Exhibit 10.18
OVERHILL FARMS, INC.
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
THIS AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT is entered into as
of the ____ day of __________________ 2002 (this "Agreement"), by and among
OVERHILL FARMS, INC., a Nevada corporation (the "Company"), THE ENTITIES FROM
TIME TO TIME PARTIES HERETO AS GUARANTORS, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS
II, L.P., a California limited partnership (the "Purchaser").
R E C I T A L S
A. The Company, OVERHILL CORPORATION (formerly known as Polyphase
Corporation and to be known from and after the effective date of the Spin-Off as
TreeCon Resources, Inc.), a Nevada corporation ("TreeCon"), OVERHILL L.C.
VENTURES, INC., a California corporation ("Overhill Ventures"), and the
Purchaser entered into that certain Securities Purchase Agreement dated as of
November 24, 1999, as amended by that certain Consent and First Amendment to
Securities Purchase Agreement dated as of August 23, 2000, and as further
amended by that certain Second Amendment to Securities Purchase Agreement dated
as of January 11, 2002, that certain Consent and Third Amendment dated as of
January 31, 2002, that certain Fourth Amendment dated as of June 28, 2002, and
that certain Fifth Amendment to Securities Purchase Agreement dated as of
September 11, 2002 (as so amended, the "Original Securities Purchase
Agreement"), pursuant to which, among other things, (a) the Company issued and
sold to the Purchaser (i) that certain Secured Senior Subordinated Note Due 2004
dated November 24, 1999, in the original principal amount of $28,000,000, as
amended by an Amendment to Secured Senior Subordinated Note Due 2004 dated as of
May 1, 2001, and as further amended by a Second Amendment to Secured Senior
Subordinated Note Due 2004 dated as of September 11, 2002 (as so amended, the
"Original Note"), and (ii) that certain Warrant (No. LL-1) to Purchase 166.04
Shares of Common Stock dated November 24, 1999 (the "Original Warrant"), and (b)
TreeCon and Overhill Ventures guarantied the payment and performance of any and
all Obligations to Purchaser, all on the terms and subject to the conditions set
forth in the Original Securities Purchase Agreement and the other Original
Investment Documents.
B. Pursuant to that certain Consent and Third Amendment to Securities
Purchase Agreement dated as of January 31, 2002, the Company issued to the
Purchaser 23.57 Series A Preferred Shares on the terms and subject to the
conditions set forth therein, and, pursuant to that certain Fifth Amendment to
Securities Purchase Agreement dated as of September 11, 2002 (the "Fifth
Amendment"), the Company issued to the Purchaser that certain Warrant No. LL-2
to Purchase 57.57 Shares of Common Stock dated as of September 11, 2002, on the
terms and subject to the conditions set forth therein.
C. TreeCon is currently the beneficial and record owner of 99.0% of the
issued and outstanding shares of Common Stock. On or about [August 15, 2001],
the Board of Directors of TreeCon approved a plan to distribute to its
stockholders on a pro rata basis in
the form of a stock dividend the shares of Common Stock owned by TreeCon and
thereby "spin off" the Company as a separate, independent publicly traded
company (the "Spin-Off"). Immediately following the Spin-Off, TreeCon will not
own any shares of, or Option Rights with respect to, the Capital Stock of the
Company or any of its Subsidiaries.
D. The consummation of the Spin-Off and the transactions contemplated
thereby or related thereto would require, among other things, amendments to the
Original Securities Purchase Agreement and certain other Original Investment
Documents. The Company and TreeCon have requested that the Purchaser (i) consent
to the consummation of the Spin-Off; (ii) consent to the amendment and
restatement of the Company's existing Articles of Incorporation and Bylaws on
the terms set forth in the Company Organizational Documents, respectively; (iii)
consent to the adoption of the 2002 Employee Stock Option Plan; (iv) consent to
the payment by the Company of all ordinary and customary costs and expenses
reasonably incurred by TreeCon in connection with consummating the Spin-Off; (v)
release TreeCon from its Guarantied Obligations under the Guaranty as provided
in Section 2.3; (vi) terminate the Parent Pledge Agreement and, in connection
therewith, release the Liens of the Purchaser in and to the Parent Pledged
Collateral pledged by TreeCon to the Purchaser thereunder; and (vii) agree that
the consummation of the Spin-Off will not constitute a Change in Control. The
matters described in clauses (i) through (vii) above are collectively referred
to herein as the "Spin-Off Related Transactions" or the "Spin-Off Related
Matters."
E. In order to induce the Purchaser to consent to the Spin-Off Related
Transactions, the Company Parties have agreed to amend and restate the Original
Securities Purchase Agreement, the Original Note, the Original Warrant and
certain other Original Investment Documents on the terms and subject to the
conditions set forth herein and in the other Investment Documents.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree to amend and restate the Original Securities Purchase Agreement as
follows:
1. DEFINITIONS; ACCOUNTING TERMS.
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to the
singular and the plural forms thereof):
"Affiliate" shall mean, with respect to any specified Person, (i) any
other Person that, directly or indirectly, owns or controls, or has the
right to acquire, whether beneficially or of record, or as a trustee,
guardian or other fiduciary (other than a commercial bank or trust
company), five percent (5%) or more of the Capital Stock of such specified
Person, (ii) any other Person that, directly or indirectly, controls, is
controlled by, is under direct or indirect common control with, or is
included in the Immediate Family of, such specified Person or any Affiliate
of such specified Person, or (iii) any Executive Officer, director, partner
or member of such specified Person, or any Person included in the Immediate
Family of any of the
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foregoing. For the purposes of this definition, the term "control," when
used with respect to any specified Person, shall mean the power to direct
or cause the direction of management or policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by
proxy, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing. Notwithstanding
anything to the contrary, for the purposes of this Agreement and the other
Investment Documents, neither the Purchaser nor any of its Affiliates,
officers, directors, partners or employees shall be deemed to be an
Affiliate of the Company.
"Agreement" shall mean this Agreement, together with the Exhibits and
the Disclosure Schedules, in each case as amended from time to time.
"AMEX" shall mean the American Stock Exchange LLC.
"Applicable Law" shall mean the applicable provisions of all (i)
constitutions, treaties, statutes, laws, rules, regulations and ordinances
of any Governmental Authority, (ii) any Consent of any Governmental
Authority and (iii) any orders, decisions, rulings, judgments or decrees of
any Governmental Authority.
"Asset Sale" shall mean any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or other dispositions) by
the Company or any of its Subsidiaries to any Person of any asset of the
Company or any such Subsidiary (other than sales, leases, transfers or
other dispositions of inventory in the ordinary course of business).
"Assignee" shall have the meaning set forth in Section 12.6.
"Assignment" shall mean an assignment or other transfer of the Note
pursuant to Section 13 of the Note.
"Bankruptcy Law" shall mean Title 11 of the United States Code (11
U.S.C. Section 101 et seq.) or any similar federal or state law for the
relief of debtors, as amended from time to time.
"Beneficiary" shall have the meaning set forth in Section 10.1.
"Benefit Plan" shall have the meaning set forth in Section 3.18.
"Board of Directors" shall mean, with respect to any Person, the board
of directors (or similar governing body) of such Person.
"Business Day" shall mean any day of the week that is not a Saturday,
a Sunday or, in the City of New York, New York or in Los Angeles,
California, a day on which banking institutions are authorized or required
by law to close.
"Capital Expenditures" shall mean, for any period, the aggregate of
all expenditures of the Company and its Subsidiaries (whether paid in cash
or accrued or financed by the incurrence of Indebtedness) during such
period, including all Capital Leases, for any property, plant, equipment or
other fixed assets, or for improvements thereto, or for replacements,
substitutions or additions thereto, that have a useful life
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of more than one (1) year or are required to be capitalized on the
consolidated balance sheet of the Company and its Subsidiaries in
accordance with GAAP.
"Capital Lease" shall mean any lease or agreement of the Company or
its Subsidiaries for property (whether real, personal or mixed) which has
been or is required to be capitalized on the consolidated balance sheet of
the Company and its Subsidiaries in accordance with GAAP.
"Capital Lease Obligations" shall mean all liabilities or other
obligations for the payment of rent for any property (whether real,
personal or mixed) which has been or is required to be capitalized on the
consolidated balance sheet of the Company and its Subsidiaries in
accordance with GAAP with respect to a Capital Lease.
"Capital Stock" shall mean, with respect to any Person, (i) if such
Person is a corporation, any and all shares (whether certificated or
uncertificated), interests, participations in profits or other equivalents
(however designated) of capital stock or other equity interests of such
Person (including common stock, preferred stock or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Commission under the Exchange Act), (ii) if
such Person is a limited liability company, any and all membership units or
interests, or (iii) if such Person is a partnership, any and all
partnership units or interests.
"Cash Interest Expense" shall mean, for any period, without
duplication and only to the extent deducted in determining Net Income
(Loss), calculated without regard to any limitation on the payment thereof
and determined in accordance with GAAP, (i) total consolidated interest
expense of the Company and its Subsidiaries (including interest paid to
Affiliates and the portion of any Capitalized Lease Obligations allocable
to interest expense), whether paid or accrued, minus (ii) to the extent
included in total consolidated interest expense, any non-cash interest
expense, including any payment-in-kind interest, amortization of original
issue discount, non-cash losses on hedging agreements and amortization of
capitalized up-front costs.
"Change in Control" shall mean the occurrence of one or more of the
following events:
(i) any "person" (other than the Purchaser) or "group" (as such
terms are used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act
or any successor provisions to either of the foregoing), including any
group acting for the purpose of acquiring, holding, voting or
disposing of securities within the meaning of Rule 13d-5(b)(1) of the
Exchange Act, becomes the "beneficial owner" (as such term is defined
in Rule 13d-3 and 13d-5 of the Exchange Act (provided that such Person
will be deemed to have "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time)), directly
or indirectly, of twenty-five percent (25%) or more of the Voting
Stock of the Company; or
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(ii) the sale, lease, transfer or other disposition of all or
substantially all of the assets of the Company or of any material
Subsidiary, or the sale of any material Subsidiary, in each case in
one transaction or a series of related transactions;
(iii) The Company or any Subsidiary is acquired by, or merges,
consolidates, reorganizes or enters into any other transaction having
a similar legal effect with any other Person and, in any such event,
any Person who is not an Affiliate of the Company as of the date
hereof acquires control of the Company or any Subsidiary (for purposes
of this clause (iii) only, the term "control" means the power (A) to
direct or cause the direction of the management or policies of the
Company or any such Subsidiary, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise,
or (B) to vote twenty-five percent (25%) or more of the Voting Stock
of the Company or any Subsidiary); or
(iv) ▇▇▇▇▇ ▇▇▇▇▇ either (A) ceases to be the President and Chief
Executive Officer of the Company, (B) ceases to be the chief executive
officer of the Company, with general and active management of the
business of the Company and responsibility for overseeing that all
orders and resolutions of the Board of Directors of the Company are
carried into effect, or (C) following the Spin-Off, ceases to
beneficially own, directly or indirectly, at least 300,000 shares of
Common Stock (without giving effect to any stock splits, reverse stock
splits, dividends or like events after the date hereof); or
(v) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ either (A) ceases to be the Chief
Financial Officer of the Company or (B) ceases to have significant
daily senior management responsibilities at the Company, provided that
the Company does not replace ▇▇. ▇▇▇▇▇▇▇ with an individual who is
reasonably acceptable to the Purchaser within ninety (90) days of ▇▇.
▇▇▇▇▇▇▇'▇ effective resignation or termination date; or
(vi) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (A) ceases to be a Senior Vice President
of the Company with significant senior management responsibilities at
the Company, provided that the Company does not replace ▇▇. ▇▇▇▇▇▇▇
with an individual who is reasonably acceptable to the Purchaser
within ninety (90) days of ▇▇. ▇▇▇▇▇▇▇'▇ effective resignation or
termination date, or (B) following the Spin-Off, ceases to
beneficially own, directly or indirectly, at least 150,000 shares of
Common Stock (without giving effect to any stock splits, reverse stock
splits, dividends or like events after the date hereof); or
(vii) (A) the institution by any Company Party or any of its
material Subsidiaries of a voluntary case under the Bankruptcy Law or
any similar proceeding under any other Applicable Law, (B) the
commencement against any Company Party or any of its material
Subsidiaries of an involuntary case seeking liquidation or
reorganization under the Bankruptcy Law or any similar proceeding
under any other Applicable Law, or the commencement of an involuntary
case or proceeding seeking the appointment of a custodian or to take
possession of all or a substantial portion of its property or to
operate
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all or a substantial portion of its business, and either (w) any
Company Party or any such material Subsidiary consents to such
involuntary case or proceeding, (x) the petition commencing such
involuntary case or proceeding is not timely controverted, (y) the
petition commencing such involuntary case or proceeding remains
undismissed and unstayed for a period of ninety (90) days or (z) an
order for relief shall have been issued or entered therein, or (C) the
liquidation, winding up or insolvency of any Company Party or any of
its material Subsidiaries.
Notwithstanding anything to the contrary, effective on and as of the
Effective Date, the consummation of the Spin-Off will not constitute a
Change in Control.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, as set forth in Section 4980B of the Code and Part 6
of Title I of ERISA.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor statute, and the treasury regulations promulgated thereunder.
"Collateral" shall mean the collateral under the Collateral Documents,
however defined.
"Collateral Documents" shall mean the Intercreditor Agreement, the
Security Agreement, the Company Pledge Agreement, the PTC Security
Agreement, the Landlord Waivers, the Warehouse Bailment Agreements, the
Parent Termination Agreement, the Deposit Account Control Agreements, the
UCC financing statements and all other agreements, instruments and
documents executed by or on behalf of any Person concurrently herewith or
at any time hereafter to guaranty or provide collateral security for or
with respect to any or all Obligations, in each case as amended from time
to time.
"Commission" shall mean the Securities and Exchange Commission, or any
successor agency.
"Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company.
"Company" shall have the meaning set forth in the preamble.
"Company Organizational Documents" shall mean, collectively, an
Amended and Restated Articles of Incorporation of the Company, in
substantially the form attached as Exhibit A-1, and an Amended and Restated
Bylaws of the Company, in substantially the form attached as Exhibit A-2.
"Company Parties" shall mean the Company and the Guarantors.
"Company Pledge Agreement" shall mean an Amended and Restated Stock
Pledge and Control Agreement dated as of the Effective Date, in form and
substance satisfactory to the Purchaser, between the Company and the
Purchaser, as amended from time to time, which amends and restates that
certain Company Pledge
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Agreement dated as of November 24, 1999, made by the Company in favor of
the Purchaser.
"Company Stock Plans" shall mean the Company's 2002 Employee Stock
Option Plan (the "2002 Stock Option Plan") and, subject to Section 5.2 of
the Investor Rights Agreement, any other stock option or stock purchase
plan, agreement or arrangement adopted or approved by the Board of
Directors of the Company and the shareholders of the Company (including the
affirmative vote of the Purchaser).
"Compliance Reports" shall mean, individually or collectively, any and
all forms, reports or other documents (or any successor forms, reports or
other documents) used or issued by any Governmental Authority (including
the USDA Food Safety and Inspection Service, the FDA, the State of
California -- Health and Human Services Agency or any successor
Governmental Authorities) with respect to food safety and/or health
inspections of the Company's or any of its Subsidiaries' facilities and/or
compliance with or violations of Applicable Law, including the following:
Application for Federal Meat, Poultry, or Import Inspection (FSIS Form
5200-2), Grant of Inspection (FSIS Form 5200-1), Process Deficiency Record
(FSIS Form 8820-2), Non-Compliance Record (FSIS Form 5400-4), Form FDA 483
and Report of Observations (EH 62 A), and any successor forms or documents
related thereto.
"Consent" shall mean any consent, approval, authorization, waiver,
permit, grant, franchise, license, exemption or order of, any registration,
certificate, qualification, declaration or filing with, or any notice to,
any Person, including any Governmental Authority.
"Consolidation" shall mean the consolidation by the Company of a
substantial part of its business operations into the ▇▇▇▇▇▇ Facilities,
including (i) the execution and delivery of the Vernon Sublease and the
Vernon Lease, in each case for certain premises commonly known as ▇▇▇▇ ▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, and generally described as a one-story
warehouse building of approximately 147,210 square feet; and (ii) the
taking of the following actions: (A) borrowing up to $4,000,000 solely to
provide the necessary additional financing to consolidate its business
operations, including constructing certain tenant improvements at the
▇▇▇▇▇▇ Facilities and financing the purchase of equipment; (B) moving
certain of the Company's properties and other assets located at its
existing manufacturing facilities on or into the ▇▇▇▇▇▇ Facilities; and (C)
terminating the Company's existing real property leases with respect to the
Company's currently leased manufacturing facilities and incur certain
termination expenses in connection therewith.
"Contingent Obligations" shall mean, with respect to any Person, any
obligation, direct or indirect, contingent or otherwise, of such Person (i)
with respect to any Indebtedness or other obligation of another Person,
including any direct or indirect guarantee of such Indebtedness (other than
any endorsement for collection or deposit in the ordinary course of
business) or any other direct or indirect obligation, by agreement or
otherwise, to purchase or repurchase any such Indebtedness or obligation or
any security therefor, or to provide funds for the payment or discharge of
any such Indebtedness or obligation (whether in the form of loans,
advances, stock
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purchases, capital contributions, dividends or otherwise), letters of
credit and reimbursement obligations for letters of credit, (ii) to provide
funds to maintain the financial condition of any other Person, or (iii)
otherwise to indemnify or hold harmless the holders of Indebtedness or
other obligations of another Person against loss in respect thereof. The
amount of any Contingent Obligation shall be the maximum amount of the
Indebtedness or obligations guaranteed or otherwise supported thereby.
"Convertible Securities" means, with respect to any Person, any
securities or other obligations issued or issuable by such Person or any
other Person that are exercisable or exchangeable for, or convertible into,
any Capital Stock of such Person.
"Default" shall mean any event or condition which, with the giving of
notice or the lapse of time or both, becomes an Event of Default.
"Deposit Account Control Agreements" or "Control Agreements" shall
mean that certain Deposit Account Control Agreement dated as of June 28,
2002, among the Senior Lender, the Company and the Purchaser, as amended
from time to time (as so amended, the "UBOC Control Agreement"), and any
other control or similar agreements entered into from time to time, in form
and substance reasonably satisfactory to the Purchaser, pursuant to which
the Company or any other Company Party grants control to the Purchaser, as
secured party, over its or their deposit or similar accounts maintained
with banks or other institutions.
"Disclosure Schedules" shall have the meaning specified in the
introductory paragraph of Section 3.
"EBITDA" shall mean, for any period, without duplication and
determined on a consolidated basis and in accordance with GAAP:
(i) the sum of (A) Net Income (Loss), (B) interest expense
deducted in determining Net Income (Loss) (including cash interest,
payment-in-kind interest and amortization of original issue discount), (C)
the amount of Taxes deducted in determining Net Income (Loss), (D) the
amount of depreciation and amortization expense deducted in determining Net
Income (Loss), (E) any extraordinary or unusual non-cash losses of the
Company or any of its Subsidiaries (provided that such extraordinary or
unusual non-cash losses do not result in any cash outlay at any time after
the Initial Closing Date) and (F) any Withdrawn Demand Registration
Expenses incurred by the Company, in each case for such period; minus
(ii) any extraordinary or unusual income or gains of the Company
or any of its Subsidiaries for such period.
"Effective Date" shall have the meaning specified in Section 2.2.
"Effective Date Balance Sheet" shall have the meaning specified in
Section 5.15.
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"Environmental Conditions" shall mean any Release of any Hazardous
Materials (whether or not such Release constituted at the time thereof a
violation of any Environmental Laws) or any violation of any Environmental
Law as a result of which any Environmental Person has or may become liable
to any Person or by reason of which the business, condition or operations
of such Environmental Person or any of its assets or properties may suffer
or be subjected to any Lien or liability.
"Environmental Laws" shall mean all Applicable Law relating to
Hazardous Materials or the protection of human health or the environment,
including all requirements pertaining to reporting, permitting,
investigating or remediating Releases or threatened Releases of Hazardous
Materials into the environment, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials. Without limiting the generality of the foregoing, the
term "Environmental Laws" shall include the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C.ss.9601 et seq.)
("CERCLA"), the Hazardous Materials Transportation Act (49 U.S.C.ss.1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C.ss.6901 et
seq.) ("RCRA"), the Federal Clean Water Act (33 U.S.C.ss.1251 et seq.), the
Clean Air Act (42 U.S.C.ss.7401 et seq.), the Toxic Substances Control Act
(15 U.S.C.ss.2601 et seq.) and the Occupational Safety and Health Act (29
U.S.C.ss.651 et seq.), as such laws may be amended from time to time, and
any other present or future federal, state, local or foreign statute,
ordinance, rule, regulation, order, judgment, decree, permit, license or
other binding determination of any Governmental Authority imposing
liability or establishing standards of conduct for the protection of human
health or the environment.
"Environmental Persons" shall mean, collectively, (i) the Company
Parties and their respective Subsidiaries or other Affiliates, (ii) any
other Person in which any of the Persons listed in clause (i) above was at
any time, or is, a partner, joint venturer, Affiliate, member or other
participant, and (iii) any predecessor or former partnership, joint
venture, trust, association, corporation, limited liability company or
other Person, whether in existence as of the date hereof or at any time
prior to the date hereof, the assets, properties, liabilities or
obligations of which have been acquired or assumed by any of the Persons
listed in clause (i) above or to which any of the Persons listed in clause
(i) above has succeeded.
"Equity Repurchase Option Agreement" shall mean that certain Equity
Repurchase Option Agreement dated as of September 11, 2002, between the
Company and the Purchaser, as amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute, including the rules and
regulations promulgated thereunder, in each case as amended from time to
time.
"ERISA Affiliate" shall mean any Person that is or was a member of the
controlled group of corporations or trades or businesses (as defined in
Subsections (b), (c), (m) or (o) of Section 414 of the Code) of which any
Company Party is or was a member at any time within the last six (6) years.
"Event of Default" shall have the meaning specified in Section 11.1.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Executive Officer" shall mean, with respect to any Person, the
president of such Person, any vice president of such Person in charge of a
principal business unit or division, any other officer who performs a
policy making function.
"Existing Indebtedness" shall have the meaning set forth in Section
3.12.
"Existing Liens" shall have the meaning set forth in Section 3.12.
"Fifth Amendment" shall mean that certain Fifth Amendment to
Securities Purchase Agreement dated as of September 11, 2002, among the
Company, TreeCon, Overhill Ventures and the Purchaser.
"Fifth Amendment Effective Date" shall mean September 11, 2002.
"Fifth Amendment Restructuring Fee" shall have the meaning set forth
in Section 8.23.
"Fifth Amendment Warrant" shall mean that certain Warrant No. LL-2 to
Purchase 57.57 Shares of Common Stock dated as of the Fifth Amendment
Effective Date and issued in connection with the consummation of the Fifth
Amendment, and shall also include any other warrant or warrants issued upon
the exercise or transfer of all or any portion thereof and the transfer,
division or combination of any such other warrant or warrants.
"Financial Statements" shall have the meaning specified in Section
3.11(a).
"Fiscal Quarter" shall mean (i) the thirteen (13) week period ending
on the last Sunday of December, March, June and September of any Fiscal
Year, except that in the event that a Fiscal Year ends on the first day of
October, then "Fiscal Quarter" shall mean the fourteen (14) week period
ending on the first Sunday of January of such Fiscal Year and on the last
Sunday of each of the three (3) thirteen (13) week periods thereafter, or
(ii) such other period as the Company may designate in writing and the
Purchaser may approve in writing.
"Fiscal Year" shall mean the fiscal year of the Company, which shall
be (i) the twelve (12) month period ending on (a) the last Sunday of
September in each calendar year, if September 30 does not fall on a
Saturday, or (b) October 1, if September 30 falls on a Saturday, or (ii)
such other period as the Company may designate in writing and the Purchaser
may approve in writing.
"Fixed Charge Coverage Ratio" shall mean, with respect to any period,
the ratio of (i) EBITDA for such period to (ii) Fixed Charges for such
period.
"Fixed Charges" shall mean, for any period and without duplication,
the sum of (i) Cash Interest Expense; (ii) scheduled payments of principal
on any Indebtedness of the Company and its Subsidiaries; (iii) scheduled
Capitalized Lease Obligations of the Company or any of its Subsidiaries for
such period representing principal; (iv) Taxes estimated to be paid by the
Company and its Subsidiaries, after
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giving effect to the net operating loss carryforward of TreeCon, if any;
(v) cash dividends or distributions, if any, paid by the Company or any of
its Subsidiaries; (vi) Capital Expenditures; and (vii) with respect to any
period ended on or before the Effective Date, all Tax Sharing Cash
Payments, in each of clauses (i) through (vii) for such period.
"Form 10 Registration Statement" shall mean a Registration Statement
on Form 10 initially filed with the SEC on or about September 27, 2001, as
amended by Amendment No. 1 to Registration Statement on Form 10 filed with
the SEC on June 28, 2002, as further amended by Amendment No. 2 to
Registration Statement on Form 10 filed with the SEC on September __, 2002,
as further amended by Amendment No. 3 to Registration Statement on Form 10
filed with the SEC on _____________, 2002, and as further amended or
supplemented.
"Fully Diluted Basis" shall mean, as applied to the calculation of the
number of shares of Capital Stock of the Company, a basis that gives effect
to, without duplication, (i) all shares of Capital Stock of the Company
outstanding at the time of determination, (ii) all additional shares of
Capital Stock of the Company reserved or to be reserved for issuance under
any stock purchase or stock option plans, agreements or arrangements of the
Company, (iii) all additional shares of Capital Stock of the Company
issuable upon conversion, exercise or exchange of all Option Rights of the
Company outstanding at the time of determination, irrespective of whether
such conversion, exercise or exchange is permitted, restricted or vested at
the time of determination, and irrespective of the price or consideration
required by such conversion, exercise or exchange, and (iv) all other
commitments, promises or understandings to issue any shares of Capital
Stock of the Company or Option Rights at the time of determination.
