SHARE EXCHANGE AGREEMENT
by and among
Harvest Restaurant Group, Inc., a Texas Corporation
and
TRC Acquisition Corporation, a Georgia Corporation
Dated as of July 9, 1998
TABLE OF CONTENTS
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PAGE
ARTICLE I ARTICLE I
CONDITIONS TO OBLIGATION OF THE PARTIES 2
Section 1.1 Conditions to Obligations 2
Section 1.2 Contemplated Transactions 2
1.2.1 Financing 2
1.2.2 Shareholder Approval of New Board of Directors 3
1.2.3 Employment Agreements 3
1.2.4 Continued Listing 3
1.2.5 Settlement of Liabilities 3
1.2.6 Conversion of Series A Convertible Preferred Stock 3
1.2.7 Combined Financials of Harvest and TRC 3
ARTICLE II FEASIBILITY PERIOD 3
Section 2.1 Feasibility Study 3
Section 2.2 Pre-Closing Documents to be Delivered 4
2.2.1 Financial Statements 4
2.2.2 Asset List 4
2.2.3 Leases 4
2.2.4 Contracts 4
2.2.5 Certificates 4
2.2.6 Taxes 4
2.2.7 Litigation 4
2.2.8 Violations 4
2.2.9 Organizational Documents 4
ARTICLE III THE CLOSING 5
Section 3.1 Closing 5
3.1.1 Time and Place of Closing 5
3.1.2 Actions of Harvest at Closing 5
3.1.2.1 Resignations 5
3.1.2.2 Certificate of Harvest 5
3.1.2.3 Corporation Resolutions 5
3.1.2.4 Exchange of Shares 5
3.1.3 Actions of TRC at Closing 5
3.1.3.1 Resignations 5
3.1.3.2 Certificate of TRC 5
3.1.3.3 Corporation Resolutions 6
3.1.4 Effective Date 6
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ARTICLE IV EXCHANGE OF SHARES 6
Section 4.1 Exchange of Shares 6
4.1.1 Exchange of TRC Common Stock 6
4.1.2 Exchange of ▇▇▇▇ ▇▇▇▇▇▇ Note and
TRC Class A Preferred Stock 6
Section 4.2 Exchange Procedure 6
4.2.1 TRC Common Stock 6
4.2.2 TRC Class A Preferred Stock 7
Section 4.3 Appraisal Rights 7
ARTICLE V TRC REPRESENTATIONS AND WARRANTIES 7
Section 5.1 TRC's Representations and Warranties 7
5.1.1 Capitalization 7
5.1.1.1 Authorized Stock 7
5.1.1.2 Issued Capital Stock 7
5.1.2 Organization Standing and Power 7
5.1.3 Subsidiaries 8
5.1.4 Title to Assets 8
5.1.5 Other Relationships 8
5.1.6 Other Transactions 8
5.1.7 Undisclosed Liabilities 8
5.1.8 Absence of Certain Changes or Events 8
5.1.9 Condition of Assets 8
5.1.10 Compliance With Law 8
5.1.11 Contracts 9
5.1.12 Permits, Licenses, Consents 9
5.1.13 Absence of Defaults 9
5.1.14 Litigation 9
5.1.15 No Breach or Violation of Law 9
5.1.16 Validity and Authorization 10
5.1.17 Completeness; No Misrepresentations 10
5.1.18 Tax Matters 10
5.1.19 Financial Statements 10
5.1.20 Full Disclosure 10
5.1.21 Absence of Certain Changes and Events 10
5.1.22 Taxes 12
5.1.23 Intellectual Property 14
5.1.24 Books and Records 16
5.1.25 Leased Properties 16
5.1.26 Employees and Employee Benefit Plans 16
5.1.27 Compensation 17
5.1.28 Insurance 17
5.1.29 Full Disclosure 18
ARTICLE VI TRC'S COVENANTS 18
Section 6.1 Continuation of Business 18
Section 6.2 No Solicitation 18
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ARTICLE VII HARVEST'S REPRESENTATIONS AND WARRANTIES 18
Section 7.1 Harvest's Representations and Warranties 18
7.1.1 Capitalization 18
7.1.1.1 Authorized Stock 18
7.1.1.2 Issued Common Stock 19
7.1.1.3 Issued Preferred Stock 19
7.1.2 Standing and Power 19
7.1.3 Subsidiaries 19
7.1.4 Title to Asset 19
7.1.5 Other Relationships 19
7.1.6 Other Transactions 19
7.1.7 Undisclosed Liabilities 19
7.1.8 Absence of Certain Changes, or Events 20
7.1.9 Condition of Assets 20
7.1.10 Compliance With Law 20
7.1.11 Contracts and Commitments 20
7.1.12 Permits, Licenses, Consents 20
7.1.13 Absence of Defaults 21
7.1.14 Litigation 21
7.1.15 No Breach or Violation of Law 21
7.1.16 Validity and Authorization 21
7.1.17 Completeness: No Misrepresentations 21
7.1.18 Tax Matters 21
7.1.19 Financial Statements 22
7.1.20 Absence of Certain Changes and Events 22
7.1.21 Taxes 23
7.1.22 Compliance With Law 25
7.1.23 Intellectual Property 25
7.1.24 Books and Records 27
7.1.25 Leased Properties 27
7.1.26 Employees and Employee Benefit Plans 28
7.1.27 Compensation 29
7.1.28 Insurance 29
7.1.29 Full Disclosure 29
7.1.30 Securities and Nasdaq Listing 29
ARTICLE VIII HARVEST'S COVENANTS 29
Section 8.1 Continuation of Business 29
Section 8.2 No Solicitation 29
Section 8.3 Termination of Stock Option Plan 30
ARTICLE IX TERMINATION 30
Section 9.1 Termination Events 30
Section 9.2 Effect of Termination 30
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ARTICLE X INDEMNIFICATION; REMEDIES 30
Section 10.1 Survival; Right to Indemnification
Not Affected by Knowledge 30
Section 10.2 Indemnification and Payment of Damages by Harvest 31
Section 10.3 Indemnification and Payment of Damages by Harvest
- Environmental Matters 31
Section 10.4 Indemnification and Payment of Damages by TRC 32
Section 10.5 Indemnification and Payment of Damages by TRC
- Environmental Matters 32
Section 10.6 Time Limitations 33
Section 10.7 Procedure for Indemnification - Third Party Claims 33
ARTICLE XI CONDITIONS TO THE EXCHANGE OF STOCK 34
Section 11.1 Conditions Precedent to Performance by Harvest 34
Section 11.2 Board and Stockholder Approval 34
11.2.1 Representations; True Representations and
Covenants Performed 34
11.2.2 No Litigation Affecting Merger 35
11.2.3 Securities Laws 35
11.2.4 Regulatory Compliance, Approvals and Consents 35
11.2.5 Filings 35
Section 11.3 Conditions Precedent to Performance by TRC 35
11.3.1 Board and Stockholder Approval 35
11.3.2 Representations True and Covenants Performed 35
11.3.3 No Litigation Affecting Merger 35
11.3.4 Securities Laws 36
11.3.5 Regulatory Compliance, Approvals and Consents 36
11.3.6 Filings 36
ARTICLE XII NOTICES 36
Section 12.1 Notices 36
Section 12.2 Change of Address 37
ARTICLE XIII GENERAL 37
Section 13.1 Governing Law 37
Section 13.2 Press Releases 37
Section 13.3 Entire Agreement 37
Section 13.4 Successors 37
Section 13.5 Modification 37
Section 13.6 Severability 38
Section 13.7 Counterparts 38
Section 13.8 Signatures by Facsimile 38
Section 13.9 Remedies of the Parties 38
Section 13.10 Arbitration 38
Section 13.11 Attorney's Fees 38
Section 13.12 Cooperation and Records Retention 38
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SCHEDULES
SCHEDULE 1 ▇▇▇▇▇▇'▇ RESTAURANTS
SCHEDULE 2 STATEMENT OF RESOLUTION OF HARVEST SERIES C PREFERRED STOCK
SCHEDULE 1.2 BUSINESS TERMS ----- N/A ----
SCHEDULE 1.2.1 FINANCING TERMS
SCHEDULE 1.2.1(A) LOAN TERMS (REVISED - HARTAN OPTION TO PUT TO TRC)
SCHEDULE 1.2.2 BOARD OF DIRECTORS
SCHEDULE 1.2.3 EMPLOYMENT AGREEMENTS
SCHEDULE 1.2.7 COMBINED FINANCIALS OF HARVEST AND TRC ----- N/A -----
SCHEDULE 5.1 TRC DISCLOSURES
SCHEDULE 7.1 HARVEST DISCLOSURES
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SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT is made and entered into as of this 9th day
of July, 1998, between HARVEST RESTAURANT GROUP, INC., a Texas corporation
("Harvest"), and TRC ACQUISITION CORPORATION, a Georgia corporation ("TRC"),
referred to jointly as the ("Parties").
RECITALS
WHEREAS, TRC has approximately 4,110,000 issued and outstanding shares of
common stock and warrants and options (all warrants and options to be converted
into the 4,110,000 shares prior to the closing contemplated herein) ("TRC Common
Stock"), and approximately 2,000 issued and outstanding shares of class A
preferred stock ("TRC Class A Preferred Stock"), which represents all of the
issued and outstanding capital stock of TRC;
WHEREAS, the principal assets and business of TRC are the operation of
approximately eleven (11) ▇▇▇▇▇▇'▇ restaurants and the franchise of two (2)
▇▇▇▇▇▇'▇ restaurants, which are described by name and location on Schedule "1"
("▇▇▇▇▇▇'▇ Restaurant(s)");
WHEREAS, Harvest is a public corporation which operates quick service
restaurants under the name Harvest Rotisserie and Harvest Food Court which
includes the brand names of Red Line Burgers and Old San Antonio Taco Factory;
WHEREAS, on June 9, 1998, Harvest was notified by the NASDAQ Stock Market,
Inc., that its continued listing on The Nasdaq Small Cap Market was subject to
revocation for its failure to meet the net tangible assets/market
capitalization/net income requirement as set forth in NASD Marketplace Rule
4310(c)(2) and for its failure to meet the minimum bid price requirements set
forth in NASD Marketplace Rule 4310(c)(4). A hearing was set before the NASD on
July 9, 1998 (the "NASD Hearing");
WHEREAS, on May 7, 1998, the parties executed a letter of intent wherein
the basic terms of the transactions described herein were agreed to and reduced
to writing, subject to further negotiations;
WHEREAS, this Agreement is entered into to, among other matters, rectify
the deficiencies with NASDAQ Compliance;
WHEREAS, it is understood and agreed that prior to the Effective Date (the
"Effective Date"), the outstanding capital stock of Harvest, including shares
issuable upon exercise of options and warrants, shall not exceed the following
share amounts: 3,463,009 shares of Common Stock (the "Harvest Common Stock"),
635,892 shares of Series A Convertible Preferred Stock (the "Harvest Series A
Preferred Stock"), 133 shares of Series B Convertible Preferred Stock (the
"Harvest Series B Preferred Stock"), and 3,083,000 options or warrants for
Common Stock, 1,923,400 warrants for Series A Convertible Preferred Stock shares
upon exercise of all warrants and options, and 200,000 shares of Common Stock
and 300,000 warrants to Sterling Capital and ▇.▇. ▇▇▇▇▇ at a strike price of
$2.50 per share (the "Harvest Warrants and Options") (the Harvest Common Stock,
Harvest Series A Preferred Stock and Harvest Series B Preferred Stock are
sometimes collectively referred to herein as "Harvest Capital Stock"). Except to
the extent of the number of Harvest Series B Preferred Stock issued in
connection with the financing described in paragraph 1.2.1 below, to the extent
that the number of actual outstanding shares of Harvest Capital Stock on the
Effective Date exceeds the share amounts stated above, then the shares of
Harvest Common Stock to be issued to the holders of TRC Common Stock as set
forth above shall be adjusted pro rata to maintain the same ownership
percentage;
WHEREAS, the intended result of this Shareholder Exchange Agreement is for
Harvest to issue 18,000,000 shares of Harvest Common Stock to TRC Shareholders
in exchange for 100% of the issued and outstanding TRC Common Stock;
WHEREAS, it is intended that the TRC convertible subordinated debenture to
▇▇▇▇ ▇▇▇▇▇▇ (the "▇▇▇▇ ▇▇▇▇▇▇ Note") and the TRC Class A Preferred Stock shall
be exchanged for a newly created series of preferred stock of Harvest (the
"Harvest Series C Preferred Stock"). Harvest Series C Preferred Stock shall
accrue dividends at the annual rate of 8%, and is convertible at the option of
the holder at any time after six (6) months into shares of Harvest Common Stock
at conversion rate of $2.50 for each share of Harvest Common Stock. Harvest
Series C Preferred Stock may be redeemed at the option of Harvest after six (6)
months after the Effective Date upon thirty (30) days written notice for $.01
per share if the closing price of Harvest's Common Stock on the NASDAQ SmallCap
Market averages at least $3.50 per share for a period of twenty (20) consecutive
trading days, if after notice to any Harvest Series C Preferred Stock holder,
and such holder does not convert. Harvest Series C Preferred Stock shall have
the rights, preferences, privileges and restrictions as are specified in the
Statement of Resolution attached hereto as Schedule 2;
WHEREAS, the Parties intend this transaction to qualify as a "tax-free
reorganization" within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that TRC become a subsidiary
of Harvest. The Parties believe that the value of Harvest stock to be received
is equal to the value of the TRC stock to be surrendered in exchange therefor.
No other consideration that could constitute "other property" within the meaning
of Section 356 of the Code is being paid by Harvest for the stock of TRC in the
merger;
NOW, THEREFORE, in reliance upon the recitals set forth above, the parties
agree as follows:
ARTICLE I.
CONDITIONS TO OBLIGATION OF THE PARTIES
Section 1.1 Conditions to Obligations. The obligation of the Parties under
this Agreement to consummate the share exchange under this Agreement is
contingent upon the completion of certain other transactions listed below and
defined collectively as the "Contemplated Transactions." Each of the Parties
shall use its best efforts to complete all of the Contemplated Transactions. If
any of the Contemplated Transactions are not completed, then the Parties shall
not be in default of their obligations under this Agreement and each party's
sole remedy shall be the termination of this Agreement.
Section 1.2 Contemplated Transactions. This Agreement contemplates that the
following multiple transactions (collectively, the "Contemplated Transactions")
be completed before or concurrently with the Closing of this transaction.
1.2.1 Financing. A financing commitment of $6,000,000.00 plus
additional sums, if a higher amount shall be required to maintain the listing of
Harvest securities on the Nasdaq Stock Market, shall be obtained on or before
the Nasdaq Hearing and is to be used approximately as follows:
(a) $1,500,000.00 to the Harvest subsidiary described below for
the development of up to five (5) ▇▇▇▇▇▇'▇ restaurants;
2
(b) $500,000.00 for the payoff of Harvest existing obligations;
and
(c) the remainder for corporate purposes.
Such financing shall be on terms equal to or better than the terms set forth on
Schedule 1.2.1 attached hereto and made a part hereof, and all other terms
reasonably requested by TRC.
The monies to be provided in 1.2.1(a) shall be funded to a new, wholly-owned
subsidiary of Harvest ("Harvest Subsidiary") within five (5) business days after
the date of NASD Hearing of the continued listing of Harvest. The sums shall be
funded for the express purposes described above in Section 1.2.1. Prior to the
advancement of payment of any monies by the Harvest Subsidiary, (1) TRC shall
franchise to the Harvest Subsidiary the right to own and operate up to five (5)
▇▇▇▇▇▇'▇ Restaurants on terms mutually agreeable; (2) Harvest and TRC shall
enter into a development and management agreement, on terms mutually agreeable,
for TRC to develop up to five (5) ▇▇▇▇▇▇'▇ Restaurants; and (3) Harvest and TRC
shall enter into an option in favor of the Harvest Subsidiary to require TRC to
purchase the developed ▇▇▇▇▇▇'▇ Restaurants, in the event that TRC, for any
reason, does not consummate the closing set forth in this Agreement. The option
shall be on terms mutually agreeable to the parties. The remainder of financing
proceeds shall be available at Closing.
1.2.2 Shareholder Approval of New Board of Directors. Harvest shall
have shareholder approval of a new Harvest Board of Directors in compliance with
all laws, which directors are set forth on Schedule 1.2.2. It is agreed and
understood that election of new Directors is subject to closing of the
transaction described in this Agreement.
1.2.3 Employment Agreements. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall have executed a
consulting agreement and ▇▇▇▇▇ ▇▇▇▇ shall have executed an employment agreement
with Harvest, the essential and principal terms of which are set out and
attached hereto as Schedule 1.2.3 and made a part hereof.
1.2.4 Continued Listing. The shares of Harvest Common Stock shall be
approved for continued listing on The Nasdaq Stock Market at the NASD Hearing.
Upon consummation of the transactions contemplated in this Agreement, the
Harvest Common Stock shall be in compliance with all NASDAQ listing
requirements.
1.2.5 Settlement of Liabilities. Harvest shall obtain settlement
agreements from all creditors with known, actual or contingent outstanding
liabilities in excess of $10,000.00. The total amount of the settlement
agreements shall be approximately $550,000.00, but not to exceed $700,000.00.
1.2.6 Conversion of Series A Convertible Preferred Stock. Harvest
shall have converted the Series A Convertible Preferred Stock to Common Stock.
1.2.7 Combined Financials of Harvest and TRC. That the Combined
Financials of Harvest and TRC are as set forth on Schedule 1.2.7 attached hereto
and made a part hereof in accordance with generally accepted accounting
principals and the Securities and Exchange Commission ("SEC") concurs.
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ARTICLE II.
FEASIBILITY PERIOD
Section 2.1 Feasibility Study. Each party is granted the right to conduct a
feasibility study of all of the existing and contingent assets and liabilities
of the other party including a physical inspection of all leases, improvements,
fixtures, mechanical equipment, personnel property, and other tangible and
intangible assets ("Feasibility Study"). Each party shall have until August 9,
1998 to conduct such a Feasibility Study ("Feasibility Period"). During the
Feasibility Period, either party, or their designated agents, may enter upon the
leased or owned premises of the other party for such analyses, tests, and
inspections which may be deemed necessary by either party. If either party
determines, in their sole judgment, that the transaction is not desirable for
any reason, then that party may, on written notice to the other party, on or
before expiration of the Feasibility Period, terminate this Agreement without
penalty or being in default of their obligations. If the written notice is not
given to the other party on or before 5:00 p.m. Eastern Standard Time on the
expiration date of the Feasibility Period, this right to terminate shall be
deemed to have been waived by the party failing to give the notice.
Section 2.2 Pre-Closing Documents to be Delivered. Each party shall deliver
to the other party copies of the following within five (5) business days from
the date of signature of this Agreement by all parties. Failure to deliver any
of the listed documents is an independent reason for the other party to
rightfully terminate this Agreement. If any one or more of the items described
in Section 2.02 do not exist, the disclosing party shall advise the receiving
party, in writing, to that effect.
2.2.1 Financial Statements. Copies of financial statements as set
forth in Sections 5.1.19 and 7.1.19. This includes monthly sales and tax reports
for the period commencing January 1, 1998, through the calendar month
immediately preceding the date of submittal of the same.
2.2.2 Asset List. A detail of inventory of all equipment, furnishings,
fixtures, and inventories as of April 19, 1998.
2.2.3 Leases. All leases of real or personal property and any
documents pertaining to such leases in the disclosing parties' possession.
2.2.4 Contracts. Copies of all contracts and warranties and related
documents including service, maintenance, management, employment, or other
agreements, including loan agreements which affect the disclosing party or its
assets. If such exist, all documents, notices, or citations indicating a default
or breach by the disclosing party of any contract in which the disclosing party
is a party.
2.2.5 Certificates. Certificates of all fire, hazard, liability, and
other insurance policies maintained by the disclosing party.
2.2.6 Taxes. The most recent real estate and personal property tax
statements regarding the disclosing party's property along with the disclosing
party's federal income tax returns for the last two (2) years and proof of
payment of all sales and payroll taxes.
2.2.7 Litigation. If such exists, all notices, citations, or other
documents evidencing actions, suits or proceedings pending or threatened or
asserted against the disclosing party, at law or in equity, before any state,
federal, county, municipal or other governmental department, commission, board,
bureau, agency, or instrumentality, whether domestic or foreign.
4
2.2.8 Violations. If such exists, all documents, notices, or citations
indicating a violation by the disclosing party of zoning, building, fire, or
similar law, ordinance, code, order, regulation or restriction claimed by any
applicable governmental authority.
2.2.9 Organizational Documents. All currently effective organizational
documents and other records of the disclosing party including, without
limitation, articles, by-laws, a list of directors, minutes, and stock ledger.
ARTICLE III.
THE CLOSING
Section 3.1 Closing.
3.1.1 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Scarborough, L.L.P., First Union Plaza, Suite 1400, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., local time, on a
date to be designated by Harvest (the "Closing Date") which shall be no later
than the 5th business day after the later to occur of (i) the expiration of the
Feasibility Period, (ii) obtaining approval from Harvest stockholders and its
Board of Directors as required in Section 10.2.1, provided, however, in no event
later than December 31, 1998. Prior to, or concurrent with the Closing, the
Articles of Share Exchange or any such other documents as may be required to be
filed to effect the merger shall be filed with the appropriate offices of any
Secretary of State and the merger shall thereby become effective.
3.1.2 Actions of Harvest at Closing. At the Closing, Harvest shall
deliver to TRC the following:
3.1.2.1 Resignations. Harvest shall deliver to TRC the written
and executed resignations of the directors of Harvest and any such executed
employment agreements, dated as of the Effective Date, as called for in this
Agreement.
3.1.2.2 Certificate of Harvest. Harvest shall deliver to TRC a
certificate which shall be dated as of Closing and which shall be signed by
Harvest's Chief Executive Officer certifying (i) the authority of Harvest to
enter into and consummate the transactions contemplated by this Agreement (along
with a copy of the proxy sent to each shareholder and a copy of the shareholder
vote); (ii) the authority of the officers of Harvest to execute and deliver any
document contemplated by this Agreement on behalf of Harvest; (iii) that the
representations and warranties of Harvest obtained herein were correct and true
when made and are correct and true as of the date of Closing (except to the
extent that any representation or warranty of Harvest specifically relates to an
earlier date); and (iv) that each and every covenant and agreement of Harvest
contained in the Agreement to be performed by Harvest on or prior to Closing has
been performed by Harvest.
