
Eligible Persons (as defined therein) to acquire up to 550,000 shares of the
Corporation's Common Stock, subject to the terms and conditions set forth
therein and in that certain letter agreement dated February 24, 2005, between
the Corporation and the undersigned.
XXXXXX XXXXXXXXX CAPITAL
PARTNERS II, L.P., a California
limited partnership
By: LLCP California Equity Partners II,
L.P., a California limited partnership,
its General Partner
By: Xxxxxx Xxxxxxxxx Capital
Partners, Inc., its General
Partner
By:
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Xxxxxx X. Xxxxxxx
Vice President