"GAAP" shall mean generally accepted accounting principles and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be approved
by a significant segment of the accounting profession, all as of the date
hereof, applied on a basis consistent with past practices.
"Governmental Authority" shall mean any nation or government, and any
state or political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government (including the Commission, the United States Food
and Drug Administration ("FDA"), the United States Department of
Agriculture ("USDA") and the United States Environmental Protection Agency
("EPA")), and any tribunal or arbitrator(s) of competent jurisdiction, and
any self-regulatory organization.
"Guarantied Obligations" shall have the meaning set forth in Section
10.1.
"Guarantors" shall mean Overhill Ventures and any other Person who
from time to time becomes a Guarantor hereunder pursuant to Section 8.16.
-11-
"Guaranty" shall mean the joint and several guaranty made by the
Guarantors in favor of the Beneficiary in respect of the Guarantied
Obligations, as provided in Section 10.
"Hazardous Materials" shall mean any substance (i) the presence of
which requires investigation or remediation under any Applicable Law; (ii)
that is defined or becomes defined as a "hazardous waste" or "hazardous
substance" under any Applicable Law (including CERCLA or RCRA); (iii) that
is toxic, explosive, corrosive, inflammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is or become regulated
by any Governmental Authority; (iv) the presence of which on any real
property causes or threatens to cause a nuisance upon the real property or
to adjacent properties or poses or threatens to pose a hazard to any real
property or to the health or safety of Persons on or about any real
property; or (v) that contains gasoline or other petroleum hydrocarbons,
polychlorinated biphenyls or asbestos.
"Hazardous Materials Claim" shall have the meaning set forth in
Section 8.15.
"Holder" shall mean any Person (including the initial Purchaser) in
whose name the Note is registered in the register maintained by the Company
pursuant to Section 11 of the Note.
"Immediate Family" of a Person includes such Person's spouse, and the
parents, children and siblings of such Person or his or her spouse and
their spouses and other Persons related to the foregoing by blood, adoption
or marriage within the second degree of kinship, and, with respect to any
officer or director of the Company, shall also include any Person who is
primarily a personal friend rather than a business associate.
"Indebtedness" shall mean, with respect to any Person, the aggregate
amount of, without duplication: (i) any indebtedness and other obligations,
contingent or otherwise, for borrowed money; (ii) all obligations evidenced
by bonds, notes, debentures or other similar instruments; (iii) all
obligations to pay the deferred purchase price of property or services
(excluding trade accounts payable arising in the ordinary course of
business that are less than sixty (60) days from their due dates and that
are not being contested in good faith in a commercially reasonable manner)
and any installment payment non-compete agreements; (iv) all Capital Lease
Obligations; (v) all obligations or liabilities of others secured by a Lien
on any asset owned by such Person, whether or not such obligation or
liability is assumed; (vi) all obligations of such Person, contingent or
otherwise, in respect of any letters of credit or bankers' acceptances;
(vii) all obligations under facilities for the discount or sale of
receivables; (viii) the maximum fixed redemption or repurchase price of any
redeemable stock of such Person; (ix) all Contingent Obligations; and (x)
all obligations which are required to be classified on the balance sheet of
such Person as long-term liabilities under GAAP.
"Indemnified Environmental Costs" shall mean all actual or threatened
liabilities, claims, actions, causes of action, judgments, orders, damages
(including foreseeable and unforeseeable consequential damages), costs,
expenses, fines,
-12-
penalties and losses (including sums paid in settlement of claims and all
reasonable consultant, expert and legal fees and reasonable expenses of
counsel) incurred in connection with any Hazardous Materials Claim, any
investigation of Site conditions or any clean-up, Remedial Work or other
remedial, removal or restoration work (whether of any Real Property or any
other real property), or any resulting damages, harm or injuries to the
Person or property of any third parties or to any natural resources.
"Indemnified Parties" shall have the meaning specified in Section
7.2.
"Initial Closing Date" shall mean November 24, 1999.
"Intangible Assets" shall mean the book value of all intangible assets
(as defined under GAAP) shown on the consolidated balance sheet of the
Company and its Subsidiaries, including organization costs, securities
issuance costs, goodwill (including any amounts, however designated on such
balance sheet, representing the excess of the purchase price paid for
assets or stock acquired over the value assigned thereto on the books of
the Company and its Subsidiaries), covenants not to compete, patents,
trademarks, copyrights, trade secrets, customer lists, know-how, licenses,
contracts, franchises, software costs, research and development costs,
investments in and monies from Affiliates and any other intangible assets.
"Intellectual Property" shall mean all (i) patents, patent
registrations, patent applications, patent disclosures and any related
continuation, continuation-in-part, divisional, reissue, reexamination,
utility, model and certificate of invention; (ii) trademarks, service
marks, trade dress, logos, trade names and corporate names, and any
registrations and applications for registration thereof; (iii) copyrights
and registrations and applications for copyrights; (iv) computer software,
data and documentation; (v) trade secrets, know-how, processes, techniques,
research and development, works, financial, marketing and business data,
pricing and cost information, business and marketing plans, customer and
supplier lists and any other confidential information, including the
Company's proprietary food recipes, if any; (vi) all proprietary rights
relating to any of the foregoing; and (vii) copies and tangible embodiments
thereof.
"Intercreditor Agreement" shall mean an Amended and Restated
Intercreditor and Subordination Agreement, dated as of the Effective Date,
between the Senior Lender and the Purchaser and acknowledged by the Company
and Overhill Ventures, as amended from time to time by the Senior Lender
and the Purchaser, which amends and restates that certain Intercreditor and
Subordination Agreement dated as of November 24, 1999, as amended by a
First Amendment dated as of August 23, 2000, as provided for in (or
supplemented by) the Consent under Intercreditor and Subordination
Agreement dated as of January 11, 2002, as provided for in (or supplemented
by) the Consent under Intercreditor and Subordination Agreement dated as of
January 31, 2002, as provided for in (or supplemented by) the Consent under
Intercreditor and Subordination Agreement dated as of June 28, 2002, and as
amended by that certain Second Amendment to and Consent under Intercreditor
and Subordination Agreement dated as of September 11, 2002.
-13-
"Investment Documents" shall mean, collectively, the Original
Securities Purchase Agreement and the other Original Investment Documents,
the SSE Assignment Agreement, this Agreement, the Note, the Warrants, the
Registration Rights Agreement, the Investor Rights Agreement, the
Suretyship Agreement, the Intercreditor Agreement and the other Collateral
Documents, the Equity Repurchase Option Agreement and all other agreements,
instruments, certificates, letters and other documents executed and/or
delivered in connection herewith or therewith, in each case as amended from
time to time.
"Investments" shall mean, as applied to any Person, (i) any direct or
indirect purchase or other acquisition by such Person of Capital Stock,
other securities or other interests of, or investments in, any other
Person, or all or any substantial part of the business or assets of any
other Person, and (ii) any direct or indirect loan, advance or capital
contribution by such Person to any other Person (including any Affiliate,
officer, director or employee of the Company), including the incurrence or
sufferance of any Indebtedness or accounts receivable of any other Person
that are not classified as current assets under GAAP or do not arise from
sales to such other Person in the ordinary course of business.
"Investor Rights Agreement" shall mean an Amended and Restated
Investor Rights Agreement dated as of the Effective Date, in form and
substance satisfactory to the Purchaser, among the Company, ▇▇▇▇▇ ▇▇▇▇▇ and
the Purchaser, as amended from time to time, which amends and restates that
certain Investor Rights Agreement dated as of November 24, 1999, as amended
by that certain Amendment to Investor Rights Agreement dated as of August
25, 2000, and that certain Second Amendment to Investor Rights Agreement
dated as of January 11, 2002, among the Company, TreeCon and the Purchaser.
"Landlord Waivers" shall mean, collectively, any and all waivers,
consents, agreements or other documents, in form and substance satisfactory
of the Purchaser, entered into for the benefit of the Purchaser by any
landlords, lessors, sublessors or other Persons that lease real property to
the Company or any of its Subsidiaries, including those listed on Schedule
1.1A.
"Leverage Ratio" shall mean, with respect to any period, the ratio of
(i) the sum of (A) total Indebtedness of the Company and its Subsidiaries
at the end of such period and (B) all Capital Leases existing at the end of
such period, to (ii) EBITDA for the four (4) consecutive Fiscal Quarters
ending as of the end of such period.
"Licenses and Permits" shall mean, collectively, all licenses,
franchises, permits, consents, approvals, registrations, certificates and
authorizations of all Governmental Authorities necessary or advisable to
the conduct of the businesses of the Company and its Subsidiaries.
"Lien" shall mean any lien, pledge, mortgage, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement or any lease in the nature thereof), any
agreement to give or refrain from giving any lien, pledge, mortgage,
security interest, charge or other encumbrance of any kind and the filing
of any financing statement or other similar form of notice under the laws
of any jurisdiction.
-14-
"Losses" shall have the meaning specified in Section 7.2.
"Margin Regulations" shall mean Regulations T, U and X of the Board of
Governors of the Federal Reserve System, or any successor thereto (the
"Federal Reserve Board"), as amended from time to time.
"Margin Stock" shall mean "margin stock" as defined in the Margin
Regulations.
"Material Adverse Effect" or "Material Adverse Change" shall mean a
material adverse effect on or adverse change in, as the case may be, (i)
the business, assets, condition (financial or otherwise), properties
(whether real, personal or otherwise), results of operations or prospects
of the Company Parties and any of their respective Subsidiaries,
individually or taken as a whole, or (ii) the ability of any Company Party
to enter into or perform its obligations under this Agreement or any other
Investment Document.
"Material Contracts" shall have the meaning set forth in Section
3.14.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
sum of: (i) the net amount of cash and cash equivalent proceeds received by
or for the account of the Company or any of its Subsidiaries from such
Asset Sale, and (ii) the net amount of cash and cash equivalents received
by or for the account of the Company or any Subsidiaries upon the sale,
conversion, collection or other liquidation of any non-cash proceeds
(including notes, debt securities, other rights to payment, Capital Stock
or other consideration received from any Asset Sale) from such Asset Sale.
For this purpose, the term "net" means net of (a) the principal amount of
any Indebtedness secured by a Permitted Lien on the assets subject to and
required to be prepaid, and actually prepaid, upon such Asset Sale, (b) any
transfer taxes payable as a result of such Asset Sale, and any reasonable
professional fees and expenses, reasonable broker's commissions and other
reasonable out-of-pocket expenses of sale paid to any Person attributable
to such Asset Sale, and (c) any income taxes reasonably estimated by the
Company to be payable in respect of such Asset Sale.
"Net Income (Loss)" shall mean, for any period, net income (loss)
after Taxes of the Company and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period, all computed in accordance
with GAAP.
"90-Day Receivables" shall mean, at any time, the total consolidated
trade receivables of the Company and its Subsidiaries, determined in
accordance with GAAP, that are then outstanding ninety (90) days past the
invoice date.
"Note" shall have the meaning set forth in Section 2.1, and shall also
include, where applicable, any additional note or notes issued by the
Company in connection with any Assignments.
"November ▇▇▇▇ ▇▇▇▇▇▇▇" shall have the meaning set forth in Section
2.1, and shall also include any other warrant or warrants issued upon the
exercise or
-15-
transfer of all or any portion thereof and the transfer, division or
combination of any such other warrant or warrants.
"Obligations" or "Obligations to Purchaser" shall mean all present and
future loans, advances, Indebtedness, claims, guarantees, liabilities or
obligations of the Company Parties (or any of them) or any of their
Subsidiaries or other Affiliates owing to the Purchaser, any Affiliate of
the Purchaser or any Indemnified Party (or any assignee or transferee
thereof), of whatever nature, type or description, arising under or in
connection with the Original Investment Documents, this Agreement, the
Note, the Warrants, the Registration Rights Agreement, the Investor Rights
Agreement (including the consulting fees payable thereunder), the
Collateral Documents, the Equity Repurchase Option Agreement, any other
Investment Documents or otherwise, any and all agreements, instruments or
other documents heretofore or hereafter executed or delivered in connection
with any of the foregoing, in each case whether due or not due, direct or
indirect, joint and/or several, absolute or contingent, voluntary or
involuntary, liquidated or unliquidated, determined or undetermined, now or
hereafter existing, amended, renewed, extended, exchanged, restated,
refinanced, refunded or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred, whether
for principal, interest (including post-judgment interest), premiums, fees,
costs, expenses (including attorneys', accountants', appraisers',
investment bankers', auctioneers' and other professional fees and expenses,
including court and other procedural costs) or other amounts incurred for
administration, collection, enforcement or otherwise, whether or not
arising after the commencement of any proceeding under the Bankruptcy Law
(including post-petition interest) and whether or not allowed or allowable
as a claim in any such proceeding, and whether or not recovery of any such
obligation or liability may be barred by any statute of limitations or such
Indebtedness, claim, liability or obligation may otherwise be
unenforceable.
"Obligor" shall have the meaning set forth in Section 10.2.
"Officer Notes" shall mean, collectively, (i) that certain Promissory
Note dated __________, 200__, made payable by ▇▇▇▇▇ ▇▇▇▇▇ to TreeCon in the
principal amount of $**[207,375]**, and (ii) that certain Promissory Note
dated __________, 200__, made payable by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to TreeCon in
the principal amount of $**[184,875]**.
"Option Rights" shall mean, with respect to any Person, any
Convertible Securities of such Person, or any warrants, options or other
rights to subscribe for or purchase, or obligations to issue, any Capital
Stock of such Person, including any options or similar rights issued or
issuable under any employee stock option plan, pension plan or other
employee benefit plan of such Person.
"Original Investment Documents" shall mean the "Investment Documents"
as defined in the Original Securities Purchase Agreement.
"Original Note" shall have the meaning set forth in the recitals.
"Original Securities Purchase Agreement" shall have the meaning set
forth in the recitals.
-16-
"Original Warrant" shall have the meaning set forth in the recitals.
"Other Guaranty" shall have the meaning set forth in Section 10.2.
"Overhill Ventures" shall have the meaning set forth in the recitals.
"Parent Pledge Agreement" shall mean the Parent Pledge Agreement dated
as of November 24, 1999, made by TreeCon in favor of the Purchaser.
"Parent Pledged Collateral" shall mean the "Pledged Collateral" as
defined in the Parent Pledge Agreement.
"Parent Termination Agreement" shall mean a Termination Agreement Re
Parent Pledge, dated as of the Effective Date, in form and substance
satisfactory to the Purchaser, between TreeCon and the Purchaser and
acknowledged by the Company and Overhill Ventures.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, as defined
in Title IV of ERISA, or any successor agency.
"Permitted Investments" shall mean (i) marketable direct obligations
issued or unconditionally guaranteed by the United States of America
(including obligations issued or held in book-entry form on the books of
the Department of the Treasury of the United States of America) or
obligations the timely payment of the principal of and interest on which
are fully guaranteed by the United States of America, all of which mature
within three (3) months from the date of acquisition thereof; (ii)
interest-bearing demand or time deposits that mature no more than thirty
(30) days from the date of creation thereof and that are either (a) insured
by the Federal Deposit Insurance Corporation or (b) held in any United
States commercial bank having general obligations rated at least "AA" or
equivalent by Standard & Poor's Rating Group Corporation or ▇▇▇▇▇'▇
Investors Service, Inc. and having capital and surplus of at least
$500,000,000 or the equivalent; or (iii) certificates of deposit that
mature no more than thirty (30) days from the date of creation thereof and
that are either (a) insured by the Federal Deposit Insurance Corporation or
(b) held in any United States commercial bank having general obligations
rated at least "AA" or equivalent by Standard & Poor's Corporation Rating
Group or ▇▇▇▇▇'▇ Investors Service, Inc. and having capital and surplus of
at least $500,000,000 or the equivalent.
"Permitted Liens" shall mean, collectively, Liens of the Company
Parties arising by reason of (i) any attachment, judgment, decree or order
of any Governmental Authority, so long as such Lien is being contested in
good faith within thirty (30) days of such Person's knowledge thereof and
is either adequately bonded or execution thereon has been stayed pending
appeal or review, and any appropriate legal proceedings which may have been
duly initiated for the review of such attachment, judgment, decree or order
shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; (ii) Taxes,
assessments or other governmental charges that are not yet delinquent or
that are being contested in good faith; (iii) pledges or deposits by the
Company or its Subsidiaries as security for payment under workers'
compensation, unemployment
-17-
insurance or other similar laws; (iv) reasonable security for the
performance by the Company or its Subsidiaries of its obligations under
real property leases; (v) deposits to secure public or statutory
obligations or in lieu of surety or appeal bonds entered into in the
ordinary course of business; (vi) operation of law in favor of carriers,
warehouse owners, landlords, storage facilities or mechanics incurred in
the ordinary course of business for sums that are not yet delinquent or are
being contested in good faith by negotiation or by appropriate proceedings
that suspend the collection thereof and, if required by GAAP, are
appropriately reserved for on the books of such Person; and (vii)
easements, rights-of-way, zoning and similar covenants and restrictions and
other similar encumbrances or title defects that, in the aggregate, are not
material in amount; provided, however, that each of the Liens described in
the foregoing clauses (i) through (vii) inclusive shall only constitute a
Permitted Lien so long as such Lien individually does not, or so long as
all such Liens do not, materially interfere with the conduct of such
Person's business or creates a Material Adverse Change.
"Person" shall mean any individual, trustee, sole proprietorship,
partnership (whether general, limited or limited liability), joint venture,
trust, unincorporated organization, association, corporation, limited
liability company and other entity, or any Governmental Authority.
"PTC Security Agreement" shall mean an Amended and Restated Patent,
Trademark and Copyright Security Agreement, dated as of the Effective Date,
in form and substance satisfactory to the Purchaser, as amended from time
to time, which amends and restates that certain Patent, Trademark and
Copyright Security Agreement dated as of November 24, 1999, among the
Company, Overhill Ventures and the Purchaser, as amended by a First
Amendment dated as of August 25, 2000.
"Purchaser" shall have the meaning set forth in the preamble.
"Real Property" shall have the meaning set forth in Section 8.15.
"Registration Rights Agreement" shall mean an Amended and Restated
Registration Rights Agreement, effective as of the Effective Date, in form
and substance satisfactory to the Purchaser, between the Company and the
Purchaser, as amended from time to time, which amends and restates that
certain Registration Rights Agreement dated as of November 24, 1999,
between the Company and the Purchaser.
"Release" shall mean any release (whether threatened or actual),
migration, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, seeping, leaching, dumping or disposing
into the environment or the workplace of any Hazardous Materials, and
otherwise as defined in any Environmental Laws.
"Remedial Work" shall have the meaning set forth in Section 8.15.
-18-
"Restricted Payment" shall mean any one or more of the following:
(i) any dividend or other distribution, direct or indirect, on
account of any Capital Stock of the Company or any of its Subsidiaries now
or hereafter outstanding;
(ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of
any Capital Stock of the Company or any of its Subsidiaries now or
hereafter outstanding;
(iii) any payment or prepayment of principal of, premium, if any,
or interest, fees or other charges on or with respect to, or any
redemption, purchase or other acquisition for value, retirement,
defeasance, sinking fund or similar payment with respect to, any
Indebtedness that is subordinated in any respect to the Obligations;
(iv) any management, consulting or similar fees payable by the
Company or any of its Subsidiaries to any Affiliate thereof; and
(v) any loans or advances by any Company Party to any of its
employees, directors, officers or stockholders, as the case may be, except
for advances to employees for moving or traveling expenses made in the
ordinary course of business.
"SEC Documents" shall mean all registration statements, prospectuses,
reports, schedules, forms, statements and other documents (including all
exhibits, schedules and other information included or incorporated by
reference therein) which are filed or are required to be filed with the
Commission under the Securities Act, the Exchange Act or the rules and
regulations promulgated thereunder, and all applications, filings, reports
and other documents which are filed or are required to be filed with the
AMEX or any other securities exchange.
"Securities" shall have the meaning specified in Section 2.1.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, all as the same shall
be in effect at the time.
"Security Agreement" shall mean an Amended and Restated Security
Agreement, dated as of the Effective Date, in form and substance
satisfactory to the Purchaser, among the Company, the Guarantors and the
Purchaser, as amended from time to time, which amends, restates and
combines (i) the Security Agreement dated as of November 24, 1999, as
amended by that certain Amendment to Security Agreement dated as of June
28, 2002, made by the Company in favor of the Purchaser, and (ii) the
Security Agreement dated as of November 24, 1999, as amended by that
certain Amendment to Security Agreement dated as of June 28, 2002, made by
Overhill Ventures in favor of the Purchaser. Any references to Security
Agreement (Company) or Security Agreement (Subsidiary) in any Investment
Document shall mean the Security Agreement on and after the Effective Date.
-19-
"Senior Availability" shall mean, at any time, the "Net Borrowing
Availability" (as such term is defined in the Senior Credit Agreement) at
such time.
"Senior Collateral Documents" shall mean the "Collateral Documents" as
such term is defined in the Senior Credit Agreement.
"Senior Credit Agreement" shall mean an Amended and Restated Loan and
Security Agreement, dated as of the Effective Date, among the Senior
Lender, the Company and Overhill Ventures, as amended from time to time,
subject to the terms of the Intercreditor Agreement, which amends that
certain Loan and Security Agreement dated as of November 24, 1999, among
the Company, Overhill Ventures and the Senior Lender, as amended by a First
Amendment to Loan and Security Agreement dated as of August 23, 2000, as
further amended by a Second Amendment to Loan and Security Agreement dated
as of January 11, 2002, as further amended by a Third Amendment to Loan and
Security Agreement dated as of June 28, 2002, and as further amended by a
Fourth Amendment to Loan and Security Agreement dated as of September 11,
2002.
"Senior Credit Documents" shall mean the "Loan Documents" as such term
is defined in the Senior Credit Agreement.
"Senior Indebtedness" shall mean, collectively, the Indebtedness of
the Company outstanding from time to time under the Senior Credit
Documents.
"Senior Lender" shall mean Union Bank of California, N.A., as "Bank"
under the Senior Credit Agreement.
"Series A Preferred Certificate of Designation" shall mean the
Certificate of Designation of the Series A Convertible Preferred Stock
originally filed by or on behalf of the Company with the Secretary of State
of the State of Nevada on March 7, 2002, pursuant to NRS Sections 78.195
and 78.1955.
"Series A Preferred Shares" shall mean 23.57 shares of Series A
Preferred Stock originally issued by the Company to the Purchaser on or
about March 13, 2002, and any securities issued or issuable as a dividend
on, or other distribution with respect to, any of the securities, or any
securities issued in replacement of or in exchange for, such shares.
"Series A Preferred Stock" shall mean that certain series of preferred
stock of the Company designated as "Series A Convertible Preferred Stock,"
par value $.01 per share, issued pursuant to the Series A Preferred
Certificate of Designation.
"▇▇▇▇▇▇▇ Note" means the Promissory Note dated October 22, 1999, made
by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in favor of Overhill Ventures in the original principal
amount of $14,000.
"Site" shall mean any real property previously, currently or hereafter
owned, leased or operated by any Environmental Person.
-20-
"60-Day Payables" shall mean, at any time, the total consolidated
trade payables and accrued expenses of the Company and its Subsidiaries,
determined in accordance with GAAP, that are then outstanding sixty (60)
days past the invoice date.
"Solvent" shall mean, with respect to any Person on the date of
determination, that: (i) the fair saleable value of such Person's assets is
greater than the amount required to be paid with respect to the probable
liability on the existing debts and other liabilities (whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent) of
such Person as they become absolute and matured; (ii) the sum of the debts
(whether matured or unmatured, liquidated or unliquidated, absolute, fixed
or contingent) of such Person will not exceed all of the property of such
Person at a fair valuation (including the value of all intangible
property); (iii) such Person's assets do not constitute unreasonably small
capital for such Person to carry on its business as now conducted and as
proposed to be conducted; and (iv) such Person does not intend to incur,
and does not believe it will incur, debts or liabilities beyond such
Person's ability to pay such debts and liabilities as they mature (taking
into account the timing and amounts of cash to be received by such Person
and of amounts to be payable on or with respect to debt of such Person).
For purposes of this definition, the amount of Contingent Obligations
outstanding at any time shall be computed as the amount that, in the light
of all the facts and circumstances existing at such time, represents the
amount that is reasonably expected to become an actual or matured
liability.
"Spin-Off" shall have the meaning set forth in the recitals.
"Spin-Off Record Date" shall mean __________, 2002, the "record date"
of the Spin-Off.
"Spin-Off Related Matters" or the "Spin-Off Related Transactions"
shall have the meanings set forth in the recitals.
"SSE Acquisition Documents" shall mean, collectively, the SSE Asset
Purchase Agreement, the SSE Assignment Agreement and the agreements,
instruments and other documents related thereto or contemplated thereby.
"SSE Asset Purchase Agreement" shall mean the Asset Purchase Agreement
dated as of August 7, 2000, between the Company and SSE Manufacturing.
"SSE Assignment Agreement" shall mean the Assignment of
Representations, Warranties, Covenants and Indemnities dated as of August
25, 2000, between the Company and the Purchaser, and consented to by SSE
Manufacturing, Inc.
"SSE Manufacturing" shall mean SSE Manufacturing, Inc., a California
corporation, the "Seller" under the SSE Asset Purchase Agreement.
"Subordinated Creditor" shall have the meaning set forth in Section
8.17.
-21-
"Subordinated Debt" shall have the meaning set forth in Section 8.17.
"Subsidiary" and "Subsidiaries" shall mean, with respect to any
Person, any other Person of which more than thirty percent (30.0%) of the
total voting power of Capital Stock entitled to vote (without regard to the
occurrence of any contingency) in the election of directors (or other
Persons performing similar functions) are at the time directly or
indirectly owned by such first Person. Unless otherwise indicated, the term
"Subsidiary" refers to any Subsidiary of the Company.
"Suretyship Agreement" shall mean an Amended and Restated Suretyship
Agreement, effective as of the Effective Date, among the Company, the
Guarantors and the Purchaser, in form and substance satisfactory to the
Purchaser, amending and restating the Suretyship Agreement dated as of
November 24, 1999, by and among the Company, the Debtors (as such term is
defined therein) and the Purchaser.