3.1.2.3 Corporation Resolutions. Harvest shall deliver to TRC
certified copies of the resolutions of the Board of Directors of Harvest
authorizing the execution, delivery, and performance of this Agreement and the
transactions contemplated herein.
3.1.2.4 Exchange of Shares. Harvest shall deliver all shares
contemplated by Section 4.01.
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3.1.3 Actions of TRC at Closing. At the Closing, TRC shall deliver to
Harvest the following:
3.1.3.1 Resignations. TRC shall deliver to Harvest the written
and executed resignations of such directors of TRC and such executed employment
agreements, dated as of the Effective Date, as called for in this Agreement.
3.1.3.2 Certificate of TRC. TRC shall deliver to Harvest a
Certificate, which shall be dated as of Closing and which shall be signed by
TRC's Chief Executive Officer certifying (i) the authority of TRC to enter into
and consummate the transactions contemplated by this Agreement; (ii) the
authority of the officers of TRC to execute and deliver any document
contemplated by this Agreement on behalf of TRC; (iii) that the representations
and warranties of TRC obtained herein were correct and true when made and are
correct and true as of the date of Closing (except to the extent that any
representation or warranty of TRC specifically relates to an earlier date); and
(iv) that each and every covenant and agreement of TRC contained in the
Agreement to be performed by TRC on or prior to Closing has been performed by
TRC.
3.1.3.3 Corporation Resolutions. TRC shall deliver to Harvest
certified copies of the resolutions of the Board of Directors of TRC and the
shareholder approval of TRC authorizing the execution, delivery, and performance
of this Agreement and the transactions contemplated herein.
3.1.4 Effective Date. The date on which the Exchange of Shares occurs
and becomes effective is hereinafter called the "Effective Date." The Effective
Date shall be the date of the filing of the Articles of Share Exchange with any
state Secretary of State that is required for the exchange of shares to lawfully
occur. The parties shall cause all such documents and instruments to be filed
with the appropriate state Secretaries of State as promptly as practicable upon
satisfaction of the conditions described herein.
ARTICLE IV.
EXCHANGE OF SHARES
Section 4.1 Exchange of Shares. Upon the Effective Date, by virtue of this
Agreement, each of the following shall be deemed to occur contemporaneously:
4.1.1 Exchange of TRC Common Stock. As of the Effective Date, all
shares of TRC Common Stock that are outstanding shall be converted into the
right to receive a total of 18,000,000 fully paid and non-assessable shares of
Harvest Common Stock (or such higher adjusted amount as provided for in the
recitals, equally among all issued and outstanding shares of TRC Common Stock
unless ratably reduced pursuant to a reverse split of Harvest Common Stock.
4.1.2 Exchange of ▇▇▇▇ ▇▇▇▇▇▇ Note and TRC Class A Preferred Stock.
The ▇▇▇▇ ▇▇▇▇▇▇ Note, valued in an amount of approximately $3,700,000.00, and
the TRC Class A Preferred Stock, valued in an amount of $3,525,000.00, along
with the Employment Agreement of ▇▇▇▇ ▇▇▇▇▇▇, shall be exchanged for 722,500
shares of Harvest Series C Preferred Stock at a value of $10.00 per share in
accordance with the provisions of Section 4.2, unless ratably reduced pursuant
to a reverse split of Harvest Common Stock.
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Section 4.2 Exchange Procedure.
4.2.1 TRC Common Stock. Unless surrendered to Harvest for exchange at
the Closing, as soon as practical after the Effective Date, the holder of each
share of TRC Common Stock exchanged pursuant to Section 4.1 shall surrender to
Harvest the certificate for such shares. Following the receipt of the TRC Common
Stock certificate, Harvest shall cause its transfer agent to issue, or Harvest
itself shall issue, to each surrendering holder a certificate representing the
number of shares of Harvest Common Stock into which such TRC Common Stock shall
have been converted. Until so surrendered and exchanged, each outstanding
certificate which, prior to the Effective Date, represented TRC Common Stock
shall, following the Effective Date, be deemed for all purposes to evidence
ownership of the number of shares of Harvest Common Stock into which such shares
of TRC Common Stock have been converted.
4.2.2 TRC Class A Preferred Stock. Unless surrendered to Harvest for
exchange at the Closing, as soon as practical after the Effective Date, the
holder of each share of TRC Class A Preferred Stock exchanged pursuant to
Section 4.1.2 shall surrender to Harvest the certificate for such shares for
cancellation. Following the receipt of the TRC Class A Preferred Stock
certificate, Harvest will issue to each surrendering holder a certificate
represented the number of shares of Harvest Series C Preferred Stock into which
such TRC Class C Preferred Stock shall have been converted. Until so surrendered
and exchanged, each outstanding certificate which, prior to the Effective Date,
representing TRC Class A Preferred Stock shall, following the Effective Date, be
deemed for all purposes to evidence ownership of the number of shares of Harvest
Series C Preferred Stock into which such shares of TRC Class A Preferred Stock
have been converted.
Section 4.3 Appraisal Rights. Notwithstanding anything to the contrary
contained in this Agreement, dissenting shares (as defined under Georgia law) of
TRC shall not be canceled or converted into Harvest Common Stock unless and
until the holder thereof shall have failed to perfect or shall have effectively
withdrawn or lost his right to seek payment of the fair value of his shares
under applicable law. If any such holder shall have so failed to perfect or
shall have effectively withdrawn or lost such right, such holder's Dissenting
Shares shall thereupon be deemed to have been exchanged into, at the Effective
Date, Harvest Common Stock, as set forth in this Article. Any payments made in
respect of Dissenting Shares shall be made by TRC, out of funds other than those
provided hereunder.
ARTICLE V.
TRC REPRESENTATIONS AND WARRANTIES
Section 5.1 TRC's Representations and Warranties. TRC makes the following
representations and warranties to Harvest as a material inducement for Harvest
to enter into this Agreement subject only to such disclaimers as disclosures and
exceptions as are expressly set forth in the attachments hereto. These
representations and warranties are limited to the best actual knowledge of TRC
Directors and officers. Further, immaterial breaches of these representations
and warranties are specifically agreed to not comprise actionable breaches. All
of TRC warranties and representations herein are modified to the extent needed
to take into account TRC disclosures set forth or identified in the attachment
hereto entitled Schedule 5.1 -- TRC Disclosures, and made a part hereof.
7
5.1.1 Capitalization.
5.1.1.1 Authorized Stock. The authorized capital stock of TRC
consists of 100,000,000 shares of TRC Common Stock, no par value per share, and
1,000,000 shares of preferred stock, $1.00 par value per share, of which 2,000
shares have been designated as Class A.
5.1.1.2 Issued Capital Stock. There are 4,110,000 shares of TRC
Common Stock issued and outstanding, and or warrants and 2,000 shares of TRC
Class A Preferred Stock, all of which are owned beneficially and of record by
the listed shareholders. All such issued and outstanding shares of TRC capital
stock duly authorized, validly issued, fully paid and non-assessable, were not
issued in violation of the terms of any contract, agreement or commitment
binding upon TRC or any preemptive rights or rights of first refusal, and were
issued in compliance with all of its charter documents and applicable law.
5.1.2 Organization Standing and Power. TRC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia and is qualified to do business where the failure to be so qualified
would materially and adversely affect its condition, properties, assets or
operations. TRC has all requisite corporate power and authority to enter into
and perform and consummate the transactions contemplated by this Agreement. The
copies of the charter documents of TRC and all amendments thereto and of its
bylaws as amended to date which have heretofore been furnished or delivered to
Harvest are correct and complete.
5.1.3 Subsidiaries. TRC has no subsidiaries other than those set forth
on Schedule 5.1.
5.1.4 Title to Assets. TRC has good, valid and indefeasible title to
its assets, free and clear of all security interests, mortgages, liens,
encumbrances, title retention or security agreements, claims, restrictions,
leases, options, rights of first offer or first refusal, confidentiality or
secrecy agreements, non-competition agreements, defects of title or other
encumbrances, or rights of others, other than those set forth on Schedule 5.1.
The execution and delivery of this Agreement and the consummation of the
transaction contemplated hereby will not constitute a violation of, nor be in
conflict with, nor constitute a default, under any terms or provisions of any
contract, lease, mortgage, indenture, or any other document whatsoever to which
TRC may be a party or to which TRC may be bound on each Closing Date.
5.1.5 Other Relationships. No affiliate, director, officer, principal
executive, or employee of, or consultant to TRC owns, directly or indirectly, in
whole or in part, any property, asset or right, tangible or intangible, relating
to or affecting TRC other than those set forth on Schedule 5.1.
5.1.6 Other Transactions. No affiliate, director, officer, principal
executive or employee of TRC, has, directly or indirectly, engaged in any
transaction with TRC outside of the ordinary course of business.
5.1.7 Undisclosed Liabilities. Prior to expiration of the Feasibility
Period, TRC has provided to Harvest a listing of its liabilities, at Schedule
5.1, except as and to the extent reflected or disclosed (or adequately reserved
for or against) in the financial statements, or except as specifically provided
by this Agreement, TRC has no debts, liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, whether due or to become
due, including, but not limited to, liabilities or obligations on account of
known fraud by any merchant, customer, taxes, other governmental charges,
duties, penalties, interest, fines, vacation pay, workmen's compensation claims,
or pension plan obligations, and there is no known basis for the assertion
against TRC.
8
5.1.8 Absence of Certain Changes or Events. The business of TRC has
been operated only in the usual and ordinary course of business and there has
not been any occurrence, event or condition outside of the ordinary course of
business.
5.1.9 Condition of Assets. The assets of TRC are in good operating
condition for the purposes of conducting the business of TRC on the Effective
Date as such business has been or is being conducted. TRC has good and
marketable title to all of the Assets subject to no mortgage, pledge, lien,
conditional sales agreement, encumbrance, security interest, or charge of any
nature whatsoever, except as herein provided.
5.1.10 Compliance With Law. TRC has complied and is in compliance with
all applicable zoning decisions and has complied and is in compliance with all
applicable federal, state, and local laws, statutes, licensing requirements,
rules, and regulations, and judicial or administrative decisions. TRC has been
granted all licenses, permits (temporary and otherwise), authorizations, and
approvals from federal, state, and local government regulatory or zoning bodies
necessary to carry on the business and maintain the assets of TRC, all of which
are currently valid and in full force and effect. All such licenses, permits,
authorizations and approvals shall be valid and in full force and effect upon
the consummation of the transactions contemplated by this Agreement. There is no
order issued, or proceeding pending or threatened, or notice served with respect
to any violation of any law, ordinance, order, writ, decree, rule, or regulation
issued by any federal state, local, or foreign court or governmental agency or
instrumentality applicable to TRC. TRC has valid business licenses to carry on
its operations.
5.1.11 Contracts. All of TRC's contracts, agreements, customer and
supplier purchase order and other commitments are legal, valid and binding and
in full force and effect, and there are no defaults thereunder. None of the
rights of TRC thereunder shall be impaired by the consummation of the
transactions contemplated by this Agreement, and all of the rights of TRC
thereunder shall be enforceable by Harvest after the Merger without the consent
or agreement of any other party except for the agreements specifically listed in
attachments hereto, which contracts require consent to assignment. Copies of all
such contracts have heretofore been delivered to Harvest by TRC and are true and
complete and include all amendments and supplements thereto and modifications
thereof.
5.1.12 Permits, Licenses, Consents. TRC has all governmental leases,
licenses, permits, consents, approvals, authorizations, qualifications and
orders necessary to conduct its business and to operate its properties and
assets, and such leases, licenses, permits, consents, approvals, authorizations,
qualifications and orders are in full force and effect. No notification to or
approval of any governmental agency is required for all governmental leases,
licenses, permits, consents, approvals, authorizations, qualifications and
orders to remain in full force and effect after the Closing. No violations exist
or have been recorded in respect of any governmental lease, license, permit,
consent, approval authorization, qualification or order of TRC. No proceeding is
pending or, to the best of TRC's knowledge, threatened looking toward the
revocation or limitation of any such governmental lease, license, permit,
consent, approval, authorization, qualification or order and there is no basis
or grounds for any such revocation or limitation. TRC has complied in all
material respects with all present and, to the best of TRC's knowledge, enacted,
but not yet effective, federal, state and local laws, rules, regulations,
ordinances, codes, orders, licenses and permits relating to any of its
properties or applicable to its business.
5.1.13 Absence of Defaults. TRC is not nor is it alleged to be, in
default under, or in breach of any term or provision of, any contract,
agreement, lease, license, commitment, instrument or fiduciary or other
9
obligation. No other party to any contract, agreement, lease, license,
commitment, instrument or fiduciary or other obligation to which TRC is party is
in default thereunder or in breach of any term or provision thereof. There
exists no condition or event which, after notice or lapse of time or both, would
constitute a default by any party to any such contract, agreement, lease,
license, commitment, instrument or fiduciary or other obligation.
5.1.14 Litigation. There is (i) no suit, action or claim, (ii) no
investigation or inquiry by any administrative agency or governmental body, and
(iii) no legal, administrative or arbitration proceeding pending or, to the best
of TRC's knowledge, threatened against TRC or any of the properties, assets,
business or prospects of TRC or to which TRC is or might become a party, and to
the best of TRC's knowledge, there is no basis or grounds for any such suit,
action, claim, investigation, inquiry or proceeding, including but not limited
to, labor, equal employment opportunity, safety and health, environmental and
antitrust laws. There is no outstanding order, writ, injunction or decree of any
court, administrative agency or governmental body or arbitration tribunal
against or affecting or relating to TRC.
5.1.15 No Breach or Violation of Law. The execution and delivery of
this Agreement by TRC and the consummation of the transactions contemplated
hereby will not (i) conflict with, or result in the breach of any of the terms
or conditions of, or constitute a default under, or result in the acceleration
of any obligation under, or require any consent, approval or notice under, the
charter documents or the bylaws, or any resolution of TRC or any contract,
agreement, commitment, indenture, mortgage, deed of trust, lease, pledge
agreement, note, bond, license or other instrument or obligation to which TRC is
now a party or by which TRC or any of the properties or assets of TRC may be
bound or affected, or (ii) violate any law, or any rule or regulation of any
administrative agency or governmental body, or any order, writ, injunction or
decree of any court, administrative agency or governmental body.
5.1.16 Validity and Authorization. This Agreement has been duly
authorized by all necessary corporate and shareholder action and duly and
validly executed and delivered by TRC and is legally binding on TRC in
accordance with its terms.
5.1.17 Completeness; No Misrepresentations. The copies of all
instruments, agreements, and written information, including without limitation
the Schedules hereto, delivered pursuant to this Agreement or otherwise
furnished or made available to Harvest by TRC, or any representatives of either
of them are complete and correct as of the date hereof. The representations and
warranties made by TRC in this Agreement or in any Schedule or other document
furnished in connection with this Agreement do not contain any untrue statement
of a material fact, or omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading. The fact that
Harvest and its representatives have conducted an investigation of TRC prior to
the execution of this Agreement shall not affect the representations and
warranties contained in this Article or the extent of the obligations or
liabilities of TRC in the event of a breach of any such representation or
warranty.
5.1.18 Tax Matters. TRC has duly and timely filed all returns with
respect to any taxes required to be filed by it or for which it may be held
responsible, and has paid, or will pay on a timely basis, all taxes shown to be
due and payable on such returns, all deficiencies and assessments of taxes,
notice of which has been received by it, and all other taxes payable by it. TRC
is not aware of any basis upon which any assessment for a material amount of
additional taxes could be made.
5.1.19 Financial Statements. It is understood that TRC's financial
statements are not audited unless indicated as such on the delivered financial
documents. The year-end financial statements and interim financial statements
delivered by TRC to Harvest have been prepared in accordance with generally
10
accepted accounting principles and present fairly the financial position of TRC
as of December 28, 1997, and as of April 19, 1998, respectively, and the
statement of income presents fairly the results of operations and changes in
financial position of TRC for the periods ended December 28, 1997, and April 19,
1998, respectively, and sales reports for the period commencing January 1, 1998,
through the calendar month immediately preceding the date of submittal of the
same, all in conformity with generally accepted accounting principles applied on
a basis consistent with that of prior periods, except that the interim financial
statements are not audited and do not contain footnotes and are subject to audit
adjustments.
5.1.20 Full Disclosure. TRC has disclosed to Harvest all material
facts relating to TRC and its operations and has not knowingly omitted to
disclose to Harvest any material fact relating to TRC, or its operations
necessary to make the statements made herein not misleading.
5.1.21 Absence of Certain Changes and Events. Except as set forth in
Schedule 5.1 hereto, since the date of the interim financial statements there
has not been:
(i) Any material adverse change in the financial condition,
results of operation, assets, liabilities or prospects of TRC, or any
occurrence, circumstance, or combination thereof which reasonably
could be expected to result in any such material adverse change;
(ii) Any transaction relating to or involving TRC, or the assets
of TRC which was entered into or carried out by TRC other than for
fair consideration in the ordinary course of business;
(iii) Any change by TRC in its accounting or tax practices or
procedures;
(iv) Any incurrence of any liability, other than liabilities
incurred in the ordinary course of business consistent with past
practices;
(v) Any sale, lease, or disposition of, or any agreement to sell,
lease, or dispose of any of its properties (whether leased or owned),
or the assets of TRC, other than sales, leases, or dispositions of
goods, materials, or equipment in the ordinary course of business or
as contemplated by this Agreement;
(vi) Any event permitting any of the assets or the properties of
TRC (whether leased or owned) to be subjected to any pledge,
encumbrance, security interest, lien, charge, or claim of any kind
whatsoever (direct or indirect) (collectively, "Liens");
(vii) Any increase in compensation or any adoption of, or
increase in, any bonus, incentive compensation, pension, profit
sharing, retirement, insurance, medical reimbursement or other
employee benefit plan, payment or arrangement to, for, or with any
employee of TRC;
(viii) Any payment or distribution of any bonus to, or
cancellation of indebtedness owing from, or incurring of any liability
relating to any employees, consultants, directors, officers, or
agents, or any persons related thereto;
11
(ix) Any notice (written or unwritten) from any employee of TRC
that such employee has terminated, or intends to terminate, such
employee's employment with TRC;
(x) Any adverse relationship or condition with suppliers or
vendors that may have an adverse effect on TRC;
(xi) Any event, including, without limitation, shortage of
materials or supplies, fire, explosion, accident, requisition or
taking of property by any governmental agency, flood, drought,
earthquake, or other natural event, riot, act of God or a public
enemy, or damage, destruction, or other casualty, whether covered by
insurance or not, which has had an adverse effect on TRC, the
properties (whether leased or owned), or any such event which could be
expected to have an adverse effect on TRC, the properties (whether
leased or owned), or the assets of TRC;
(xii) Any modification, waiver, change, amendment, release,
rescission, accord and satisfaction, or termination of, or with
respect to, any term, condition, or provision of any contract,
agreement, license, or other instrument to which TRC is a party and
relating to or affecting TRC other than any satisfaction by
performance in accordance with the terms thereof in the ordinary
course of business;
(xiii) Any discharge or satisfaction of any lien or payment of
any liabilities, other than in the ordinary course of business;
(xiv) Any waiver of any rights of substantial value by TRC, other
than waivers having no material adverse effect on TRC;
(xv) Any issuance of equity securities of TRC or any issuance of
warrants, calls, options or other rights calling for the issuance,
sale, or delivery of TRC's equity securities;
(xvi) Any declaration of any dividend or any distribution of any
shares of its capital stock, or redemption, purchase, or other
acquisition of any shares of its capital stock or any grant of an
option, warrant, or other right to purchase or acquire any such
shares;
(xvii) Any amendment, or agreement to amend, TRC's Articles of
Incorporation or Bylaws, or any merger or consolidation with, or any
agreement to merge or consolidate with, any other corporation,
partnership, limited liability company or any other entity;
(xviii) Any reduction, or agreement to reduce, the cash or
short-term investments of TRC, other than to meet cash needs arising
in the ordinary course of business;
(xix) Any work interruptions, labor grievances or claims filed,
proposed law or regulation or any event of any character, materially
adversely affecting future prospects of TRC;
12
(xx) Any revaluation by TRC of any of its assets;
(xxi) Any loan by TRC to any person or entity, or any guaranty by
TRC of any loan; or
(xxii) Any other event or condition of any character which
materially adversely affects, or reasonably may be expected to so
affect, the assets of TRC or the properties (whether leased or owned)
of TRC.
5.1.22 Taxes.
(i) Definitions. For purposes of this Agreement:
(a) the term "Taxes" means (A) all federal, state, local, foreign
and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatever, together with any interest and any
penalties, additions to tax or additional amounts with respect
thereto, (B) any liability for payment of amounts described in
clause (A) whether as a result of transferee liability, of being
a member of an affiliated, consolidated, combined or unitary
group for any period, or otherwise through operation of law, and
(C) any liability for the payment of amounts described in clauses
(A) or (B) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to
indemnify any other person; and the term "Tax" means any one of
the foregoing Taxes; and
(b) the term "Returns" means all returns, declarations, reports,
statements, claims for refund and other documents required to be
filed in respect of Taxes, and the term "Return" means any one of
the foregoing Returns.
(ii) TRC has properly completed and filed on a timely basis
(including extensions) and in correct form all Returns required to be
filed on or prior to the Closing. As of the time of filing, the
foregoing Returns correctly reflected the facts regarding the income,
business, assets, operations, activities, status or other matters of
TRC or any other information required to be shown thereon. In
particular, the foregoing Returns are not subject to unpaid penalties
under Section 6662 of the Internal Revenue Code of 1986, as amended
(the "Code"), relating to accuracy-related penalties (or any
corresponding provision of state, local or foreign Tax law) or any
other unpaid penalties.
(iii) With respect to all amounts in respect of Taxes imposed
upon TRC, or for which TRC is liable, whether to taxing authorities
(as, for example, under law) or to other persons or entities (as, for
example, under tax allocation agreements), with respect to all taxable
periods ending on or before the Closing and portions of periods
commencing before the Closing and ending after the Closing, all
applicable tax laws and agreements have been fully complied with, and
all such amounts required to be paid by TRC to taxing authorities or
others on or before the Closing have been paid, and all such amounts
required to be paid by TRC to taxing authorities or others after the
Closing which have not been paid are reflected on the financial
statements of TRC.
13
(iv) No notices raising tax issues have been received by TRC from
any taxing authority in connection with any of the Returns. No
extensions or waivers of statutes of limitations with respect to the
Returns have been given by or requested from TRC. All deficiencies
asserted or assessments made as a result of any examinations have been
fully paid, or are fully reflected as a liability in the financial
statements of TRC, or are being contested and an adequate reserve
therefor has been established and is fully reflected in the financial
statements of TRC.