"Tangible Net Worth" shall mean, with respect to the Company and its
Subsidiaries at any time and without duplication: (i) the sum of (a) the
excess of the book value of assets over liabilities at such time,
determined on a consolidated basis in accordance with GAAP, and (b) the
amount shown for redeemable warrants on the consolidated balance sheet of
the Company and its Subsidiaries at such time, minus (ii) Intangible Assets
at such time.
"Tax" or "Taxes" shall mean any present and future income, excise,
sales, use, stamp or franchise taxes and any other taxes, fees, duties,
levies, withholdings or other charges of any nature whatsoever imposed by
any taxing authority, whether federal, state, local or foreign, together
with any interest and penalties and additions to tax.
"Tax Sharing Cash Payments" shall mean, for any taxable period ending
on or prior to the effective date of the Spin-Off, all cash payments
actually made by the Company to TreeCon on account of the Tax Sharing
Payable for such period.
"Tax Sharing Payable" shall mean, for any taxable period ended on or
prior to the effective date of the Spin-Off, the total amount owed by the
Company to TreeCon for such period arising from the accrual of income or
franchise Taxes of the Company that the Company would have otherwise been
obligated to pay with respect to such period if the Company had filed
income or franchise Tax returns on a stand-alone basis; provided, however,
that for the taxable period ended on or about the effective date of the
Spin-Off, the total Tax Sharing Payable shall not exceed $**[_________]**.
"Texas Timberjack" shall mean Texas Timberjack, Inc., a Texas
corporation and a wholly owned Subsidiary of TreeCon.
"Third Party Intellectual Property Rights" shall have the meaning
specified in Section 3.27.
"Total Payables" shall mean, at any time, the total consolidated trade
payables and accrued expenses of the Company and its Subsidiaries at such
time, determined in accordance with GAAP.
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"Total Receivables" shall mean, at any time, the total consolidated
trade receivables of the Company and its Subsidiaries at such time,
determined in accordance with GAAP.
"TreeCon" shall have the meaning set forth in the recitals. TreeCon is
defined in the Original Securities Purchase Agreement and the other
Original Investment Documents as "Parent" and is the same Person for
purposes of the Investment Documents.
"TreeCon Accounts Receivable" shall mean an accounts receivable owing
by TreeCon to the Company through _________, 2002, in the aggregate amount
of $__________ and shown on the balance sheet of the Company and its
Subsidiaries at _____________, 2002.
"UCC" shall have the meaning set forth in the Security Agreement.
"Vernon Facilities" shall mean the Company's subleased or leased
manufacturing and other facilities commonly known as ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, consisting of approximately 147,210 square feet located
in a one-story warehouse building and more particularly described in the
Vernon Sublease and the ▇▇▇▇▇▇ Lease.
"▇▇▇▇▇▇ Lease" shall mean that certain Standard Industrial/Commercial
Single-Tenant Lease -- Net Real Estate Lease (including the Addendum
thereto) dated January 1, 2002, between Vernon Associates, LLC, a
California limited liability company, as "Lessor," and the Company, as
"Lessee," with respect to the Vernon Facility.
"Vernon Sublease" shall mean that certain Sublease dated as of January
1, 2002, between ▇▇▇▇▇▇ Paper Products, Inc., a California corporation, as
"Sublandlord," and the Company, as "Subtenant," with respect to the Vernon
Facility.
"Voting Stock" of a Person shall mean all classes of Capital Stock of
such Person then outstanding and normally entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof, as applicable.
"Warehouse Bailment Agreements" shall mean, collectively, warehouse
bailment agreements or similar documents, in form and substance
satisfactory to the Purchaser, entered into from time to time for the
benefit of the Purchaser by any Person (including warehousemen) that stores
or otherwise holds inventory or other assets of the Company or any
Subsidiary, including those listed on Schedule 1.1B.
"Warrants" shall mean, collectively, the November 1999 Warrant, the
Fifth Amendment Warrant and any other warrants issued by the Company to the
Purchaser at any time after the Effective Date.
"Warrant Shares" shall mean any and all shares of Common Stock issued
or issuable from time to time upon exercise of any Warrant, and any
securities issued or
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issuable as a dividend on, or other distribution with respect to, any of
the securities, or any securities issued in replacement of or in exchange
for, such shares of Common Stock.
"Withdrawn Demand Registration Expenses" shall mean all costs or
expenses incurred by the Company in connection with a Demand Registration
(as such term is defined in the Registration Rights Agreement) that is
withdrawn by the Demanding Holders (as such term is defined in the
Registration Rights Agreement) solely as a result of the occurrence of any
adverse market conditions of the type that is customarily found in
underwriting or similar purchase agreements relating to public offerings
and which may be relied upon by underwriters or purchasers to terminate
such underwriting or purchase agreement.
1.2 Accounting Terms and Computations. For purposes of this Agreement or
any other Investment Document, (a) all accounting terms used in this Agreement
or any other Investment Document that are not expressly defined herein or
therein have the meanings given to them under GAAP, (b) all computations made
pursuant to this Agreement or any other Investment Document shall be made in
accordance with GAAP and (c) all financial statements and other financial
information required to be delivered by the Company or any Guarantor hereunder
or under any other Investment Document shall, except as otherwise expressly
provided in this Agreement, be prepared in accordance with GAAP in the ordinary
course of business consistent with past practices, except that any such
financial statements or other financial information (i) which are unaudited may
be subject to year-end audit adjustments and may omit footnotes and (ii) with
respect to any accounting period ended on or prior to the Effective Date may be
qualified only with respect to the characterization or re-characterization of
the TreeCon Accounts Receivable.
1.3 Independence of Covenants. All covenants in this Agreement or any
other Investment Document shall each be given independent effect so that if a
particular action or condition is not permitted by any such covenant, the fact
that it would be permitted by another covenant, by an exception thereto, or be
otherwise within the limitations thereof, shall not avoid the occurrence of a
Default or an Event of Default if such action is taken or condition exists.
1.4 Headings; Construction and Interpretation. The headings in this
Agreement and any other Investment Document are for convenience of reference
only, do not constitute a part of this Agreement or such other Investment
Document and are not to be considered in construing or interpreting this
Agreement or such other Investment Document. All section, preamble, recital,
exhibit, schedule, disclosure schedule, annex, clause and party references
contained in this Agreement or any other Investment Document are to this
Agreement or such other Investment Document unless otherwise stated. Unless the
context of this Agreement or any other Investment Document clearly requires
otherwise, the use of the word "including" is not limiting and the use of the
word "or" has the inclusive meaning represented by the phrase "and/or."
References in this Agreement or any other Investment Document to any agreement,
other document or law "as amended" or "as amended from time to time," or
amendments of any document or law, shall include any amendments, supplements,
restatements, replacements, renewals, refinancings, waivers or other
modifications. This Agreement and each other Investment Document has been
negotiated by, and entered into between or among, persons that are sophisticated
and knowledgeable in business matters. Accordingly, any rule of law or legal
decision that would require
-24-
interpretation of this Agreement or any other Investment Document against the
party that drafted it shall not be applicable and is irrevocably and
unconditionally waived. All provisions of this Agreement and each other
Investment Document shall be construed in accordance with their fair meaning,
and not strictly for or against any party. Any references in this Agreement or
any other Investment Document to any Section of former Annex A of the Original
Securities Purchase Agreement refers to the Section in Articles 8 or 8.24, as
the case may be, that corresponds with such Section in former Annex A.
1.5 Determinations. Any determination or calculation contemplated by this
Agreement or any other Investment Document that is made by the Purchaser shall
be final and conclusive and binding upon the Company Parties in the absence of
manifest error.
1.6 Knowledge of the Company. Whenever the term "knowledge of the Company"
or "best knowledge of the Company Parties" or words of similar import are used
in this Agreement or any other Investment Document with respect to the existence
or absence of any fact, it shall mean that any one or more of the following
Persons knows or should have known, based upon the reasonable inquiry of such
Person, of the existence or absence of such fact: ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
2. AMENDMENT AND RESTATEMENT OF EXISTING SECURITIES; SPIN-OFF-RELATED
TRANSACTIONS.
2.1 Authorization. The Company has authorized (a) the amendment and
restatement of the Original Securities Purchase Agreement on the terms and
subject to the conditions set forth herein, (b) the amendment and restatement of
the Original Note, on the terms and subject to the conditions set forth in an
Amended and Restated Secured Senior Subordinated Note Due 2004, in substantially
the form of Exhibit B (as amended from time to time, the "Note") and (c) the
amendment and restatement of the Original Warrant, on the terms and subject to
the conditions set forth in an Amended and Restated Warrant to Purchase 166.04
Shares of Common Stock, in substantially the form of Exhibit C (as amended from
time to time, the "November ▇▇▇▇ ▇▇▇▇▇▇▇"). The Note and the Warrants are
sometimes referred to herein as the "Securities."
2.2 Effectiveness of Transactions; Consent to Spin-Off Related Matters;
Effective Date. The effectiveness of the amendment and restatement of the
Original Securities Purchase Agreement, the Original Note and the Original
Warrant shall be subject to the satisfaction (or waiver) of each of the
conditions precedent set forth in Section 5 and Section 6 (the first date upon
which all such conditions precedent have been satisfied (or waived) is referred
to as the "Effective Date"). Effective on and as of the Effective Date and
subject to the terms and conditions set forth herein, the Purchaser shall be
deemed to have consented to the Spin-Off Related Matters. The Purchaser's
consent provided for above in this Section 2.2 shall be limited solely to the
Spin-Off Related Matters and shall not be construed as applying to any other
transactions or matters involving the Company, TreeCon, any other Company Party
or any of its or their Subsidiaries prior to, simultaneously with or at any time
after the Spin-Off, except as expressly provided herein or in any other
Investment Document.
2.3 Limited Release of TreeCon. Subject to the terms and conditions set
forth herein, effective on and as of the Effective Date, TreeCon shall be
released from certain
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Obligations (including Guarantied Obligations), but only to the extent provided
for in, and as limited by, the Parent Termination Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES. The Company Parties
jointly and severally represent and warrant to the Purchaser that, except as
expressly set forth in the Disclosure Schedules (the "Disclosure Schedules"):
3.1 Organization and Qualification. Each of the Company and TreeCon is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and has all requisite power and authority to own or
lease and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted. The Company is duly qualified or
licensed to do business as a foreign corporation in the States of California,
Texas and each other jurisdiction in which the character of the properties or
assets owned, leased or operated or the nature of the activities conducted makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed in such other jurisdictions could not have, individually
or in the aggregate, a Material Adverse Effect.
3.2 Corporate or Other Power. Each Company Party has the requisite power
and authority to execute, deliver and perform its obligations under this
Agreement and all other Investment Documents to which it is a party, including,
with respect to the Company, the power and authority to amend and restate the
Original Securities Purchase Agreement and the Original Note and to issue the
Note.
3.3 Authorization; Binding Effect. Each Company Party has by all necessary
action duly authorized (a) the execution and delivery of this Agreement and each
other Investment Document to which it is a party and (b) the performance of its
obligations hereunder and thereunder. This Agreement and each other Investment
Document to which any Company Party is a party constitutes the legal, valid and
binding obligation of such Company Party, respectively, enforceable against such
Company Party, respectively, in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability and except as rights of indemnity or
contribution may be limited by federal or applicable state securities or "blue
sky" laws or the public policy underlying such laws.
3.4 Subsidiaries. Schedule 3.4 sets forth a true, complete and correct
list of all direct and indirect Subsidiaries of the Company. Each such
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and has all requisite
power and authority to own or lease and operate its properties and assets and to
carry on its business as now conducted and as proposed to be conducted, and is
duly qualified or licensed to do business in each jurisdiction in which the
character of the properties or assets owned, leased or operated or the nature of
the activities conducted makes such qualification or licensing necessary. No
Company Party owns or holds any Capital Stock of any other Person. There is no
Subsidiary of the Company that is not a Guarantor.
-26-
3.5 Conflict with Other Instruments; Existing Defaults; Ranking.
(a) The execution, delivery and performance by each Company Party of
this Agreement and each other Investment Document to which it is a party,
and the consummation of the transactions contemplated hereby and thereby,
do not and will not (i) violate the charter or bylaws of such Company
Party, in each case as in effect on the date hereof, (ii) conflict with,
result in a breach of, or constitute (or, with the giving of notice or
lapse of time or both, would constitute) a default under, any term of any
lease, credit agreement, indenture, note, mortgage, instrument or other
agreement to which such Company Party is a party or by which any of its
properties or assets are bound (including any Material Contracts) or (iii)
violate any provision of Applicable Law.
(b) No Company Party or any of its Subsidiaries is in default, breach
or violation of (i) its charter or bylaws, as in effect on the date hereof,
(ii) any term of any lease, credit agreement, indenture, note, mortgage,
instrument or other material agreement to which it is a party or by which
any of its properties or assets are bound (including any Material
Contracts) or (iii) any provision of Applicable Law. Without limiting the
generality of the foregoing, there does not exist any "Event of Default"
(as defined in the Senior Credit Agreement) or any default or event of
default under any other credit or financing agreement to which any Company
Party or any of its Subsidiaries is a party or by which any of its
properties or assets are bound.
(c) There are no restrictions which prohibit the amendment,
restatement or issuance of the Securities, prohibit or restrict any merger,
sale of assets or other event which could result in a Change in Control, or
otherwise prohibit any other financings by any Company Party including any
public or private debt or equity financings.
(d) No Indebtedness of the Company ranks pari passu with any
Indebtedness evidenced by the Note or with any other Obligations, and
payment of principal of, premium, if any, and interest on the Indebtedness
evidenced by the Note is subordinate only to the Senior Indebtedness.
3.6 Governmental and Other Third Party Consents. Except for the Consent of
the Senior Lender and the Consents listed in Schedule 3.6 and those that have
already been obtained or made, no Consent of any Governmental Authority or other
Person is or will be required in connection with the execution, delivery and
performance of this Agreement, the Note, the Collateral Documents or any other
Investment Document or to ensure the legality, validity or enforceability hereof
or thereof or for the purpose of maintaining in full force and effect any
Licenses and Permits. Each Consent which has been obtained or made in connection
with the execution, delivery and performance of this Agreement or any other
Investment Document is in full force and effect. The time within which any
administrative or judicial appeal, reconsideration, rehearing or other review of
any such Consent may be taken or instituted has lapsed, and no such appeal,
reconsideration or rehearing or other review has been taken or instituted.
-27-
3.7 Capitalization.
(a) The authorized capital stock of the Company consists solely of
100,000,000 shares of Common Stock, of which 9,400,828 shares are issued
and outstanding and are owned of record by the Persons listed in Schedule
3.7(a), and 50,000,000 shares of "blank check" preferred stock, par value
$.01 per share, of the Company, 28 shares of which have been designated as
"Series A Convertible Preferred Stock" and 23.57 shares of which are issued
and outstanding and are owned of record by the Purchaser. All of the issued
and outstanding shares of Capital Stock of the Company have been duly
authorized and are validly issued, fully paid and non-assessable, and are
free and clear of any Liens and other restrictions (including any
restrictions on the right to vote, sell or otherwise dispose of such
Capital Stock) and of any preemptive or other similar rights to subscribe
for or to purchase any such Capital Stock, other than those contained in
the Investor Rights Agreement. Schedule 3.7(a) sets forth true, correct and
complete information regarding the capital structure of the Company
immediately prior to the Effective Date on a Fully Diluted Basis. There
are: (i) no outstanding Option Rights of the Company other than the
Warrants owned or held by the Purchaser as of the date hereof; (ii) no
voting trusts or other agreements or undertakings with respect to the
voting of the Capital Stock of the Company; (iii) no obligations or rights
(whether fixed or contingent) on the part of the Company or any other
Person to purchase, repurchase, redeem or "put" any outstanding shares of
the Capital Stock of the Company or Option Rights of the Company; and (iv)
no agreements granting any Person any rights of first offer or first
refusal, registration rights or "drag-along," "tag-along" or similar rights
with respect to any transfer of any Capital Stock or Option Rights of the
Company or any of its Subsidiaries. All shares of Capital Stock and Option
Rights of the Company that have been issued by the Company have been issued
and offered in compliance with all federal and applicable state securities
laws. No Capital Stock or Option Rights of the Company will become issuable
to any Person pursuant to any "anti-dilution" provisions of any such issued
and outstanding securities of the Company on account of the issuance of the
Securities, the exercise of any Warrant or the application of the
"anti-dilution" provisions contained in any Warrant.
(b) The authorized capital stock of Overhill Ventures consists solely
of 10,000 shares of capital stock, of which 1,000 shares are issued and
outstanding as of the date hereof. The Company beneficially owns, directly
or indirectly, all of the issued and outstanding shares of Capital Stock of
Overhill Ventures. All of the outstanding shares of Capital Stock of
Overhill Ventures have been duly authorized and are validly issued, fully
paid and nonassessable, and are free and clear of any Liens and other
restrictions (including any restrictions on the right to vote, sell or
otherwise dispose of such Capital Stock) and of any preemptive or other
similar rights to subscribe for or to purchase any such Capital Stock.
There are: (i) no outstanding Option Rights of Overhill Ventures; (ii) no
voting trusts or other agreements or undertakings with respect to the
voting of the capital stock of Overhill Ventures; (iii) no obligations or
rights (whether fixed or contingent) on the part of Overhill Ventures to
purchase, repurchase, redeem or put any outstanding shares of its Capital
Stock or Option Rights of Overhill Ventures; and (iv) no agreements
granting any Person any rights of first offer or first refusal,
registration rights or "drag-along," "tag-along" or similar rights with
respect to any transfer of any Capital
-28-
Stock of Overhill Ventures or Option Rights issued by Overhill Ventures.
All of the shares of Capital Stock of Overhill Ventures and Option Rights
of Overhill Ventures have been issued and offered in compliance with all
federal and applicable state securities laws.
(c) Immediately following the Spin-Off, TreeCon will not own or hold,
directly or indirectly, any shares of, or Option Rights with respect to,
the Capital Stock of the Company or any of its Subsidiaries.
(d) Schedule 3.7(d) sets forth a true and correct description of the
capitalization of the Company showing, in reasonable detail, the total
number and type of shares of Capital Stock of the Company immediately
following the consummation of the Spin-Off on a Fully Diluted Basis.
(e) No transaction, event or other occurrence has occurred which has
caused or would cause an adjustment to the Conversion Price (as defined in
Section 6(a) of the Certificate of Designation of the Series A Preferred
Stock) of the Series A Preferred Shares pursuant to the terms of the Series
A Preferred Shares.
3.8 Validity and Issuance of Warrant Shares. All Warrant Shares have been
duly authorized and are duly and validly issued, fully paid and non-assessable.
3.9 Validity of Liens of Purchaser. The Liens granted to the Purchaser
under the Collateral Documents, and the Liens granted to the Purchaser under the
Security Agreement, continue to constitute, and constitute, legal, valid,
enforceable and perfected security interests and Liens in and to the Collateral,
prior in right to all Liens (other than the Liens in favor of the Senior Lender)
securing the due and punctual payment, performance and observance of all
Obligations, including the payment and performance of all Obligations under the
Note.
3.10 SEC Documents. The Company has filed with the Commission all SEC
Documents (including the Form 10 Registration Statement) that have been required
to be filed by it with the Commission and the AMEX, and TreeCon has timely filed
(after giving effect to extensions) with the Commission since the Initial
Closing Date all SEC Documents that have been required to be filed by it with
the Commission and the AMEX. Schedule 3.10 sets forth a true, complete and
correct list of all SEC Documents filed by the Company and the respective dates
of filing. The Company has delivered true, correct and complete copies of each
such SEC Document. Each SEC Document filed by the Company complies with all
applicable requirements of the Securities Act, the Exchange Act or the
applicable AMEX rules, as the case may be, and, when filed with the SEC, did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company and its
Subsidiaries included in each SEC Document complied as to form, as of the dates
of its filing with the Commission, with applicable accounting requirements and
the published rules and regulations of the Commission with respect thereto, were
prepared in accordance with GAAP (except, in the case of unaudited statements,
as permitted by the Commission) and fairly present the consolidated financial
position of the Company and its Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash
-29-
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments consistent with past practices and
consistently applied).
3.11 Financial Information.
(a) The Company has delivered to the Purchaser true, correct and
complete copies of (i) audited financial statements of the Company
consisting of consolidated balance sheets of the Company and its
Subsidiaries as of September 27, 1999, September 30, 2000 and September 30,
2001, and audited consolidated statements of operations, shareholders'
equity and changes in financial position or cash flows for each of the
three (3) years then ended, together with a report and an opinion of Ernst
& Young LLP, the Company's independent accountants, and (ii) unaudited
consolidated financial statements of the Company and its Subsidiaries
consisting of a balance sheet as of June 30, 2002, and a statement of
operations and cash flows for the nine (9)-month period then ended (the
financial statements referred to in clauses (i) and (ii) are collectively
referred to as the "Financial Statements"). The Financial Statements
(including, in each case, the related schedules and notes) fairly present
the consolidated financial position of the Company and its Subsidiaries as
of the respective dates of such balance sheets and the results of
operations of the Company and its Subsidiaries for the respective periods
covered by such statements of operations, shareholders' equity and changes
in financial position or cash flows, as the case may be, and have been
prepared in accordance with GAAP.
(b) Except as previously disclosed in the SEC Documents filed by the
Company or previously disclosed by the Company in a press release, since
September 30, 2001, no Material Adverse Change has occurred.
(c) None of the Company Parties, TreeCon or any of their respective
Subsidiaries, Affiliates, officers or directors (i) is contemplating the
filing of a petition under the Bankruptcy Law or the liquidation of all or
any major portion of its assets or properties or (ii) is aware of any
Person contemplating the filing of any petition against it under the
Bankruptcy Law. None of the Company Parties or any of their respective
Subsidiaries is contemplating changing its business, as such business is
being conducted on the date hereof.
(d) The Company has previously furnished to the Purchaser true,
correct and complete copies of all "management" letters issued by the
Company's and TreeCon's independent auditors since January 1, 2000.
3.12 Existing Indebtedness; Existing Liens; Investments; Etc.
(a) Schedule 3.12 sets forth a true, correct and complete list or
schedule, and describes, as of the date or dates indicated therein, as
applicable:
(i) all Indebtedness of the Company Parties and their
respective Subsidiaries on a consolidated and consolidating basis
(collectively, "Existing Indebtedness") as of the date immediately
preceding the Effective Date;
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(ii) all Liens as of a recent practicable date in respect of any
assets of the Company Parties or their respective Subsidiaries
(collectively, "Existing Liens"), showing, as to each such Lien, the
name of the grantor and secured party, the Indebtedness secured
thereby, the name of the debtor (if different from the grantor) and
the assets or other property covered by such Lien;
(iii) all Investments of the Company Parties and their
Subsidiaries as of the date hereof;
(iv) all UCC financing statements existing as of the date hereof
naming any Company Party or any of its Subsidiaries as a debtor; and
(v) a payables aging schedule for the Company and its
Subsidiaries as of a recent practicable date.
(b) Except as set forth on Schedule 3.12, no Company Party or any of
its Subsidiaries has any Indebtedness, liabilities or other obligations as
of the date hereof, whether accrued, absolute, contingent or otherwise,
that are required to be reflected on a balance sheet prepared in accordance
with GAAP and that are not reflected on the consolidated balance sheet of
the Company and its Subsidiaries included in the Financial Statements.
(c) Immediately following the Effective Date, no Company Party or any
of its Subsidiaries will have any Indebtedness, whether accrued, absolute,
contingent or otherwise (whether individually or in the aggregate), except
for (i) "Revolving Loans" and the "Term Loan," in each case as defined in
the Senior Credit Agreement, and (ii) Indebtedness under the Note.
3.13 Absence of Certain Changes. Except for the Consolidation, and as
otherwise previously disclosed in the SEC Documents filed by the Company or
previously disclosed by the Company in a press release or to the Purchaser in
writing, except as provided in Schedule 3.13, since September 30, 2001, there
has not been:
(a) Any transaction outside of the ordinary course of business
involving any Company Party or its Subsidiaries;
(b) Any declaration, setting aside or payment of any dividend or
other distribution or payment (whether in cash, stock or property) with
respect to the Capital Stock of the Company or any of its Subsidiaries, or
any redemption, purchase or other acquisition of securities of the Company
or any of its Subsidiaries, or any payment to any stockholder of the
Company or any of its Subsidiaries not in its capacity as a stockholder;
(c) Any damage, destruction or loss, whether or not covered by
insurance, to any material assets or properties of the Company or any of
its Subsidiaries;
-31-
(d) Any material adverse change in the assets, liabilities, condition
(financial or otherwise), operations or prospects of any Company Party or
any of its Subsidiaries;
(e) Except for the transfer of the Officer Notes from TreeCon to the
Company in connection with the Spin-Off, any loan or advance made by any
Company Party or any of its Subsidiaries to any Person, except travel
advances or other reasonable business expense advances made in the ordinary
course of business to any of its employees;
(f) Any Indebtedness for borrowed money incurred by any Company Party
or any of its Subsidiaries or any commitment to incur Indebtedness for
borrowed money entered into by any Company Party or any of its Subsidiaries
(except as contemplated by this Agreement);
(g) Any capital expenditures or commitments to make capital
expenditures materially in excess of the amount reflected in the final
budgets for the Fiscal Years ended September 30, 2001 or September 30,
2002, a copy of which final budget for the Fiscal Year ending September 30,
2002, is attached as Schedule 3.13(g);
(h) Any indemnity or other claims made by or against any Company
Party or any of its Subsidiaries with respect to or in connection with any
acquisition or sale or other disposition, whether direct or indirect, of
the Capital Stock or assets of any other Person;
(i) Any amendment or other modification to the charter or bylaws of
any Company Party or any of its Subsidiaries, except in connection with the
issuance of shares of Series A Preferred Stock to the Purchaser and the
Spin-Off;
(j) The formation of any Subsidiary of any Company Party or any of
its Subsidiaries;
(k) Except for the forgiveness of the TreeCon Accounts Receivable,
any waiver by any Company Party or any of its Subsidiaries of a valuable
right or of material Indebtedness owed to it;
(l) Any payment, satisfaction, discharge or cancellation of any debts
or claims of any Company Party or any of its Subsidiaries other than in the
ordinary course of business consistent with past practices;
(m) Any amendment, modification or termination of any Material
Contract;
(n) Any increase in the Contingent Obligations of any Company Party
or any of its Subsidiaries, by way of guarantees or otherwise;
(o) Any mortgage, pledge or subject to Lien of any of the assets or
properties of any Company Party or any of its Subsidiaries, or any
assumption of, or taking any assets or properties subject to, any
liability;
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(p) Any resignation or termination of employment of any director,
officer or key employee of any Company Party or any of its Subsidiaries;
(q) Any Investment by any Company Party or any of its Subsidiaries in
the Capital Stock of any Person;
(r) Any payment of management or other fees by the Company or any of
its Subsidiaries to TreeCon or any other Affiliate of the Company (other
than as described in recital D, clause (iv));
(s) Any offer, issuance or sale of any shares of Capital Stock or
Option Rights of any Company Party or any of its Subsidiaries, other than
to the Purchaser or to employees under the 2002 Employee Stock Option Plan;
(t) Any alteration or change in the Company's credit guidelines and
policies, charge-off policies or accounting methods, quality control
procedures or policies or manner of preparing its financial statements or
maintaining its books of account;
(u) any increase in, or commitment to increase, the salaries, wages,
bonuses or other compensation payable or to become payable to any officer
or other employee of the Company or any of its Subsidiaries, other than
increases in salaries and wages in the ordinary course of business
consistent with past practices and not in excess of fifteen percent (15.0%)
for any one officer or other employee;
(v) The adoption by any Company Party or any of its Subsidiaries of
any new Benefit Plan or material amendment to any Benefit Plan, other than
the Overhill Farms, Inc. Employee Stock Option Plan, involving any officer,
director, employee or former employee of any Company Party or any of its
Subsidiaries (or any of their dependents or beneficiaries);
(w) Any settlement of any litigation, entry of a consent decree or
entry of any judgment against any Company Party or any of its Subsidiaries
with a value of $25,000 or more;
(x) Any revaluation or write-off of any asset of any Company Party or
any of its Subsidiaries, including increases in reserves except in the
ordinary course of business consistent with past practice or any write-up
or write-down of the value of any inventory, property, plant, equipment or
any other asset (other than the write-off of the TreeCon Accounts
Receivable); or
(y) The occurrence of any other event or the development of any other
condition which could have a Material Adverse Effect.
3.14 Material Contracts.
(a) Schedule 3.14 sets forth a true, correct and complete list of all
existing or pending contracts, commitments, licenses, agreements,
obligations or arrangements, whether oral or written, formal or informal,
to which any Company
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Party or any of its Subsidiaries is a party (or intend to become a party)
or to which any of its assets or properties is bound (or may become bound):
(i) under which any Company Party or any of its Subsidiaries
is indemnified for or against any liability in excess of $250,000 or
under which any Company Party or any of its Subsidiaries is or could
be obligated to indemnify any Person in excess of $100,000;
(ii) under which any Company Party or any of its Subsidiaries
leases personal property from or to third parties;
(iii) for the purchase or sale of products or other personal
property or for the furnishing or receipt of services by any Company
Party or any of its Subsidiaries (A) which calls for performance over
a period of more than one (1) year, (B) which involves payments of
more than the $100,000 in the aggregate or (C) in which any Company
Party or any of its Subsidiaries has agreed to purchase a minimum
quantity of goods or services in excess of $200,000 in value or has
agreed to purchase goods or services exclusively from any Person
(provided, however, that it is agreed that the Company shall not be
required to list on Schedule 3.14 any poultry purchase contracts
entered into in the ordinary course of business, provided that such
contracts will be deemed to be Material Contracts);
(iv) (A) granting representation, marketing or distribution
rights, other than food brokers' agreements entered into in the
ordinary course of business, or (B) relating to Intellectual Property;
(v) regarding the financing of its business or any part of its
business or operations;
(vi) establishing any partnership, any joint venture or any
strategic alliance;
(vii) under which any Company Party or any of its Subsidiaries
has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) Indebtedness (including Capital Lease
Obligations);
(viii) concerning any confidentiality obligations entered into
outside of the ordinary course of business or any covenants or
agreements restricting it from carrying on any business or from
competing in any line of business or with any Person;
(ix) with officers, directors, employees, consultants or
independent contractors of any Company Party or any of its
Subsidiaries;
(x) resulting in the creation or incurrence of any Lien
(including any precautionary lease filings);
(xi) involving any Affiliates of any Company Party or any of
its Subsidiaries;
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(xii) under which the consequences of a default or termination
could have a Material Adverse Effect on any Company Party or any of
its Subsidiaries, whether individually or in the aggregate;
(xiii) under which any Company Party or any of its Subsidiaries
will (A) receive aggregate payments from customers, (B) make aggregate
payments to vendors or other suppliers or (C) make or receive
aggregate payments to or from any other Persons, in each case in
excess of $500,000 per annum;
(xiv) any collective bargaining agreement entered into by, or
binding upon, the Company or any of its Affiliates; and
(xv) not entered into in the ordinary course of business and
described in response to any of the foregoing clauses.
All of the types of contracts, commitments, licenses, agreements,
obligations or arrangements described in clauses (i) through (xv) above,
together with the real property leases and other interests described in
Section Error! Reference source not found., whether entered into prior to,
on or after the Effective Date, are collectively referred to herein as the
"Material Contracts." The Company has previously provided a true, correct
and complete copy of each of the written Material Contracts, and a written
summary of each of the oral Material Contracts, including all amendments,
supplements or other modifications thereto.
(b) Each Material Contract existing as of the date hereof is (i) a
legal, valid and binding obligation of the Company Party or its
Subsidiaries that is a party thereto, enforceable against it in accordance
with its terms (assuming the enforceability of such Material Contract
against the other parties thereto), (ii) to the best knowledge of the
Company Parties, a legal, valid and binding obligation of the other parties
thereto, enforceable against such other parties in accordance with its
terms (assuming the enforceability of such Material Contract against any
Company Party or any of its Subsidiaries party thereto) and (iii) in full
force and effect on the date hereof. Any Company Party or any of its
Subsidiaries, on the one hand, and, to the best knowledge of the Company
Parties, all other parties to the existing Material Contracts, on the other
hand, are in substantial compliance with the terms thereof, and no default
or event of default by any Company Party or any of its Subsidiaries, as the
case may be, or, to the best knowledge of the Company Parties, any other
party thereto exists thereunder.
(c) No Company Party or any of its Subsidiaries is a party to any
contract, commitment, license, agreement, obligation or arrangement that
restricts it from carrying on its business or any part thereof, or from
competing in any line of business or with any Person.
3.15 [Intentionally Omitted].
3.16 Accounts Receivable. All accounts receivable of the Company and its
Subsidiaries (a) to the best knowledge of the Company Parties, are legal, valid
and binding obligations of the Persons shown on the books of the Company or such
Subsidiary as the
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respective account debtors with respect thereto, (b) arose out of bona fide
sales actually made or services actually performed on or prior to such date in
the ordinary course of business, (c) are not subject to any discount, rebate,
offset, return privilege or claim outside of the ordinary course of business
(and are reflected in the reserves established on the books of the Company or
such Subsidiary, as the case may be, in accordance with GAAP) and (d) to the
best knowledge of the Company Parties, are valid and collectible in the ordinary
course of business. To the best knowledge of the Company Parties, no customer
has indicated an unwillingness or an inability to pay any amount included in the
accounts receivables of the Company or any of its Subsidiaries.
3.17 Labor Relations. Each of the Company Parties and their Subsidiaries is
in full compliance with the Fair Labor Standards Act (29 U.S.C. (s)201 et seq.),
all state wage and hour laws and all worker's compensation laws and is not
engaged in any unfair labor practice which has had or could have a Material
Adverse Effect. Except as disclosed on Schedule 3.17:
(a) There is no labor strike, slowdown, work stoppage or charge of
unfair labor practice, and there are no material labor disputes,
grievances, complaints or arbitration proceedings, pending or affecting any
Company Party or any of its Subsidiaries nor, to the best knowledge of the
Company Parties, is there any basis therefor or threat thereof;
(b) No Company Party or any of its Subsidiaries is bound by or subject
to any written or oral, express or implied, contract, commitment or
arrangement with any labor union or other employee organization, and no
labor union or other employee organization has requested or sought to
represent any of the employees, representatives or agents of the Company or
any of its Subsidiaries;
(c) No Company Party or any of its Subsidiaries is aware of any labor
union or other employee organization activity involving the employees of
the Company or any of its Subsidiaries, or of any officer or key employee,
or any group of officers or key employees, that intends to terminate his or
her employment with the Company or any of its Subsidiaries;
(d) To the best knowledge of the Company Parties, there are no
petitions pending before the National Labor Relations Board in connection
with any pending claim for union representation; and
(e) To the best knowledge of the Company Parties, there is no fact or
circumstance which could, with the passage of time or otherwise, cause this
representation and warranty to be no longer true and correct.
3.18 Employee Benefit Plans; ERISA. For purposes of Sections 3.18(a)
through 3.18(j), the term "Company" shall include any ERISA Affiliate. However,
this Section 3.18 will not apply to a "Multiemployer Plan" (as defined in
Section 4001(a)(3) of ERISA) to which the Company or any ERISA Affiliate
contributes or is obligated to contribute, except as expressly referred to
herein.
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(a) Schedule 3.18 sets forth a true, correct and complete list of:
(i) Each individual employment, termination, or severance
agreement since October 1, 2000, between any Company Party, on the one
hand, and each employee whose annual compensation is or was at a base
rate equal to or exceeding $100,000, on the other hand;
(ii) All employee benefit plans (as defined in ERISA Section
3(3)), including all Multiemployer Plans; and
(iii) All other profit-sharing, bonus, stock option, stock
purchase, stock bonus, restricted stock, stock appreciation right,
phantom stock, vacation pay, holiday pay, tuition reimbursement,
scholarship, severance, dependent care assistance, excess benefit,
incentive compensation, salary continuation, supplemental retirement,
employee loan or loan guarantee program, split dollar, cafeteria plan
and other compensation arrangements;
in each case maintained or contributed to by the Company or any of its
Subsidiaries for the benefit of its or their employees (or former
employees) and/or their beneficiaries. All of these types of arrangements
shall be collectively referred to as "Benefit Plans." An arrangement will
not fail to be a Benefit Plan simply because it only covers one individual,
or because the Company's or any Subsidiary's obligations under the plan
arise by reason of its being a "successor employer" under Applicable Law.
Furthermore, a Voluntary Employees' Beneficiary Association under Section
501(c)(9) of the Code will be considered a Benefit Plan for this purpose.
(b) The Company has delivered to the Purchaser a true and complete
copy of each of the following documents, to the extent that they are
applicable:
(i) Each Benefit Plan and any related funding agreements (e.g.,
trust agreements or insurance contracts), including all amendments
(and Schedule 3.18 includes a description of any such amendment that
is not in writing);
(ii) The current draft of the Summary Plan Description and all
subsequent Summaries of Material Modifications of each Benefit Plan;
(iii) The most recent Internal Revenue Service determination
letter for each Benefit Plan that is intended to qualify for favorable
income tax treatment under Section 401(a) or 501(c)(9) of the Code,
which determination letter reflects all amendments that have been made
to the plan (except as set forth in Schedule 3.18); and
(iv) The two (2) most recent Form 5500s (including all applicable
Schedules and the opinions of the independent accountants) that were
filed on behalf of the Benefit Plan, and the most recent Form 5500
(including all applicable schedules and the opinions of the
independent accountants) that were filed on behalf of each
Multiemployer Plan.
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(c) All costs of administering and contributions required to be made
to each Benefit Plan (including any Multiemployer Plan) under the terms of
that Benefit Plan, ERISA, the Code, or any other applicable law have been
timely made, and are fully deductible in the year for which they were paid.
All other amounts that should be accrued to date as liabilities of the
Company under or with respect to each Benefit Plan (including
administrative expenses and incurred but not reported claims) for the
current plan year of the plan have been recorded on the books of the
Company. There will be no liability of the Company (i) with respect to any
Benefit Plan that has previously been terminated or (ii) under any
insurance policy or similar arrangement procured in connection with any
Benefit Plan in the nature of a retroactive rate adjustment, loss sharing
arrangement, or other liability arising wholly or partially out of events
occurring before the Effective Date.
(d) Each Benefit Plan at all times has been operated in accordance
with its terms, and complies currently, and has complied in the past, both
in form and in operation, with all Applicable Law, including ERISA and the
Code. The Internal Revenue Service has issued a favorable determination
letter with respect to each Benefit Plan that is intended to qualify under
Section 401(a) or 501(c)(9) of the Code, and no event has occurred (either
before or after the date of the letter) that would disqualify the plan.
(e) Neither the Company nor any of its Subsidiaries maintains any plan
that provides (or will provide) medical or death benefits to one or more
former employees or independent contractors (including retirees), other
than benefits that are required to be provided under COBRA and any state
law continuation coverage or conversion rights. The Company and its
Subsidiaries have complied in all material respects with the continuation
coverage requirements of COBRA.
(f) Neither the Company nor any of its Subsidiaries maintains any plan
(including any Multiemployer Plan) that is subject to Section 412 of the
Code.
(g) There are no investigations, proceedings, lawsuits or claims
pending or, to the best knowledge of the Company Parties, threatened
relating to any Benefit Plan.
(h) No Company Party or any of its Subsidiaries has any intention or
commitment, whether legally binding or not, to create any additional
Benefit Plan, or to modify any existing Benefit Plan so as to increase
benefits to participants or the cost of maintaining the plan. The benefits
under all Benefit Plans are as represented, and have not been, and will not
be increased subsequent to the date documents are provided to the
Purchaser. No statement, either oral or written, has been made by the
Company (or any agent of the Company) to any Person regarding any Benefit
Plan that is not in accordance with the Plan that could have adverse
economic consequences to the Purchaser.
(i) None of the persons performing services for the Company or its
Subsidiaries have been improperly classified as being independent
contractors, leased employees, or as being exempt from the payment of wages
for overtime.
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(j) None of the Benefit Plans provide any benefits that (i) become
payable or become vested solely as a result of the consummation of this
transaction or (ii) would result in excess parachute payments (within the
meaning of Section 280G of the Code), either (A) solely as a result of the
consummation of this transaction or (B) as a result of the consummation of
this transaction and any actions taken by the Purchaser after the Initial
Closing Date. Furthermore, the consummation of this transaction will not
require the funding (whether formal or informal) of the benefits under any
Benefit Plan (e.g., contributions to a "rabbi trust").
(k) The present value of all accrued benefits under any Benefit Plans
subject to Title IV of ERISA (including any Multiemployer Plans) shall not,
as of the Effective Date, exceed the value of the assets of such Benefit
Plans allocated to such accrued benefits, based upon the applicable
provisions of the Code and ERISA, and each such Benefit Plan shall be
capable of being terminated as of the Effective Date in a "standard
termination" under Section 4041(b) of ERISA. With respect to each Benefit
Plan that is subject to Title IV of ERISA (including any Multiemployer
Plan), (i) no amount is due or owing from any Company Party to the PBGC or
to any such Benefit Plan on account of any withdrawal therefrom, and (ii)
no such Benefit Plan has been terminated other than in accordance with
ERISA or at a time when the plan was not sufficiently funded. The
transactions contemplated under this Agreement shall not result in any such
withdrawal or other liability under ERISA. None of the Company Parties has
any knowledge of any actual or planned reorganization of any Multiemployer
Plan. None of the Benefit Plans subject to Title IV of ERISA (including any
Multiemployer Plan) has, since September 2, 1974, been completely or
partially terminated nor has there been any "reportable event," as such
term is defined in Section 4043(b) of ERISA, with respect to any of such
Benefit Plans since the effective date of ERISA nor has any notice of
intent to terminate been filed or given with respect to any such Benefit
Plan.
3.19 Taxes.
(a) The affiliated group (within the meaning of Section 1504(a) of the
Code) of TreeCon has timely filed all federal, state and other Tax Returns
required to have been filed by it or them for each taxable period during
which the Company and its Subsidiaries were members of the affiliated
group. All such Tax Returns were correct and complete in all respects. All
income or other Taxes owed by such affiliated group (whether or not shown
on the Tax Returns) have been paid for each taxable period during which the
Company and its Subsidiaries were members of the affiliated group.
(b) The Company, TreeCon and each of their respective Subsidiaries
have withheld and paid all Taxes required to be withheld and paid by it or
them in connection with amounts paid or owing to any employees, creditors,
shareholders or other third parties.
(c) Except as set forth in Schedule 3.19, (i) none of the Company,
TreeCon or any of their respective Subsidiaries has been advised that any
Tax Returns have been or are being audited by any Governmental Authority,
(ii) there are no agreements, waivers or other arrangements providing for
an extension of time
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with respect to the assessment of any Taxes or deficiency against the
Company, TreeCon or any of their respective Subsidiaries, (iii) there are
no actions, suits, proceedings or claims now pending by or against the
Company, TreeCon or any of their respective Subsidiaries in respect of any
Taxes or assessments, and (iv) there is no pending or, to the best
knowledge of the Company Parties, threatened audit or investigation of the
Company, TreeCon or any of their respective Subsidiaries by any
Governmental Authority relating to any Taxes or assessments, or any claims
for additional taxes or assessments asserted by any Governmental Authority.
(d) Except as may be required or permitted under the Code with respect
to the filing of consolidated Tax returns and as may be provided in Section
8.10, none of the Company, TreeCon or any of their respective Subsidiaries
is a party to or bound by any tax sharing, tax indemnity or tax allocation
agreement or other similar arrangement.
(e) Pursuant to Section 355(c) of the Code, TreeCon will recognize no
gain in connection with the distribution of the Common Shares by TreeCon in
the Spin-Off.
(f) TreeCon will distribute no property in the Spin-Off other than
qualified property within the meaning of Section 355(c)(2)(B) of the Code.
(g) None of the Common Stock distributed by TreeCon in the Spin-Off
will be treated as other property pursuant to Section 355(a)(3)(B) of the
Code, and the Common Stock does not constitute non-qualified preferred
stock as defined in Section 351(g)(2) of the Code.
(h) None of the Common Stock distributed by TreeCon in the Spin-Off
will be distributed in a disqualified distribution within the meaning of
Section 355(d)(2) of the Code (provided, however, that the Company shall
not be deemed to have breached this clause (h) if TreeCon is deemed after
the Spin-Off to have distributed shares of Common Stock in a disqualified
distribution and, as a result thereof, the Company does not incur losses,
claims, damages, obligations, liabilities, judgments, costs or expenses in
excess of $250,000 in the aggregate).
(i) There is no plan or arrangement within the meaning of Section
355(e) of the Code pursuant to which one or more persons will acquire stock
representing a fifty percent (50%) or greater interest in either TreeCon or
the Company.
(j) There is no excess loss account with respect to the Capital Stock
of the Company or any Subsidiary.
(k) For two years preceding the effective date of the Spin-Off, no
person or persons have acquired an interest in TreeCon that will result in
one or more persons acquiring stock representing a 50-percent or greater
interest in the Company or TreeCon as a result of the Spin-Off.
(l) Neither the Spin-Off, nor any revisions to compensation
arrangements effected in connection with the Spin-Off will result in any
liability of the Company (including any liability for an indemnity pursuant
to any employment arrangement)
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as a result of the application of Section 280G or any disallowance of
the deduction of any compensation expense as a result of the
application of Section 162(m) of the Code.
3.20 Legal Action. Schedule 3.20 sets forth a true, complete and
correct list of all actions, suits, arbitrations, investigations, inquiries
or other proceedings, whether governmental or non-governmental, pending or
threatened as of the date hereof or at any time since January 1, 2000, (a)
against, relating to or affecting any Company Party, TreeCon or any of
their respective Subsidiaries, or any officer, director or employee thereof
in his or her capacity as such, or any of its or their respective assets,
properties or businesses (provided that such Schedule may omit any
individual action, suit or other proceeding that involves a monetary claim
of less than $10,000 (provided that the aggregate of all such actions,
suits or other proceedings does not exceed $20,000)) or (b) that seeks to
enjoin the Spin-Off or any transaction related thereto or contemplated
thereby. Such Schedule sets forth, as to each matter identified therein,
the names of the parties thereto, the forum for such matter, a summary of
the details of the matter, the settlement or other disposition of the
matter (including the monetary value of such settlement or other
disposition) or, if such matter is still pending, a statement to that
effect and a summary of the current status. There is no outstanding order,
judgment, writ, decree, injunction or ruling of any Governmental Authority
against, relating to or affecting any Company Party, TreeCon or any of
their respective Subsidiaries or assets, or any officer, director or
employee thereof in his or her capacity as such. There is no action, suit,
arbitration, investigation, inquiry or other proceeding pending or
threatened before any Governmental Authority which questions the validity
or enforceability of this Agreement or any Investment Document or any
actions taken or to be taken pursuant hereto or thereto, or which could,
individually or in the aggregate, have a Material Adverse Effect. The
Company has furnished true, correct and complete copies of all Compliance
Reports issued by any Governmental Authority since January 1, 1997.
3.21 Transactions with Affiliates.
(a) As of the Effective Date, there is no contract, commitment,
license, agreement, debt, obligation or arrangement between any
Company Party or any of its Subsidiaries, on the one hand, and TreeCon
or any of TreeCon's Affiliates, on the other, other than the agreement
of the Company to make Tax Sharing Cash Payments to TreeCon for the
taxable year ended on or about September 30, 2002, and as provided in
this Agreement.
(b) Except as set forth on Schedule 3.21, immediately following
the Effective Date:
(i) none of the Company Parties or any of their respective
Subsidiaries will be indebted, directly or indirectly, to any of
its own officers, directors or employees or those of its
Affiliates, or any members of the Immediate Families of such
officers, directors or employees, except for compensation
payable to its own officers, directors or employees and
reasonable travel expenses accrued in the ordinary course of
business; and
(ii) none of the officers or directors of the Company Parties
or any of their respective Subsidiaries, or any members of the
Immediate Families of
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such officers or directors, will (A) be indebted to any Company
Party or its Subsidiaries in any amount whatsoever, other than
under the Officer Notes, or (B) to the best knowledge of the
Company Parties, have any direct or indirect ownership interests
in any Person which, directly or indirectly, competes with the
Company Parties.
(c) Except as set forth on Schedule 3.21, no Executive Officer,
director or direct shareholder of the Company or any of its
Subsidiaries, or any member of his or her Immediate Families, has any
direct or indirect interest in any contract, commitment, license,
agreement, obligation or arrangement to which any Company Party or any
of its Subsidiaries is a party. No Executive Officer, director or, to
the best knowledge of the Company Parties, shareholder of TreeCon, or
any member of his or her Immediate Families, has any direct or
indirect interest in any contract, commitment, license, agreement,
obligation or arrangement to which the Company Parties or any of their
respective Subsidiaries is a party.
(d) None of the Company Parties or any of their respective
Subsidiaries is a party to any agreement relating to the voting or
disposition of the Capital Stock of any Company Party or any of its
Subsidiaries.
(e) Except as set forth on Schedule 3.21, since January 1, 2000,
no shareholder, employee, officer, director or Affiliate of any
Company Party, and no member of the Immediate Family of any such
Person, has engaged in any transaction or commercial relationship with
the Company or TreeCon, other than the payment of compensation to its
own officers and employees and reasonable travel expenses accrued in
the ordinary course of business.
(f) Since January 1, 2000, no Company Party or any of its
Subsidiaries has loaned or advanced funds to any of its Affiliates,
officers, directors, employees or shareholders or to any member of the
Immediate Families of any of the foregoing, except for travel advances
to its own employees made in the ordinary course of business.
3.22 Investment Company Act; Margin Stock. No Company Party or any of
its Subsidiaries is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, and no
Company Party or any of its Subsidiaries is controlled by such a company.
No Company Party or any of its Subsidiaries is engaged in extending credit
for the purposes of purchasing or carrying Margin Stock. No Company Party
or any of its Subsidiaries has any Margin Stock, as determined in
accordance with the Margin Regulations.
3.23 Compliance with Laws; Licenses and Permits. The Company and each
of its Subsidiaries are in compliance with all Applicable Law (including
the rules and regulations of the FDA and the USDA), including the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002. Schedule 3.23 sets forth a true, correct and
complete list of all Licenses and Permits held by the Company and its
Subsidiaries in connection with the ownership of their assets or the
conduct of their businesses (which Schedules shall set forth, with respect
to each License or Permit, its name, the issuing Person, the date it was
issued and the date of expiration), and such Licenses and Permits
constitute all of the Licenses and Permits required under Applicable Law to
own their respective assets or conduct their respective businesses as now
conducted and as
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proposed to be conducted. All of Licenses and Permits are validly issued
and in full force and effect, and the Company and its Subsidiaries have
fulfilled and performed all of their obligations with respect thereto and
have full power and authority to operate thereunder.
3.24 Title to Property; Liens. The Company and each of its
Subsidiaries has good and marketable title to its real properties (or valid
leasehold interests in real property) and good and merchantable title to
its other respective properties, and none of such properties is subject to
any Liens, except for Liens in favor of the Senior Lender and the Purchaser
and Permitted Liens. The Company and each of its Subsidiaries enjoy quiet
possession under all leases to which they are parties as lessees, and all
of such leases are valid, subsisting and in full force and effect. None of
such leases contains any provision restricting the incurrence of
indebtedness by the lessee or any unusual or burdensome provision adversely
affecting the current and proposed operations of the Company or its
Subsidiaries.
3.25 Real Property.
(a) Neither the Company nor any other Company Party owns any fee
interest in any real property.