(v) There are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the assets of TRC.
(vi) TRC is not a party to or bound by (nor will TRC become a
party to or become bound by) any tax indemnity, tax sharing or tax
allocation agreement.
(vii) TRC has never been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code.
(viii) TRC has not filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income Tax law) or
agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local or foreign income Tax law) apply to any
disposition of any asset owned by it.
(ix) None of the assets of TRC directly or indirectly secures any
debt the interest on which is tax exempt under Section 103(a) of the
Code.
(x) None of the assets of TRC is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
(xi) TRC has not made and will not make a deemed dividend
election under Treas. Reg. ss.1.1502-32(f)(2) or a consent dividend
election under Section 565 of the Code.
(xii) TRC has not agreed to make, nor is it required to make, any
adjustment under Sections 481(a) or 263A of the Code or any comparable
provision of state or foreign tax laws by reason of a change in
accounting method or otherwise.
(xiii) TRC is not party to any joint venture, partnership, or
other arrangement or contract which could be treated as a partnership
for federal income tax purposes.
(xiv) TRC's book basis of each of its assets is reflected in its
financial statements.
(xv) All elections with respect to Taxes made during the fiscal
years ended December 31, 1996, December 31, 1996 and December 31, 1997
are reflected on the Returns for such periods, copies of which have
been provided to Harvest.
14
5.1.23 Intellectual Property.
(i) TRC and its subsidiaries own or have the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary or desirable for the operation of the
business of TRC. Each item of Intellectual Property owned or used by
any of TRC and its subsidiaries immediately prior to the closing
hereunder will be owned or available for use by TRC, its subsidiaries,
or its subsidiaries on identical terms and conditions immediately
subsequent to the closing hereunder. Each of TRC and its subsidiaries
has taken all necessary and desirable action to maintain and protect
each item of Intellectual Property that it owns or uses.
(ii) None of TRC and its subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of third parties, and none of TRC
shareholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of TRC and its
subsidiaries has ever received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that any of TRC
and its subsidiaries must license or refrain from using any
Intellectual Property rights of any third party). TRC and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of TRC and its subsidiaries, no third
party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
any of TRC and its subsidiaries.
(iii) Schedule 5.1 identifies each patent or registration which
has been issued to any of TRC and its subsidiaries with respect to any
of its Intellectual Property, identifies each pending patent
application or application for registration which any of TRC and its
subsidiaries has made with respect to any of its Intellectual
Property, and identifies each license, agreement, or other permission
which any of TRC and its subsidiaries has granted to any third party
with respect to any of its Intellectual Property (together with any
exceptions). TRC has delivered to Harvest correct and complete copies
of all such patents, registrations, applications, licenses,
agreements, and permission (as amended to date) and has made available
to Harvest correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of
each such item. Schedule 5.1 also identifies each trade name or
unregistered trademark used by any of TRC and its subsidiaries in
connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in Schedule 5.1:
(a) TRC and its subsidiaries possess all right, title, and
interest in and to the item, free and clear of any security
interest, license, or other restriction;
(b) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(c) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item; and
(d) none of TRC and its subsidiaries has ever agreed to indemnify
any person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
15
(iv) Schedule 5.1 identifies each item of Intellectual Property
that any third party owns and that any of TRC and its subsidiaries
uses pursuant to license, sublicense, agreement, or permission. TRC
has delivered to Harvest correct and complete copies of all such
licenses, sublicenses, agreements, and permission (as amended to
date). With respect to each item of Intellectual Property required to
be identified in Schedule 5.1:
(a) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force
and effect.
(b) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments
and assumptions referred to above);
(c) no party to the license, sublicense, agreement, or permission
is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach of default or
permit termination, modification, or acceleration thereunder;
(d) no party to the license, sublicense, agreement, or permission
has repudiated any provision thereof;
(e) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are
true and correct with respect to the underlying license;
(f) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(g) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of TRC and its subsidiaries, is threatened
which challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(h) none of TRC and its subsidiaries has granted any sublicense
or similar right with respect to the license, sublicense,
agreement, or permission.
(v) None of TRC and the directors and officers (and employees
with responsibility for Intellectual Property matters) of TRC and its
subsidiaries has any new products, inventions, procedures, or methods
of manufacturing or processing that any competitors or other third
parties have developed which reasonably could be expected to supersede
or make obsolete any product or process of any of TRC and its
subsidiaries.
5.1.24 Books and Records. The books and records of TRC to which
Harvest and their accountants and attorneys have been given access are the true
books and records of TRC and truly and fairly reflect the underlying facts and
transactions in all respects.
16
5.1.25 Leased Properties. The Financial Statements and Schedule 5.1
hereto together list all personal property (including equipment leases) and real
property leased by TRC in connection with the business (the "Leased Properties")
and the aggregate annual rent or other fees payable under all such leases. TRC
has a valid leasehold or ownership interest in all of the Leased Properties,
free and clear of any liens. The negotiation and consummation of this Agreement
and the transactions contemplated hereby will not result in any penalties, the
acceleration of payments or the termination of any lease of Leased Properties.
5.1.26 Employees and Employee Benefit Plans.
5.1.26.1 Other than as set forth in Schedule 5.1 hereto, TRC is
not a party to any pension, profit sharing, savings, retirement or other
deferred compensation plan, or any bonus (whether payable in cash or stock) or
incentive program, or any group health plan (whether insured or self-funded), or
any disability or group life insurance plan or other employee welfare benefit
plan, or to any collective bargaining agreement or other agreement, written or
oral, with any trade or labor union, employees' association or similar
organization. TRC is not a party to, nor has made any contribution to or
otherwise incurred any obligation under, any "multi-employer plan" as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
5.1.26.2 With respect to each such plan set forth in Schedule 5.1
(a "Plan"), TRC has furnished to Harvest or their counsel complete and accurate
copies of the Plan documents (including trust documents, insurance policies or
contracts, employee booklets, summary plan descriptions and other authorizing
documents, and any material employee communications). With respect to each Plan
subject to ERISA as either an employee pension benefit plan within the meaning
of Section 3(2) of ERISA or an employee welfare benefit plan within the meaning
of Section 3(1) of ERISA, TRC has prepared in good faith and timely filed all
requisite governmental reports and has properly and timely posted, or
distributed all notices and reports to employees required to be filed, posted,
or distributed with respect to each Plan. Each Plan has at all times been
properly and completely funded by TRC and has been operated and administered in
all respects in accordance with its terms and all applicable laws, including,
but not limited to, ERISA and the Code.
5.1.26.3 All Plans that are intended to qualify (the "Qualified
Plans") under Section 401(a) of the Code have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
included as part of Schedule 5.1 hereof. Except as disclosed on Schedule 5.1,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries have been timely
filed and distributed, and copies thereof are included as part of Schedule 5.1
hereof. TRC further represents that:
(a) there have been no terminations, partial terminations, or
discontinuance of contributions to any such Qualified Plan
intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service;
(b) no such plan listed in Schedule 5.1, subject to the
provisions of Title IV of ERISA has been terminated;
(c) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such
plan listed in Schedule 5.1; and
17
(d) TRC has not incurred any liability under Section 4062 of
ERISA.
5.1.26.4 TRC has not made any oral or written communications to
its current or former employees that guarantee current or former employees
continuation of employer-provided benefits or retirement coverage under TRC's
welfare benefit plans or which would have any effect on TRC's ability to
terminate retiree or any other benefits to all current or former employees.
5.1.26.5 TRC has not violated any of the health care continuation
coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985 applicable to its Employees prior to the Closing or any prior actions of or
transactions entered into by TRC.
5.1.27 Compensation. TRC has delivered to Harvest an accurate
schedule, attached to this Agreement as Schedule 5.1, showing all officers,
directors, and key employees of TRC and the rate of compensation (and the
portions thereof attributable to salary, bonus, and other compensation,
respectively) of the directors, officers, and key employees.
5.1.28 Insurance. TRC maintains policies of insurance covering the
assets of TRC, properties, and business in types and amounts as set forth in
Schedule 5.1. TRC is in compliance with each of such policies such that none of
the coverage provided under such policies has been invalidated and TRC has not
received any written notice of cancellation of any such policies. Schedule 5.1
lists and describes all TRC insurance policies in effect immediately prior to
the time of Closing. Such policies are with reputable insurers and are in
amounts sufficient for the prudent protection of the properties and the Business
of TRC.
5.1.29 Full Disclosure. TRC has disclosed to all material facts
relating to TRC and its operations and has not knowingly omitted to disclose to
Harvest any material fact relating to TRC, or its operations necessary to make
the statements made herein not misleading.
ARTICLE VI.
TRC's COVENANTS
Section 6.1 Continuation of Business. TRC covenants and agrees with Harvest
as follows, between the date hereof and the Effective Date, unless otherwise
consented to in writing by Harvest or as provided for by this Agreement, (i) it
shall conduct its affairs solely in the ordinary course of business consistent
with past practice and shall not materially change its policies and practices;
(ii) shall not issue or cause to be issued by TRC any capital stock or security
convertible into capital stock, except pursuant to outstanding warrants,
convertible preferred stock, stock options and convertible debentures, or grant
any options or rights to acquire capital stock, or otherwise alter TRC's capital
structure; (iii) shall not repurchase any of its securities or pay any dividend
or make any distribution with respect to its securities other than normal cash
dividends; (iv) shall not enter into any contract or arrangement other than in
the ordinary course of business; and (v) shall not amend its charter documents
or bylaws.
Section 6.2 No Solicitation. Unless and until the Effective Date occurs,
TRC shall not (i) solicit any offer to acquire all or any part of TRC's
business, assets or other properties or capital stock, whether by merger,
purchase of assets, tender offer or otherwise or (ii) except as required by law,
disclose, directly or indirectly, any information not customarily disclosed to
any person or entity concerning TRC's business or properties, afford to any
other person or entity access to TRC's properties, books or records or otherwise
assist or encourage any person or entity in connection with any of the
foregoing.
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ARTICLE VII.
HARVEST'S REPRESENTATIONS AND WARRANTIES
Section 7.1 Harvest's Representations and Warranties. Harvest makes the
following representations and warranties to TRC as a material inducement for TRC
to enter into this Agreement subject only to such disclaimers as disclosures and
exceptions as are expressly set forth in the attachments hereto. These
representations and warranties are limited to the best actual knowledge of
Harvest Directors and officers. Further, immaterial breaches of these
representations and warranties are specifically agreed to not comprise
actionable breaches. All of Harvest's warranties and representations herein are
modified to the extent needed to take into account Harvest's disclosures set
forth or identified in the attachment hereto entitled Schedule 7.1 -- Harvest
Disclosures and made a part thereof.
7.1.1 Capitalization.
7.1.1.1 Authorized Stock. The authorized capital stock of Harvest
consists of 20,000,000 shares of Harvest Common Stock, $0.01 par value per
share, and by Closing shall be 100,000,000 shares of Harvest Common Stock, $0.01
par value per share, and 5,000,000 shares of preferred stock, $1.00 par value
per share, of which 3,000,000 shares have been designated as Series A Preferred
Stock and 1,000 shares have been designated as Series B Preferred Stock.
7.1.1.2 Issued Common Stock. There are 3,463,009 (18,000,000 to
be issued in this transaction) shares of Harvest Common Stock issued and
outstanding. All such issued and outstanding shares of Harvest Common Stock are
duly authorized, validly issued, fully paid and non-assessable, were not issued
in violation of the terms of any contract, agreement or commitment binding upon
Harvest or any preemptive rights or rights of first refusal, and were issued in
compliance with all of its charter documents and applicable law.
7.1.1.3 Issued Preferred Stock. There are 635,892 shares of
Harvest Series A Preferred Stock and 133 shares of Harvest Series B Preferred
Stock issued and outstanding. All such issued and outstanding shares of Harvest
Preferred Stock are duly authorized, validly issued, fully paid and
non-assessable, were not issued in violation of the terms of any contract,
agreement or commitment binding upon Harvest or any preemptive rights or rights
of first refusal, and were issued in compliance with all of its charter
documents and applicable law.
7.1.2 Organization Standing and Power. Harvest is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and is qualified to do business where the failure to be so qualified would
materially and adversely affect its condition, properties, assets or operations.
Harvest has all requisite corporate power and authority to enter into and
perform and consummate the transactions contemplated by this Agreement. The
copies of the charter documents of Harvest and all amendments thereto and of its
bylaws as amended to date which have heretofore been furnished or delivered to
the TRC are correct and complete.
7.1.3 Subsidiaries. Harvest has no subsidiaries other than those
listed on Schedule 7.1.
7.1.4 Title to Assets. Harvest has good, valid and indefeasible title
to its assets, free and clear of all security interests, mortgages, liens,
encumbrances, title retention or security agreements, claims, restrictions,
leases, options, rights of first offer or first refusal, confidentiality or
19
secrecy agreements, non-competition agreements, defects of title or other
encumbrances of rights of others. The execution and delivery of this Agreement
and the consummation of the transaction contemplated hereby will not constitute
a violation of, nor be in conflict with, nor constitute a default, under any
terms or provisions of any contract, lease, mortgage, indenture, or any other
document whatsoever to which Harvest may be a party or to which Harvest may be
bound on each Closing Date.
7.1.5 Other Relationships. No affiliate, director, officer, principal
executive, or employee of or consultant to Harvest owns, directly or indirectly,
in whole or in part, any property, asset or right, tangible or intangible
relating to or affecting Harvest.
7.1.6 Other Transactions. No affiliate, director, officer, principal
executive or employee of Harvest, has, directly or indirectly, engaged in any
transaction with Harvest outside of the ordinary course of business.
7.1.7 Undisclosed Liabilities. Prior to expiration of the Feasibility
Period, Harvest has provided to TRC a listing of its liabilities, at Schedule
7.1, except as and to the extent reflected or disclosed (or adequately reserved
for or against) in the financial statements, or except as specifically provided
by this Agreement, Harvest has no debts, liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, whether due or to
become due, including, but not limited to, liabilities or obligations on account
of known fraud by any merchant customer, taxes, other governmental charges,
duties, penalties, interest, fines, vacation pay, workmen's compensation claims,
or pension plan obligations and there is no known basis for the assertion
against Harvest.
7.1.8 Absence of Certain Changes, or Events. The business of Harvest
has been operated only in the usual and ordinary course of business and there
has not been any occurrence, event or condition outside of the ordinary course
of business.
7.1.9 Condition of Assets. The assets of Harvest are in good operating
condition for the purposes of conducting the business of Harvest on the
Effective Date as such business has been or is being conducted. Harvest has good
and marketable title to all of its assets subject to no mortgage, pledge, lien,
conditional sales agreement, encumbrance, security interest, encumbrance, or
charge of any nature whatsoever, except as herein provided.
7.1.10 Compliance With Law. Harvest has complied and is in compliance
with all applicable zoning decisions and has complied and is in compliance with
all applicable federal, state, and local laws, statutes, licensing requirements,
rules, and regulations, and judicial or administrative decisions. Harvest has
been granted all licenses, permits (temporary and otherwise), authorizations,
and approvals from federal, state, and local government regulatory or zoning
bodies necessary to carry on the business and maintain the assets of Harvest,
all of which are currently valid and in full force and effect. All such
licenses, permits, authorizations and approvals shall be valid and in full force
and effect upon the consummation of the transactions contemplated by this
Agreement. There is no order issued, or proceeding pending or threatened, or
notice served with respect to any violation of any law, ordinance, order, writ,
decree, rule, or regulation issued by any federal state, local, or foreign court
or governmental agency or instrumentality applicable to Harvest. Harvest has
valid business licenses to carry on its operations.
7.1.11 Contracts and Commitments. All of Harvest's contracts,
agreements, customer and supplier purchase order and other commitments are
legal, valid and binding and in full force and effect, and there are no defaults
thereunder. None of the rights of Harvest thereunder shall be impaired by the
consummation of the transactions contemplated by this Agreement, and all of the
rights of Harvest thereunder shall be enforceable by TRC after the Merger
without the consent or agreement of any other party except for the agreements
specifically listed in attachments hereto, which contracts require consent to
assignment. Copies of all such contracts have heretofore been delivered to TRC
by Harvest and are true and complete and include all amendments and supplements
thereto and modifications thereof.
20
7.1.12 Permits, Licenses, Consents. Harvest has all governmental
leases, licenses, permits, consents, approvals, authorizations, qualifications
and orders necessary to conduct its business and to operate its properties and
assets, and such leases, licenses, permits, consents, approvals, authorizations,
qualifications and orders are in full force and effect. No notification to or
approval of any governmental agency is required for all governmental leases,
licenses, permits, consents, approvals, authorizations, qualifications and
orders to remain in full force and effect after the Closing. No violations exist
or have been recorded in respect of any governmental lease, license, permit,
consent, approval, authorization, qualification or order of Harvest. No
proceeding is pending or, to the best of Harvest's knowledge, threatened,
looking toward the revocation or limitation of any such governmental lease,
license, permit, consent, approval, authorization, qualification or order and
there is no basis or grounds for any such revocation or limitations Harvest has
complied in all material respects with all present and, to the best of Harvest's
knowledge, enacted but not yet effective, federal state and local laws, rules,
regulations, ordinances, codes, orders, licenses and permits relating to any of
its properties or applicable to its business.
7.1.13 Absence of Defaults. Except as provided in the attached
disclosures, Harvest is not nor is it alleged to be, in default under, or in
breach of any term or provision of, any contract, agreement, lease, license,
commitment, instrument or fiduciary or other obligation. No other party to any
contract, agreement, lease, license, commitment, instrument or fiduciary or
other obligation to which Harvest is party is in default thereunder or in breach
of any term or provision thereof. There exists no condition or event which,
after notice or lapse of time or both, would constitute a default by any party
to any such contract, agreement, lease, license, commitment, instrument or
fiduciary or other obligation.
7.1.14 Litigation. Except as provided in the attached disclosures,
there is (i) no suit, action or claim, (ii) no investigation or inquiry by any
administrative agency or governmental body, and (iii) no legal, administrative
or arbitration proceeding pending or, to the best of Harvest's knowledge,
threatened against Harvest or any of the properties, assets, business or
prospects of Harvest or to which Harvest is or might become a party, and to the
best of Harvest's knowledge, there is no basis or grounds for any such suit,
action, claim, investigation, inquiry or proceeding, including but not limited
to, labor, equal employment opportunity, safety, health, environmental and
antitrust laws. There is no outstanding order, writ, injunction or decree of any
court, administrative agency or governmental body or arbitration tribunal
against or affecting or relating to Harvest.
7.1.15 No Breach or Violation of Law. The execution and delivery of
this Agreement by Harvest and the consummation of the transactions contemplated
hereby will not (i) conflict with, or result in the breach of any of the terms
or conditions of or constitute a default under, or result in the acceleration of
any obligation under, or require any consent, approval or notice under, the
charter documents or the bylaws or any resolution of Harvest or any contract,
agreement, commitment, indenture, mortgage, deed of trust, lease, pledge
agreement, note, bond, license or other instrument or obligation to which
Harvest is now a party or by which Harvest or any of the properties or assets of
Harvest may be bound or affected, or (ii) violate any law, or any rule or
regulation of any administrative agency or governmental body, or any order,
writ, injunction or decree of any court, administrative agency or governmental
body.
21
7.1.16 Validity and Authorization. This Agreement has been duly
authorized by all necessary corporate action and upon approval of Harvest
shareholders is duly and validly executed and delivered by Harvest and is
legally binding on Harvest in accordance with its terms.
7.1.17 Completeness: No Misrepresentations. The copies of all
instruments, agreements, and written information, including without limitation
the Schedules hereto, delivered pursuant to this Agreement or otherwise
furnished or made available to TRC by Harvest, or any representatives of either
of them are complete and correct as of the date hereof. The representations and
warranties made by Harvest in this Agreement or in any Schedule or other
document furnished in connection with this Agreement do not contain any untrue
statement of a material fact, or omit to state a material fact necessary to make
the statements or facts contained herein or therein not misleading. The fact
that TRC and its representatives have conducted an investigation of Harvest
prior to the execution of this Agreement shall not affect the representations
and warranties contained in this Article VII or the extent of the obligations or
liabilities of Harvest in the event of a breach of any such representation or
warranty.
7.1.18 Tax Matters. Harvest has duly and timely filed all returns with
respect to any taxes required to be filed by it or for which it may be held
responsible, and has paid, or will pay on a timely basis, all taxes shown to be
due and payable on such returns, all deficiencies and assessments of taxes,
notice of which has been received by it, and all other taxes payable by it.
Harvest is not aware of any basis upon which any assessment for a material
amount of additional taxes could be made.
7.1.19 Financial Statements. It is understood that Harvest's financial
statements are not audited unless indicated as such on the delivered financial
documents. The year-end financial statements and interim financial statements
delivered by Harvest to TRC have been prepared in accordance with generally
accepted accounting principles and present fairly the financial position of
Harvest as of December 28, 1997, and as of April 19, 1998, respectively, and the
statement of income presents fairly the results of operations and changes in
financial position of Harvest for the periods ended December 28, 1997, and April
19, 1998, respectively, and sales reports for the period commencing January 1,
1998, through the calendar month immediately preceding the date of submittal of
the same, all in conformity with generally accepted accounting principles
applied on a basis consistent with that of prior periods, except that the
interim financial statements are not audited and do not contain footnotes and
are subject to audit adjustments.
7.1.20 Absence of Certain Changes and Events. Except as set forth in
Schedule 7.1 hereto, since the date of the interim financial statements there
has not been:
7.1.20.1 Any material adverse change in the financial condition,
results of operation, assets, liabilities or prospects of Harvest, or any
occurrence, circumstance, or combination thereof which reasonably could be
expected to result in any such material adverse change;
7.1.20.2 Any transaction relating to or involving Harvest, or the
assets of Harvest which was entered into or carried out by Harvest other than
for fair consideration in the ordinary course of business;
7.1.20.3 Any change by Harvest in its accounting or tax practices
or procedures;
7.1.20.4 Any incurrence of any liability, other than liabilities
incurred in the ordinary course of business consistent with past practices;
22
7.1.20.5 Any sale, lease, or disposition of, or any agreement to
sell, lease, or dispose of any of its properties (whether leased or owned), or
the assets of Harvest, other than sales, leases, or dispositions of goods,
materials, or equipment in the ordinary course of business or as contemplated by
this Agreement;
7.1.20.6 Any event permitting any of the assets or the properties
of Harvest (whether leased or owned) to be subjected to any pledge, encumbrance,
security interest, lien, charge, or claim of any kind whatsoever (direct or
indirect) (collectively, "Liens");
7.1.20.7 Any increase in compensation or any adoption of, or
increase in, any bonus, incentive compensation, pension, profit sharing,
retirement, insurance, medical reimbursement or other employee benefit plan,
payment or arrangement to, for, or with any employee of Harvest;
7.1.20.8 Any payment or distribution of any bonus to, or
cancellation of indebtedness owing from, or incurring of any liability relating
to any employees, consultants, directors, officers, or agents, or any persons
related thereto;
7.1.20.9 Any notice (written or unwritten) from any employee of
Harvest that such employee has terminated, or intends to terminate, such
employee's employment with Harvest;
7.1.20.10 Any adverse relationship or condition with suppliers or
vendors that may have an adverse effect on Harvest;
7.1.20.11 Any event, including, without limitation, shortage of
materials or supplies, fire, explosion, accident, requisition or taking of
property by any governmental agency, flood, drought, earthquake, or other
natural event, riot, act of God or a public enemy, or damage, destruction, or
other casualty, whether covered by insurance or not, which has had an adverse
effect on Harvest, the properties (whether leased or owned), or any such event
which could be expected to have an adverse effect on Harvest, the properties
(whether leased or owned), or the assets of Harvest;
7.1.20.12 Any modification, waiver, change, amendment, release,
rescission, accord and satisfaction, or termination of, or with respect to, any
term, condition, or provision of any contract, agreement, license, or other
instrument to which Harvest is a party and relating to or affecting the Harvest
other than any satisfaction by performance in accordance with the terms thereof
in the ordinary course of business;
7.1.20.13 Any discharge or satisfaction of any lien or payment of
any liabilities, other than in the ordinary course of business;
7.1.20.14 Any waiver of any rights of substantial value by
Harvest, other than waivers having no material adverse effect on Harvest;
7.1.20.15 Any issuance of equity securities of Harvest or any
issuance of warrants, calls, options or other rights calling for the issuance,
sale, or delivery of Harvest's equity securities;
7.1.20.16 Any declaration of any dividend or any distribution of
any shares of its capital stock, or redemption, purchase, or other acquisition
of any shares of its capital stock or any grant of an option, warrant, or other
right to purchase or acquire any such shares;
23
7.1.20.17 Any amendment, or agreement to amend, Harvest's
Articles of Incorporation or Bylaws, or any merger or consolidation with, or any
agreement to merge or consolidate with, any other corporation, partnership,
limited liability company or any other entity;
7.1.20.18 Any reduction, or agreement to reduce, the cash or
short-term investments of Harvest, other than to meet cash needs arising in the
ordinary course of business;
7.1.20.19 Any work interruptions, labor grievances or claims
filed, proposed law or regulation or any event of any character, materially
adversely affecting future prospects of Harvest;
7.1.20.20 Any revaluation by Harvest of any of its assets;
7.1.20.21 Any loan by Harvest to any person or entity, or any
guaranty by Harvest of any loan; or
7.1.20.22 Any other event or condition of any character which
materially adversely affects, or reasonably may be expected to so affect, the
assets of Harvest or the properties (whether leased or owned) of Harvest.
7.1.21 Taxes.
7.1.21.1 Definitions. For purposes of this Agreement:
(a) the term "Taxes" means (A) all federal, state, local,
foreign and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits,
license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes,
fees, assessments or charges of any kind whatever, together
with any interest and any penalties, additions to tax or
additional amounts with respect thereto, (B) any liability
for payment of amounts described in clause (A) whether as a
result of transferee liability, of being a member of an
affiliated, consolidated, combined or unitary group for any
period, or otherwise through operation of law, and (C) any
liability for the payment of amounts described in clauses
(A) or (B) as a result of any tax sharing, tax indemnity or
tax allocation agreement or any other express or implied
agreement to indemnify any other person; and the term "Tax"
means any one of the foregoing Taxes; and
(b) the term "Returns" means all returns, declarations, reports,
statements, claims for refund and other documents required
to be filed in respect of Taxes, and the term "Return" means
any one of the foregoing Returns.
7.1.21.2 Harvest has properly completed and filed on a timely
basis (including extensions) and in correct form all Returns required to be
filed on or prior to the Closing. As of the time of filing, the foregoing
24
Returns correctly reflected the facts regarding the income, business, assets,
operations, activities, status or other matters of Harvest or any other
information required to be shown thereon. In particular, the foregoing Returns
are not subject to unpaid penalties under Section 6662 of the Internal Revenue
Code of 1986, as amended (the "Code"), relating to accuracy-related penalties
(or any corresponding provision of state, local or foreign Tax law) or any other
unpaid penalties.
7.1.21.3 With respect to all amounts in respect of Taxes imposed
upon Harvest, or for which Harvest is liable, whether to taxing authorities (as,
for example, under law) or to other persons or entities (as, for example, under
tax allocation agreements), with respect to all taxable periods ending on or
before the Closing and portions of periods commencing before the Closing and
ending after the Closing, all applicable tax laws and agreements have been fully
complied with, and all such amounts required to be paid by Harvest to taxing
authorities or others on or before the Closing have been paid, and all such
amounts required to be paid by Harvest to taxing authorities or others after the
Closing which have not been paid are reflected on the financial statements of
Harvest.
7.1.21.4 No notices raising tax issues have been received by
Harvest from any taxing authority in connection with any of the Returns. No
extensions or waivers of statutes of limitations with respect to the Returns
have been given by or requested from Harvest. All deficiencies asserted or
assessments made as a result of any examinations have been fully paid, or are
fully reflected as a liability in the financial statements of Harvest, or are
being contested and an adequate reserve therefor has been established and is
fully reflected in the financial statements of Harvest.
7.1.21.5 There are no liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of Harvest.
7.1.21.6 Harvest is not a party to or bound by (nor will Harvest
become a party to or become bound by) any tax indemnity, tax sharing or tax
allocation agreement.
7.1.21.7 Harvest has never been a member of an affiliated group
of corporations within the meaning of Section 1504 of the Code.
7.1.21.8 Harvest has not filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income Tax law) or agreed to
have Section 341(f)(2) of the Code (or any corresponding provision of state,
local or foreign income Tax law) apply to any disposition of any asset owned by
it.
7.1.21.9 None of the assets of Harvest directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of the
Code.
7.1.21.10 None of the assets of Harvest is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
7.1.21.11 Harvest has not made and will not make a deemed
dividend election under Treas. Reg. ss.1.1502-32(f)(2) or a consent dividend
election under Section 565 of the Code.
7.1.21.12 Harvest has not agreed to make, nor is it required to
make, any adjustment under Sections 481(a) or 263A of the Code or any comparable
provision of state or foreign tax laws by reason of a change in accounting
method or otherwise.
25
7.1.21.13 Harvest is not party to any joint venture, partnership,
or other arrangement or contract which could be treated as a partnership for
federal income tax purposes.
7.1.21.14 Harvest's book basis of each of its assets is reflected
in its financial statements.
7.1.21.15 All elections with respect to Taxes made during the
fiscal years ended December 31, 1996, December 31, 1996 and December 31, 1997
are reflected on the Returns for such periods, copies of which have been
provided to TRC.
7.1.22 Compliance With Law. Harvest has complied and is in compliance
with all applicable zoning decisions and has complied and is in compliance with
all applicable federal, state, and local laws, statutes, licensing requirements,
rules, and regulations, and judicial or administrative decisions. Harvest has
been granted all licenses, permits (temporary and otherwise), authorizations,
and approvals from federal, state, and local government regulatory or zoning
bodies necessary to carry on the business and maintain the assets of Harvest,
all of which are currently valid and in full force and effect. All such
licenses, permits, authorizations and approvals shall be valid and in full force
and effect upon the consummation of the transactions contemplated by this
Agreement. There is no order issued, or proceeding pending or threatened, or
notice served with respect to any violation of any law, ordinance, order, writ,
decree, rule, or regulation issued by any federal state, local, or foreign court
or governmental agency or instrumentality applicable to Harvest. Harvest has
valid business licenses to carry on its operations.
7.1.23 Intellectual Property.
7.1.23.1 Harvest and its subsidiaries own or have the right to
use pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary or desirable for the operation of the business of Harvest.
Each item of Intellectual Property owned or used by any of Harvest and its
subsidiaries immediately prior to the closing hereunder will be owned or
available for use by Harvest, its subsidiaries, or its subsidiaries on identical
terms and conditions immediately subsequent to the closing hereunder. Each of
Harvest and its subsidiaries has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that it owns or uses.
7.1.23.2 None of Harvest and its subsidiaries has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of Harvest shareholders
and the directors and officers (and employees with responsibility for
Intellectual Property matters) of Harvest and its subsidiaries has ever received
any charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that any of
Harvest and its subsidiaries must license or refrain from using any Intellectual
Property rights of any third party). Harvest and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Harvest and
its subsidiaries, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of any of Harvest and its subsidiaries.
7.1.23.3 Schedule 7.1 identifies each patent or registration
which has been issued to any of Harvest and its subsidiaries with respect to any
of its Intellectual Property, identifies each pending patent application or
application for registration which any of Harvest and its subsidiaries has made
with respect to any of its Intellectual Property, and identifies each license,
agreement, or other permission which any of Harvest and its subsidiaries has
granted to any third party with respect to any of its Intellectual Property
26
(together with any exceptions). Harvest has delivered to TRC correct and
complete copies of all such patents, registrations, applications, licenses,
agreements, and permission (as amended to date) and has made available to TRC
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Schedule 7.1 also
identifies each trade name or unregistered trademark used by any of Harvest and
its subsidiaries in connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in Schedule 7.1:
(a) Harvest and its subsidiaries possess all right, title, and
interest in and to the item, free and clear of any security
interest, license, or other restriction;
(b) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(c) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, enforceability,
use, or ownership of the item; and
(d) none of Harvest and its subsidiaries has ever agreed to
indemnify any person for or against any interference,
infringement, misappropriation, or other conflict with
respect to the item.
7.1.23.4 Schedule 7.1 identifies each item of Intellectual
Property that any third party owns and that any of Harvest and its subsidiaries
uses pursuant to license, sublicense, agreement, or permission. Harvest has
delivered to TRC correct and complete copies of all such licenses, sublicenses,
agreements, and permission (as amended to date). With respect to each item of
Intellectual Property required to be identified in Schedule 7.1:
(a) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full
force and effect.
(b) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the
consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to
above);
(c) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute
a breach of default or permit termination, modification, or
acceleration thereunder;
(d) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(e) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above
are true and correct with respect to the underlying license;
27
(f) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(g) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of Harvest and its subsidiaries, is
threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and
(h) none of Harvest and its subsidiaries has granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
7.1.23.5 None of Harvest and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Harvest and
its subsidiaries has any new products, inventions, procedures, or methods of
manufacturing or processing that any competitors or other third parties have
developed which reasonably could be expected to supersede or make obsolete any
product or process of any of Harvest and its subsidiaries.
7.1.24 Books and Records. The books and records of Harvest to which
TRC and their accountants and attorneys have been given access are the true
books and records of Harvest and truly and fairly reflect the underlying facts
and transactions in all respects.
7.1.25 Leased Properties. The Financial Statements and Schedule 7.1
hereto together list all personal property (including equipment leases) and real
property leased by Harvest in connection with the business (the "Leased
Properties") and the aggregate annual rent or other fees payable under all such
leases. Harvest has a valid leasehold or ownership interest in all of the Leased
Properties, free and clear of any liens. The negotiation and consummation of
this Agreement and the transactions contemplated hereby will not result in any
penalties, the acceleration of payments or the termination of any lease of
Leased Properties.
7.1.26 Employees and Employee Benefit Plans.
7.1.26.1 Other than as set forth in Schedule 7.1 hereto, Harvest
is not a party to any pension, profit sharing, savings, retirement or other
deferred compensation plan, or any bonus (whether payable in cash or stock) or
incentive program, or any group health plan (whether insured or self-funded), or
any disability or group life insurance plan or other employee welfare benefit
plan, or to any collective bargaining agreement or other agreement, written or
oral, with any trade or labor union, employees' association or similar
organization. Harvest is not a party to, nor has made any contribution to or
otherwise incurred any obligation under, any "multi-employer plan" as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
7.1.26.2 With respect to each such plan set forth in Schedule 7.1
(a "Plan"), Harvest has furnished to TRC or their counsel complete and accurate
copies of the Plan documents (including trust documents, insurance policies or
contracts, employee booklets, summary plan descriptions and other authorizing
documents, and any material employee communications). With respect to each Plan
subject to ERISA as either an employee pension benefit plan within the meaning
of Section 3(2) of ERISA or an employee welfare benefit plan within the meaning
of Section 3(1) of ERISA, Harvest has prepared in good faith and timely filed
all requisite governmental reports and has properly and timely posted, or
distributed all notices and reports to employees required to be filed, posted,
or distributed with respect to each Plan. Each Plan has at all times been
properly and completely funded by Harvest and has been operated and administered
in all respects in accordance with its terms and all applicable laws, including,
but not limited to, ERISA and the Code.
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7.1.26.3 All Plans that are intended to qualify (the "Qualified
Plans") under Section 401(a) of the Code have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
included as part of Schedule 7.1 hereof. Except as disclosed on Schedule 7.1,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries have been timely
filed and distributed, and copies thereof are included as part of Schedule 7.1
hereof. Harvest further represents that:
(a) there have been no terminations, partial terminations, or
discontinuance of contributions to any such Qualified Plan
intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service;
(b) no such plan listed in Schedule 7.1, subject to the
provisions of Title IV of ERISA has been terminated;
(c) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such
plan listed in Schedule 7.1; and
(d) Harvest has not incurred any liability under Section 4062 of
ERISA.
7.1.26.4 Harvest has not made any oral or written communications
to its current or former employees that guarantee current or former employees
continuation of employer-provided benefits or retirement coverage under
Harvest's welfare benefit plans or which would have any effect on Harvest's
ability to terminate retiree or any other benefits to all current or former
employees.
7.1.26.5 Harvest has not violated any of the health care
continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985 applicable to its Employees prior to the Closing or
any prior actions of or transactions entered into by Harvest.
7.1.27 Compensation. Harvest has delivered to TRC an accurate
schedule, attached to this Agreement as Schedule 7.1, showing all officers,
directors, and key employees of Harvest and the rate of compensation (and the
portions thereof attributable to salary, bonus, and other compensation,
respectively) of the directors, officers, and key employees.
7.1.28 Insurance. Harvest maintains policies of insurance covering the
assets of Harvest, properties, and business in types and amounts as set forth in
Schedule 7.1. Harvest is in compliance with each of such policies such that none
of the coverage provided under such policies has been invalidated and Harvest
has not received any written notice of cancellation of any such policies.
Schedule 7.1 lists and describes all Harvest insurance policies in effect
immediately prior to the time of Closing. Such policies are with reputable
insurers and are in amounts sufficient for the prudent protection of the
properties and the Business of Harvest.
7.1.29 Full Disclosure. Harvest has disclosed to TRC all material
facts relating to Harvest and its operations and has not knowingly omitted to
disclose to TRC any material fact relating to Harvest, or its operations
necessary to make the statements made herein not misleading.
29
7.1.30 Securities and Nasdaq Listing. Harvest is currently listed on
NASDAQ. Harvest is subject to the reporting requirements of the Securities and
Exchange Act of ▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇▇ ▇▇▇").
ARTICLE VIII.
HARVEST'S COVENANTS
Section 8.1 Continuation of Business. Harvest covenants and agrees as
follows: between the date hereof and the Closing, unless otherwise consented to
in writing by TRC or as provided for by this Agreement, (i) it shall conduct its
affairs solely in the ordinary course of business consistent with past practice
and shall not materially change its policies and practices; (ii) shall not issue
or cause to be issued by Harvest any capital stock or security convertible into
capital stock, except pursuant to outstanding warrants, convertible preferred
stock, stock options and convertible debentures, or grant any options or rights
to acquire capital stock, or otherwise alter Harvest's capital structure; (iii)
shall not repurchase any of its securities or pay any dividend or make any
distribution with respect to its securities other than normal cash dividends;
(iv) shall not enter into any contract or arrangement other than in the ordinary
course of business; and (v) shall not amend its charter documents or bylaws.
Section 8.2 No Solicitation. Unless and until the Closing occurs, Harvest
shall not (i) solicit any offer to acquire all or any part of Harvest's
business, assets or other properties or capital stock, whether by merger,
purchase of assets, tender offer or otherwise or (ii) except as required by law,
disclose, directly or indirectly, any information not customarily disclosed to
any person or entity concerning Harvest's business or properties, afford to any
other person or entity access to Harvest's properties, books or records or
otherwise assist or encourage any person or entity in connection with any of the
foregoing.
Section 8.3 Termination of Stock Option Plan. Harvest shall use its best
efforts to modify its Stock Option Plan, if any, at or prior to Closing to
account for new employees from TRC to be included thereunder. As of the Closing,
the amount outstanding under the Stock Option Plan shall not exceed 483,000
shares at $1.00 strike price and all such shares have been included in the total
of all Harvest Common Shares listed in the "Whereas" clauses.
ARTICLE IX.
TERMINATION
Section 9.1 Termination Events. This Agreement may, by notice given prior
to or at the Closing, be terminated:
9.1.1 by either TRC or Harvest if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived;
9.1.2 (i) by TRC if any of the conditions in Article I and Article XI
have not been satisfied as of the Closing or if satisfaction of such a condition
is or becomes impossible (other than through the failure of TRC to comply with
its obligations under this Agreement) and TRC has not waived such condition on
or before the Closing; or (ii) by Harvest, if any of the conditions in Article I
and Article XI have not been satisfied of the Closing or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Harvest
to comply with their obligations under this Agreement) and Harvest has not
waived such condition on or before the Closing;
30
9.1.3 by mutual consent of TRC and Harvest; or
9.1.4 by either TRC or Harvest if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before December
31, 1998, or such later date as the parties may agree upon.
Section 9.2 Effect of Termination. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Article I, all further
obligations of the parties under this Agreement will terminate; provided,
however, that if this Agreement is terminated by a party because of the Breach
of the Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
ARTICLE X.
INDEMNIFICATION; REMEDIES
Section 10.1 Survival; Right to Indemnification Not Affected by Knowledge.
All representations, warranties, covenants, and obligations in this Agreement,
and any other certificate or document delivered pursuant to this Agreement will
survive the Closing. The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
Knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing, with respect
to the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
Section 10.2 Indemnification and Payment of Damages by Harvest. Harvest
will indemnify and hold harmless TRC, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages" ), arising, directly or indirectly, from or in
connection with: (a) any breach of any representation or warranty made by
Harvest in this Agreement or any other certificate or document delivered by
Harvest pursuant to this Agreement; (b) any breach of any representation or
warranty made by Harvest in this Agreement as if such representation or warranty
were made on and as of the Closing.
10.2.1 any breach by either Harvest of any covenant or obligation of
such Harvest in this Agreement;
10.2.2 any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Harvest (or any Person acting
on its behalf) in connection with any of the Contemplated Transactions.
31
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to TRC.
Section 10.3 Indemnification and Payment of Damages by Harvest '
Environmental Matters. In addition to the provisions of Section 10.2, Harvest
will indemnify and hold harmless TRC for, and will pay to TRC, the amount of any
Damages (including costs of cleanup, containment, or other remediation) arising,
directly or indirectly, from or in connection with:
10.3.1 any Environmental, Health, and Safety Liabilities arising out
of or relating to: (i) (A) the ownership, operation, or condition at any time on
or prior to the Closing of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
Harvest has or had an interest, or (B) any Hazardous Materials or other
contaminants that were present on the Facilities or such other properties and
assets at any time on or prior to the Closing; or (ii) (A) any Hazardous
Materials or other contaminants, wherever located, that were, or were allegedly,
generated, transported, stored, treated, released, or otherwise handled by
Harvest or by any other Person for whose conduct they are or may be held
responsible at any time on or prior to the Closing, or (B) any Hazardous
Activities that were, or were allegedly, conducted by Harvest or by any other
Person for whose conduct they are or may be held responsible; or
10.3.2 any bodily injury (including illness, disability, and death,
and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
Harvest or any other Person for whose conduct they are or may be held
responsible, in any way arising from or allegedly arising from any Hazardous
Activity conducted or allegedly conducted with respect to the facilities or the
operation of Harvest prior to the Closing, or from Hazardous Material that was
(i) present or suspected to be present on or before the Closing, on or at the
facilities (or present or suspected to be present on any other property, if such
Hazardous Material emanated or allegedly emanated from any of the facilities and
was present or suspected to be present on any of the facilities on or prior to
the Closing) or (ii) Released or allegedly Released by Harvest or any other
Person for whose conduct they are or may be held responsible, at any time on or
prior to the Closing.
TRC will be entitled to control any cleanup, any related proceeding,
and, except as provided in the following sentence, any other Proceeding with
respect to which indemnity may be sought under this Section 10.3.
Section 10.4 Indemnification and Payment of Damages by TRC. TRC will
indemnify and hold harmless Harvest, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with: (a) any breach of any representation or warranty made by TRC in
this Agreement or any other certificate or document delivered by TRC pursuant to
this Agreement; (b) any breach of any representation or warranty made by TRC in
this Agreement as if such representation or warranty were made on and as of the
Closing.
32
10.4.1 any breach by either TRC of any covenant or obligation of such
TRC in this Agreement;
10.4.2 any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with TRC (or any Person acting on
its behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Harvest.
Section 10.5 Indemnification and Payment of Damages by TRC - Environmental
Matters. In addition to the provisions of Section 10.2, TRC will indemnify and
hold harmless Harvest for, and will pay to Harvest, the amount of any Damages
(including costs of cleanup, containment, or other remediation) arising,
directly or indirectly, from or in connection with:
10.5.1 any Environmental, Health, and Safety Liabilities arising out
of or relating to: (i) (A) the ownership, operation, or condition at any time on
or prior to the Closing of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
TRC has or had an interest, or (B) any Hazardous Materials or other contaminants
that were present on the Facilities or such other properties and assets at any
time on or prior to the Closing; or (ii) (A) any Hazardous Materials or other
contaminants, wherever located, that were, or were allegedly, generated,
transported, stored, treated, released, or otherwise handled by TRC or by any
other Person for whose conduct they are or may be held responsible at any time
on or prior to the Closing, or (B) any Hazardous Activities that were, or were
allegedly, conducted by TRC or by any other Person for whose conduct they are or
may be held responsible; or
10.5.2 any bodily injury (including illness, disability, and death,
and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
TRC or any other Person for whose conduct they are or may be held responsible,
in any way arising from or allegedly arising from any Hazardous Activity
conducted or allegedly conducted with respect to the facilities or the operation
of TRC prior to the Closing, or from Hazardous Material that was (i) present or
suspected to be present on or before the Closing, on or at the facilities (or
present or suspected to be present on any other property, if such Hazardous
Material emanated or allegedly emanated from any of the facilities and was
present or suspected to be present on any of the facilities on or prior to the
Closing) or (ii) Released or allegedly Released by TRC or any other Person for
whose conduct they are or may be held responsible, at any time on or prior to
the Closing.