(b) Schedule 3.25 sets forth a true, correct and complete list of
all real property leases, subleases or licenses pursuant to which the
Company or any of its Subsidiaries is a lessor, lessee, sublessor,
sublessee, licensor or licensee of real property, in each case as
amended through the date hereof, which list includes the street
address, the identity of the lessors, lessees, sublessors, sublessees,
licensors or licensees, the term thereof (referencing applicable
extension or renewal periods), the rent payment terms and the current
use. The Company has delivered to the Purchaser true, correct and
complete copies of each such lease, sublease or license. The Purchaser
hereby acknowledges receipt of each lease, sublease or license listed
on such Schedule. The real property interests described or listed on
Schedule 3.25 constitute all of the leasehold interests in real
property leased or otherwise held for use by the Company and its
Subsidiaries. With respect to each such lease, sublease and license,
except as set forth on Schedule 3.25:
(i) such lease, sublease and license is legal, valid, binding
and enforceable against the parties thereto and is in full force
and effect;
(ii) no party thereto is in breach or default, and no event
has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iii) there are no disputes, oral agreements or forbearance
programs in effect as to any such lease, sublease or license;
and
(iv) neither the Company nor any of its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest therein.
(c) No Consent of any party to any lease, sublease or license is
required in connection with the execution, delivery or performance of
this Agreement, the Note or the other Investment Document, including
the amendment, restatement and
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issuance of the Securities, and the exercise of any remedies under any
of the Collateral Documents, and no such event shall be prohibited by,
or shall constitute a default under, any such lease, sublease or
license.
(d) All parking lots located on any real property leased by the
Company or any of its Subsidiaries are in compliance with Applicable
Law, including zoning requirements, and are adequate for its employees
and business operations.
3.26 Environmental Matters. Except as set forth in Schedule 3.26:
(a) Each Environmental Person and each Site is in compliance with
all, and no Environmental Person has any liability under, any
Environmental Laws.
(b) No Release has occurred at any Site, and there are no present
or past Environmental Conditions in any way relating to any
Environmental Person, any Site or the business or operations of any
Environmental Person.
(c) The Company has delivered to the Purchaser true, correct and
complete copies of all environmental site assessments, audits, studies
or reports relating to any Environmental Condition or relating to the
business, condition or operations of all Environmental Persons.
(d) No Environmental Person is a "potentially responsible party"
within the meaning of CERCLA with respect to any federal, state, local
or foreign environmental clean-up site or with respect to
investigations or corrective actions under any Environmental Laws.
(e) No Environmental Person has received notice of any alleged,
actual or potential responsibility, inquiry, investigation or
administrative or judicial proceeding regarding (i) any Release by any
Environmental Person at any Site or other location or (ii) any
violation of or non-compliance by any Environmental Person with the
conditions of any License or Permit required under any Environmental
Laws or the provisions of any Environmental Laws. No Environmental
Person has received notice of any other claim, demand or action by any
Person alleging any actual or threatened injury or damage to any
Person, property, natural resources or the environment arising from or
relating to any Release, transportation or disposal of any Hazardous
Materials.
(f) Each Environmental Person has furnished all notices and
warnings, made all reports and has kept and maintained all records
required by, and in compliance with, all Environmental Laws, including
any notices and Consents required under any Environmental Laws in
connection with the consummation of the transactions contemplated by
the Investment Documents.
3.27 Intellectual Property.
(a) The Company and each of its Subsidiaries owns, or is licensed
or otherwise possesses legally enforceable rights to use, all
Intellectual Property used in the conduct of its business as currently
conducted and as proposed to be conducted. Schedule 3.27 lists (i) all
patents, patent applications, trademarks, servicemarks,
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trademark and servicemark applications, copyrights and trade names
owned or held by the Company or any of its Subsidiaries and used in
the conduct of its or their businesses, including the jurisdictions in
which each such Intellectual Property right has been issued or
registered or in which any such application for such issuance or
registration has been filed; (ii) all material written licenses,
sublicenses and other agreements to which the Company or any of its
Subsidiaries is a party and pursuant to which any Person (other than
employees of the Company in the course of their employment) is
authorized to use any such Intellectual Property rights; and (iii) all
material written licenses, sublicenses and other agreements to which
the Company or any of its Subsidiaries is a party and pursuant to
which the Company or any of its Subsidiaries is authorized to use any
third party patents, trademarks or copyrights, including computer
software ("Third Party Intellectual Property Rights") which are used
in the businesses of the Company or the Subsidiaries or which form a
part of any product or service of the Company or its Subsidiaries, all
of which are in full force and effect. The Company has delivered to
the Purchaser correct and complete copies of all such patents,
registrations, applications, licenses and agreements and related
documentation, all as amended to date. Neither the Company nor any of
its Subsidiaries has agreed to indemnify any Person for or against any
infringement, misappropriation or other conflict with respect to any
item of Intellectual Property that the Company owns or uses. Neither
the Company nor any of its Subsidiaries is a party to any oral
license, sublicense or agreement which, if reduced to written form,
would be required to be listed in Schedule 3.27 under the terms of
this Section 3.27.
(b) Neither the Company nor any of its Subsidiaries will be, as a
result of the execution and delivery of this Agreement or the
performance of the Company Parties' obligations under this Agreement,
in breach of any license, sublicense or other agreement relating to
its Intellectual Property or Third Party Intellectual Property Rights.
(c) Neither the Company nor any of its Subsidiaries has been
named in any suit, action or other proceeding which involves a claim
of infringement of any Intellectual Property rights of any third
party. The performance of the services offered by the Company and its
Subsidiaries do not infringe on any Intellectual Property rights of
any other Person, and to the best knowledge of the Company Parties,
the Intellectual Property rights of the Company and its Subsidiaries
are not being infringed by activities, products or services of any
third party.
3.28 Nature of Business. The Company is not engaged in any business
other than the manufacture, distribution and sale of frozen food products
and any activities ancillary or related thereto.
3.29 Powers of Attorney. Except as executed in connection with the
Collateral Documents, there are no outstanding powers of attorney executed
by or on behalf of the Company or any of its Subsidiaries.
3.30 Listing of Common Stock. The shares of Common Stock are listed
for trading solely on the AMEX. No Capital Stock of the Company or any of
its Subsidiaries is listed or traded on any securities exchange other than
the shares of Common Stock listed for trading on the AMEX. The Company has
previously furnished to the Purchaser true, correct and complete copies of
all material written communications with the AMEX.
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3.31 Insurance. Schedule 3.31 sets forth a true and complete list of
all liability and other insurance policies insuring the Company and its
Subsidiaries against losses arising out of or related to the businesses of
the Company and its Subsidiaries (which list accurately describes the
coverage carried and the expiration dates of such policies). The Company
and each of its Subsidiaries is covered by insurance in scope and amount
customary and reasonable for the businesses in which it is engaged and will
be so covered after consummation of the transactions contemplated hereby.
The insurance policies listed on Schedule 3.31 constitute insurance
protection against all liability, claims and risks occurring in the
ordinary course of business customarily included within comprehensive
liability coverage and at amounts and levels customarily maintained for a
business of this type. Schedule 3.31 also sets forth all claims made by the
Company or any of its Subsidiaries under such policies during the past
three (3) years. All such policies are in full force and effect.
3.32 Customers. Schedule 3.32 lists the names and addresses of the
**[six (6)]** most significant customers (by revenue) of the Company during
each of the Fiscal Years ended September 30, 2000 and September 30, 2001,
and the amount of revenues accounted for by each such customer during each
such period. No customer of the Company accounts for more than
**[twenty-five percent (25.0%)]** of the total revenues of the Company in
the Fiscal Year ended September 30, 2001. The Company has not received any
notice, nor has the Company any reason to believe, that any significant
customer of the Company has ceased, or will cease, to use the products or
services of the Company, or has reduced, or will reduce, the use of such
products or services at any time.
3.33 Suppliers. Schedule 3.33 lists the **[six (6)]** largest
suppliers of any products or services to the Company during the Fiscal Year
ended September 30, 2001, and the amount of purchases made by the Company
from each during such period. No material purchase order or commitment of
the Company is in excess of normal requirements, nor are prices provided
therein in excess of current market prices for the products or services to
be provided thereunder.
3.34 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change
in, the business relationship between the Company or its Subsidiaries, on
the one hand, and any customer or group of customers whose purchases,
individually or in the aggregate, are material to the business of the
Company, as the case may be, or with any material suppliers, on the other,
and there exists no present condition or state of facts or circumstances
which could materially and adversely affect the Company or its Subsidiaries
or prevent the Company or its Subsidiaries from conducting such business
after the consummation of the transactions contemplated by this Agreement
in substantially the same manner in which it has been heretofore been
conducted.
3.35 Personal Property Leases. Schedule 3.35 sets forth a true and
complete list and description of all agreements (or group of related
agreements) for the lease of personal property by the Company or any of its
Subsidiaries, including the name of the lessor, the type of lease (whether
operating, capital or otherwise), a description of the property and the
monthly rental payments due. Neither the Company nor any of its
Subsidiaries has breached any agreement pertaining to, is in default with
respect to, or is overdue in payment of, any amounts owing under any lease
agreement disclosed on Schedule 3.35. No such lease agreement contains any
provisions which restrict or prohibit (a) the issuance of the
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Securities as contemplated herein, (b) any other financings by the Company
or any Subsidiaries, including any public or private debt or equity
financings or (c) other than ordinary restrictions on assignment, any
merger, sale of assets or other event which could result in a Change in
Control.
3.36 Employment Agreements. Schedule 3.36 sets forth a true, correct
and complete list of all employment, agency, independent contractor and
sales representative agreements, golden parachute agreements and
employee-related non-competition and non-solicitation agreements to which
any Company Party or any of its Subsidiaries is a party. The Company has
previously delivered true, correct and complete copies of all such
agreements, including all amendments thereto. Each such agreement is in
writing, is a valid and binding agreement enforceable against the
respective parties thereto in accordance with its terms, and no party to
any such agreement is in breach of, or in default with respect to, any of
its obligations thereunder, nor is the Company or any of its Subsidiaries
aware of any facts or circumstances which might give rise to any breach or
default thereunder.
3.37 Solvency. Each of the Company, TreeCon and its Subsidiaries is
Solvent. Immediately following the Effective Date, each of the Company,
TreeCon and its Subsidiaries will be Solvent. Neither any Company Party,
TreeCon nor any of its Subsidiaries intends to incur, or believes it will
incur, by virtue of the consummation of the transactions contemplated
hereby and by the other Investment Documents, debts or liabilities that are
beyond its ability to pay as they mature. No transfer of property is being
made and no obligation is being incurred in connection with the
transactions contemplated by this Agreement and the other Investment
Documents with the intent to hinder, delay or defraud either present or
future creditors of the Company Parties, TreeCon or their respective
Subsidiaries.
3.38 Corporate Separateness.
(a) Customary formalities regarding the corporate existence of
the Company have at all times since its formation been, and such
customary formalities will continue to be, observed.
(b) The Company has at all times since its formation accurately
maintained in all material respects, and will continue to accurately
maintain, its financial statements, accounting records and other
corporate documents separate from those of TreeCon and the other
Subsidiaries of TreeCon and any other Person. The Company has not at
any time since its formation commingled, and will not commingle, its
assets with those of TreeCon or any other Subsidiary of TreeCon, any
of its other Affiliates or any other Person. The Company has at all
times since its formation accurately maintained in all material
respects, and will continue to accurately maintain, its own bank
accounts and separate books of account. TreeCon has not at any time,
and will not, commingle any of its assets with those of the Company or
any other entity.
(c) The Company has at all times since its formation paid, and
will continue to pay, its own liabilities from its own separate
assets. TreeCon has at all times since the Company's formation paid,
and will continue to pay, its own liabilities from its own separate
assets (it being understood that to the extent any funds in any
material amount were previously loaned or advanced by the Company
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to TreeCon, such funds were properly recorded on the books of TreeCon
as an asset of TreeCon and on the books of the Company as an
intercompany receivable owing from TreeCon).
(d) The Company has at all times since its formation identified
itself, and will continue to identify itself, in all dealings with the
public under its own corporate or trade names and as a separate and
distinct entity. The Company has not at any time since its formation
identified itself, and will not identify itself, as being a division
or a part of TreeCon (other than as a Subsidiary of TreeCon) or of any
other Person. TreeCon has not at any time identified the Company, and
will not identify the Company, as being a division or part of TreeCon
(other than as a Subsidiary of TreeCon) or any of other Person but
only as a separate and distinct entity.
(e) To the best knowledge of the Company Parties, the Company has
at all times since its formation been adequately capitalized in light
of the nature of its business. The Company will continue to be
adequately capitalized in light of the nature of its business.
(f) The Company has not at any time since its formation assumed
or guaranteed any material liabilities of TreeCon (or any predecessor
entity) or any other Person (other than Overhill Ventures). The
Company has not at any time since its formation acquired any
securities or other obligations of TreeCon (or any predecessor
entity).
3.39 Public Utility Holding Company Act. None of the Company Parties,
TreeCon or any of their respective Subsidiaries is a "holding company" or a
"subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company," as
such terms are defined in the Public Utility Holding Company Act of 1935,
as amended.
3.40 Deposit and Other Accounts. Schedule 3 to the Security Agreement
sets forth a true, correct and complete list of all banks and other
financial institutions and depositories at which the Company or any of its
Subsidiaries maintains (or has caused to be maintained) or will maintain
deposit accounts, spread accounts, operating accounts, trust accounts,
trust receivable accounts or other accounts of any kind or nature into
which funds of the Company (including funds in which the Company maintains
a contingent or residual interest) or any such Subsidiary are deposited
from time to time. Such Schedule correctly identifies the name and address
of each depository, the name in which each account is held, the purpose of
the account, the account number, the contact person at such depository and
his or her telephone number. The Company will notify the Purchaser and
supplement Schedule 3 to the Security Agreement as new accounts are
established within two (2) Business Days thereof.
3.41 Books and Records. The minute books and similar records of the
Company and its Subsidiaries contain true and complete records of all
actions taken at any meetings of the Company's or such Subsidiary's
shareholders, Board of Directors or any committees thereof, as the case may
be, and of all written consents executed in lieu of the holding of any such
meeting. The books and records of the Company and its Subsidiaries
accurately reflect in all respects the assets, liabilities, business,
financial condition and results of operations of
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the Company and such Subsidiaries, respectively, and have been maintained
in accordance with good business, accounting and bookkeeping practices.
3.42 Burdensome Obligations; Future Expenditures. No Company Party or
any of its Subsidiaries is a party to or bound by any agreement,
instrument, deed, lease or other document, or is subject to any charter,
bylaw or other restriction, commitment or requirement, which, in the
opinion of its management, is so unusual or burdensome that in the
foreseeable future it could have a Material Adverse Effect. No Company
Party or any of its Subsidiaries anticipates that future expenditures, if
any, by the Company Parties or any of their respective Subsidiaries needed
to meet the provisions of any Applicable Law will be so burdensome as to
have or cause, or create a material risk of having or causing, a Material
Adverse Effect.
3.43 Brokers; Certain Expenses. None of the Company Parties, TreeCon
or any of their respective Subsidiaries or Affiliates has paid or is
obligated to pay any fee or commission to any broker, finder, investment
banker or other intermediary in connection with this Agreement, any other
Investment Document or any of the transactions contemplated hereby or
thereby. None of the Company Parties, TreeCon or any of their respective
Subsidiaries or Affiliates is bound by any agreement or commitment for the
provision of investment banking or financial advisory services with respect
to any recapitalization, issuance of debt or equity securities or other
capital or financing transactions involving any Company Parties.
3.44 Due Diligence Response. The Company has delivered to the
Purchaser true, correct and complete copies of each of the documents and
other materials requested in the Due Diligence Checklist which was
furnished to the Company on or about August 5, 1999, to the extent such
documents or other materials exist with respect to any Company Party or
TreeCon.
3.45 Disclosure. After due inquiry of the directors, officers and
employees of the Company having knowledge of the matters represented,
warranted or stated in this Agreement, neither this Agreement, the
Disclosure Schedules nor any other Investment Document, nor any
certificate, report, questionnaire, statement or document furnished by or
on behalf of the Company Parties or any of their respective Subsidiaries,
whether included in any materials provided to the Purchaser prior to the
date hereof or included in this Agreement or any other Investment Document
or in any Exhibit or Disclosure Schedule or in any other document or
instrument delivered at any time, is, or will be, untrue with respect to
any material fact or omits, or will omit, to state a material fact
necessary in order to make the statement made herein or therein, in light
of the circumstances in which such statement was made, not misleading. To
the best knowledge of the Company Parties, there are no facts or
circumstances existing that could have a Material Adverse Effect, either
individually or in the aggregate. The information contained in each of the
management questionnaires completed by certain officers, directors and
employees of the Company and TreeCon and the corporate questionnaire dated
August 23, 1999, prepared by the Company and delivered to the Purchaser
prior to the date of this Agreement is true and correct.
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4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company as follows:
4.1 Organization. The Purchaser is a limited partnership formed and
validly existing under the laws of the State of California, and has all
requisite power and authority to enter into this Agreement and each other
Investment Document to which it is a party and to consummate the
transactions contemplated hereby.
4.2 Authorization. The execution, delivery and performance of this
Agreement and of each of the other Investment Documents to which the
Purchaser is a party, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary action on
the part of the Purchaser.
4.3 Due Execution and Delivery; Binding Obligations. This Agreement
has been duly executed and delivered by the Purchaser. This Agreement is,
and at the time of the Effective Date each of the other Investment
Documents to which the Purchaser is a party will be, a legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
conveyance or similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability and except
as rights of indemnity or contribution may be limited by federal or state
securities or other laws or the public policy underlying such laws.
4.4 No Violation. The execution, delivery and performance by the
Purchaser of this Agreement and each of the other Investment Documents to
which the Purchaser is a party, and the consummation of the transactions
contemplated hereby, do not violate (a) the limited partnership agreement
of the Purchaser as in effect on the date hereof, (b) any law, statute,
rule or regulation applicable to the Purchaser, (c) any order, ruling,
judgment or decree of any Governmental Authority binding on the Purchaser
or (d) any term of any material indenture, mortgage, lease, agreement or
instrument to which the Purchaser is a party.
4.5 Investment Intent. The Purchaser is acquiring the Securities for
its own account, for investment purposes, and not with a view to or for
sale in connection with any distribution thereof. The Purchaser understands
that the Note has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance upon
specific exemptions therefrom, which exemptions may depend upon, among
other things, the bona fide nature of the Purchaser's investment intent as
expressed herein.
4.6 Accredited Investor Status. The Purchaser is an "accredited
investor" (as such term is defined in Rule 501 of Regulation D promulgated
under the Securities Act). By reason of its business and financial
experience, the Purchaser has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the
merits and risks of the investment in the Securities, has the capacity to
protect its own interests and is able to bear the economic risk of such
investment. The Purchaser has had an opportunity to review the books and
records of the Company and to ask questions of representatives of the
Company concerning the terms and conditions of the transactions
contemplated by this Agreement.
-50-
4.7 Governmental Consents. The execution and delivery by the Purchaser
of this Agreement and each of the other Investment Documents to which it is
a party, and the consummation by the Purchaser of the transactions
contemplated hereby, do not and will not require any Consent of any
Governmental Authority.
5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligations of the
Purchaser to consent to the Spin-Off and the other transactions contemplated
hereby is subject to the satisfaction of the conditions precedent set forth in
this Section 5; provided, however, that any or all of such conditions may be
waived, in whole or in part, by the Purchaser in its sole and absolute
discretion:
5.1 Effective Date. The Effective Date shall occur on or before
September [__], 2002.
5.2 Representations and Warranties; No Default. Each of the
representations and warranties made by the Company Parties in this
Agreement shall be true and correct in all respects on and as of the date
made, and shall be true and correct in all respects on and as of the
Effective Date, with the same effect as if made on and as of the Effective
Date; each of the covenants, agreements and obligations of the Company
Parties under this Agreement to be performed or satisfied by it or them on
or prior to the Effective Date has been performed or satisfied by it or
them on or before the Effective Date; and no Default or Event of Default
shall exist and be continuing under the Original Securities Purchase
Agreement or any other Original Investment Document or result from the
amendment and restatement of the Original Securities Purchase Agreement,
the Original Note, the Original Warrant or the other Original Investment
Documents or the consummation of the other transactions contemplated
thereby. The Company shall have delivered to the Purchaser an Officers'
Certificate, signed by the President and Chief Executive Officer and the
Chief Financial Officer of the Company, dated as of the Effective Date, to
such effect and to the effect that each of the other conditions set forth
in this Section 5 has been satisfied and fulfilled.
5.3 Reimbursement of Fees and Expenses. The Company shall have paid
directly to the Purchaser's counsel, by wire transfer in immediately
available funds to a bank account designated by its counsel, all legal fees
and expenses incurred by or on behalf of the Purchaser in connection with
the preparation, negotiation, execution and delivery of this Agreement and
the other Investment Documents and the administration, exercise and
enforcement of the Purchaser's rights, powers and remedies through the
Effective Date.
5.4 Purchase Permitted By Applicable Law. The consummation of the
transactions contemplated by this Agreement, including the Spin-Off, shall
not be prohibited by or violate any Applicable Law and shall not subject
any party to any Tax, penalty or liability, under or pursuant to any
Applicable Law, and shall not be enjoined (temporarily or permanently)
under, or prohibited by or contrary to, any injunction, order, decree or
ruling. Without limiting the generality of the foregoing, the consummation
of the transactions contemplated hereby shall otherwise comply with all
applicable requirements of federal securities and state securities or "blue
sky" laws.
5.5 No Injunction or Order. No injunction, order, decree or ruling by
any Governmental Authority shall have been issued or in effect that
prohibits or limits any of the transactions contemplated by this Agreement
or the other Investment Documents, including the Spin-Off, and there shall
not be any action, suit, proceeding or investigation pending or,
-51-
to the best knowledge of the Company Parties, threatened against any Company
Party or any of its Subsidiaries that (a) draws into question the validity,
legality or enforceability of this Agreement or the other Investment Documents
or the consummation of the transactions contemplated hereby or thereby or (b)
might result, in the judgment of the Purchaser, in the imposition of a penalty
if the Securities were delivered as contemplated hereunder or in any Material
Adverse Change.
5.6 Opinions of Counsel. The Purchaser shall have received (a) an opinion
letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Nevada counsel to TreeCon and the
Company, dated as of the Effective Date and addressed to the Purchaser, in form
and substance satisfactory to the Purchaser and its counsel and (b) an opinion
letter of Jenkens & ▇▇▇▇▇▇▇▇▇, special counsel to TreeCon, the Company and
Overhill Ventures, dated as of the Effective Date and addressed to the
Purchaser, in form and substance satisfactory to the Purchaser and its counsel.
5.7 Delivery of Certain Documents. The Company shall have delivered to the
Purchaser the following documents, each dated as of the Effective Date:
(a) This Agreement, duly executed by the Company Parties, together
with the Exhibits and Disclosure Schedules;
(b) The Note, duly executed by the Company;
(c) The November 1999 Warrant, duly executed by the Company;
(d) Acknowledgement and Confirmation of Certain Investment Documents,
duly executed by the Company;
(e) The Registration Rights Agreement, duly executed by the Company;
(f) The Investor Rights Agreement, duly executed by the Company,
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, together with duly executed spousal
consents; and
(g) The Suretyship Agreement, duly executed by the Company Parties.
5.8 Collateral Documents. The Company shall have delivered to the
Purchaser the following Collateral Documents, each dated as of the Effective
Date:
(a) The Intercreditor Agreement, in form and substance satisfactory
to the Purchaser, duly executed by the Senior Lender and acknowledged by
the Company Parties;
(b) The Security Agreement, duly executed by the Company and Overhill
Ventures, together with all schedules;
(c) The Company Pledge Agreement, duly executed by the Company,
together with all schedules;
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(d) The PTC Security Agreement, in form and substance satisfactory to
the Purchaser, duly executed by the Company and Overhill Ventures, together
with all schedules;
(e) UCC Financing Statements, in form and substance satisfactory of
the Purchaser, naming the Company or Overhill Ventures, as the case may be,
as debtor, as requested by the Purchaser;
(f) Deposit Account Control Agreements among the Company, the
relevant depository and the Purchaser, in form and substance reasonably
satisfactory to the Purchaser, duly executed by the Company and such
depository as the Purchaser may request;
(g) Landlord Waivers, in form and substance satisfactory to the
Purchaser, duly executed by the Company and the respective
landlords/lessors designated by the Purchaser, as the Purchaser may
request;
(h) Warehouse Bailment Agreements, in form and substance satisfactory
to the Purchaser, duly executed by the Company, the Senior Lender and the
respective bailees designated by the Purchaser, as the Purchaser may
request;
(i) File-stamped copies of UCC termination statements filed with
respect to existing UCC financing statements that are to be terminated, if
any, as reasonably requested by the Purchaser; and
(j) Such other Collateral Documents as the Purchaser may reasonably
request.
5.9 Parent Termination and Release. The Purchaser shall have received the
Parent Termination Agreement, duly executed by TreeCon and acknowledged by the
Company and Overhill Ventures, terminating the Parent Pledge Agreement and
releasing the Liens in favor of the Purchaser in the Parent Pledged Collateral,
all as provided therein.
5.10 Spin-Off-Related Matters.
(a) The Purchaser shall have received written evidence, in form and
substance satisfactory to the Purchaser, that the Spin-Off has been
consummated.
(b) The Purchaser shall have received a copy of the tax opinion of
Ernst & Young LLP, independent auditors of TreeCon and the Company,
addressed to TreeCon, in form and substance substantially identical to the
form previously reviewed by the Purchaser.
(c) The Form 10 Registration Statement shall have been declared
effective by the SEC under the Exchange Act, and the Purchaser shall have
received true, correct and complete copies of the Form 10 Registration
Statement (including the initial filing and each amendment or supplement
thereto), certified by the Secretary of the Company as of the Effective
Date.
(d) The Board of Directors of TreeCon shall have formally approved
the Spin-Off (including the distribution of the shares of Common Stock
owned by
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TreeCon to the holders of its common stock on the Spin-Off Record Date),
and the Purchaser shall have received written evidence of the same.
(e) The Purchaser shall have received true, correct and complete
copies of all third party consents, authorizations and approvals, in form
and substance satisfactory to the Purchaser, necessary or required to be
obtained in connection with this Agreement, the consummation of the
transactions contemplated hereby and the consummation of the Spin-Off.
(f) The Purchaser shall have received written evidence from the AMEX
that the shares of Common Stock issued in connection with the Spin-Off have
been approved for trading on the AMEX, subject to official notice of
issuance.
(g) The Purchaser shall have received such other documents relating
to the Spin-Off as the Purchaser may request.
5.11 Senior Credit Documents. The Company shall have delivered to the
Purchaser true, correct and complete copies of all Senior Credit Documents
entered into on or about the Effective Date, certified by the Secretary of the
Company as of the Effective Date.
5.12 Delivery of Corporate Documents. The Company shall have delivered to
the Purchaser the following for each of the Company, Overhill Ventures and
TreeCon:
(a) With respect to the Company only, copies of its charter as in
effect immediately prior to the Effective Date, certified by its Secretary
of State of its jurisdiction of incorporation as of a recent practicable
date, and its bylaws as in effect immediately prior to the Effective Date,
certified by its Secretary as being in full force and effect as a recent
practicable date;
(b) Copies of its charter as in effect immediately following the
Spin-Off, certified by the Secretary of State of its jurisdiction of
incorporation, and its bylaws as in effect immediately following the
Effective Date, certified by its Secretary as being in full force and
effect as of the Effective Date;
(c) A corporate good standing certificate and a good standing tax
certificate, if available, from the Secretary of State of its state of
incorporation or organization and the Franchise Tax Board of the State of
California or similar state taxing authority, and good standing
certificates from each jurisdiction in which it is required to be qualified
to transact business as a foreign corporation or other entity (including,
with respect to the Company, California and Texas), in each case dated as
of a recent practicable date prior to the Effective Date;
(d) Resolutions of the Board of Directors (or similar governing body)
approving and authorizing the execution, delivery and performance of this
Agreement, the Note and the other Investment Documents to which it is a
party, and the consummation of the transactions contemplated thereby
(including, in the case of the Company, the amendment and restatement of
this Agreement, the Original Note, the Original Warrant and the other
Original Investment Documents and, in the case of TreeCon, the consummation
of the Spin-Off and the declaration and payment of
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the related stock dividend), certified by its Secretary as being in full
force and effect through the Effective Date;
(e) Signature and incumbency certificates of its officers executing
the documents referred to in clause (c) above and any other agreements,
instruments, certificate or other documents required to be executed by it
in connection herewith; and
(f) Such other documents as the Purchaser may reasonably request.
5.13 [Employment Agreements. The Company shall have delivered to the
Purchaser amendments or other modifications to (a) that certain Employment
Agreement dated as of November 1, 1999, among ▇▇▇▇▇ ▇▇▇▇▇, the Company and
TreeCon, in form and substance reasonably satisfactory to the Purchaser, and (b)
that certain Employment Agreement dated as of November 1, 1999, among ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, the Company and TreeCon, in form and substance reasonably satisfactory
to the Purchaser.]
5.14 Insurance Matters. The Company shall have delivered to the Purchaser
certificates of insurance and policies or binders of insurance covering the
Company and its Subsidiaries which are required to be maintained by the Company
and its Subsidiaries as of the Effective Date, together with additional insured
and lender's loss payable endorsements in favor of the Purchaser, all in form
and substance satisfactory to the Purchaser.
5.15 Delivery of Effective Date Balance Sheet. The Company shall have
delivered to the Purchaser a consolidated balance sheet of the Company and its
Subsidiaries as of the Effective Date (the "Effective Date Balance Sheet") after
giving effect to the Spin-off and the transactions contemplated hereby and by
the Senior Credit Documents. The Effective Date Balance Sheet shall be
accompanied by an Officer's Certificate, in form and substance satisfactory to
the Purchaser, duly executed by the President and Chief Executive Officer and
the Chief Financial Officer of the Company, certifying as to the assumptions on
which it is based.
5.16 Delivery of Financial Projections. The Company shall have delivered to
the Purchaser, and the Purchaser shall have approved, revised consolidated and
consolidating financial projections of the Company and its Subsidiaries for the
three (3) Fiscal Years ending [_____________], 2005. Such financial projections
shall specify the assumptions on which they are based and shall be made in good
faith. The financial projections shall be accompanied by an Officer's
Certificate, in form and substance satisfactory to the Purchaser, duly executed
by the President and Chief Executive Officer and the Chief Financial Officer of
the Company, specifying, among other things, the assumptions on which such
financial projections are based.
5.17 Compliance Certificate. The Company shall have delivered to the
Purchaser a Compliance Certificate, in the form previously furnished to the
Company by the Purchaser, signed by the President and Chief Executive Officer
and the Chief Financial Officer of the Company, stating that each of them has
reviewed this Agreement and the other Investment Documents and the financial
condition and results of operations of the Company and its Subsidiaries for
purposes of delivering such Compliance Certificate and certifying (i) as to the
accuracy and completeness of the financial covenant calculations set forth
therein, which financial covenant calculations shall be made as of the Effective
Date
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and shall give effect to the transactions contemplated by this Agreement, the
other Investment Documents and the Senior Loan Documents, and (ii) whether any
Defaults or Events of Default, or any "Events of Default" (as such term is
defined in the Senior Credit Agreement), have occurred or are continuing or will
occur as a result of such transactions.
5.18 Solvency Certificates. The Purchaser shall have received (a) a
Solvency Certificate, in substantially the form of Exhibit D-1, duly executed by
the President and Chief Executive Officer and the Chief Financial Officer of the
Company, and (b) a Solvency Certificate, in substantially the form of Exhibit
D-2, duly executed by the President and Chief Executive Officer and the Chief
Financial Officer of TreeCon, in each case certifying as to the matters
described therein.
5.19 Consents. The Company Parties shall have obtained all Consents
required to be obtained from all Governmental Authorities and other Persons
(including the Senior Lender) in connection with the transactions contemplated
by this Agreement (including the Consents listed on Schedule 3.6), and the
Purchaser shall have approved the terms and conditions thereof.
5.20 Benefit Plan Documents. The Purchaser shall have received true,
correct and complete copies of each of the documents described in Section
3.18(b).
5.21 Proceedings Satisfactory. All proceedings taken prior to or on the
Effective Date in connection with the execution and delivery of this Agreement
and the other Investment Documents, and the consummation of the other
transactions contemplated hereby and thereby, and all papers and other documents
relating thereto, shall be in form and substance satisfactory to the Purchaser
and its counsel, and the Purchaser shall have received copies of all such
documents and papers, where appropriate, to be counterpart originals and/or
certified by proper authorities, corporate officials and other Persons.
6. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY PARTIES. The obligation of the
Company Parties to consummate the transactions contemplated hereby is subject to
the satisfaction of the conditions set forth in this Section 6; provided,
however, that any or all of such conditions may be waived, in whole or in part,
by the Company in its sole and absolute discretion:
6.1 Representations and Warranties. The representations and warranties of
the Purchaser in this Agreement shall be true and correct in all material
respects at and as of the Effective Date after giving effect to the transactions
contemplated by this Agreement, as if made on and as of the Effective Date, and
the Purchaser shall have performed or satisfied all of its covenants and
agreements hereunder to be performed or satisfied on or prior to the Effective
Date.
6.2 Purchase Permitted By Applicable Law. The consummation of the
transactions contemplated by this Agreement shall not be prohibited by or
violate any Applicable Law and shall not subject any party to any Tax, penalty
or liability, under or pursuant to any Applicable Law, and shall not be enjoined
(temporarily or permanently) under, or prohibited by or contrary to, any
injunction, order, decree or ruling. Without limiting the generality of the
foregoing, the consummation of the transactions contemplated hereby shall
otherwise comply with all applicable requirements of federal and state
securities laws.
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6.3 No Injunction or Order. There shall not have been issued any
injunction, order, decree or ruling that prohibits or limits any of the
transactions contemplated by this Agreement or the other Investment Documents.
7. INDEMNIFICATION; FEES AND EXPENSES.
7.1 Transfer Taxes. The Company shall pay all stamp, transfer and other
similar Taxes (together in each case with interest and penalties, if any)
payable or determined to be payable in connection with the execution and
delivery of this Agreement or the issuance of the Securities, and shall hold
harmless the Purchaser from and against any and all liabilities with respect to
or resulting from any delay in paying, or omission to pay, such Taxes.
7.2 Losses.
(a) Whether or not the transactions contemplated by this Agreement
are consummated, the Company shall indemnify and hold harmless the
Purchaser, its successors and assigns, and its Affiliates, employees,
partners, officers, directors, representatives, agents, attorneys,
successors and assigns (the "Indemnified Parties"), from and against any
and all losses, claims, damages, liabilities, judgments, Indemnified
Environmental Costs, expenses and costs, including attorneys' fees and
other fees and expenses incurred in, and the costs of preparing for,
investigating or defending any matter (collectively, "Losses"), incurred by
such Indemnified Party in connection with or arising from:
(i) Any breach of any warranty or the inaccuracy of any
representation made by any Company Party;
(ii) The failure by any Company Party to fulfill any of its
covenants, agreements or undertakings under this Agreement or any
other Investment Document (or any other document or instrument
executed herewith or pursuant hereto); or
(iii) Any third party actions, suits, proceedings or claims
brought against any Indemnified Party with respect to (i) the
Spin-Off, the Form 10 Registration Statement or any of the
transactions related thereto or contemplated hereby, (ii) the issuance
of the Note, the exercise of any Warrant or the other matters arising
out of or in connection with the transactions contemplated by this
Agreement or any other Investment Document or (iii) the business,
operations or affairs of any Company Party or any of its Subsidiaries.
(b) The Company shall either pay directly all Losses which it is
required to pay hereunder or reimburse any Indemnified Party within ten
(10) days after any request for such payment. The obligations of the
Company to the Indemnified Parties under this Section 7 shall be separate
obligations to each Indemnified Party, and the liability of the Company to
such Indemnified Parties hereunder shall not be extinguished solely because
any Indemnified Party is not entitled to indemnity hereunder.
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(c) The obligations of the Company to the Indemnified Parties under
this Section 7 shall survive (i) the repayment of the Note (whether at
maturity, by prepayment or acceleration or otherwise), (ii) any transfer of
the Note (or any interest therein), (iii) the termination of this Agreement
or any other Investment Document and (iv) the exercise and/or sale of any
Warrant (or any interest therein) or the sale of any Warrant Shares.
7.3 Indemnification Procedures. Any Person entitled to indemnification
under this Section 7 shall (a) give prompt written notice to the Company of any
claim with respect to which it seeks indemnification and (b) permit the Company
to assume the defense of such claim with counsel selected by the Company and
reasonably acceptable to such Person; provided, however, that any Person
entitled to indemnification hereunder shall first have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (i)
the Company has agreed to pay such fees or expenses of such counsel; (ii) the
Company has failed to notify such Person in writing within ten (10) days of its
receipt of such written notice of claim that it will assume the defense of such
claim and employ counsel reasonably satisfactory to such Person; or (iii) in the
judgment of any such Person, based upon the advice of counsel, a conflict of
interest may exist between such Person and the Company with respect to such
claims (in which case, if the Person notifies the Company in writing that such
Person elects to employ separate counsel at the expense of the Company, the
Company shall not have the right to assume the defense of such claim on behalf
of such Person). The Company will not be subject to any liability for any
settlement made without its consent (but such consent may not be unreasonably
withheld). No Indemnified Party may, without the consent of the Company (which
consent will not be unreasonably withheld), consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the Company of a release from
all liability in respect of such claim or litigation.
7.4 Contribution. If the indemnification provided for in this Section 7 is
unavailable to the Purchaser or any other Indemnified Party in respect of any
Losses, then the Company, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such Losses, in such proportion as is appropriate to reflect the relative fault
of the Company, on the one hand, and such Indemnified Party on the other hand,
in connection with the actions, statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault of the Company, on the one hand, and such Indemnified Party, on the other
hand, shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
taken by, or relates to information supplied by, either the Company or such
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or
omission. The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7.4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
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7.5 Deal-Related Costs and Expenses. The Company shall be responsible for,
and shall pay (or cause to be paid), all out-of-pocket costs and expenses of
every type and nature (including all fees and expenses of counsel, accounting
fees and expenses and other deal-related costs and expenses) incurred by or on
behalf of the Purchaser, in connection with the preparation, negotiation,
execution and delivery of this Agreement, the Note, the November 1999 Warrant,
Collateral Documents and the other Investment Documents and the consummation of
the transactions contemplated hereby and thereby and, at the Purchaser's request
and direction, the Company shall reimburse third party providers directly for
all of such costs and expenses.
7.6 Costs of Collection. The Company agrees to pay all costs and expenses,
including the fees and expenses of all attorneys, accountants and other experts
retained by the Purchaser, which are expended or incurred by or on behalf of the
Purchaser in connection with (a) the collection and enforcement of the
Obligations, whether or not any action, suit or other proceeding is commenced;
(b) any actions for declaratory relief in any way related to the Obligations;
(c) the protection or preservation of any rights, powers or remedies of the
Purchaser under this Agreement or any other Investment Document; (d) the
negotiation, preparation, execution and delivery of any amendment, waiver,
consent or release relating to or under this Agreement, the Note or any other
Investment Document; (e) any actions taken in reviewing the financial affairs of
the Company Parties, TreeCon or their respective Subsidiaries if any Event of
Default has occurred or the Purchaser has determined in good faith that an Event
of Default may likely occur, which actions shall include the following: (i)
inspect the facilities of the Company Parties, TreeCon or their respective
Subsidiaries or conduct audits or appraisals of the financial condition of the
Company Parties, TreeCon or their respective Subsidiaries; (ii) have an
accounting or other firm selected by the Purchaser review the books and records
of the Company Parties, TreeCon or their respective Subsidiaries and perform a
thorough and complete examination thereof; (iii) interview the employees,
attorneys, accountants and customers of, and any other Persons related to, the
Company Parties or any of their respective Subsidiaries whom the Purchaser
believes may have relevant information concerning the business, condition
(financial or otherwise), results of operations or prospects of the Company,
TreeCon and such Subsidiaries; and (iv) undertake any other action which the
Purchaser believes is necessary to assess accurately the financial condition and
prospects of the Company Parties, TreeCon or their respective Subsidiaries; (f)
any refinancing, restructuring (whether in the nature of a "work out" or
otherwise), bankruptcy or insolvency proceeding involving the Company Parties,
TreeCon or any of their respective Subsidiaries or other Affiliates, including
any refinancing or restructuring of this Agreement, the Note or any other
Investment Documents; (g) any actions taken to verify, maintain, perfect and
protect any Lien granted to the Purchaser by the Company Parties or other Person
under the Investment Documents; or (h) any effort by the Purchaser to protect,
assemble, complete, collect, sell, liquidate or otherwise dispose of any
Collateral, including in connection with any case under Bankruptcy Law. The
Company hereby consents to the taking of the foregoing actions by the Purchaser
(provided, however, that, with respect to clause (e)(iii) above, none of the
Company Parties will be required to produce any document or disclose material to
the Purchaser which would otherwise be expressly protected from production or
disclosure by any attorney-client or accountant-client privilege existing under
Applicable Law, unless waived by the Company Parties).
8. AFFIRMATIVE COVENANTS. The Company covenants and agrees that, so long as
any Obligations remain outstanding or the Purchaser owns or holds, or has the
right to
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acquire, directly or indirectly, five percent (5.0%) or more of the Common Stock
calculated on a Fully Diluted Basis, the Company shall, except as otherwise
provided in Section 8.22, perform, comply with and observe each of the covenants
set forth in this Section 8, as applicable.
8.1 Payment of Note. The Company shall pay all principal, premium, if any,
interest and other payment Obligations owing pursuant to the terms of this
Agreement, the Note and the other Investment Documents, in each case on the
dates and in the manner provided for therein.
8.2 Performance of Investment Documents. The Company shall, and shall
cause each of its Subsidiaries to, perform, comply with and observe all of its
or their Obligations under this Agreement, the Note and each other Investment
Document.
8.3 Information Reporting Requirements. The Company shall furnish to the
Purchaser:
(a) As soon as available, and in no event later than ninety (90) days
after the end of each Fiscal Year (as such number of days may be extended
as provided in the last sentence of this clause (a)), a consolidated
balance sheet of the Company and its Subsidiaries as of the end of such
Fiscal Year, and related consolidated statements of operations,
shareholders' equity and cash flows of the Company and its Subsidiaries for
such Fiscal Year, setting forth in comparative form the corresponding
figures for the immediately preceding Fiscal Year, all in reasonable detail
and prepared in accordance with GAAP, and accompanied by a report and an
opinion, prepared in accordance with generally accepted auditing standards,
of independent certified public accountants of recognized standing selected
by the Company and acceptable to the Purchaser (which opinion shall provide
that such consolidated financial statements present fairly, in all material
respects, the financial position for the periods indicated in conformity
with GAAP, and which opinion shall not be qualified or limited because of a
restricted or limited examination by such accountant of any material
portion of the records of the Company or any of its Subsidiaries or
otherwise qualified in any respect (other than, with respect to any Fiscal
Year ending on or prior to September 30, 2002 only, as to the
re-characterization of the TreeCon Accounts Receivable as a dividend as
opposed to an intercompany accounts receivable). The parties agree that the
ninety (90) day period set forth above for any Fiscal Year shall be
extended for an additional fifteen (15) days for such Fiscal Year if the
Company delivers to the Purchaser in draft form, not later than ninety (90)
days after the end of such Fiscal Year, copies of the draft audited
financial statements, including the notes thereto, required to be furnished
to the Purchaser under this clause (a);
(b) Within two (2) days after it is prepared, and in no event later
than thirty (30) days after the last day of each calendar month (or, if the
Company delivers drafts thereof and of the Compliance Certificate to be
delivered pursuant to clause (e) of this Section 8.3 not later than thirty
(30) days after the end of any calendar month which is also the end of any
Fiscal Quarter, then in no event later than forty-five (45) days after the
last day of any such calendar month), a monthly financial package for such
month (the "Monthly Reporting Package"), all in
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reasonable detail and prepared in accordance with GAAP, consisting of at
least the following:
(i) an income statement for such month, with comparative
information for the current monthly budget and the same month during
the immediately preceding Fiscal Year;
(ii) a year-to-date income statement for such month, with
comparative information for the current year-to-date budget and the
same year-to-date month during the immediately preceding Fiscal Year;
(iii) a cash flow statement for such month (including specific
line items for any Tax Sharing Cash Payments), with comparative
information for the current monthly budget and the same month during
the immediately preceding Fiscal Year;
(iv) a year-to-date cash flow statement for such month
(including specific line items for any Tax Sharing Cash Payments),
with comparative information for the current year-to-date budget and
the same year-to-date period during the immediately preceding Fiscal
Year;
(v) a balance sheet as at the end of such month (including
specific line items for the TreeCon Accounts Receivable and any Tax
Sharing Payable), with comparative information as at the end of the
same month during the immediately preceding Fiscal Year; and
(vi) other information, as may be requested by the Purchaser, to
monitor mutually agreeable critical success factors of the Company
that need to be achieved in order for the Company to meet its
financial projections;
(c) On Wednesday of each week (to be furnished via telecopier), a
package of information (the "Weekly Reporting Package"), including: (i) the
weekly internal sales report of the Company and its Subsidiaries with
respect to the prior week; (ii) the consolidated accounts receivables of
the Company and its Subsidiaries as of the end of such prior week; (iii)
the 90-Day Receivables as of the end of such prior week; (iv) the
consolidated accounts payables of the Company and its Subsidiaries as of
the end of such prior week; (v) the 60-Day Payables as of the end of such
prior week; (vi) a copy of the borrowing base certificate, if any, required
to be delivered to the Senior Lender during the prior week; and (vii) any
additional information mutually agreed upon by the Company and the
Purchaser;
(d) At least thirty (30) days prior to the beginning of each Fiscal
Year, a copy of the Company's internal financial projections for such
Fiscal Year (the "Annual Financial Projections"), prepared on a monthly
basis and in reasonable detail, which shall include the following: (i) a
balance sheet, income statement and cash flow statement for each month of
such Fiscal Year; (ii) a capital expenditures budget, including internal
rate of return analysis and "payback" analysis; (iii) an explanation in
reasonable detail of all material changes proposed for the business and its
personnel and facilities; (iv) an explanation in reasonable detail of all
material assumptions underlying such financial projections, which
assumptions shall be
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believed by the Company to be reasonable; (v) a description of the
opportunities to be pursued during such Fiscal Year; and (vi) a description
of any incentive compensation expected to be paid to senior management;
(e) Simultaneously with the delivery of (i) the financial statements
required to be delivered to the Purchaser under clause (a) of this Section
8.3 and (ii) the financial statements required to be delivered to the
Purchaser under clause (b) of this Section 8.3 with respect to each
calendar month which ends on the last day of any Fiscal Quarter, a
Compliance Certificate, in substantially the form of Exhibit D attached to
the Securities Purchase Agreement, signed by the President and Chief
Executive Officer and the Chief Financial Officer of the Company,
certifying that each of them has reviewed this Agreement and the other
Investment Documents and such financial statements (including the financial
condition and results of operations) of the Company and its Subsidiaries
for purposes of delivering such Compliance Certificate and further
certifying as to the matters set forth in such Compliance Certificate;
(f) Promptly after submission to any Governmental Authority (and in
any event not later than five (5) days thereafter), all documents and
information furnished to such Governmental Authority in connection with any
investigation of the Company or any of its Subsidiaries other than routine
inquiries by such Governmental Authority;
(g) Promptly (and in any event not later than five (5) days) after
the issuance of any Compliance Report, or series of Compliance Reports,
which could have a Material Adverse Effect, a copy (or copies) of such
Compliance Report(s) (or written summaries of any oral determination(s));
(h) Promptly (and in any event not later than one (1) Business day)
after an officer of the Company obtains knowledge thereof or any Executive
Officer of the Company should have obtained knowledge thereof, notice of
(i) the occurrence of any event, act or condition which constitutes a
Default or Event of Default or a "Default" or "Event of Default" as defined
in the Senior Credit Documents; (ii) the commencement of any litigation
against the Company or any of its Subsidiaries involving an amount in
excess of $100,000 or any investigation or other proceeding of any
Governmental Authority against the Company or any of its Subsidiaries; or
(iii) any event, occurrence or development which could have a Material
Adverse Effect. Each such notice shall specify in reasonable detail the
nature of such item or matter and what action the Company or any other
Person is taking or proposes to take to cure the same; and
(i) Promptly upon request (and in any event not later than five (5)
days thereafter), such other information concerning the business,
operations, condition (financial or otherwise) or affairs of the Company or
any of its Subsidiaries or other Affiliates as the Purchaser may from time
to time request (provided that if such information is in the possession of
a third party, the Company shall take such actions as may be necessary to
obtain such information from such third party and shall furnish it
immediately upon receipt to the Purchaser).
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8.4 Company SEC Documents. The Company shall timely file with the
Commission, and provide to the Purchaser within five (5) days after the filing
thereof, all SEC Documents that are required to be filed by U.S. corporations
that are subject to the reporting requirements of the Exchange Act; provided,
however, that if at any time the Company is not required to file with the
Commission any SEC Documents, it shall prepare an "equivalent" SEC Document
which shall contain substantially the same information as would be included in
such SEC Document and shall furnish it to the Purchaser within the time period
specified under applicable federal securities laws. In addition, the Company
shall timely file with the AMEX (or any other national securities exchange or
the Nasdaq, as the case may be), and provide to the Purchaser within five (5)
days after the filing thereof, all SEC Documents required to be filed therewith.
Each SEC Document to be filed by the Company, when filed with the Commission or
the AMEX (or on any other national securities exchange), as the case may be,
will comply with all applicable requirements of the Securities Act, the Exchange
Act or the AMEX (or other national securities exchange) rules, as the case may
be, and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company and its
Subsidiaries to be included in each SEC Document will comply as to form, as of
the date of its filing with the Commission, with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, will be prepared in accordance with GAAP (except, in the case
of unaudited statements, as permitted by the Commission) and will fairly present
the consolidated financial position of the Company and its Subsidiaries as of
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments consistent with past practices and
consistently applied).
8.5 Compliance with Laws. The Company shall, and shall cause each of its
Subsidiaries to, at all times comply with all Applicable Law (including
Environmental Laws and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002) in respect of the conduct
of its business and the ownership of its properties in the states in which it
conducts its business.
8.6 Legal Existence. The Company shall, and shall cause each of its
Subsidiaries to, at all times do or cause to be done all things necessary to (a)
maintain and preserve its existence, rights and privileges, and become or remain
duly qualified and in good standing in each jurisdiction in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary, and (b) preserve, renew and keep in
full force and effect all of its Licenses and Permits.
8.7 Books and Records; Inspections. The Company shall, and shall cause
each of its Subsidiaries to, maintain proper books of record and account in
which full, true and complete entries in conformity with GAAP and all
requirements of Applicable Law shall be made of all dealings and transactions in
relation to its business and activities. The Company shall, and shall cause each
of its Subsidiaries to, permit the designated representatives and/or agents of
the Purchaser to visit and inspect any of the properties of the Company or such
Subsidiaries, and to examine the books of record and account of the Company or
such Subsidiaries and to discuss the affairs, finances and accounts of the
Company or such Subsidiaries with, and be advised as to the same by, its
officers, attorneys and independent accountants, all at such reasonable times
and to such extent as the Purchaser may request (and in any event as soon as
practicable (and not later than three (3) Business Days)
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thereafter). The parties acknowledge that, by virtue of the matters set forth in
this Section 8.7, neither the Company nor any of its Subsidiaries shall be
deemed to have waived any attorney-client or accountant-client privilege
existing under Applicable Law with respect to information requested by the
Purchaser and expressly covered by such privilege.
8.8 Maintenance of Properties. The Company shall, and shall cause each of
its Subsidiaries to, maintain and preserve all of its properties which are
necessary or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and comply at all times with the
provisions of all leases to which each of them is a party as lessee or under
which each of them occupies property, so as to prevent any loss or forfeiture
thereof or thereunder. The Company shall, and shall cause each of its
Subsidiaries to, make all payments and otherwise perform all of its obligations
under all leases of real property to which the Company or any such Subsidiary is
a party, keep such leases in full force and effect and not permit such leases to
expire, lapse or be terminated (or any rights to renew such leases to be
forfeited or canceled), notify the Purchaser of any default by any party thereto
and cooperate with the Purchaser in all respects to cure any such default.