TRC will be entitled to control any cleanup, any related proceeding,
and, except as provided in the following sentence, any other Proceeding with
respect to which indemnity may be sought under this Section 10.5.
Section 10.6 Time Limitations. If the Closing occurs, Harvest shall have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing, unless on or before July 9, 2000 TRC notifies Harvest of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by TRC; a claim for indemnification or reimbursement not based upon
any representation or warranty or any covenant or obligation to be performed and
33
complied with prior to the Closing, may be made at any time. If the Closing
occurs, TRC shall have no liability (for indemnification or otherwise) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing, unless on or before Harvest
notifies TRC of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Harvest.
Section 10.7 Procedure for Indemnification - Third Party Claims.
10.7.1 Promptly after receipt by an indemnified party under Section
10.2, 10.4, or (to the extent provided in the last sentence of Section 10.3)
Section 10.3 of notice of the commencement of any Proceeding against it (the
"Proceeding"), such indemnified party shall, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
10.7.2 If any Proceeding referred to in Section 10.07.1 is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party shall, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party shall not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it shall be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
10.7.3 Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party shall not be bound by any determination of a Proceeding
so defended or any compromise or settlement effected without its consent (which
may not be unreasonably withheld).
34
10.7.4 Harvest and TRC hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Harvest with respect to such a
claim anywhere in the world.
10.7.5 Procedure for Indemnification - Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
ARTICLE XI.
CONDITIONS TO THE EXCHANGE OF STOCK
Section 11.1 Conditions Precedent to Performance by Harvest. The
obligations of Harvest under this Agreement are subject to the satisfaction of
the following conditions (any or all of which may be waived by Harvest in its
sole discretion to the extent permitted by law):
11.1.1 Board and Stockholder Approval. The Merger shall have been
effectively adopted and approved at or prior to the Effective Date by the Board
of Directors and stockholders of TRC in accordance with applicable law; it is
understood, however, that such adoption and approval shall have been obtained
prior to the expiration of the Feasibility Period.
11.1.2 Representations; True Representations and Covenants Performed.
The representations and warranties of TRC set forth herein shall be true and
correct in all material respects immediately prior to the Closing with the same
effect as if made at that time. TRC shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by them on or prior to the Closing.
11.1.3 No Litigation Affecting Merger. No judgment, decree, order or
ruling of any court or regulatory or governmental authority shall have been
issued or entered against TRC which would be violated by the consummation of
this transaction, and no person or entity which is not a party to this Agreement
shall have commenced any litigation against TRC seeking to restrain or prohibit,
or to obtain substantial damages in connection with, this Agreement or the
transactions contemplated hereby.
11.1.4 Securities Laws. All approvals, consents, permits, licenses or
qualifications from authorities administrating the securities or "blue-sky" laws
of any state having jurisdiction required for the consummation of this
transaction shall have been obtained and shall be effective.
11.1.5 Regulatory Compliance, Approvals and Consents. TRC shall have
complied with all legal provisions applicable to this transaction, and all
approvals required under any legal provision to carry out this transaction, and
all consents required to be obtained in connection with this transaction in
order to avoid a default under any contract, agreement, commitment, lease,
mortgage, instrument or other document to or by which any of TRC is a party or
may be bound, shall have been obtained on terms reasonably satisfactory to
Harvest.
35
11.1.6 Filings. A duly certified, executed and acknowledged copy of
articles of merger with respect to the merger shall have been filed with the
appropriate Secretary in accordance with applicable law and a duly certified,
executed and acknowledged copy of this Agreement, or a certificate of merger
with respect thereto, shall have been filed with the appropriate Secretary in
accordance with applicable law.
Section 11.2 Conditions Precedent to Performance by TRC. The obligations of
TRC under this Agreement are subject to the satisfaction of the following
conditions (any or all of which may be waived by TRC in their sole discretion to
the extent permitted by law):
11.2.1 Board and Stockholder Approval. This Agreement and the
transactions and matters contemplated herein shall have been effectively adopted
and approved at or prior to the Closing by the Board of Directors of Harvest and
stockholders of Harvest in accordance with applicable law and Harvest shall have
delivered such certificate and evidence of the same as reasonably requested by
TRC. Those matters include, without limitation, shareholder and Board of
Directors' approval of a reverse split of the shares of each class of stock of
Harvest to meet Nasdaq requirements, and approval of the merger contemplated
herein, approval of the Board of Directors contemplated in Schedule 1.2.2,
approval of a change of management, if required, and approval by Harvest Warrant
holders of a reset to these Warrants as required by TRC.
11.2.2 Representations True and Covenants Performed. The
representations and warranties of Harvest set forth herein shall be true and
correct in all material respects immediately prior to the Effective Date with
the same effect as if made at that time. Harvest shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by them on or prior to the Effective Date. The
President of Harvest shall have delivered to TRC a certificate to such effect.
11.2.3 No Litigation Affecting Merger. No judgment, decree, order or
ruling of any court or regulatory or governmental authority shall have been
issued or entered against Harvest which would be violated by the completion of
the Merger, and no person or entity which is not a party to this Agreement shall
have commenced any litigation against Harvest seeking to restrain or prohibit,
or to obtain substantial damages in connection with, this Agreement or the
transactions contemplated hereby.
11.2.4 Securities Laws. All approvals, consents, permits, licenses or
qualifications from authorities administering the securities or "blue-sky" laws
of any state having jurisdiction required for the consummation of the Merger
shall have been obtained and shall be effective.
11.2.5 Regulatory Compliance, Approvals and Consents. Harvest shall
have complied with all legal provisions applicable to this transaction, and all
approvals required under any legal provision to carry out this transaction, and
all consents required to be obtained in connection with this transaction in
order to avoid a default under any contract, agreement, commitment, lease,
mortgage, instrument or other document to or by which Harvest is a party or may
be bound, shall have been obtained on terms reasonably satisfactory to TRC.
11.2.6 Filings. A duly certified, executed and acknowledged copy of
this Agreement, or a certificate of merger with respect thereto, shall have been
filed with the appropriate state Secretary in accordance with applicable law and
a duly certified, executed and acknowledged copy of articles of merger with
respect to the Merger shall have been filed with the appropriate Secretary in
accordance with applicable law.
36
ARTICLE XII.
NOTICES
Section 12.1 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder or with respect
hereto shall be in writing, and may be given by (a) personal service, (b)
first-class United States mail postage prepaid, (c) overnight delivery service,
charges prepaid or (d) telecopy or other means of electronic transmission, if
confirmed promptly by any of the methods specified in clauses (a)-(c) of this
sentence, and will be deemed to have been duly given or made when delivered
personally, when mailed first-class, postage prepaid, registered or certified
mail, overnight delivery service, charges prepaid or when sent by electronic
transmission, to the respective parties, as follows:
If to Harvest: Harvest Restaurant Group, Inc,
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to: Rosenberg, Tuggey, Agather, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ P.C.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to TRC: TRC Acquisition Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇ III
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Scarborough, L.L.P.
First Union Plaza, Suite 1400
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Section 12.2 Change of Address. Any of the parties hereto may change the
address to which such communications are to be directed to it or him by giving
written notice to the other parties in the manner provided in Section 11.01.
ARTICLE XIII.
GENERAL
Section 13.1 Governing Law. This Agreement and the performance of the
transactions contemplated hereby shall be governed by and construed and enforced
in accordance with the laws of Texas, notwithstanding any contrary application
of conflicts of laws principles.
37
Section 13.2 Press Releases. The parties hereto agree to use their best
efforts to coordinate the preparation of and making of any public announcements
of the transactions contemplated by this Agreement. No such release or public
announcement pertaining to the transactions contemplated by this Agreement may
be made by either party without the prior written consent of the other party,
unless such release or announcement is required by law.
Section 13.3 Entire Agreement. This Agreement and the Schedules hereto and
the agreements, documents and instruments referred to herein, set forth the
entire agreement and understanding of the parties in respect of the transactions
contemplated hereby and supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof, whether oral or written.
The parties hereto have not relied upon any promises, representations,
warranties, agreements, covenants or undertakings, other than those expressly
set forth or referred to herein.
Section 13.4 Successors. This Agreement and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
TRC, its respective successors and permitted assigns, and Harvest and its
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be transferred or assigned (by
operation of law or otherwise) by any of the parties hereto without the prior,
written consent of the other parties.
Section 13.5 Modification. This Agreement may not be changed, amended,
terminated, augmented, rescinded, or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder or
thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first part, to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
Section 13.6 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
Section 13.7 Counterparts. This Agreement and any amendment or modification
hereof may be executed simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
Section 13.8 Signatures by Facsimile. Any facsimile signature of any party
hereto shall constitute a legal, valid and binding execution hereof by such
party.
Section 13.9 Remedies of the Parties. TRC acknowledges that, in addition to
all other remedies to which Harvest is entitled, Harvest shall have the right to
enforce the terms of this Agreement by a decree of specific performance,
provided Harvest is not in material default hereunder. Harvest acknowledges
that, in addition to all other remedies to which TRC is entitled, TRC shall have
38
the right to enforce the terms of this Agreement by a decree of specific
performance, provided TRC is not in material default hereunder. The parties also
agree that the rights and remedies of each party to this Agreement set forth in
this Agreement and in all of the exhibits and schedules attached hereto and
documents referred to herein shall be cumulative and shall inure to the benefit
of each such party.
Section 13.10 Arbitration. In the event of a dispute between the parties
arising under this Agreement, the parties shall submit to binding arbitration
before a single arbitrator in Atlanta, Georgia, under the Commercial Arbitration
Rules of the American Arbitration Association. The decision of the arbitrator
shall be final and binding with respect to the dispute subject to arbitration
and shall be enforceable in any court of competent jurisdiction. Nothing in this
paragraph 13.10 shall derogate from the rights of the parties to seek
preliminary injunctive relief to preserve the status quo.
Section 13.11 Attorney's Fees. In the event of arbitration or litigation
filed or instituted between the parties with respect to this Agreement or
related agreements, the prevailing party will be entitled to receive from the
other party all costs, damages and expenses, including reasonable attorney's
fees, incurred by the prevailing party in connection with that action or
proceeding whether or not the controversy is reduced to judgment or award. The
prevailing party will be that party who may be fairly said by the arbitrator(s)
or the court to have prevailed on the major disputed issues.
Section 13.12 Cooperation and Records Retention. TRC and Harvest shall (i)
provide the other with access to such records, original or copies, or assistance
as may reasonably be requested by them in connection with the preparation of any
Tax Return, in connection with any audit or other examination by any Taxing
authority or any judicial or administrative proceedings relating to liability
for Taxes, or financial reporting obligations, (ii) each retain and provide the
other, with any records or other information which may be relevant to any such
Tax Return, audit or examination, proceeding or determination, or financial
reporting obligations, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any Tax Return of the other for any
period. All Tax Returns, supporting work 9schedules and other records or
information which may be relevant to such Tax Returns for all tax periods or
portions thereof ending before or including the Closing date shall remain with
Harvest or TRC and shall be made available for inspection and copying by the
parties hereto during normal business hours.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger as of the date first above written.
HARVEST RESTAURANT GROUP, INC. TRC ACQUISITION CORPORATION
__________________________________________ _______________________________
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: ▇▇▇▇▇ ▇▇▇▇ III
Title: Chairman & Chief Executive Officer Title:
39
FIRST AMENDMENT
TO
SHARE EXCHANGE AGREEMENT
THIS FIRST AMENDMENT TO SHARE EXCHANGE AGREEMENT (this "Amendment") is
entered into as of this 10th day of August, 1998, by and among HARVEST
RESTAURANT GROUP, INC., a Texas corporation ("Harvest"), and TRC ACQUISITION
CORPORATION, a Georgia corporation ("TRC").
W I T N E S S E T H:
--------------------
WHEREAS, Harvest and TRC have executed that certain Share Exchange
Agreement, dated as of July 9, 1998 (the "Exchange Agreement"); and
WHEREAS, Harvest and TRC have agreed to amend the Exchange Agreement as
provided herein;
NOW, THEREFORE, in consideration of the premises set forth above, and the
mutual covenants herein contained, Harvest and TRC hereby agree as follows:
1. Section 2.1 Feasibility Study. The second sentence of this section is
modified to read as follows: "Each party shall have until the earlier of August
31, 1998 or the date the Proxy Statement describing the Share Exchange is filed
with the Securities Exchange Commission to conduct such a Feasibility Study
("Feasibility Period")."
2. Ratification. Except as set forth herein, the terms and conditions of
the Exchange Agreement shall remain unmodified and in full force and effect and
the Exchange Agreement, as so modified, is hereby ratified and confirmed.
3. Counterparts. This Amendment may be executed in counterparts, each of
which shall constitute an original and all of which together shall constitute
one and the same instrument.
4. Signatures by Facsimile. Any facsimile signature of either party hereto
shall constitute the legal, valid and binding execution hereof by such party.
IN WITNESS WHEREOF, Harvest and TRC have caused this First Amendment to
Share Exchange Agreement to be executed by their duly authorized representatives
as of the day and year first above written.
HARVEST RESTAURANT GROUP, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇, CFO
------------------------------------------
Chief Financial Officer
For: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
TRC ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ III
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ III
Chairman and Chief Executive Officer
SECOND AMENDMENT
TO
SHARE EXCHANGE AGREEMENT
THIS SECONDAMENDMENT TO SHARE EXCHANGE AGREEMENT (this "Amendment") is
entered into as of this 31st day of August, 1998, by and among HARVEST
RESTAURANT GROUP, INC., a Texas corporation ("Harvest"), and TRC ACQUISITION
CORPORATION, a Georgia corporation ("TRC").
WITNESSETH:
-----------
WHEREAS, Harvest and TRC have executed that certain Share Exchange
Agreement, dated as of July 9, 1998 (the "Exchange Agreement"); and
WHEREAS, Harvest and TRC have previously agreed to amend the Exchange
Agreement as provided herein in the First Amendment thereto, and have now agreed
to further amend the sum by the terms set forth below:
NOW, THEREFORE, in consideration of the premises set forth above, and the
mutual covenants herein contained, Harvest and TRC hereby agree as follows:
1. Section 2.1 Feasibility Study. The second sentence of this section is
modified to read as follows: 'Each party shall have until the earlier of
September 8, 1998 or the date the Proxy Statement describing the Share Exchange
is filed with the Securities Exchange Commission to conduct such a Feasibility
Study ("Feasibility Period")."
2. Ratification. Except as set forth herein, the terms and conditions of
the Exchange Agreement shall remain unmodified and in full force and effect and
the Exchange Agreement, as so modified, is hereby ratified and confirmed.
3. Counterparts. This Amendment may be executed in counterparts, each of
which shall constitute an original and all of which together shall constitute
one and the same instrument.
4. Signatures by Facsimile. Any facsimile signature of either party hereto
shall constitute the legal, valid and binding execution hereof by such party.
IN WITNESS WHEREOF, Harvest and TRC have caused this Second Amendment to
Share Exchange Agreement to be executed by their duly authorized representatives
as of the day and year first above written.
HARVEST RESTAURANT GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
TRC ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ III
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ III
Chairman and Chief Executive Officer
THIRD AMENDMENT
TO
SHARE EXCHANGE AGREEMENT
THIS THIRD AMENDMENT TO SHARE EXCHANGE AGREEMENT (this "Amendment") is
entered into as of this 8TH day of September, 1998, by and among HARVEST
RESTAURANT GROUP, INC., a Texas corporation ("Harvest"), and TRC ACQUISITION
CORPORATION, a Georgia corporation ("TRC").
WITNESSETH:
-----------
WHEREAS, Harvest and TRC have executed that certain Share Exchange
Agreement, dated as of July 9, 1998 (the "Exchange Agreement"); and
WHEREAS, Harvest and TRC have previously agreed to amend the Exchange
Agreement as provided herein in the First Amendment thereto, and have now agreed
to further amend the sum by the terms set forth below:
NOW, THEREFORE, in consideration of the premises set forth above, and the
mutual covenants herein contained, Harvest and TRC hereby agree as follows:
1. Section 2.1 Feasibility Study. The second sentence of this section is
modified to read as follows: "Each party shall have until the earlier of
September 15, 1998 or the date the Proxy Statement describing the Share Exchange
is filed with the Securities Exchange Commission to conduct such a Feasibility
Study ("Feasibility Period")."
2. Counterparts. This Amendment may be executed in counterparts, each of
which shall constitute an original and all of which together shall constitute
one and the same instrument.
3. Signatures by Facsimile. Any facsimile signature of either party hereto
shall constitute the legal, valid and binding execution hereof by such party.
IN WITNESS WHEREOF, Harvest and TRC have caused this Fourth Amendment to
Share Exchange Agreement to be executed by their duly authorized representatives
as of the day and year first above written.
HARVEST RESTAURANT GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
TRC ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ III
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ III
Chairman and Chief Executive Officer
FOURTH AMENDMENT
TO
SHARE EXCHANGE AGREEMENT
THIS FOURTH AMENDMENT TO SHARE EXCHANGE AGREEMENT (this "Amendment") is
entered into as of this 15th day of September, 1998, by and among HARVEST
RESTAURANT GROUP, INC., a Texas corporation ("Harvest"), and TRC ACQUISITION
CORPORATION, a Georgia corporation ("TRC").
WITNESSETH:
-----------
WHEREAS, Harvest and TRC have executed that certain Share Exchange
Agreement, dated as of July 9, 1998 (the "Exchange Agreement"); and
WHEREAS, Harvest and TRC have previously agreed to amend the Exchange
Agreement as provided herein in the First Amendment thereto, and have now agreed
to further amend the sum by the terms set forth below:
NOW, THEREFORE, in consideration of the premises set forth above, and the
mutual covenants herein contained, Harvest and TRC hereby agree as follows:
1. Section 2.1 Feasibility Study. The second sentence of this section is
modified to read as follows: "Each party shall have until the earlier of
September 22, 1998 or the date the Proxy Statement describing the Share Exchange
is filed with the Securities Exchange Commission to conduct such a Feasibility
Study ("Feasibility Period")."
2. Counterparts. This Amendment may be executed in counterparts, each of
which shall constitute an original and all of which together shall constitute
one and the same instrument.
3. Signatures by Facsimile. Any facsimile signature of either party hereto
shall constitute the legal, valid and binding execution hereof by such party.
IN WITNESS WHEREOF, Harvest and TRC have caused this Fourth Amendment to
Share Exchange Agreement to be executed by their duly authorized representatives
as of the day and year first above written.
HARVEST RESTAURANT GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
TRC ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ III
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ III
Chairman and Chief Executive Officer
FIFTH AMENDMENT
TO
SHARE EXCHANGE AGREEMENT
THIS FIFTH AMENDMENT TO SHARE EXCHANGE AGREEMENT (this "Amendment") is
entered into as of this 22ND day of September, 1998, by and among HARVEST
RESTAURANT GROUP, INC., a Texas corporation ("Harvest"), and TRC ACQUISITION
CORPORATION, a Georgia corporation ("TRC").
WITNESSETH:
-----------
WHEREAS, Harvest and TRC have executed that certain Share Exchange
Agreement, dated as of July 9, 1998 (the "Exchange Agreement"); and
WHEREAS, Harvest and TRC have previously agreed to amend the Exchange
Agreement as provided herein in the various Amendments thereto, and have now
agreed to further amend the sum by the terms set forth below:
NOW, THEREFORE, in consideration of the premises set forth above, and the
mutual covenants herein contained, Harvest and TRC hereby agree as follows:
1. Section 2.1 Feasibility Study. The second sentence of this section is
modified to read as follows: "Each party shall have until the earlier of
September 23, 1998 or the date the Proxy Statement describing the Share Exchange
is filed with the Securities Exchange Commission, to conduct such a Feasibility
Study ("Feasibility Period")."
2. Counterparts. This Amendment may be executed in counterparts, each of
which shall constitute an original and all of which together shall constitute
one and the same instrument.
3. Signatures by Facsimile. Any facsimile signature of either party hereto
shall constitute the legal, valid and binding execution hereof by such party.
IN WITNESS WHEREOF, Harvest and TRC have caused this Fifth Amendment to
Share Exchange Agreement to be executed by their duly authorized representatives
as of the day and year first above written.
HARVEST RESTAURANT GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
TRC ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ III
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ III
Chairman and Chief Executive Officer
SIXTH AMENDMENT
TO
SHARE EXCHANGE AGREEMENT
THIS SIXTH AMENDMENT TO SHARE EXCHANGE AGREEMENT (this "SIXTH AMENDMENT")
is entered into as of this _____ day of September, 1998, by and among HARVEST
RESTAURANT GROUP, INC., a Texas corporation ("Harvest"), TRC ACQUISITION
CORPORATION, a Georgia corporation ("TRC") and HARTAN, INC., a Texas corporation
("Hartan").
W I T N E S S E T H :
---------------------
WHEREAS, Harvest and TRC have executed that certain Share Exchange
Agreement, dated as of July 9, 1998 which was amended pursuant to those certain
amendments dated August 10, 1998, August 31, 1998, September 8, 1998, September
15, 1998, and September 22, 1998, respectively (as amended, the "Agreement");
and
WHEREAS, Harvest and TRC have agreed to amend certain provisions of the
Exchange Agreement as provided herein including, but not limited to, inclusion
of Hartan, a wholly-owned subsidiary of Harvest, as a party, and to describe
this transaction as a forward triangular merger;
NOW, THEREFORE, in consideration of the premises set forth above, and the
mutual covenants herein contained, Harvest, Hartan and TRC hereby agree as
follows:
1. Title. The Agreement is hereby renamed "Share Exchange and Merger
Agreement".
2. Introduction. The introductory paragraph of the Agreement is modified to
read as follows:
This SHARE EXCHANGE AND MERGER AGREEMENT (the "Agreement") is
made and entered into as of the 9th day of July, 1998, between HARVEST
RESTAURANT GROUP, INC., a Texas corporation ("Harvest"), HARTAN, INC.,
a Texas corporation and a wholly-owned subsidiary of Harvest
("Hartan") and TRC ACQUISITION CORPORATION, a Georgia corporation
("TRC"), referred to jointly as the "Parties".
3. Recitals.
(a) The first "WHEREAS" clause is modified to read as follows:
WHEREAS, TRC has approximately 4,110,000 issued and
outstanding shares of common stock ("TRC Common Stock") including
options and warrants ("TRC Options and Warrants"), and
approximately 2,000 issued and outstanding shares of class A
preferred stock ("TRC Class A Preferred Stock"), which represents
all of the issued and outstanding capital stock of TRC;
(b) In the seventh "WHEREAS" clause, the last sentence is modified to
read as follows:
Except to the extent of the number of shares of Harvest
Series C Preferred Stock issued in connection with the financing
described in subsection 1.2.1 below, and stock dividends issued
on any of the above-referenced stock, to the extent that the
number of actual outstanding shares of Harvest Capital Stock on
the Effective Date exceeds the share amounts stated above, then
the shares of Harvest Common Stock to be issued to the holders of
TRC Common Stock as set forth above shall be adjusted pro rata to
maintain the same ownership percentage;
(c) The eighth "WHEREAS" clause is modified to read as follows:
WHEREAS, the intended result of this Agreement is for TRC to
merge into Hartan, Inc., a new, wholly-owned subsidiary of
Harvest ("Hartan") as part of a forward triangular merger and for
Harvest to issue 18,000,000 shares of Harvest Common Stock in
exchange for 100% of the TRC Common Stock and the TRC Options and
Warrants.
(d) Beginning in the ninth "WHEREAS" clause and continuing throughout
the Agreement, all references to "Harvest Series C Preferred Stock" are
modified to read "Harvest Series D Preferred Stock".
(e) The final "WHEREAS" clause of this section is modified to read as
follows:
WHEREAS, the Parties intend for this transaction to qualify
as a "tax-free reorganization" pursuant to Section 368(a)(1)(A)
within the provisions of the Internal Revenue Code of 1986, as
amended (the "Code") by virtue of the provisions of Section
368(a)(2)(D) of the Code, and agree that TRC shall have the
authority to make any amendments and modifications to this
Agreement as it may deem appropriate to ensure that this
transaction qualifies as a tax-free reorganization under the
Code;
2
4. Section 1.2 Contemplated Transactions.
(a) All references to "Harvest Subsidiary" in Section 1.2 and
throughout the remainder of the Agreement are deleted and "Hartan" is
inserted in lieu thereof.
(b) In subsection 1.2.1, the next to last sentence is modified to read
as follows: "The option shall be on terms mutually agreeable to the
parties, as set forth in Schedule 1.2.1."
(c) Subsection 1.2.3 is modified to read as follows:
1.2.3 Employment and Severance Agreements. ▇▇▇▇▇ ▇▇▇▇ shall
have executed an employment agreement with Harvest and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ shall have executed a severance agreement with Harvest,
the essential and principal terms of each of which are set out
and attached hereto as Schedule 1.2.3 and made a part hereof.
(d) Subsection 1.2.4 is deleted.
(e) Subsection 1.2.5 is modified to read as follows:
1.2.5 Settlement of Liabilities. Harvest shall obtain
settlement agreements from all creditors with known, actual or
contingent outstanding liabilities in excess of $10,000.00. The
total amount permitted to be paid in order to obtain the
settlement agreements (the "Settlement Payment") shall be
approximately $550,000.00, but shall not exceed $1,000,000.00. In
calculating the amount of the Settlement Payment, Harvest shall
have the right to credit any proceeds received by Harvest in
connection with such disputed matters, or liquidation of its
assets, against amounts paid to obtain the settlement agreements.
(f) Subsection 1.2.6 is deleted and the following subsection is added
to Section 11.2 of the Agreement:
11.2.7 Harvest shall have used best efforts to convert the
Harvest Series A Preferred Stock to Harvest Common Stock.
(g) Subsection 1.2.7 is deleted.
5. Section 3.1 Closing. The following new subsection 3.1.5 is added to the
end of this section:
3.1.5 Actions of Hartan at Closing. At the Closing, Hartan
shall deliver to TRC the following:
3
3.1.5.1 Resignations. Hartan shall deliver to Harvest
the written and executed resignations of the directors of
Hartan and termination of any such executed employment
agreements, if any, dated as of the Effective Date, as
called for in this Agreement.
3.1.5.2 Certificate of Hartan. Hartan shall deliver to
TRC a certificate, which shall be dated as of Closing and
which shall be signed by Hartan's Chief Executive Officer,
certifying: (i) the authority of Hartan to enter into and
consummate the transactions contemplated by this Agreement;
(ii) the authority of the officers of Hartan to execute and
deliver any document contemplated by this Agreement on
behalf of Hartan; (iii) that the representations and
warranties of Hartan obtained herein were correct and true
when made and are correct and true as of the date of Closing
(except to the extent that any representation or warranty of
Hartan specifically relates to an earlier date); and (iv)
that each and every covenant and agreement of Hartan
contained in the Agreement to be performed by Hartan on or
prior to Closing has been performed by Hartan.
3.1.5.3 Corporate Resolutions. Hartan shall deliver to
TRC certified copies of the resolutions of the Board of
Directors of Hartan and shareholder approval of Hartan
authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated herein.
6. Article IV Exchange of Shares. Article IV is renamed "Exchange of Shares
and Merger".
7. Subsection 4.1.1 Exchange of TRC Common Stock, Options and Warrants.
This subsection is modified to read as follows:
4.1.1 Exchange of TRC Common Stock, Options and Warrants. As of
the Effective Date, all shares of TRC Common Stock and all TRC Options
and Warrants that are outstanding shall be converted into the right to
receive a total of 18,000,000 fully paid and non-assessable shares of
Harvest Common Stock (or such higher adjusted amount as provided for
in the recitals) equally among all issued and outstanding shares of
TRC Common Stock and TRC Options and Warrants unless ratably reduced
pursuant to a reverse split of Harvest Common Stock.
8. Subsection 4.1.2 Exchange of ▇▇▇▇ ▇▇▇▇▇▇ Note and TRC Class A Preferred
Stock. This subsection is modified to read as follows:
The ▇▇▇▇ ▇▇▇▇▇▇ Note, including the principal balance and all
interest accrued thereon, valued in an amount of approximately
$3,100,000.00, the ▇▇▇▇ ▇▇▇▇▇▇ employment agreement, valued in an
amount of approximately $600,000.00, and the TRC Class A Preferred
Stock, valued in an amount of approximately $3,525,000.00, shall be
exchanged for 722,500 shares of Harvest Series D Preferred Stock at a
value of $10.00 per share in accordance with the provisions of Section
4.2, unless ratably reduced pursuant to a reverse split of Harvest
Common Stock.
4
9. Subsection 4.1.3 Santa ▇▇▇▇ Squeeze, Inc. Note. The following new
subsection is added to Section 4.1:
4.1.3 Exchange of Santa ▇▇▇▇ Squeeze, Inc. Note. The Santa ▇▇▇▇
Squeeze, Inc. Real Estate Lien Note in the amount of approximately
$150,000.00 shall be paid and satisfied in full by payment of
$50,000.00 cash and delivery of 50,000 shares of registered Harvest
Common Stock.
10. Subsection 4.2.2 TRC Class A Preferred Stock. All references to "TRC
Class C Preferred Stock" are modified to read "TRC Class A Preferred Stock".
11. The following new Section 4.4 shall be added to the end of Article IV:
Section 4.4 Merger Procedure.
4.4.1 Upon the Effective Date, TRC shall be merged with and
into Hartan in accordance with this Agreement. Upon the Effective
Date, Hartan shall be the surviving corporation of the merger by
and between TRC and Hartan. Upon the Effective Date, the separate
existence and corporate organization of TRC shall cease, except
insofar as it may be continued by statute. The identity,
existence, powers, rights and immunities of Hartan shall continue
unaffected.
4.4.2 On the Effective Date, the Articles of Incorporation
and Bylaws of Hartan shall become the Articles of Incorporation
and Bylaws of the surviving corporation and shall thereafter
continue to be Hartan's Articles of Incorporation and Bylaws
until changed as provided by law and in accordance with said
documents.
4.4.3 The new directors and officers of Harvest (required
pursuant to this Agreement) shall become the directors and
officers of Hartan as of the Effective Date.
4.4.4 Except as otherwise provided herein, upon the
Effective Date, Hartan shall be obligated to perform and/or pay
all obligations and liabilities of TRC which obligations and
liabilities Hartan expressly assumes and agrees to perform or
pay, subject to the effectuation of the merger contemplated
herein. Also, upon the Effective Date, Hartan will possess all
property, real, personal and otherwise, owned by TRC (in addition
to any such property owned by Hartan immediately prior to the
Effective Date).
5
12. Section 5.1 TRC's Representations and Warranties. The first sentence of
Section 5.1 is modified to read as follows:
TRC makes the following representations and warranties to Harvest
and Hartan as a material inducement for Harvest and Hartan to enter
into this Agreement subject only to such disclaimers, disclosures and
exceptions as are expressly set forth in the attachments hereto.
13. Subsection 5.1.7 Undisclosed Liabilities. This subsection is revised to
read as follows:
Prior to expiration of the Feasibility Period, TRC has provided
to Harvest the financial statements set forth in subsection 5.1.19.
Except as and to the extent reflected or disclosed (or adequately
reserved for or against) in such financial statements or in Schedule
5.1, TRC has no debts, liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, whether due or to
become due, including, but not limited to, liabilities or obligations
on account of known fraud by any merchant, customer, taxes, other
governmental charges, duties, penalties, interest, fines, vacation
pay, workmen's compensation claims or pension plan obligations, and
there is no known basis for the assertion of such against TRC.
14. Article VII Harvest's Representations and Warranties.
(a) Article VII titled "Harvest's Representations and Warranties" is
modified to be titled "Harvest's and Hartan's Representations and
Warranties".
(b) All references to "Harvest" contained in Sections 7.1, 7.1.2,
7.1.3, 7.1.4, 7.1.5, 7.1.6, 7.1.7, 7.1.8, 7.1.9, 7.1.10, 7.1.11, 7.1.12,
7.1.13, 7.1.14, 7.1.15, 7.1.16, 7.1.17, 7.1.18, 7.1.20, 7.1.21, 7.1.22,
7.1.23, 7.1.24, 7.1.25, 7.1.26, 7.1.27, 7.1.28 and 7.1.29 shall be modified
to read "Harvest and/or Hartan".
15. Subsection 7.1.7 Undisclosed Liabilities. This subsection is revised to
read as follows:
Prior to expiration of the Feasibility Period, Harvest has
provided to TRC the financial statements set forth in subsection
7.1.19. Except as and to the extent reflected or disclosed (or
adequately reserved for or against) in such financial statements or in
Schedule 7.1, Harvest has no debts, liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, whether
due or to become due, including, but not limited to liabilities or
obligations on account of known fraud by any merchant, customer,
taxes, other governmental charges, duties, penalties, interest, fines,
vacation pay, workmen's compensation claims, pension plan obligations,
and there is no known basis for the assertion of such against Harvest.
6
16. Article X Indemnification and Remedies. This Article is deleted and the
following is inserted in lieu thereof:
ARTICLE X
INDEMNIFICATION AND REMEDIES
Section 10.1 Indemnification by Harvest. Harvest and its successors
and assigns hereby agree that notwithstanding any investigation which may
have been made by or on behalf of TRC prior to the Closing, Harvest shall
indemnify, defend and hold harmless TRC (and any affiliated party, officer,
director or employee of TRC) at any time after consummation of the Closing
from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses including,
subject to this Article, interest, penalties, court costs and reasonable
attorneys' fees and expenses asserted against, imposed upon or incurred by
TRC or any affiliated party, directly or indirectly, caused (a) by reason
of or resulting from or arising out of any material misrepresentation or
any material breach or nonfulfillment of any representation, covenant,
warranty or agreement of Harvest or Hartan contained in or made pursuant to
this Agreement, and (b) by any obligation of TRC, to the extent disclosed
to Harvest in this Agreement, for which TRC (and any affiliated party of
TRC) is or may become personally liable.
Section 10.2 Indemnification by TRC. TRC and its successors and
assigns hereby agree that notwithstanding any investigation which may have
been made by or on behalf of Harvest prior to the Closing, TRC shall
indemnify, defend and hold harmless Harvest (and any affiliated party,
officer, director or employee of Harvest) at any time after consummation of
the Closing from and against all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs and expenses,
including, subject to this Article, interest, penalties, court costs and
reasonable attorneys' fees and expenses asserted against, imposed upon or
incurred by Harvest or any affiliated party, directly or indirectly, caused
(a) by reason of or resulting from or arising out of any material
misrepresentation or any material breach or nonfulfillment of any
representation, warranty, covenant and/or agreement of TRC contained in or
made pursuant to this Agreement, and (b) by any obligation of Harvest, to
the extent disclosed to TRC in this Agreement, for which Harvest (and any
affiliated party of Harvest) is or may become personally liable.
Section 10.3 Defense
10.3.1 Promptly after the receipt by any person entitled to
indemnification under this Article X of notice of (i) any claim or
(ii) the commencement of any action or proceeding, such party (the
"Aggrieved Party") will, if claim with respect thereto is made against
any party obligated to provide indemnification pursuant to this
Article X (the "Indemnifying Party"), give such Indemnifying Party
written notice of such claim or the commencement of such action or
proceeding and shall permit the Indemnifying Party to assume the
defense of any such claim or any proceeding or litigation resulting
7
from such claim, unless the action or proceeding seeks an injunction
or other similar relief against the Aggrieved Party or there is a
conflict of interest between it and the Indemnifying Party in the
conduct of the defense of such action. Failure by the Indemnifying
Party to notify the Aggrieved Party of its election to defend any such
proceeding or action within a reasonable time, but in no event more
than fifteen (15) days after written notice thereof shall have been
given to the Indemnifying Party, shall be deemed a waiver by the
Indemnifying Party of its right to defend such action.
10.3.2 If the Indemnifying Party assumes the defense of any such
claim or litigation resulting therefrom with counsel reasonably
acceptable to the Aggrieved Party, the obligations of the Indemnifying
Party as to such claim shall be limited to taking all steps necessary
in the defense or settlement of such claim or litigation resulting
therefrom and to holding the Aggrieved Party harmless from and against
any losses, damages and liabilities caused by or arising out of any
settlement of, or any judgment entered in connection with, such claim
or litigation. The Aggrieved Party may participate, at its expense, in
the defense of such claim or litigation provided that the Indemnifying
Party shall direct and control the defense of such claim or
litigation. The Aggrieved Party shall cooperate and make available all
books and records reasonably necessary and useful in connection with
the defense. The Indemnifying Party shall not, in the defense of such
claim or any litigation resulting therefrom, consent to entry of any
judgment, except with the written consent of the Aggrieved Party, or
enter into any settlement, except with the written consent of the
Aggrieved Party.
10.3.3 If the Indemnifying Party shall not assume the defense of
any such claim or litigation resulting therefrom, the Aggrieved Party
may defend against such claim or litigation in such manner as it may
deem appropriate and reasonably satisfactory to the Aggrieved Party.
The Indemnifying Party shall promptly reimburse the Aggrieved Party
for the amount of all expenses, legal or otherwise, as incurred by the
Aggrieved Party in connection with the defense against or settlement
of such claim or litigation. No settlement of claim or litigation
shall be made without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. If no settlement of the
claim or litigation is made, the Indemnifying Party shall promptly
reimburse the Aggrieved Party for the amount of any judgment rendered
with respect to such claim or in such litigation and of all expenses,
legal or otherwise, as incurred by the Aggrieved Party in the defense
against such claim or litigation.
10.3.4 Notwithstanding anything to the contrary herein contained,
TRC shall be entitled to control any cleanup, containment,
remediation, related proceeding, or other action or proceeding arising
from or in connection with any environmental, health or safety
liability or any hazardous materials or activities.
8
Section 10.4 Remedies Non-Exclusive. The remedies provided in this
Article X shall not be exclusive of or limit any other remedies that may be
available to either party in the event of a breach of this Agreement.
17. Section 11.2 Conditions Precedent to Performance by TRC.
(a) Subsection 11.2.1 is modified to read as follows:
This Agreement and the transactions and matters contemplated
herein shall have been effectively adopted and approved at or
prior to the Closing by the Board of Directors of Harvest and
Hartan, respectively, and stockholders of Harvest and Hartan,
respectively, in accordance with applicable law and Harvest and
Hartan shall have delivered such certificates and evidence of the
same as reasonably requested by TRC. Those matters include,
without limitation, shareholder approval of a reverse split of
the shares of each class of stock of Harvest and approval of the
merger contemplated herein, shareholder approval of the new Board
of Directors set forth in Schedule 1.2.2 and approval of a change
of management, if required.
(b) In subsections 11.2.2, 11.2.3, 11.2.4, 11.2.5 and 11.2.6, all
references to "Harvest" are modified to read "Harvest and Hartan".
18. Section 12.1 Notices. This section is modified to include the following
address for Hartan:
If to Hartan: Hartan, Inc.
c/o Harvest Restaurant Group, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to: Rosenberg, Tuggey, Agather, ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇ P.C.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
19. Section 13.9 Remedies of the Parties. All references to "Harvest"
contained in this section are modified to read "Harvest and Hartan".
20. Nondisparagement. At no time shall Harvest, TRC or Hartan or any of
their officers, directors or other representatives, disparage, denigrate or
otherwise defame any other or the business, services, properties or assets, or
any of the officers, directors, employees, agents or other representatives of
Harvest, TRC or Hartan provided, however, that the foregoing shall in no way
9
limit or preclude obligations of any party to comply with applicable law, and
any disclosures required thereunder. The foregoing sentence shall create no
liability on the part of any party to this Agreement or its officers, directors
or other representatives due to unsubstantiated statements attributed to such
party or its officers, directors or other representatives by a third party.
21. Ratification. Except as set forth herein, the terms and conditions of
the Agreement shall remain unmodified and in full force and effect and the
Agreement, as so modified, is hereby ratified and confirmed.
22. Counterparts. This Sixth Amendment may be executed in counterparts,
each of which shall constitute an original and all of which together shall
constitute one and the same instrument.
23. Facsimile Signatures. Each party shall be authorized to accept, and may
rely upon a facsimile transmission of this Sixth Amendment executed by the other
party and such document shall be binding upon the executing party.
[SIGNATURES ON FOLLOWING PAGE]
10
IN WITNESS WHEREOF, Harvest, Hartan and TRC have caused this Sixth
Amendment to Share Exchange Agreement to be executed by their duly authorized
representatives as of the day and year first above written.
HARVEST RESTAURANT GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
TRC ACQUISITION CORPORATION
By:
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ III
Chairman and Chief Executive Officer
HARTAN, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
----------------------------------
11
Schedule 1
(List of ▇▇▇▇▇▇'▇ Stores)
Corporate Restaurant Locations Franchise
Restaurant Locations
▇▇▇▇▇▇'▇ Northridge ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇▇▇▇
That Chicken Place Inc. ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇'▇ Vinings ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇'▇ ▇▇▇▇▇
▇▇▇▇▇▇'▇ Vinings, Inc. ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇'▇ Oaks ▇▇▇▇▇▇'▇ Fayetteville *
▇▇▇▇▇▇'▇ Oaks Inc. ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tanner's Spalding Tanner's Suwanee *
Tanner's ▇▇▇▇▇▇▇▇ Inc. ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Norcross, Ga 3009
Tanner's ▇▇▇▇▇ ▇▇▇▇▇▇'▇ Canton *
▇▇▇▇▇▇'▇ Mill Inc. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇'▇ Lawrenceville
▇▇▇▇▇▇'▇ Lawrenceville, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Corporate Catering Location
▇▇▇▇▇▇'▇ Catering
▇▇▇▇▇▇'▇ Catering, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
* Operate under TRC Acquisition Corporation legal entity
Schedule 2
(Statement of Resolution of Harvest Series D Preferred Stock)
See Attached
HARVEST RESTAURANT GROUP, INC.
(a Texas corporation)
---------------------
STATEMENT OF RESOLUTION
ESTABLISHING SERIES OF PREFERRED STOCK
--------------------------------------
Series D Convertible Preferred Stock
To: The Secretary of State
of the State of Texas
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act (the "Act"), the undersigned corporation, HARVEST RESTAURANT
GROUP, INC., (the "Corporation"), hereby submits the following statement for the
purpose of establishing and designating a series of shares of preferred stock to
be known as Series D Convertible Preferred Stock and fixing and determining the
relative rights and preferences thereof:
ARTICLE ONE
NAME
----
1. The name of the Corporation is HARVEST RESTAURANT GROUP, INC. and
the charter number of the Corporation is 01274398.
ARTICLE TWO
CORPORATE RESOLUTIONS
---------------------
Be it known that on May 19, 1997 the Corporation had established and
designated 3,000,000 shares of its preferred stock as Series A Redeemable
Convertible Preferred Stock ("Series A Preferred Stock") and on December 22,
1997 the Corporation had established and designated 1,000 shares of its
preferred stock as Series B Convertible Preferred Stock ("Series B Preferred
Stock"), and on July 2, 1998 the Corporation had established and designated
1,000 shares of its preferred stock as Series C Convertible Preferred Stock
("Series C Preferred Stock").
2. The following resolution establishing and designating an additional
series of preferred stock, known as: the Series D Convertible Preferred Stock
(the "Series D Preferred Stock"), and fixing and determining the relative rights
and preferences thereof was duly adopted by the Board of Directors of the
Corporation on __________ ___, 1998. The Series D Preferred Stock shall rank
junior to the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock.