8.9 Maintenance of Insurance. The Company shall, and shall cause each of
its Subsidiaries to, continue to maintain with financially sound and reputable
insurers policies of insurance, coverage amounts and related terms and
conditions that are at least as favorable to the Company and its Subsidiaries as
those maintained by the Company and its Subsidiaries on the Effective Date and
such other insurance policies, coverage amounts and related terms and conditions
as the Purchaser may reasonably request. Such insurance shall include
comprehensive general liability, fire and extended coverage, product liability,
property damage, workers' compensation, flood insurance (if the Purchaser
determines that such insurance is required by Applicable Law), earthquake loss
insurance, environmental liability insurance, business interruption insurance
(either for loss of revenues or for additional expenses), key man life insurance
on the life of ▇▇▇▇▇ ▇▇▇▇▇ and directors and officers liability insurance. All
insurance covering liability shall name the Purchaser as an additional insured,
all insurance covering property subject to a Lien in favor of the Purchaser
shall name the Purchaser as a loss payee and, with respect to any casualty or
loss, provide that the full amount of insurance proceeds shall be payable to the
Purchaser (if not payable to the Senior Lender for the benefit of the Senior
Lender under the Senior Credit Documents), and all key man life insurance
policies shall have the Purchaser as the irrevocable collateral assignee. In
addition, each insurance policy shall further provide for at least thirty (30)
days' prior written notice to the Purchaser of the cancellation or substantial
modification thereof.
8.10 Taxes.
(a) The Company shall, and shall cause each of its Subsidiaries to,
pay and discharge promptly when due all Taxes, except Taxes that are being
diligently contested in good faith and by appropriate proceedings if
adequate reserves (determined in the good faith judgment of the Board of
Directors of the Company) have been established with respect thereto.
(b) For two years following the effective date of the Spin-Off, the
Company will not engage in any transaction that results in one or more
persons acquiring stock representing a fifty percent (50%) or greater
interest in the Company (including any interest in the Company acquired by
such person or persons in the
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Spin-Off as a result of any interest in TreeCon acquired by such person or
persons during the two-year period preceding the effective date of the
Spin-Off).
(c) For two years following the effective date of the Spin-Off,
TreeCon will not engage in any transaction that results in one or more
Persons acquiring the Capital Stock of TreeCon representing a fifty percent
(50%) or greater equity interest in TreeCon (including any interest in
TreeCon acquired by such person or persons during the two-year period
preceding the effective date of the Spin-Off). It is agreed that the
Company shall be deemed to have breached this clause (c), and an Event of
Default shall have occurred, if TreeCon engages in any such transaction
and, as a result thereof, the Company incurs losses, claims, damages,
liabilities, judgments, costs or expenses in excess of $250,000 in the
aggregate (provided that the foregoing shall not limit in any way the
Purchaser's rights, powers or remedies as against TreeCon).
(d) Any tax sharing agreement between the Company and any of TreeCon
and any other subsidiary of TreeCon will be terminated as of the effective
date of the Spin-Off and will have no further effect for any taxable year
(whether the current year, a future year or a past year).
(e) TreeCon and each subsidiary of TreeCon agree to indemnify the
Company from and against the entirety of any taxes, penalties or interest
for which the Company may be liable that result from, arise out of, relate
to, are in the nature of, or are caused by any liability of the Company for
taxes of any person other than the Company (i) under Reg. (S)1.1502-6 (or
any similar provision of state, local or foreign law), (ii) as a transferee
or successor, (iii) by contract or (iv) otherwise.
(f) TreeCon will include the income of the Company (including any
deferred income triggered into income by Treasury Regulation (S)1.1502-13
and (S)1.1502-14 and any excess loss accounts taken into income under
Treasury Regulation (S)1.1502-19) on the consolidated federal income tax
returns of TreeCon for all periods through the effective date of the
Spin-Off and pay any federal income taxes attributable to such income. The
Company will furnish tax information to TreeCon for inclusion in TreeCon's
federal consolidated income tax return for the period which includes the
effective date of the Spin-Off in accordance with the Company's past custom
and practice. TreeCon shall allow the Company to review and comment upon
such tax returns to the extent that they relate to the Company. TreeCon
will take no position on such returns that relate to the Company that would
adversely affect the Company after the Effective Date, and will in no event
change any tax election, accounting method or accounting practice used in
earlier tax returns that would affect the Company after the Effective Date.
The income of the Company will be apportioned to the period up to and
including the effective date of the Spin-Off and the period after the
effective date of the Spin-Off by closing the books of the Company as of
the end of the effective date of the Spin-Off.
(g) TreeCon will allow the Company and its counsel to participate in
any audits of the consolidated federal income tax returns of TreeCon to the
extent that such returns relate to the Company. TreeCon will not settle any
such audit in a manner that would adversely affect the Company in periods
after the effective date
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of the Spin-Off without the prior written consent of the Company, which
consent shall not unreasonably be withheld.
(h) TreeCon will allow the Company to review and comment upon any
amendment of any consolidated federal income Tax return of TreeCon to the
extent that they relate to the Company. TreeCon will take no position on
such amended returns that relate to the Company that would adversely affect
the Company after the effective date of the Spin-Off, and will in no event
change any tax election, accounting method or accounting practice used in
earlier tax returns that would affect the Company after the effective date
of the Spin-Off.
(i) TreeCon will immediately pay to the Company any refund of taxes
(or reduction in tax liability) resulting from a carryback of a tax
attribute of the Company from a period after the effective date of the
Spin-Off into TreeCon consolidated tax return, when such refund or
reduction is realized by the TreeCon consolidated group. TreeCon will
cooperate with the Company in obtaining such refunds (or reduction in tax
liability), including through the filing of the amended tax returns or
refund claims. The Company agrees to indemnify TreeCon for any Taxes
resulting from the subsequent disallowance of such tax attribute on audit
or otherwise, but only to the extent that such refund or reduction was paid
to Company by TreeCon.
(j) To the extent applicable, the Company and TreeCon shall use the
same procedures, and TreeCon shall provide the Company with the same rights
and indemnities, in connection with any combined or consolidated state
income or franchise tax return of TreeCon that includes the Company.
8.11 ERISA Matters.
(a) The Company shall, and shall cause each of its Subsidiaries to,
cause each Benefit Plan to be operated in compliance with the terms of such
Benefit Plan and Applicable Law and pay and discharge promptly any
liability imposed upon it or them pursuant to the provisions of such
Benefit Plan and Applicable Law; provided, however, that neither the
Company nor any such Subsidiaries shall be required to pay any such
liability if (i) the amount, applicability, or validity thereof shall be
diligently contested in good faith by appropriate proceedings and (ii) such
Person shall have set aside on its books reserves which, in the opinion of
such Person's independent accountants, are adequate with respect thereto.
(b) The Company shall, and shall cause each of its Subsidiaries to,
deliver to the Purchaser promptly, but in no event more than two (2)
Business Days after any Executive Officer of any Company Party or any of
its Subsidiaries obtains knowledge of (i) the intention of the Internal
Revenue Service to (A) revoke the tax-qualified status of any Benefit Plan
that is a tax-qualified retirement plan, (B) impose an excise tax upon the
occurrence of a "prohibited transaction" as such term is defined in Section
4975 of the Code, or (C) disallow a deduction (in whole or in part) for a
contribution to a Benefit Plan, (ii) the institution of a lawsuit against a
Benefit Plan (or a Fiduciary of such plan), (iii) any event which might
reasonably result in a withdrawal from any Benefit Plan subject to the
provisions of Title IV of ERISA (including a Multiemployer Plan), (iv) the
termination of, or any "reportable
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event," as such term is defined in Section 4043(b) of ERISA, with respect
to, any of such Benefit Plans, (v) the reorganization of any Multiemployer
Plan, (vi) any strike, slowdown, work stoppage, or material charge of
unfair labor practice, labor dispute, grievance, complaint, or arbitration
proceeding, (vii) any attempt by a labor union or employee organization to
represent any employees of any member of the Company Parties not
represented as of the Effective Date, (viii) any notice by any labor union
or employee organization that it desires to renegotiate any collective
bargaining agreement, or (ix) the intention of the United States Department
of Labor to impose a penalty under Section 502 of ERISA relating to a
Benefit Plan, a written notice specifying the nature of such action, what
action has been taken, is being taken, or is proposed to be taken with
respect thereto, and a copy of any correspondence or other documentation
relating to the matter.
8.12 Communication with Accountants. The Company hereby authorizes the
Purchaser to communicate directly with the independent certified public
accountants of the Company Parties, and authorizes such accountants to disclose
to the Purchaser any and all financial statements and other supporting financial
documents, workpapers and schedules as the Purchaser may request. The parties
acknowledge that neither the Company nor any of its Subsidiaries will be
required to produce any document or disclose material to the Purchaser which
would otherwise be expressly protected from production or disclosure by any
attorney-client or accountant-client privilege existing under Applicable Law,
unless waived by the Company.
8.13 Compliance with Material Contracts. The Company shall, and shall cause
the other Company Parties and its or their Subsidiaries to: (a) perform, comply
with and observe all terms and provisions of each Material Contract to be
performed, complied with or observed by it, (b) subject to Section 9.10,
maintain each Material Contract in full force and effect, (c) enforce each
Material Contract in accordance with its terms and (d) take all actions to such
end as the Purchaser may request from time to time. Upon the request of the
Purchaser, the Company shall make such demands or requests for information and
reports or action of each other party to each Material Contract as the Company
shall be entitled to make thereunder. Without limiting the generality of the
foregoing, the Company Parties shall take and cause to be taken all actions
necessary to enforce its rights under any employment agreements,
non-competition, non-solicitation and/or confidentiality agreements to which it
is a party and file any action or lawsuit to enforce the same within thirty (30)
days of its becoming aware that any violation of any of the same has occurred.
8.14 Fiscal Year End. The Company will cause the Fiscal Year of the Company
and its Subsidiaries to end on (i) the last Sunday of September, if September 30
does not fall on a Saturday, or (ii) October 1, if September 30 falls on a
Saturday, or (iii) such other date as the Company may designate and the
Purchaser shall approve in writing.
8.15 Environmental Matters.
(a) The Company shall, and shall cause each other Company Party to,
comply, and cause all tenants and any other Persons who may come upon any
property now or hereafter owned, leased or operated by any Company Party or
any of its Subsidiaries (the "Real Property") to comply, with all
Environmental Laws, including those requiring disclosures to prospective
and actual buyers or tenants of all or any portion of the Real Property.
None of the Company Parties or any of their
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respective Subsidiaries will install or allow to be installed any
underground storage tanks on any Real Property. The Company Parties shall,
and shall cause each of their respective Subsidiaries to, comply with the
recommendations of any qualified environmental engineer or other expert
engaged by the Company, any Guarantor or any of their respective
Subsidiaries with respect to any Real Property.
(b) The Company shall promptly notify the Purchaser in writing (i) if
it knows, suspects or believes there may be any Hazardous Materials in or
around any part of the Real Property, any improvements constructed on the
Real Property, or the soil, groundwater or soil vapor on or under the Real
Property, or that any Company Party or any of its Subsidiaries or the Real
Property may be subject to any threatened or pending investigation by any
Governmental Authority under any Applicable Law pertaining to any Hazardous
Materials, and (ii) of any claim made or threatened by any Person arising
out of or resulting from any Hazardous Materials being present or released
in, on or around any part of the Real Property, any improvements
constructed on the Real Property or the soil, groundwater or soil vapor on
or under the Real Property (any of the matters described in clauses (i) and
(ii) above being referred to as a "Hazardous Materials Claim").
(c) Each Indemnified Party shall have the right, during normal
business hours, to enter and visit any Real Property for the purposes of
observing the Real Property, taking and removing soil or groundwater
samples and conducting tests on any part of the Real Property, if any
Indemnified Party has reason to believe that Hazardous Materials may be
present on the Real Property; provided, however, that no Indemnified Party
shall have any duty to visit or observe the Real Property or to conduct
tests, and no site visit, observation or testing by any Indemnified Party
imposes any liability on any Indemnified Party. The Company shall obtain
all Consents necessary, if any, for such Indemnified Party to do any of the
same. In no event will any site visit, observation or testing by any
Indemnified Party be a representation that Hazardous Materials are or are
not present in, on or under the Real Property, or that there has been or
will be compliance with any Environmental Law. None of the Company Parties
or their respective Subsidiaries nor any other Person shall be entitled to
rely on any site visit, observation or testing by any Indemnified Party.
The Indemnified Parties owe no duty of care to protect the Company Parties,
any of their respective Subsidiaries or any other Person against or to
inform any Company Party, any of its Subsidiaries or any other Person of
the presence of any Hazardous Materials or any other adverse condition
affecting the Real Property. The Indemnified Party will make reasonable
efforts to avoid interfering with the existing use of the Real Property by
the Company Parties or any of their respective Subsidiaries in exercising
any rights provided in this Section 8.15.
(d) The Company shall, and shall cause each of its Subsidiaries to,
promptly undertake any and all remedial work in response to Hazardous
Materials Claims ("Remedial Work") to the extent required by any
Governmental Authority involved or as recommended by prudent business
practices, if such standard requires a higher degree of remediation, and in
all events to minimize any impairment to the Real Property. All Remedial
Work must be conducted (i) in a diligent and timely fashion by licensed
contractors acting under the supervision of a consulting environmental
engineer; (ii) pursuant to a detailed written plan for the Remedial Work
approved by all public or private agencies or persons with a legal or
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contractual right to such approval; (iii) with insurance coverage
pertaining to liabilities arising out of the Remedial Work as is then
customarily maintained with respect to such activities; and (iv) only
following receipt of any required permits, licenses or approvals. The
selection of the Remedial Work contractors and consulting environmental
engineer, the contracts entered into with such parties, any disclosures to
or agreements with any public or private agencies or parties relating to
Remedial Work and the written plan for the Remedial Work (and any changes
thereto) at the Purchaser's option, is subject to the Purchaser's prior
written approval.
8.16 Additional Guarantors. The Company shall take all such action, and
shall cause each of its Subsidiaries to take all such action, from time to time
as shall be necessary or advisable to ensure that all Subsidiaries are
Guarantors under the Guaranty. If the Company or any of its Subsidiaries is
permitted to form or acquire any new Subsidiary pursuant to Section 9.9, the
Company shall, or shall cause such new Subsidiary to, within five (5) days after
receipt of the Purchaser's consent to such formation or acquisition, execute and
deliver (or cause the execution and delivery of): (a) a joinder agreement to the
Guaranty, in form and substance satisfactory to the Purchaser, pursuant to which
such Subsidiary (and its Subsidiaries, if any) would become a Guarantor, (b)
such collateral security agreements, instrument and other documents, in form and
substance reasonably satisfactory to the Purchaser, under which such Subsidiary
would grant a valid first priority security interest and lien on all assets,
properties and rights of such Subsidiary to secure the payment and performance
in full of all Guarantied Obligations, (c) if such Subsidiary has any
Subsidiaries, pledge agreements, together with (i) certificates representing all
of the Capital Stock of any Person owned by such Subsidiary and (ii) undated
stock powers executed in blank, (d) such other agreements, instruments,
approvals or other documents as may be requested by the Purchaser in order to
create, perfect, establish, and maintain a valid, first priority, perfected
security interest and Lien (subject only to the Senior Liens) in favor of the
Purchaser (subject on to the Liens of the Senior Lender) or to effect the intent
that such Subsidiary shall become bound by all of the terms, covenants and
agreements contained in the other Investment Documents to which Guarantors are
parties, and (e) opinions of counsel to the Company or such Subsidiary as to
such matters as the Purchaser may request. In addition, the Company shall grant
to the Purchaser a valid first priority, perfected security interest (subject
only to the Senior Liens) in and to the Capital Stock of any Subsidiary to
secure the Guarantied Obligations.
8.17 Corporate Separateness.
(a) All customary formalities regarding the separate corporate
existence of the Company and its Subsidiaries will be observed at all
times.
(b) The Company will accurately maintain its financial statements,
accounting records and other corporate documents separate from those of any
Subsidiary and any other Person. The Company will not commingle its assets
with those of any Subsidiary or any other Person. The Company will
accurately maintain its own bank accounts and separate books of account.
(c) The Company will pay its own liabilities from its own separate
assets.
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(d) The Company will identify itself in all dealings with the public
under its own corporate or trade names and as a separate and distinct
entity, and each Subsidiary will identify itself in all dealings with the
public under its own corporate or trade names and as a separate and
distinct entity. The Company will not identify itself as being a division
of any Subsidiary or any other Person, and no Subsidiary will identify
itself as being a division of the Company or any other Person.
(e) The Company will use its best efforts to assure that it, and each
Subsidiary, is at all times adequately capitalized in light of the nature
of its business.
8.18 Intercompany Debt Subordination.
(a) The Company Parties (each a "Subordinated Creditor") hereby
absolutely subordinates, both in right of payment and in time of payment,
(i) in the case of any Guarantor, any and all present or future obligations
and liabilities of the Company or any other Guarantor to such Guarantor and
(ii) in the case of the Company, any and all present and future obligations
and liabilities of any Guarantor to the Company (such obligations and
liabilities referred to in clause (i) or (ii) being "Intercompany
Subordinated Debt"), to the prior indefeasible payment in full in cash of
all Obligations or the obligations of such Person under the Guaranty, as
applicable. Each Subordinated Creditor agrees to make no claim for, or
receive payment with respect to, such Intercompany Subordinated Debt until
all Obligations and such obligations have been fully discharged in cash.
(b) All amounts and other assets that may from time to time be paid
or distributed to or otherwise received by any Subordinated Creditor in
respect of any Intercompany Subordinated Debt in violation of this Section
8.18 shall be segregated and held in trust by the Subordinated Creditor for
the benefit of the Purchaser and promptly paid over to the Purchaser.
(c) Each Subordinated Creditor shall file, in any bankruptcy,
reorganization or similar proceeding in which the filing of claims is
required by Applicable Law, all claims that such Subordinated Creditor may
have against the Company or any other Obligor relating to any Intercompany
Subordinated Debt owed to such Subordinated Creditor and shall assign to
the Purchaser all rights relating to such Intercompany Subordinated Debt.
If any Subordinated Creditor does not file any such claim as provided
herein, such Subordinated Creditor hereby authorizes and appoints the
Purchaser, as its attorney-in-fact, to do so in the name of the
Subordinated Creditor or, in the Purchaser's discretion, to assign the
claim to a nominee and to cause proof of claim to be filed in the name of
the Purchaser or the Purchaser's nominee. The foregoing power of attorney
is coupled with an interest and is irrevocable. Each Subordinated Creditor
agrees that, in connection with any such proceeding, it shall not contest
or oppose the treatment of claims of the Purchaser in any plan of
reorganization or otherwise and it shall vote any claims that exist by
virtue of the Intercompany Subordinated Debt in connection with any plans
of reorganization or otherwise, as may be requested by the Purchaser. The
Purchaser or its nominee shall have the right, in its discretion, to accept
or reject any plan proposed in such proceeding and to take any other action
which a party filing a claim is entitled to do. In all such cases, whether
in administration, bankruptcy or otherwise, the Person or Persons
authorized to pay such claim shall pay to the
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Purchaser the amount payable on such claim and, to the full extent
necessary for that purpose, each Subordinated Creditor hereby assigns to
the Purchaser all of such Subordinated Creditor's rights to any such
payments or distributions; provided, however, the Subordinated Creditor's
obligations hereunder shall not be satisfied except to the extent that the
Purchaser receives cash by reason of any such payment or distribution.
8.19 AMEX Listing. The Company shall use its best efforts to maintain at
all times the listing of its Common Stock on the AMEX or, if the Company elects,
to maintain a listing of its Common Stock on any other national securities
exchange.
8.20 Future Information. All data, certificates, reports, statements,
documents and other information furnished to the Purchaser by or on behalf of
the Company or any of its Subsidiaries or any of their respective
representatives or agents in connection with this Agreement, the other
Investment Documents or the transactions contemplated hereby and thereby, at the
time the information is so furnished, shall not contain any untrue statement of
a material fact, shall be complete and correct in all material respects to the
extent necessary to give the Purchaser sufficient and accurate knowledge of the
subject matter thereof, and shall not omit to state a material fact necessary in
order to make the statements contained therein not misleading in light of the
circumstances under which such information is furnished.
8.21 Further Assurances. From time to time after the date hereof, the
Company Parties will execute and deliver, and will cause its Subsidiaries and
any other Persons who are required to give their Consent to execute and deliver,
such instruments, certificates and documents, and will take all such actions, as
the Purchaser may reasonably request, for the purposes of implementing or
effectuating the provisions of this Agreement, the Note and the other Investment
Documents. Upon exercise by the Purchaser of any power, right, privilege or
remedy pursuant to this Agreement, this Agreement, or any other Investment
Document which requires any Consent, the Company will execute and deliver, and
will cause each of its Subsidiaries and any other Persons to execute and
deliver, all applications, certifications, instruments and other documents and
papers that may be required to be obtained for such Consent.
8.22 Survival of Certain Affirmative Covenants. From and after the date
that the Obligations under the Note have been paid and performed in full, the
Company shall no longer be obligated to perform, comply with and observe the
covenants set forth in Sections 8.1 (Payment of Note), 8.3(c) (Informational
Reporting Requirements; Weekly Reporting Package), 8.4 (Company SEC Documents),
8.12 (Communications with Accountants), 8.13 (Compliance with Material
Contracts), 8.14 (Fiscal Year End), 8.16 (Additional Subsidiary Guarantors),
8.20 (Future Information) and 8.21 (Further Assurances). All other covenants and
obligations set forth in this Section 8 shall survive the repayment of the
Obligations to Purchaser under the Note.
8.23 Fifth Amendment Restructuring Fee. As provided in Section 3 of the
Fifth Amendment, the Company agrees to pay to the Purchaser a restructuring fee
(the "Fifth Amendment Restructuring Fee") in the aggregate amount of $423,000.
The Fifth Amendment Restructuring Fee shall be deemed fully earned on and as of
the Fifth Amendment Effective Date (as defined in the Fifth Amendment) and shall
be due and payable in three (3) installments as follows:
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(a) $100,000 was due and payable, and was paid, on the Fifth
Amendment Effective Date;
(b) $100,000 shall be due and payable on December 1, 2002, provided
that the Senior Availability under the Senior Credit Agreement on the
immediately preceding Business Day is at least $131,000 (the "December
Minimum Senior Availability Amount"), and, provided further, that if the
Senior Availability is not at least equal to the December Minimum Senior
Availability Amount on such immediately preceding Business Day, then such
installment payment shall be due and payable on the Business Day
immediately following the first Business Day thereafter upon which the
Senior Availability under the Senior Credit Agreement is at least equal to
December Minimum Senior Availability Amount; and
(c) $223,000 shall be due and payable on March 31, 2003, provided
that the Senior Availability under the Senior Credit Agreement on the
immediately preceding Business Day is at least $1,727,000 (the "March
Minimum Senior Availability Amount"), and, provided further, that if the
Senior Availability is not at least equal to the March Minimum Senior
Availability Amount on such immediately preceding Business Day, then such
installment payment shall be due and payable on the Business Day
immediately following the first Business Day thereafter on which the Senior
Availability under the Senior Credit Agreement is at least equal to the
March Minimum Senior Availability Amount;
Provided further, however, that (i) if the Maximum Amount under and as
defined in the Senior Credit Agreement has been increased from $16,000,000 at
any time after the Fifth Amendment Effective Date, then the December Minimum
Senior Availability Amount and the March Minimum Senior Availability Amount
shall each be increased by the amount of such increase to such Maximum Amount
and (ii) notwithstanding the installment payment due dates described above, any
portion of the Fifth Amendment Restructuring Fee that remains unpaid as of the
date upon which all principal, interest and fees owing to Union Bank of
California, N.A., as the Senior Lender, under the Senior Credit Agreement have
been paid in full in cash shall be immediately paid in full in cash to the
Purchaser. In addition, the Purchaser agrees that (A) if the Company treats any
installment payment of the Fifth Amendment Restructuring Fee as an expense in
the accounting period in which the payment is made, such payment shall be
treated as an "add-back" in calculating EBITDA for purposes of Section 9.14(a)
for such period, or (B) if the Company treats any such installment payment as a
capital item in the accounting period in which the payment is made, the
amortization of such payment shall be excluded as an interest expense in
calculating the Fixed Charge Coverage Ratio for purposes of Section 9.14(b).
8.24 Landlord Waivers; Warehouse Bailment Agreements. The Company shall use
its best efforts to deliver, or cause to be delivered, to the Purchaser from
time to time fully executed copies of such Landlord Waivers and Warehouse
Bailment Agreements as the Purchaser may request.
9. NEGATIVE AND FINANCIAL COVENANTS. The Company covenants and agrees that, so
long as any Obligations remain outstanding or the Purchaser owns or holds, or
has the right to acquire, directly or indirectly, five percent (5.0%) or more of
the Common Stock calculated on a Fully Diluted Basis, the Company shall, except
as otherwise provided
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in Section 9.15, perform, comply with and observe each of the covenants set
forth in this Section 9, as applicable:
9.1 Limitations on Indebtedness. The Company shall not, and shall not
permit any other Company Party or any of its or their Subsidiaries to, create,
incur, assume, guarantee, suffer to exist or become or remain liable with
respect to any Indebtedness, except for:
(a) The Obligations; or
(b) Indebtedness payable to the Senior Lender under the Senior Credit
Documents (including any refinancings, restructurings (whether in the
nature of a "work out" or otherwise), restatements or refundings thereof,
up to the maximum amount of the then existing revolving line of credit),
all subject to the limitations and other provisions set forth in the
Intercreditor Agreement; or
(c) Guaranties constituting the endorsement of negotiable instruments
for deposit or collection in the ordinary course of business; or
(d) Trade accounts payable arising in the ordinary course of business
that are more than sixty (60) days past their due dates and do not exceed
$200,000 in the aggregate at any one time, provided that if the aggregate
amount of trade accounts payable arising in the ordinary course of business
that are more than sixty (60) days past their due dates exceeds $200,000 at
any one time, then the Company shall not be deemed to be in violation of
this clause (d) if the amount in excess of $200,000 is being disputed or
contested in good faith by appropriate proceedings in a commercially
reasonable manner; or
(e) Subordinated Indebtedness payable under that certain Unsecured
Promissory Note dated August 25, 2000, made payable by the Company to SSE
Manufacturing in the principal amount of $900,000.