BE IT RESOLVED that, pursuant to the authority expressly granted and
vested in the Board of Directors of the Corporation in accordance with Article
Four, Section 1 of the Corporation's Articles of Incorporation, authorizing
5,000,000 shares of Preferred Stock (the "Preferred Stock"), $1.00 par value per
share, approved and adopted on June 17, 1993 by the affirmative vote of the
holders of more than the requisite majority of the issued and outstanding shares
of Common Stock of the Corporation entitled to vote thereon (being the only
voting capital stock of the Corporation then outstanding) in accordance with and
pursuant to the provisions of Article 2.13 of the Texas Business Corporation Act
(the "Act"), the Board of Directors of the Corporation does hereby approve and
adopt the following resolutions designating and authorizing for issuance, in
accordance with the provisions of Article 2.13 of the Act, the Series D
Preferred Stock of the Corporation, said resolutions hereby effected being made
prior to the issuance of any shares of Series D Preferred Stock, such shares of
Series D Preferred Stock to consist of 750,000 shares, each having a par value
of $1.00 per share, and each of which shares of Series D Preferred Stock shall
have the dividend rights, voting powers, redemption provisions, liquidation
preferences and the relative, optional or other special rights, and shall be
subject to the qualifications, limitations or restrictions set forth below and
the remaining 1,248,000 authorized shares of the Preferred Stock shall remain
undesignated and reserved for future issuance subject to the future action of
the Board of Directors of the Corporation.
Rights and Preferences of Series D Preferred Stock
--------------------------------------------------
1. Dividends.
( a ) Amount and Payment of Dividend. Subject to the limitations
hereinafter set forth, the holders of Series D Preferred Stock shall be entitled
to receive, but only when, if and as declared by the Board of Directors,
dividends at the rate of eight percent (8%) per annum of the original issue
price thereof of Ten and No/100 Dollars ($10.00) per share, and no more, payable
only at the time such shares are converted pursuant to Section 4 hereof. Such
dividends may be paid in cash or in shares of Common Stock of the Corporation as
determined by the Company in its sole discretion; provided, however, no
fractional shares may be issued for dividends, any fractional shares will be
rounded to the nearest whole share, and provided further that if any such
dividend is paid in whole or in part by shares of Common Stock, the number of
shares of such security to be issued as a stock dividend shall be determined by
the reported market price of a share of the respective security on the last day
of the period for such stock dividend. Any shares of Series D Preferred Stock
issued after the date hereof shall accrue dividends from the date of issuance.
( b ) Cumulative Rights. To the extent, if any, that dividends at
the rate set forth in Section 1(a) above shall not be paid or set apart in full
for the Series D Preferred Stock, the aggregate deficiency shall be cumulated
and must be fully paid or set apart for payment before any dividends may be paid
upon or set apart for the Common Stock of the Corporation or before the
Corporation may purchase any of its Common Stock or otherwise make any
distribution on account of its Common Stock or any other class of capital stock
now or hereafter authorized or issued by the Corporation which ranks on a parity
with or junior to the Series D Preferred Stock (other than (i) a dividend
payable in Common Stock, or (ii) by conversion into or exchange for capital
stock of the Corporation ranking junior to the Series D Preferred Stock as to
dividends).
( c ) No Interest on Accrued Dividends. Any accumulations of
dividends on the Series D Preferred Stock shall not bear interest.
( d ) Declaration. Dividends on the Series D Preferred Stock
shall be declared if, when and as the Board of Directors of the Corporation
shall in its sole discretion deem advisable, and only from the surplus of the
Corporation as such shall be fixed and determined by the said Board of
Directors. The determination of the Board of Directors at any time of the amount
of surplus available for the payment of dividends shall be binding and
conclusive on the holders of the shares of Series D Preferred Stock then
outstanding. If dividends are not paid in full upon the Series D Preferred Stock
and any other Preferred Stock ranking on a parity as to dividends with the
Series D Preferred Stock, all dividends declared upon shares of Series D
Preferred Stock and upon such other shares of Preferred Stock will be declared
pro rata so that in all cases the amount of dividends declared per share on the
Series D Preferred Stock and such other Preferred Stock shall bear the same
ratio to each other that the accumulated dividends per share on the shares of
the Series D Preferred Stock and such other shares of Preferred Stock bear to
each other. The holders of the Series D Preferred Stock shall not be entitled to
receive any dividends thereon other than the dividends provided for in the
preceding provisions of this Section.
2. Voting Rights and Notice of Meetings. The holders of the Common
Stock shall have the exclusive right and power to vote on any matter submitted
to a vote of the shareholders of the Corporation and the holders of the Series D
Preferred Stock shall have no right or power whether authorized by the Act or
otherwise to vote on any matter or in any proceeding or to be represented at or
to receive notice of any meeting of the shareholders.
3. Redemption by Corporation.
The Corporation shall have the right to redeem the shares of Series D
Preferred Stock at any time after six months from the date of issuance for $.01
per share, if the closing price of the Corporation's Common Stock as quoted on
any national securities exchange, NASDAQ, or any NASD regulated quotation
service exceeds $3.50 per share for twenty (20) consecutive trading days. Notice
of redemption must be mailed at least 30 days in advance to each holder of
record of the Series D Preferred Stock to the holder's address as shown on the
stock transfer books of the Corporation. On the redemption date, the shares of
Series D Preferred Stock will automatically convert to into Common Stock at the
conversion rate as set forth in Section 4 below. Upon conversion all rights of
the holders of such Series D Preferred Stock will terminate.
4. Conversion of Series D Preferred Stock.
( a ) Conversion Right of Holder. Each share of the Series D
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after six months from the date of issuance of such share of Series D
Preferred Stock into fully-paid and nonassessable whole shares of Common Stock
upon the terms and conditions set forth in the following paragraphs of this
Section.
( b ) Exercise of Conversion Right. Any holder of the Series D
Preferred Stock electing to convert such stock into Common Stock pursuant to
Section 4(a) hereof shall deliver the certificates for the Series D Preferred
Stock to the Corporation's principal office or the office of the Corporations
Transfer Agent, with the form of written notice to the Corporation endorsed on
such certificate(s) of his election to convert such Series D Preferred Stock
into Common Stock duly filled out and executed. The conversion right in respect
of any such Series D Preferred Stock pursuant to Section 4(a) hereof shall be
deemed to have been exercised at the date on which the holder delivers such
notice of conversion duly filled out and executed to the Corporation or the
Corporation's transfer agent.
( c ) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of each share of Series D Preferred Stock shall be
equal to $10.00, divided by $2.50 provided, however, the Corporation shall not
be required, in connection with any such conversion, to issue a fraction of a
share of its Common nor to deliver any stock certificate representing a fraction
thereof.
( d ) Adjustment of Conversion Rate. The number of shares of
Common Stock into which share of the Series D Preferred Stock is convertible
shall be subject to adjustment from time to time in certain instances, as
follows:
(1) On Changes in Capitalization. On any recapitalization of
the Corporation through the spilt, reverse split, subdivision or
combination of its outstanding Common Stock into a greater or
smaller number of shares, the number of shares of Common Stock
into which the shares of Series D Preferred Stock may be
converted shall be increased or reduced in the same proportion by
an adjustment to the conversion rate.
(2) On Capital Reorganization, Reclassification,
Consolidation, Merger or Sale of Corporate Assets. On any capital
reorganization, reclassification of the capital stock,
consolidation, merger, or sale or conveyance of all or
substantially all of the assets of the Corporation to another
corporation, each share of Series D Preferred Stock shall be
convertible into the same kind and amounts of securities,
including share or other assets, or both, into which the number
of shares of capital stock of the Corporation which would have
been deliverable on conversion of such shares of Series D
Preferred Stock immediately prior to such reorganization,
reclassification, consolidation, merger, sale or conveyance would
have been entitled. Appropriate adjustments, as determined by the
Board of Directors of the Corporation, shall be made in the
application of the provisions herein set forth with respect to
the rights and interests thereafter of the holders of the Series
D Preferred Stock so that said provisions, including the
provisions with respect to changes in, and other adjustments of,
the Conversion Rate, shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or other assets
thereafter deliverable on conversion of the shares of Series D
Preferred Stock.
( f ) Statement of Adjusted Amount. Whenever the amount of shares
of Common Stock for the conversion of Series D Preferred Stock shall be adjusted
pursuant to the provisions hereof, the Corporation shall forthwith maintain at
its office and file with the transfer agent or agents, a statement signed by the
President or Vice President of the Corporation and by its Chief Financial
Officer, stating the adjusted amount of any securities deliverable for each
share of Series D Preferred Stock, calculated to the nearest one hundredth
(1/100) share, and setting forth in reasonable detail the method of calculation
and the facts requiring such adjustment and on which the calculation is based.
Each adjustment shall remain in effect until a subsequent adjustment hereunder
is required.
( g ) Fractional Shares. Neither fractional shares nor scrip or
other certificates evidencing such shares shall be issued on conversion of the
Series D Preferred Stock as herein provided, but the Corporation shall, in lieu
thereof, round all such fractional shares to the nearest whole share.
( h ) Payment of Taxes on Conversion of Series D Preferred Stock.
The Corporation shall pay any and all issue and other taxes that may be payable
in respect of any issue or delivery of Common Stock on conversion of shares of
Series D Preferred Stock pursuant hereto. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of Common Stock in a name other than that in which the
shares of Series D Preferred Stock so converted were registered and no such
issue or delivery shall be made unless and until the person requesting it has
paid to the Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
( i ) Reservation of Sufficient Common Stock. So long as any
shares of Series D Preferred Stock shall remain outstanding and the holders
thereof shall have the right to convert said shares in accordance with the
provisions of this Section 4, the Corporation will at all times reserve from the
authorized and unissued shares of its Common Stock a sufficient number of shares
to provide for such conversions, and will take such other corporation action as
may be necessary from time to time in order that it may validly and legally
issue fully-paid and non-assessable shares of such Common Stock upon conversion
of the Series D Preferred Stock.
( j ) Status of Converted Preferred Shares. All shares of Series
D Preferred Stock so converted shall be canceled and such shares shall be
restored to the status of authorized but unissued shares of Preferred Stock.
5. Liquidation Rights.
( a ) Liquidation Preference Amount. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the business
or affairs of the Corporation, and after payment of, or adequate provision for
payment of, the debts, liabilities and other claims of the Corporation as
determined by its Board of Directors, each holder of the Series D Preferred
Stock shall be entitled to receive, out of the remaining net assets of the
Corporation legally available for distribution to its shareholders, before any
payment or distribution shall be made on the Common Stock, or on any other class
of stock of the Corporation ranking junior to the shares of Series D Preferred
Stock upon liquidation, the amount of Ten Dollars ($10.00) per share of Series D
Preferred Stock, plus all accrued and unpaid dividends on each such share up to
the date fixed for distribution.
( b ) Proportionate Distribution Where Assets Insufficient. In
the event the assets of the Corporation available for distribution to the
holders of shares of Series D Preferred Stock upon dissolution, liquidation or
winding up of the Corporation whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (a) of this Section, no such distribution shall be made on
account of any shares of any class of capital stock of the Corporation ranking
on a parity with the shares of Series D Preferred Stock upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of Series D Preferred Stock, ratably, in
proportion to the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such dissolution, liquidation or
winding up.
( c ) Nonparticipation Right. After the payment to the holders of
the shares of Series D Preferred Stock of the full preferential amounts provided
for in either paragraph (a) or (b) of this Section, as applicable, the holders
of Series D Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Corporation.
( d ) Excluded Transactions. Neither the consolidation nor merger
of the Corporation with or into any other corporation, nor the sale, mortgage,
exchange or conveyance of all or substantially all of the properties, assets or
business of the Corporation, nor any liquidation, dissolution or winding up of
the Corporation occurring substantially concurrently with any such transaction
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning hereof, unless otherwise determined by the Board
of Directors of the Corporation.
6. No Preemptive Rights. No holder of shares of the Series D Preferred
Stock shall, as such holder, have any preemptive right to subscribe to or
purchase any shares of any class of capital stock of the Corporation now or
hereafter authorized or issued, whether or not exchangeable for any capital
stock of the Corporation of any class or classes now or hereafter authorized or
issued; nor shall any holder of shares of the Series D Preferred Stock, as such
holder, have any right to purchase, acquire or subscribe for any securities
which the Corporation may issue or sell whether or not convertible into or
exchangeable for shares of capital stock of the Corporation of any class or
classes, and whether or not any such securities have attached or appurtenant
thereto warrants, options or other instruments which entitle the holders thereof
to purchase, acquire or subscribe for shares of capital stock of any class or
classes of the Corporation.
7. Covenants of the Corporation. The Corporation will not, by
amendment to its Articles of Incorporation, as amended, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the preferences and limitations
of Series D Preferred Stock to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions set forth herein relating to Series D Preferred Stock and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holders of the Series D Preferred Stock against
dilution or other impairment.
IN WITNESS WHEREOF, HARVEST RESTAURANT GROUP, INC. has caused this
Statement of Resolution Establishing Series of Shares to be signed by ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, its Chairman of the Board and Chief Executive Officer, and attested
by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, its Secretary, this __th day of _______, 1998.
HARVEST RESTAURANT GROUP, INC.
By: _____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Chairman of the Board and
Chief Executive Officer
By: _____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Chief Financial Officer and Secretary
Schedule 1.2
(Business Terms)
Not Applicable
Schedule 1.2.1
(Financing Terms)
See Attached
▇.▇. ▇▇▇▇▇ INC.
SECURITIES
MEMBER NASD SIPC
THURSDAY, JULY 9, 1998
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
HARVEST RESTAURANT GROUP INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DEAR ▇▇▇▇:
PLEASE LET THIS LETTER STAND AS AN AGREEMENT BETWEEN HARVEST RESTAURANT GROUP
(THE "COMPANY-) AND ▇. ▇. ▇▇▇▇▇ SECURITIES, (THE 'CONSULTANT) TO ACCOMPLISH THE
PLACEMENT OF UP TO $6,000,000.00, ON A BEST EFFORTS BASIS, FOR THE COMPANY WHICH
SHALL BE ISSUED PURSUANT TO A PRIVATE PLACEMENT UNDER REGULATION "D" OF THE
SECURITIES LAWS OF THE UNITED STATES. THE CONSULTANT SHALL HAVE AN EXCLUSIVE
RIGHT TO PLACE SUCH SHARES FOR A PERIOD OF 10 DAYS COMMENCING THE DATE OF THIS
AGREEMENT. THE SHARES TO BE ISSUED BY THE COMPANY SHALL BE ON THE FOLLOWING
TERMS AND CONDITIONS:
▇, ▇▇▇▇▇▇-. $6.000,000.00-, $4,000,000.00 IMMEDIATELY
2. TERMS: 7% CONVERTIBLE PREFERRED, THE PREFERRED $HARES WILL BE CONVERTIBLE
INTO EITHER, THE SERIES "A" PREFERRED STOCK OR COMMON STOCK, AT THE INVESTOR'S
OPTION, AT THE EARLIER OF 90 DAYS OR AN EFFECTIVE REGISTRATION STATEMENT. THE
CONVERSION PRICE WILL BE AT A 20% DISCOUNT TO THE FIVE DAY AVERAGE CLOSING BID
PRICE PRIOR TO CONVERSION. COMPANY SHALL FILE A REGISTRATION STATEMENT WITH THE-
SEC NO LATER THAN 30 DAYS FOLLOWING THE INITIAL FUNDING AND WILL HAVE THE
REGISTRATION EFFECTIVE NO LATER THAN 90 DAYS FOLLOWING THE INITIAL FUNDING OR BE
SUBJECT TO PENALTIES.
2A. CONDITIONS TO FUNDING.
1. THE FIRST TRANCHE OF $2,000,000.00 WILL BE RELEASED FROM ESCROW
UPON A FAVORABLE OUTCOME OF THE NASDAQ HEARING.
2. THE SECOND $2.000,000.00 WILL BE RELEASED FROM ESCROW UPON THE
APPROVAL OF SHAREHOLDERS AND EFFECTIVE DATE OF MERGER WITH TRC.
3. THE THIRD $2,000,000.00 WILL BE FUNDED WITHIN 30 DAYS THEREAFTER OR
IMMEDIATELY UPON THE EFFECTIVE REGISTRATION OF THE UNDERLYING SHARES.
3. CONSULTING FEES: THE COMPANY AGREES TO PAY CONSULTANT A FEE OF 200,000
SHARES, PRE SPLIT, OF COMMON STOCK. IN ADDITION, COMPANY SHALL ISSUE TO
CONSULTANT WARRANTS EXERCISABLE FOR FIVE YEARS AT $2.50 PER SHARE- THE NUMBER OF
WARRANTS WILL BE EQUAL TO 50,000 PER MILLION DOLLARS RAISED.
4. CONDITIONS: THIS PROPOSAL IS SUBJECT TO REGULATORY APPROVAL AND THE COMPANY'S
B0ARD OF DIRECTORS APPROVAL. COMPANY AGREES TO MAINTAIN THE CONFIDENTIALITY OF
CONSULTANT'S CLIENTS EXCEPT TO THE EXTENT DISCLOSURE THEREOF MAY BE REQUIRED BY
LAW. SUCH CLIENTS ARE DEFINED AS INDIVIDUALS OR INSTITUTIONS WHO INVEST IN THIS
PRIVATE PLACEMENT. FOR TWO YEARS FROM THE DATE HEREOF, COMPANY WILL NOT SOLICIT
SUCH CLIENTS FOR THE PURPOSE OF CORPORATE FINANCE WITHOUT THE WRITTEN PERMISSION
OF CONSULTANT, WHICH CONSENT WILL NOT UNREASONABLY BE WITHHELD. IF ANY FINANCING
IS DONE WITH SUCH CLIENTS, THE COMPANY WILL BE OBLIGATED TO PAY LIKE FEES AS
DESCRIBED ABOVE TO THE CONSULTANT. FURTHERMORE, THE COMPANY AGREES NOT TO ENGAGE
IN ANY ADDITIONAL EQUITY FUNDING FOR A PERIOD OF SIXTY (60) DAYS AFTER THE FINAL
CLOSING WITHOUT CONSENT OF THE CONSULTANT.
IF THIS LETTER MEETS WITH YOUR APPROVAL, PLEASE- EXECUTE IN THE SPACE PROVIDED
BELOW, AND WE SHALL HAVE OUR DRAW LAWYERS UP THE APPROPRIATE LEGAL DOCUMENTS FOR
YOUR REVIEW.
SINCERELY,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇ SECURITIES INC.
AGREED AND ACCEPTED TO THIS 9 DAY OF 1998
HARVEST RESTAURANT GROUP, INC
BY: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇
Schedule 1.2.1(a)
(Loan Terms)
(Revised - HarTan Option to Put to TRC)
SHARE EXCHANGE AGREEMENT
SCHEDULE 1.2.1(a)
HARTAN OPTION TO PUT TO TRC
In the event that TRC and Harvest shall not complete a proposed merger on or
before the outside date for consummation set forth in a binding merger
agreement, including any permitted or agreed extensions, Hartan shall have the
option to require TRC to purchase any assets or the restaurants, if any, and the
associated premises, if any, at a price equal to the aggregate funds deposited
in the operating fund accounts of Hartan, and advanced to TRC, plus TRC's
indemnification of Harvest and Hartan from liabilities directly associated with
such assets after the date of such transfer. Such option shall be exercised by
written notice within 15 days after the earlier of termination of merger
discussions or a binding merger agreement, or expiration of the time for
consummation of such agreement without such a merger. If such option is
exercised, such transfers, and payment therefor, shall be closed within 30 days
after notice of exercise. Upon payment as required hereby, such option may be
exercised, at TRC's option, against the assets or all stock of Hartan.
Schedule 1.2.2
(Board of Directors)
Proposed Board of Directors is as follows:
New Nominees for Directors of Harvest:
--------------------------------------
▇▇▇▇▇ ▇▇▇▇ III
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
Existing Harvest Board Members to be retained until June 1999:
--------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
Schedule 1.2.3
(Employment Agreements)
▇▇. ▇▇▇▇ Employment Terms:
The Company will enter into a five year employment agreement with ▇▇. ▇▇▇▇,
pursuant to which ▇▇. ▇▇▇▇ will be the Chairman of the Company. His base salary
will be $200,000 per year, with annual CPI increases each anniversary. ▇▇. ▇▇▇▇
will be eligible for incentive cash bonuses, based on the Company attaining
certain goals approved by the Board. In addition, ▇▇. ▇▇▇▇ will be eligible
participate in any employee stock option plan and will receive employee
benefits, such as health and life insurance normal and customary for executives
in similar positions.
▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Terms:
All employment agreements with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall be terminated at closing;
in consideration thereof, ▇▇▇▇▇▇▇▇▇ shall receive at closing the sum of $150,000
cash; and $150,000 in shares of registered Harvest common stock, or registered
stock options for such shares at a price of $0.01 per share.
Schedule 1.2.7
(Combined Financials of Harvest and TRC)
Not Applicable
Schedule 5.1
(TRC Disclosures)
See Attached
Schedule 5.1.3
Subsidiaries
Central Administration, Inc. (formerly ▇▇▇▇▇▇'▇ Management, Inc.)
That Chicken Place Inc.
▇▇▇▇▇▇'▇ Vinings, Inc.
▇▇▇▇▇▇'▇ Oaks Inc.
▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇▇ Inc.
▇▇▇▇▇▇'▇ Mill Inc.
▇▇▇▇▇▇'▇ Lawrenceville, Inc.
▇▇▇▇▇▇'▇ ▇▇▇▇▇▇, Inc.
NW Store, Inc. (formerly ▇▇▇▇▇▇'▇ Rome, Inc.)
▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇, Inc.
▇▇▇▇▇▇'▇ Catering, Inc.
Schedule 5.1.4
Title to Assets
In addition to the leases noted in section 5.1.25, the Company's properties are
subject to security interests under:
Loan and security agreement with NationsBank, N.A.
--------------------------------------------------
All equipment, fixtures, leasehold improvements and furniture at the Lilburn
restaurant location
Loan agreement with Sirrom Capital Corporation:
-----------------------------------------------
All capital stock of TRC and subsidiaries
Promissory note and security agreement with First Union National Bank
---------------------------------------------------------------------
All equipment located at the Fayetteville restaurant location
Commercial promissory note and security agreement with Colonial Bank, N.A.
--------------------------------------------------------------------------
All business equipment located at the Canton restaurant location
Loan and security agreement with Southtrust Bank of Georgia, N.A.
-----------------------------------------------------------------
All equipment, fixtures, leasehold improvements and furniture at the Emory
restaurant location
Security agreement with SYSCO Food Services, Inc.
-------------------------------------------------
All trade accounts receivable, equipment, inventory, and additions, thereto of
▇▇▇▇▇▇'▇ locations in ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, Lawrenceville, Catering, Emory, Oaks,
Vinings, Northridge and Spalding
Lease agreement with Toshiba Easy Lease:
----------------------------------------
Toshiba DK-280 phone system and voice mail
Lease agreement with Minolta Business Systems
---------------------------------------------
Office copier (Minolta 5420) and fax machine (Minolta 1800)
Lease agreement with Mazda America Credit:
------------------------------------------
1997 Mazda Millenia
Other:
Dishwashing machines are under lease from Auto-Chlor at all locations except
Fayette and Canton. Beverage machines are leased from Coca-Cola at all
locationsand Certain properties are provided by vendors on a loaned basis:
Coffee and tea machines, Snapple Coolers, Neon signs
Schedule 5.1.5
Other Relationships
▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ each own a 6.25% interest in the entity (Epic X,
LLC ) that owns the Fayetteville location
Schedule 5.1.6
Other Transactions
▇▇▇▇▇ ▇▇▇▇ has personally guaranteed the First Union and Colonial notes
▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ guaranteed the former Regions Bank note
▇▇▇▇ ▇▇▇▇▇▇▇, through Brookhaven Capital Corporation has either borrowed or TRC
has Brookhavens behalf. Additionally, certain royalties owed to the Company have
not been paid. As of September 15, 1998 the balance is $123,935
Schedule 5.1.14
Litigation
Mae ▇▇▇▇ ▇▇▇▇▇▇ vs Tanners Rome, Inc. Superior Court, ▇▇▇▇▇ County, Georgia
Civil Action 97 - CV - 9172-3. Alleged slip and fall at Rome location. Referred
to insurance carrier. Pending.
Riverview Associates, Ltd. v. Tanners Vinings, Inc., Superior Court of ▇▇▇▇
County, Georgia, Case No. 95-1-6018-33. Dispute concerning breach of lease
regarding Vinings location. Settled, pending mutual dismissal.
Shorter Partners, LP vs. Northwest Store, Inc. and Central Administration, Inc.,
State Court of ▇▇▇▇▇▇ County, Georgia, Civil Action File No. 97 VS-0125811.
Pending action by landlord of premises in Rome Georgia seeking rents against
insolvent subsidiary relating to closure of that location.
▇▇▇▇▇▇▇ vs. Tanners Management, Inc., State Court of ▇▇▇▇▇▇ County, Georgia
Civil Action 96 VS-0118395, served on October 1, 1996 regarding alleged slip and
fall at Lilburn location. Referred to insurance carrier. Settlement pending.
Schedule 5.1.21
Absence of Certain Changes and Events
x.v. On July 1, 1998, TRC issued 6,000 $.01 stock purchase warrants to
Riverview Associates, LTD in settlement of dispute under a prior lease.
Schedule 5.1.23
Intellectual Property
i.i.i. Common law trademark rights to the name "▇▇▇▇▇▇'▇," "▇▇▇▇▇▇'▇ Home of the
Rotisserie ▇▇▇▇▇▇'▇ Original Rotisserie Grill," are claimed by TRC Acquisition
Corporation. Said trademarks have not been granted registration with the United
States Patent and Trademark Office. The ▇▇▇▇ "▇▇▇▇▇▇'▇ Chicken Rotisserie" has
been denied registration based upon the ▇▇▇▇ granted U.S. registration No.
1,506,690 as "▇▇▇▇▇▇'▇ Bar & Grill" registered by ▇▇▇▇▇▇'▇ Inc., a Kansas ,
corporation filed March 7, 1998.
Schedule 5.1.25
Leased Properties
Corporate Office
TRC Acquisition Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Annual Rental: $50,400
▇▇▇▇▇▇'▇ Northridge ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇▇▇▇ **
That Chicken Place Inc. ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Annual Rental: $80,000
Annual Rental: $53,268 Annual Rental: $53,100
▇▇▇▇▇▇'▇ Vinings ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇'▇ Vinings, Inc. ▇▇▇▇▇▇'▇ ▇▇▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Annual Rental: $68,580 Annual Rental: $45,600
▇▇▇▇▇▇'▇ Oaks ▇▇▇▇▇▇'▇ Fayetteville *
▇▇▇▇▇▇'▇ Oaks Inc. ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Annual Rental: $143,000
Annual Rental: $68,316
Tanner's Spalding Tanner's Suwanee *
Tanner's Spalding Inc. ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Annual Rental:$74,160
Annual Rental: $65,760
Tanner's ▇▇▇▇▇ ▇▇▇▇▇▇'▇ Canton *
▇▇▇▇▇▇'▇ Mill Inc. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Annual Rental: $64,728 Annual Rental: $82,548
▇▇▇▇▇▇'▇ Lawrenceville ▇▇▇▇▇▇'▇ Catering
▇▇▇▇▇▇'▇ Lawrenceville, Inc. ▇▇▇▇▇▇'▇ Catering, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ Annual Rental: $54,396
Annual Rental: $44,772
* Leased under TRC Acquisition Corporation legal entity
** Leased by TRC Acquisition Corporation with sublease to ▇▇▇▇▇▇'▇ Montgomery,
Inc.
Schedule 5.1.26
Employees and Employee Benefit Plans
Manager Bonus Plan
Group Health, Life and Disability Plan
Schedule 5.1.27
Compensation
Annual
Officers Title Salary Other Benefits
* ▇▇▇▇▇ ▇ ▇▇▇▇ CEO $0 Health ins.
* ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ President $225,000 Health ins., car allowance
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Sr VP Operations $125,000 Health ins., car provided
▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ VP CFO $60,000 Health ins.
* ▇▇▇▇ ▇▇▇▇▇▇▇ Exec VP $0 Health ins.
* Director
Directors
▇▇▇▇▇ ▇ ▇▇▇▇▇▇ $0
▇▇▇▇▇ ▇▇▇▇▇ $0
Schedule 5.1.28
Insurance
Policy information as previously provided still in effect: Summarized as
follows:
PROPERTY:
$4,245,000 Blanket Limit - Real and Personal Property, Leasehold
Improvements
$2,100,000 Blanket Business Income including Extra Expense
ELECTRONIC DATA PROCESSING:
$25,000 Electronic data processing equipment
$10,000 Data/Media
$ 5,000 Extra Expense
COMMERCIAL GENERAL LIABILITY:
$2,000,000 General Aggregate Limit
$1,000,000 Each Occurrence Limit
$1,000,000 Each Occurrence - Liqour Liability
$1,000,000 Per Occurrence - Employee Benefits Liability
COMMERCIAL AUTOMOBILE:
$1,000,000 Bodily Injury and Property Damage Combined
$ 5,000 Medical Payments
$ 300,000 Uninsured/Underinsured Motorist
$1,000,000 Non-Owned/Hired Car
$ 50,000 Hired Car Physical Damage
WORKERS' INDEMNIFICATION POLICY
EMPLOYER'S LIABILITY:
$500,000 Per Person/Per Accident
$500,000 Per Person/Per Occupational Disease
$500,000 Aggregate Occupational Disease
UMBRELLA LIABILITY:
$10,000,000 Each Incident Loss
$10,000,000 Products/Completed operations Aggregate
$10,000,000 General Aggregate
BOILER & MACHINERY
$3,000,000 Combined Property Damage and Business Interruption
$ 100,000 Consequential Damage
$ 25,000 Service Interruption
CRIME
$250,000 Employee Theft Coverage
$ 25,000 Premises Coverage
$ 25,000 Transit Coverage
$250,000 Depositors Forgery Coverage
$250,000 Computer Thief and Funds Transfer Fraud Coverage
DIRECTOR & OFFICER LIABILITY
$1,000,000 Aggregate
Schedule 7.1
(Harvest Disclosures)
See Attached
SCHEDULE 7.1
HARVEST DISCLOSURES
-------------------
SUBSCHEDULE 7.1.1.1
CAPITALIZATION
--------------
In July 1998, Harvest filed a stock designation for Series C Preferred Stock of
1000 shares at a par value of $1.00.
SUBSCHEDULE 7.1.1.2
ISSUED COMMON STOCK
-------------------
As of August 12, 1998, 3,852,661 common shares have been issued.
SUBSCHEDULE 7.1.1.3
ISSUED PREFERRED STOCK
----------------------
Issued preferred stocks are as follows:
594,272 Series A
133 Series B
200 Series C
Additional common share dividends may be issued prior to closing.
SCHEDULE 7.1.2
ORGANIZATION STANDING AND POWER
-------------------------------
None
SCHEDULE 7.1.3
SUBSIDIARIES
------------
1. Harvest Restaurants, Inc.
2. Cluckers Restaurants, Inc.
3. Harvest Rotisserie on Tezel, Inc.
4. Red Line Food Court, Inc.
5. Hartan, Inc.
SUBSCHEDULE 7.1.4
TITLE TO ASSETS
---------------
None
SUBSCHEDULE 7.1.5
OTHER RELATIONSHIPS
-------------------
None.
SUBSCHEDULE 7.1.6
OTHER TRANSACTIONS
------------------
A company which Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ is affiliated has loaned money to Harvest
(Santa ▇▇▇▇).
SCHEDULE 7.1.7
UNDISCLOSED LIABILITIES
-----------------------
See attachment.
Harvest Restaurant Group, Inc.
Listing of Potential Claims
As of August 31, 1998
Potential
Creditor
Creditor: Claim
Real Estate Leases:
Company-owned Stores
S. Breaswood 40,562.50
Kingwood 30,000.00
Loop 1640, 32,500.00
West Ave 50,000.00
Medical Road 3,500.00
▇▇▇▇▇▇ ▇▇▇▇ ▇
▇. ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ 0
Broadway 0
Red Line 0
Subtotal 156,562.50
Franchised Stores:
North Carolina Harvest, Inc.
Eastway Square 14,317.96
Hardy 12,465.14
Indiana Harvest, Inc.
CNL Fund 55,592.48
Don Thorgmartin 30,000.00
▇▇▇▇▇▇ Enter 35,000.00
Florida Harvest, Inc.
▇▇▇▇▇▇ Bansp 0
Port Charlotte Retail Cnt 26,750.00
Bay-Guard Ltd. 11,583.50
KR Chicken Mgmt 0
Apostoleres 30,000.00
Northern California
CEP Investors 54,500.58
Subtotal 270,209.66
Total Real Estate Leases 426,772.16
Equipment Leases:
Company Sign Leases:
Aetna signs 7,898.77
▇▇▇▇▇▇ signs 33,262.43
▇▇▇▇▇▇ signs 32,194.19
73,355.39
Company Equip Leases:
United Leasing 2,500.00
United Leasing 3,500.00
United Leasing 4,800.00
First Federal 12,000.00
Advanta 20,382.05
Imperial 57,528,.45
Green Tree/Americorp/VAR 23,329.48
Green Tree/VAR 20,582.93
Advanta/VAR Corpus 8,367.19
▇▇▇▇ AcceptancCorp 13,800.00
IBM Credit 3,000.00
Dell 3,500.00
Dell 3,500.00
Potential
Creditor
Creditor: Claim
Sanwa Leasing 3,710.52
Sanwa Leasing 5,028.33
Sanwa Leasing 6,278.03
Sanwa Leasing 4,173.69
Sanwa Leasing 3,879.72
Sanwa Leasing 2,807.34
Subtotal 212,667.73
Franchisee Equip Leases:
Indiana
Captec 237,553.53
▇▇▇▇ Acceptance 5,512.00
Florida
Captec 28,509.22
Captec 11,593.41
ELC 1,500.00
ELC 1,500.00
ELC 1,500.00
Advanta 3,174.34
Advanta/Camera 4,600.00
Advanta/Camera 5,900.00
Advanta/Camera 4,600.00
Orix 5,560.00
Orix 4,100.00
▇▇▇▇ Acceptance 7,578.25
North Carolina
▇▇▇▇ Acceptance 3,425.01
Northern California
Captec 58,209.29
Subtotal 384,815.05
Total Equipment Leases 670,838.17
Franchisee A/P w/ Company Guarantee:
North Carolina
Sysco Food 48,946.00
Indiana
Sysco Food 39,563.10
Florida
Sysco Food 36,268.05
Forum Systems 25,000.00
HME 15,640.85
Subtotal 165,418.00
Company Vendors 306,494.00
Advances/Notes/Other:
Company:
Equip loan 47,500.00
Advances from Santa ▇▇▇▇ Squeeze Corp 159,060.00
SAMA, Inc 245,171.76
Subtotal 451,731.76
Franchisee Obligations:
KR Chicken 137,756.71
KR Sarasota 172,075.84
KR memphis 145,410.99
Roasters 127,326.62
Pollo Tropical 0
582,570.16
Total Liabilities 2,604,008.00
SCHEDULE 7.1.8
ABSENCE OF CERTAIN CHANGES OR EVENTS
------------------------------------
All restaurants and operations are closed. The corporation is winding down.
SCHEDULE 7.1.9
CONDITION OF ASSETS
-------------------
No assets remain in the corporation with the exception of the Tezel property and
office furniture and equipment.
SCHEDULE 7.1.10
COMPLIANCE WITH LAW
-------------------
None.
SCHEDULE 7.1.11
CONTRACTS AND COMMITMENTS
-------------------------
All contracts and debts are past due and/or in default.
SCHEDULE 7.1.12
PERMITS, LICENSES, CONSENTS
---------------------------
None.
SCHEDULE 7.1.13
ABSENCE OF DEFAULTS
-------------------
All obligations and debts of the corporation are currently in default.
SCHEDULE 7.1.14
LITIGATION
----------
1. KR Chicken Assoc. Ltd.
----------------------
KR Sarasota Assoc. Ltd.
-----------------------
KR Memphis-Florida Assoc. Ltd.
------------------------------
Filed 1/22/98 (Case Nos. 98-01090,098-01092,98-01093)
Filed in Florida, Broward County Circuit Court
Seeking to foreclose a security interest on promissory notes guaranteed by
the Company in the amount of $455,244.
Settlement: Plaintiffs have agreed in that in exchange for the Company
settling its obligations with Captec and removing the Plaintiffs from
$38,000 of the debt owed to Captec, they will release the Company from the
promissory notes. The Captec lease settlements are in negotiation.
2. Pollo Operations, Inc.
----------------------
Filed 2/5/98 (case no. 98-00604)
Filed in Florida, Hillsborough County Circuit Court
Seeking to foreclose a mortgage lien and security interest in real
property, for which the Company guaranteed a $868,000 mortgage note to
Plaintiff.
Settlement: The real property was sold in July 1998 in full satisfaction of
the mortgage note, with the Company receiving a full release of all claims.
3. ▇▇▇▇▇▇ Enterprises
------------------
Filed 2/18/98 (case no. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇)
Filed in Indiana, ▇▇▇▇▇▇ County
Plaintiff seeking damages for breach of a commercial lease that the Company
guaranteed for its franchisee.
Settlement: Settled all claims for $20,000 to be paid with 14 days of the
completion of the Merger with TRC.
4. R. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
------------------
Filed 1/30/98 (case no. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇)
Filed in Indiana, ▇▇▇▇▇▇ County
Plaintiff seeking damages for breach of a commercial lease that the Company
guaranteed for its franchisee.
Settlement: Settled all claims for $20,000 which was paid in August 1998.
5. Sysco Food Services
-------------------
Filed 5/29/98 (case no. ▇▇-▇▇▇▇▇▇▇)
Filed in Florida, Manatee County
Plaintiff seeking payment of $36,268 from sale of products on an open
account which the Company guaranteed for its franchisee.
Settlement: Settled all claims for $11,760 to be paid within 14 days of the
Merger with TRC.
6. Captec Financial Group, Inc.
----------------------------
Filed 5/15/98 (case No. 98-CI-07356)
Filed in Texas, Bexar County District Court
Plaintiff seeking recovery of damages totaling $277,656 for failure to make
payments under (3) Equipment lease which the Company is liable.
Settlement: Plaintiff rejected Company's offer of $74,967. Still being
negotiated.
7. Sembler Enterprises, Inc.
-------------------------
Filed 7/6/98 (case no. 98-03282CI19)
Filed in Florida, Pinellas County Circuit Court
Plaintiff seeking damages for breach of a commercial lease that the Company
guaranteed for its franchisee.
Settlement: Settled all claims for $11,345.49 to be paid within 14 days of
the Merger with TRC.
8. ▇▇▇▇▇▇▇▇ Family Partners
------------------------
Filed 3/2/98 (Case no. 98-CI-03182)
Filed in Texas, Bexar County District Court
Plaintiff seeking damages for breach of a commercial lease that the Company
entered into.
Settlement: Settled all claims for $17,500 paid in July 1998.
9. ▇▇▇ ▇▇▇▇ Ho and Chi Pen Ho
--------------------------
Filed 6/1/98 (Case no. 98-2048-E)
Filed in Texas, Nueces County District Court
Plaintiff seeking damages for breach of a commercial lease. Company never
entered into a lease agreement on the property.
Settlement: Company will make a motion to dismiss the suit. No further
action expected.
10. Wingarten Realty Investors
--------------------------
Filed 12/16/97
Filed in Texas, ▇▇▇▇▇▇ County
Plaintiff seeking damages for breach of a commercial lease that the Company
entered into.
Settlement: Court Date rescheduled to December 1998. Settlement offer of
$20,000 has not been accepted.
11. Green Tree Vendor Services Co.
------------------------------
Filed 8/12/98
Filed in Texas, Bexar County Court
Plaintiff seeking recovery of damages totaling $38,691.20 for failure to
make payments under (2) Equipment lease which the Company is liable.
Plaintiff's rejected Company's offer of $12,100 plus return of the
equipment.
Settlement: being negotiated.
12. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------
Filed 8/20/98
Filed in Bexar County District Court
Plaintiff seeking damages for breach of a commercial lease that the Company
entered.
Plaintiff rejected offer of $35,000 for settlement.
13. Sysco Food Services
-------------------
Filed 7/24/98
Suit on Trade Account; Plaintiff seeks $10,003.40 plus interest.
14. PR Newswire Association, Inc.
-----------------------------
Filed 8/3/98
Suit on Trade Account; Plaintiff seeks $7,110.00
SCHEDULE 7.1.15
NO BREACH OF VIOLATION OF LAW
-----------------------------
Only to extent disclosed by other Schedule.
SCHEDULE 7.1.16
VALIDITY AND AUTHORIZATION
--------------------------
None.
SCHEDULE 7.1.17
COMPLETENESS, NO MISREPRESENTATIONS
-----------------------------------
None.
SCHEDULE 7.1.18
TAXES
-----
An extension for State Franchise Tax has been filed. The return is now due
November 15, 1998.
SCHEDULE 7.1.19
FINANCIAL STATEMENTS
--------------------
None.
SCHEDULE 7.1.20
ABSENCE OF CERTAIN CHANGES AND EVENTS
-------------------------------------
None.
SUBSCHEDULE 7.1.20.1
All operations have ceased.
SUBSCHEDULE 7.1.20.2
Harvest has liquidated all "operating" assets and attempts to satisfy
outstanding obligations.
SUBSCHEDULE 7.1.20.3
None.
SUBSCHEDULE 7.1.20.4
None.
SUBSCHEDULE 7.1.20.5
Harvest has liquidated all "operating assets" in an attempt to satisfy
outstanding obligations.
SUBSCHEDULE 7.1.20.6
None.
SUBSCHEDULE 7.1.20.7
None.
SUBSCHEDULE 7.1.20.8
A Consulting Agreement for six (6) months has been entered into with ▇▇. ▇▇▇
▇▇▇▇▇▇▇.
SUBSCHEDULE 7.1.20.9
All employees, with the exception of Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇ ▇▇▇▇▇▇▇,
have been terminated.
SUBSCHEDULE 7.1.20.10
All debts and obligations currently owed to suppliers and vendors are in
default.
SUBSCHEDULE 7.1.20.11
None.
SUBSCHEDULE 7.1.20.12
Harvest is attempting to negotiate and settle all liabilities and lawsuits.
SUBSCHEDULE 7.1.20.13
Harvest recently paid off a debt to Comet Signs which had a lien on personal
property.
SUBSCHEDULE 7.1.20.14
None.
SUBSCHEDULE 7.1.20.15
Harvest recently filed a stock designation for Series C preferred stock and paid
dividends by issuing common stocks to holders of Series B preferred stock.
SUBSCHEDULE 7.1.20.16
Dividends have been declared and paid on Series A preferred stock. A claim for a
warranty worth 170,000 shares (approximately) of stock to ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇ is
outstanding. ▇▇. ▇▇▇▇▇ ▇ ▇▇▇▇ has also indicated a claim of right of first
refusal on the financing being raised by the Company.
SUBSCHEDULE 7.1.20.17
None.
SUBSCHEDULE 7.1.20.18
None.
SUBSCHEDULE 7.1.20.19
All restaurants have ceased operations.
SUBSCHEDULE 7.1.20.20
Assets of the corporation have been written down pursuant to generally accepted
accounting principles.
SUBSCHEDULE 7.1.20.21
None.
SUBSCHEDULE 7.1.20.22
All operations of the restaurant have ceased.
SCHEDULE 7.1.21
None.
SUBSCHEDULE 7.1.21.4
The corporation has not paid personal property tax on:
1. Leased office space
2. West Ave. Property
3. Corpus Christi property
4. Medical Dr. property
SUBSCHEDULE 7.1.21.5
None.
SUBSCHEDULE 7.1.21.6
None.
SUBSCHEDULE 7.1.21.7
None.
SUBSCHEDULE 7.1.21.8
None.
SUBSCHEDULE 7.1.21.9
None.
SUBSCHEDULE 7.1.21.10
None.
SUBSCHEDULE 7.1.21.11
None.
SUBSCHEDULE 7.1.21.12
None.
SUBSCHEDULE 7.1.21.13
None.
SUBSCHEDULE 7.1.21.14
All assets of the corporation have been written down pursuant to generally
accepted accounting principles.
SUBSCHEDULE 7.1.21.15
None.
SCHEDULE 7.1.22
None.
SUBSCHEDULE 7.1.23.1
None.
SUBSCHEDULE 7.1.23.2
None.
SUBSCHEDULE 7.1.23.3
As indicated on Trademark Status Report dated June 10, 1998 as previously
provided
SUBSCHEDULE 7.1.23.4
None.
SUBSCHEDULE 7.1.23.5
None.
SCHEDULE 7.1.24
BOOKS AND RECORDS
-----------------
None.
SCHEDULE 7.1.25
LEASED PROPERTIES
-----------------
None.
SCHEDULE 7.1.26
1994 Stock Compensation Plan
SUBSCHEDULE 7.1.26.2
1994 Stock Compensation Plan
SUBSCHEDULE 7.1.26.3
None.
SUBSCHEDULE 7.1.26.4
None.
SUBSCHEDULE 7.1.26.5
None.
SCHEDULE 7.1.27
COMPENSATION
------------
None.
SCHEDULE 7.1.28
All insurance has been canceled effective August 26, 1998.
SCHEDULE 7.1.29
None.
SCHEDULE 7.1.30
None.