9.2 Limitations on Liens. The Company shall not, and shall not permit any
other Company Party or any of its or their Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist, any Lien with respect to
any of its properties (whether tangible or intangible, now existing or hereafter
acquired), except:
(a) Liens in favor of the Purchaser;
(b) Liens in favor of the Senior Lender securing the Indebtedness
described in Section 9.1(b);
(c) Liens on assets subject to operating leases which are
contemplated by the Capital Expenditures budget applicable to the Fiscal
Year in which such operating lease is entered into, provided that any such
Lien does not encumber any property other than the assets so leased; and
(d) Permitted Liens.
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9.3 Limitations on Investments. The Company shall not, and shall not
permit any other Company Party or any of its or their Subsidiaries to, directly
or indirectly, purchase, make or own any Investment, except:
(a) Permitted Investments; and
(b) Investments listed in Schedule 3.12.
9.4 Limitations on Restricted Payments. The Company shall not, and shall
not permit any other Company Party or any of its or their Subsidiaries to,
directly or indirectly, make any Restricted Payments. Notwithstanding the
foregoing sentence, so long as the Company and its Subsidiaries, individually
and in the aggregate, are not Insolvent and no Default or Event of Default has
occurred and is continuing or would occur as a result thereof, the Company may
make the following Restricted Payments:
(a) Any dividend or other distribution on account of any Capital Stock
of the Company or any Subsidiary now or hereafter outstanding which is
payable solely in shares of the same class of Capital Stock;
(b) The issuance of Common Stock upon the exercise of Option Rights of
the Company; or
(c) The cancellation or acquisition of any Capital Stock of the
Company as payment to the Company of the exercise price of any Option
Rights of the Company.
9.5 Change in Business. The Company shall not, and shall not permit any
other Company Party or any of its or their Subsidiaries to, engage in any
business other than the manufacture, distribution and sale of food products and
activities ancillary thereto.
9.6 Sales of Receivables. The Company shall not, and shall not permit any
other Company Party or any of its or their Subsidiaries to, sell, assign,
discount, transfer, or otherwise dispose of any material accounts receivable,
chattel paper, promissory notes, drafts or trade acceptances or other rights to
receive payment held by it, with or without recourse, except for the purpose of
collection or settlement in the ordinary course of business.
9.7 [Intentionally Omitted].
9.8 Transactions With Affiliates. The Company shall not, and shall not
permit any other Company Party or any of its or their Subsidiaries to, enter
into any transaction, contract or other arrangement with any officer, director,
employee or Affiliate of the Company or such Subsidiary, as the case may be, at
any time on terms that are no less favorable to the Company or such Subsidiary,
as the case may be, than those that might be obtained in an arm's length
transaction, contract or other arrangement, as the case may be, at such time
from a Person who is not an officer, director, employee or Affiliate of the
Company. Any transaction between the Company, on the one hand, and any Affiliate
of the Company, on the other hand, shall be unanimously approved in advance by
all members of the Board of Directors of the Company who are not interested in
the transaction.
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9.9 Fundamental Changes. The Company shall not, and shall not permit any
other Company Party or any of its or their Subsidiaries to:
(a) make any change in its business objectives, purposes, structure or
operations as the same exists on the date hereof;
(b) amend, modify or alter its charter, bylaws or other organizational
documents in a manner which either (i) is material and adverse to the
Purchaser or the holder of any Warrant or any Warrant Shares, (ii)
adversely affects the ability of any Company Party to pay any Obligations
or any Guarantied Obligations, as the case may be, owed by it or (iii)
adversely affects the Liens granted in favor of the Purchaser in any
Collateral, the priority of any such Liens or any equity ownership
interests of the Purchaser in any Company Party or any Subsidiary;
(c) merge, consolidate, amalgamate, reorganize or recapitalize;
(d) form or create any additional Subsidiaries;
(e) sell, lease, transfer or otherwise dispose of, in any transaction
or series of transactions, all or a significant portion of its assets
(whether now owned or hereafter acquired), other than dispositions of
assets in the ordinary course of business not to exceed $100,000 in the
aggregate in any Fiscal Year;
(f) wind up, liquidate or dissolve itself (or permit or suffer any
thereof);
(g) become a general partner in any partnership (whether general or
limited) or enter into any joint venture or strategic alliance; or
(h) reincorporate or reorganize itself under the laws of any
jurisdiction other than the jurisdiction in which it is incorporated or
organized as of the Effective Date.
9.10 Agreements Affecting Capital Stock and Indebtedness; Amendments to
Material Contracts. The Company shall not, and shall not permit any other
Company Party or any of its or their Subsidiaries to:
(a) enter into any voting agreement, voting trust, irrevocable proxy
or other agreement limiting or otherwise affecting the voting rights of the
Capital Stock of any Company Party (other than the Investor Rights
Agreement);
(b) extend, refinance, renew, replace, restructure, exchange or refund
any Indebtedness; provided, however, that the Company may refinance, renew,
replace, restructure, exchange or refund all indebtedness existing under
the Senior Credit Documents if the terms of subordination which would apply
to the Indebtedness evidenced by the Note after giving effect to such
refinancing, renewal, replacement, restructuring, exchange or refunding
would be no less favorable to the Purchaser than those set forth in the
Intercreditor Agreement;
(c) (i) amend, supplement, restate or otherwise modify any agreement,
instrument or other document evidencing any Indebtedness (other than the
Senior Credit Documents in connection with a refinancing of senior
Indebtedness owing
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thereunder), or request a waiver of any term or provision contained
therein, or (ii) amend, supplement or otherwise modify any Senior Credit
Document in connection with any extension, refinancing, renewal,
replacement, restructuring, exchange or refunding of any Indebtedness owing
thereunder;
(d) cancel or terminate (or consent to or accept any cancellation or
termination of) any Material Contract, including any agreement, instrument
or other document evidencing any Indebtedness (but expressly excluding the
Senior Credit Documents), amend or otherwise modify any Material Contract
(other than the Senior Credit Documents) or give any consent, waiver or
approval thereunder, waive any breach of or default under any such Material
Contract, or take any action in connection with any such Material Contract
that would impair the value of the interests or rights of any Company Party
or Subsidiary thereunder or that would impair the interest or rights of the
Purchaser hereunder or under this Agreement or any other Investment
Document; or
(e) adopt or approve any shareholder rights plan or similar plan or
arrangement.
9.11 Conditional Sales. The Company shall not, and shall not permit any
other Company Party or any of its or their Subsidiaries to, make any sale to any
customer on a ▇▇▇▇-and-hold, guaranteed sale, sale and return, sale on approval,
consignment or any other repurchase or return basis, other than in the ordinary
course of business consistent with prior periods.
9.12 Payment Restrictions Affecting Certain Subsidiaries. The Company shall
not, and shall not permit any other Company Party or any of its or their
Subsidiaries to, enter into or permit to exist any agreement, instrument or
other document which, directly or indirectly, prohibits or restricts in any
manner, or would have the effect of prohibiting or restricting in any manner,
the ability of any such Subsidiary to (a) pay dividends or make other
distributions in respect of its Capital Stock owned by the Company or any other
Subsidiary, (b) pay or repay any Indebtedness owed to the Company or any other
Subsidiary, (c) make loans or advances to the Company or (d) transfer any of its
properties or assets to the Company or any other Subsidiary.
9.13 [Intentionally Omitted]
9.14 Financial Covenants. The Company covenants and agrees that, so long as
any Obligations to Purchaser remain outstanding, the Company shall perform,
comply with and observe each of the covenants set forth in this Section 9.14.
(a) Minimum EBITDA. For each of the four (4) consecutive Fiscal
Quarter periods listed in the table below, EBITDA shall not be less than
the total amount set forth opposite each such period in the table:
Four (4) Consecutive Fiscal Minimum
Quarter Period Ending in EBITDA
------------------------ ------
June 2002 ............................... $8,040,000
September 2002 .......................... 7,596,000
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December 2002 ............................ 8,000,000
March 2003 ............................... 9,000,000
June 2003 ................................ 10,500,000
September 2003 ........................... 11,500,000
December 2003 ............................ 12,783,000
March 2004 ............................... 12,843,000
June 2004 ................................ 12,998,000
September 2004 ........................... 13,194,000
(b) Minimum Fixed Charge Coverage Ratio. For each of the four (4)
consecutive Fiscal Quarter periods listed in the table below, the Fixed
Charge Coverage Ratio shall not be less than the ratio set forth opposite
each such period in the table:
Minimum Fixed
Four (4) Consecutive Fiscal Charge Coverage
Quarter Period Ending in Ratio
------------------------ -----
June 2002 ................................ 1.14
September 2002 ........................... 1.00
December 2002 ............................ 1.05
March 2003 ............................... 1.10
June 2003 ................................ 1.15
September 2003 ........................... 1.20
December 2003 ............................ 1.61
March 2004 ............................... 1.63
June 2004 ................................ 1.66
September 2004 ........................... 1.69
(c) Maximum Leverage Ratio. As of the last day of each of the Fiscal
Quarters listed in the table below, the Leverage Ratio shall not exceed the
ratio set forth opposite each such period in the table:
Maximum
Fiscal Quarter Ending in Leverage Ratio
------------------------ --------------
June 2002 ................................ 4.94
September 2002 ........................... 5.45
December 2002 ............................ 5.15
March 2003 ............................... 4.50
June 2003 ................................ 3.80
September 2003 ........................... 3.40
December 2003 ............................ 2.35
March 2004 ............................... 2.28
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June 2004 2.21
September 2004 2.01
(d) Maximum Capital Expenditures. Capital Expenditures shall not
exceed $400,000 with respect to any Fiscal Quarter, and shall in no event
exceed $1,200,000 with respect to any Fiscal Year; provided, however, that
if (a) the Company prepares and furnishes to the Purchaser a "payback"
analysis of Capital Expenditures it proposes to make or incur in excess of
such amounts, (b) the Purchaser has at least five (5) Business Days to
review such analysis and (c) if satisfied with such analysis in its sole
discretion, the Purchaser consents in writing to such excess amount(s)
prior to the incurrence thereof, then the Company may make or incur such
excess Capital Expenditures.
(e) Minimum Tangible Net Worth. Tangible Net Worth at any time shall
not be less than $(10,993,000).
9.15 Survival of Certain Negative Covenants. From and after the date that
the Obligations under the Note have been paid and performed in full, the Company
Parties shall not be obligated to perform, comply with and observe the covenants
set forth in Sections 9.2 (Limitations on Liens), 9.3 (Limitations on
Investments), 9.6 (Sales of Receivables), 9.9 (Fundamental Changes), 9.10
(Agreements Affecting Capital Stock and Indebtedness; Amendments to Material
Contracts), 9.11 (Conditional Sales) and 9.12 (Payment Restrictions Affecting
Certain Subsidiaries). All other covenants and obligations set forth in this
Section 9 shall survive repayment of the Obligations under the Note.
10. GUARANTY.
10.1 Unconditional Guaranty.
(a) The Guarantors unconditionally, jointly and severally and
irrevocably guaranty and promise to pay to the order of the Purchaser and
its successors and assigns (collectively, the "Beneficiary"), on demand, in
lawful money of the United States of America, and as and when due (whether
at maturity or earlier, by acceleration or otherwise), any and all
Obligations from time to time owing by the Company to the Beneficiary
(collectively, the "Guarantied Obligations"). All Guarantied Obligations
shall be conclusively presumed to have been created in reliance of this
Guaranty.
(b) In addition, the Guarantors jointly and severally agree to pay to
the Beneficiary obligations of any kind, including any and all costs and
expenses (including attorneys' fees and expenses) incurred by the
Beneficiary in connection with (a) the collection of all sums guaranteed
hereunder or (b) the exercise or enforcement of any rights, powers or
remedies of the Beneficiary under this Guaranty or Applicable Law.
(c) All payments under this Guaranty shall be made free and clear of
any and all deductions, withholdings and setoffs, including withholding on
account of Taxes. If any deduction or withholding shall be required by
Applicable Law, each Guarantor shall be required to pay such additional
amounts as may be required so that the net amount received by the
Beneficiary, after such deduction or withholding
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(including with respect to such additional amounts), shall be equal to the
amount otherwise required to be paid under this Guaranty.
10.2 Continuing and Irrevocable Guaranty. This Guaranty is a continuing
guaranty of the Guarantied Obligations and may not be revoked and shall not
otherwise terminate unless and until all Guarantied Obligations have been
indefeasibly paid and performed in full. If, notwithstanding the foregoing, any
Guarantor shall have any right under Applicable Law to terminate this Guaranty
prior to indefeasible payment in full of the Guarantied Obligations, no such
termination shall be effective until noon the next Business Day after the
Beneficiary shall receive written notice thereof, signed by such Guarantor. Any
such termination shall not affect this Guaranty in relation to (a) any
Guarantied Obligation that was incurred or arose prior to the effective time of
such notice, (b) any Guarantied Obligation incurred or arising after such
effective time where such Guarantied Obligation is incurred or arises either
pursuant to commitments existing at such effective time or incurred for the
purpose of protecting or enforcing rights against the Company, any Guarantor or
other guarantor of or other Person directly or indirectly liable on the
Guarantied Obligations or any portion thereof (each of the Company, the
Guarantors and any such other guarantor or Person is referred to herein as an
"Obligor") or any Collateral given for the Guarantied Obligations or any other
guaranties of the Guarantied Obligations or any portion thereof (an "Other
Guaranty"), (c) any renewals, extensions, readvances, modifications or
rearrangements of any of the foregoing or (d) the liability of any other
Guarantor hereunder.
10.3 Nature of Guaranty. The liability of each Guarantor hereunder is
independent of and not in consideration of or contingent upon the liability of
the Company or any other Obligor, and a separate action or actions may be
brought or prosecuted against any Guarantor, whether or not any action is
brought or prosecuted against the Company or any other Obligor or whether the
Company or any other Obligor is joined in any such action or actions. This
Guaranty shall be construed as a continuing, absolute and unconditional guaranty
of payment (and not merely of collection), and the liability of each Guarantor
under this Guaranty shall be irrevocable, absolute and unconditional, without
regard to (and each Guarantor irrevocably waives):
(a) the legality, validity or enforceability of this Agreement
(including this Guaranty), the Note or any other Investment Document, any
of the Guarantied Obligations, any Lien or any Collateral or any Other
Guaranty;
(b) any defense (other than payment), set-off or counterclaim that may
at any time be available to the Company or any other Obligor against, and
any right of setoff at any time held by, the Beneficiary;
(c) any acts of commission or omission of any kind (other than gross
negligence) at any time on the part of the Beneficiary with respect to any
matter whatsoever;
(d) the liquidation or dissolution of the Company or any other
Obligor, any bankruptcy, insolvency, reorganization, arrangement,
assignment for the benefit of creditors, receivership or similar event or
proceeding with respect to the Company or any other Obligor, or any action
taken by any trustee or receiver of the Company
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or any other Obligor or by any court or any proceeding with respect to the
Company or any other Obligor;
(e) any change of ownership of the Capital Stock of the Company or any
other Obligor, or any change in the relationship between any Guarantor and
the Company (including the termination of such relationship); or
(f) any other circumstance whatsoever (with or without notice to or
knowledge of any Guarantor or any other Obligor), whether or not similar to
any of the foregoing, that constitutes, or might be construed to
constitute, an equitable or legal discharge of the Company or any other
Obligor, in bankruptcy or in any other instance.
Any payment by any Obligor or other circumstance that operates to toll any
statue of limitations applicable to such Obligor shall also operate to toll the
statute of limitations applicable to each Guarantor. When making any demand
hereunder (including by commencement or continuance of any legal proceeding),
the Beneficiary may, but shall be under no obligation to, make a similar demand
on all or any of the other Obligors, and any failure by the Beneficiary to make
any such demand shall not relieve any Guarantor of its obligations hereunder.
10.4 Authorization. Each Guarantor authorizes the Beneficiary, without
notice to or further assent by such Guarantor, and without affecting such
Guarantor's liability hereunder (regardless of whether any subrogation or
similar right that such Guarantor may have or any other right or remedy of such
Guarantor is extinguished or impaired), from time to time to:
(a) permit the Company to increase or create Guarantied Obligations,
or terminate, release, compromise, subordinate, extend, accelerate or
otherwise change the amount or time, manner or place of payment of, or
rescind any demand for payment or acceleration of, the Guarantied
Obligations or any part thereof, or otherwise amend the terms and
conditions of this Agreement, the Note or any other Investment Document or
any provision thereof;
(b) take and hold Collateral from the Company or any other Person for
the Guarantied Obligations, perfect or refrain from perfecting a Lien on
such Collateral, and exchange, enforce, subordinate, release (whether
intentionally or unintentionally), or take or fail to take any other action
in respect of, any such Collateral or Lien or any part thereof;
(c) exercise in such manner and order as it elects in its sole
discretion, fail to exercise, waive, suspend, terminate or suffer
expiration of, any of the remedies or rights of the Beneficiary against the
Company or any other Obligor in respect of any Guarantied Obligations or
any Collateral;
(d) release, add or settle with any other Obligor in respect of this
Guaranty, any Other Guaranty or the Guarantied Obligations;
(e) accept partial payments on the Guarantied Obligations and apply
any and all payments or recoveries from any Obligor or Collateral to such
of the
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Guarantied Obligations as the Beneficiary may elect in its sole discretion,
whether or not such Guarantied Obligations are secured or guaranteed;
(f) refund at any time, at the Beneficiary's sole discretion, any
payments or recoveries received by the Beneficiary in respect of any
Guarantied Obligations or any Collateral; and
(g) otherwise deal with the Company, any other Obligor and any
Collateral as the Beneficiary may elect in its sole discretion.
10.5 Certain Waivers. Each Guarantor waives:
(a) the right to require the Beneficiary to proceed against the
Company or any other Obligor, to proceed against or exhaust any Collateral
or to pursue any other remedy in the Beneficiary's power whatsoever, and
the right to have the property of the Company or any other Obligor first
applied to the discharge of the Guarantied Obligations;
(b) all rights and benefits under Section 2809 of the California Civil
Code and any other Applicable Law purporting to reduce a guarantor's
obligations in proportion to the obligation of the principal or providing
that the obligation of a surety or guarantor must neither be larger nor in
other respects more burdensome than that of the principal;
(c) the benefit of any statute of limitations affecting the Guarantied
Obligations or such Guarantor's liability hereunder and of Section 359.5 of
the California Code of Civil Procedure;
(d) any requirement of marshaling or any other principle of election
of remedies and all rights and defenses arising out of an election of
remedies by the Beneficiary, even though that election of remedies, such as
non-judicial foreclosure with respect to the security for a guarantied
obligation, has destroyed such Guarantor's rights of subrogation, and
reimbursement against the Company by the operation of Section 580d of the
California Code of Civil Procedure or otherwise;
(e) any right to assert against the Beneficiary any defense (legal or
equitable), set-off, counterclaim and other right that any Guarantor may
now or any time hereafter have against the Company or any other Obligor;
(f) presentment, demand for payment or performance (including
diligence in making demands hereunder), notice of dishonor or
nonperformance, protest, acceptance and notice of acceptance of this
Guaranty, and all other notices of any kind;
(g) any rights, defenses and other benefits that such Guarantor may
have by reason of any failure of the Beneficiary to comply with Applicable
Law in connection with a disposition of Collateral;
(h) all defenses that at any time may be available to such Guarantor
by virtue of any valuation, stay, moratorium or other law now or hereafter
in effect;
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(i) any failure, omission, delay or lack of diligence on the part of
the Beneficiary to enforce, assert or exercise any right, power or remedy
conferred on the Beneficiary in respect of the Guarantied Obligations; or
(j) ALL RIGHTS AND DEFENSES THAT ARE OR MAY BECOME AVAILABLE TO SUCH
GUARANTOR BY REASON OF SECTIONS 2787 TO 2855, INCLUSIVE, AND SECTION 3433
OF THE CALIFORNIA CIVIL CODE OR SIMILAR APPLICABLE LAW.
10.6 Subrogation; Certain Agreements.
(a) Each Guarantor waives any and all rights of subrogation,
indemnity, contribution or reimbursement, and any and all benefits of and
rights to enforce any power, right or remedy that the Beneficiary may now
or hereafter have in respect of the Guarantied Obligations against the
Company or any other Obligor, any and all benefits of and rights to
participate in any collateral, whether real or personal property, now or
hereafter held by the Beneficiary, and any and all other rights and claims
(as defined in the Bankruptcy Code) the Guarantor may have against the
Company or any other Obligor, under Applicable Law, or otherwise, at law or
in equity, by reason of any payment hereunder, unless and until the
Obligations shall have been paid in full. Without limitation, each
Guarantor shall exercise no voting rights, shall file no claim, and shall
not participate or appear in any bankruptcy or insolvency case involving
the Company with respect to the Guarantied Obligations unless and until all
the Guarantied Obligations shall have been paid in full. If,
notwithstanding the foregoing, any amount shall be paid to any Guarantor on
account of any such rights at any time, such amount shall be held in trust
for the benefit of the Beneficiary and shall forthwith be paid to the
Beneficiary to be credited and applied in accordance with the terms of this
Agreement and the other Investment Documents upon the Guarantied
Obligations, whether matured, unmatured, absolute or contingent, in the
discretion of the Beneficiary.
(b) Each Guarantor assumes the responsibility for being and keeping
itself informed of the financial condition of the Company and each other
Obligor and of all other circumstances bearing upon the risk of non-payment
of the Guarantied Obligations that diligent inquiry would reveal, and
agrees that the Beneficiary shall have no duty to advise any Guarantor of
information regarding such condition or any such circumstances.
10.7 Bankruptcy No Discharge.
(a) Without limiting Section 10.3, this Guaranty shall not be
discharged or otherwise affected by any bankruptcy, reorganization,
liquidation, dissolution or similar proceeding commenced by or against the
Company, any Guarantor or any other Obligor, including (i) any discharge
of, or bar or stay against collecting, all or any part of the Guarantied
Obligations in or as a result of any such proceeding, whether or not
assented to by the Beneficiary, (ii) any disallowance of all or any portion
of the Beneficiary's claim for repayment of the Guarantied Obligations,
(iii) any use of cash or other collateral in any such proceeding, (iv) any
agreement or stipulation as to adequate protection in any such proceeding,
(v) any failure by the Beneficiary to file or enforce a claim against the
Company, any Guarantor or any
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other Obligor or its estate in any bankruptcy or reorganization case, (vi)
any amendment, modification, stay or cure of the Beneficiary's rights that
may occur in any such proceeding, (vii) any election by the Beneficiary
under Section 1111(b)(2) of the Bankruptcy Code, or (viii) any borrowing or
grant of a Lien under Section 364 of the Bankruptcy Code. Each Guarantor
understands and acknowledges that by virtue of this Guaranty, it has
specifically assumed any and all risks of any such proceeding with respect
to the Company and each other Obligor.
(b) Notwithstanding anything to the contrary herein, any Event of
Default under Section 11.1(h) or Section 11.1(i) shall render all
Guarantied Obligations automatically due and payable for purposes of this
Guaranty, without demand on the part of the Beneficiary.
(c) Notwithstanding anything to the contrary herein contained, this
Guaranty (and any Lien on the Collateral securing this Guaranty or the
Guarantied Obligations) shall continue to be effective or be reinstated, as
the case may be, if at any time any payment, or any part thereof, of any or
all of the Guarantied Obligations is rescinded, invalidated, declared to be
fraudulent or voidable as a preference or otherwise required to be restored
or returned by the Beneficiary in connection with any bankruptcy,
reorganization, liquidation, dissolution or similar proceeding involving
the Company, any other Obligor or otherwise, or if the Beneficiary elects
to return any such payment or proceeds or any part thereof in its sole
discretion, all as though such payment had not been made or such proceeds
not been received.
10.8 Maximum Liability of Guarantors. If the obligations of any Guarantor
hereunder otherwise would be subject to avoidance under Section 548 of the
Bankruptcy Law or any applicable state law relating to fraudulent conveyances or
fraudulent transfers, taking into consideration such Guarantor's (a) rights of
reimbursement and indemnity from the Company with respect to amounts paid by
such Guarantor, (b) rights of subrogation to the rights of the Beneficiary and
(c) rights of contribution from each other Obligor, then such obligations hereby
are reduced to the largest amount that would make them not subject to such
avoidance. Any Person asserting that such Guarantor's obligations are so
avoidable shall have the burden (including the burden of production and of
persuasion) of proving (i) that, without giving effect to this Section 10.8,
such Guarantor's obligations hereunder would be avoidable and (ii) the extent to
which such obligations are reduced by operation of this Section 10.8.
10.9 Financial Benefit. Each Guarantor hereby acknowledges and warrants it
has derived or expects to derive a financial advantage from the financial
accommodations made by the Beneficiary to the Company. After giving effect to
this Guaranty and the other transactions contemplated hereby, such Guarantor is
not Insolvent or left with assets or capital that is unreasonably small in
relation to its business or the Obligations.
10.10 Review of Documents; Understanding with Respect to Waivers. Each
Guarantor hereby acknowledges that it has copies of and is fully familiar with
this Agreement and each of the other Investment Documents executed and delivered
(or to be executed and delivered) to the Company in connection herewith. Each
Guarantor warrants and agrees that each waiver set forth in this Section 10 is
made with such Guarantor's full knowledge of its significance and consequences
and after opportunity to consult with
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counsel of its own choosing and that, under the circumstances, each such waiver
is reasonable and should not be found contrary to public policy or law.
10.11 Corporate Existence; Properties. Each Guarantor covenants that it
will at all times preserve and maintain its corporate existence and any rights
and franchises material to its business and maintain in good repair, working
order and condition (ordinary wear and tear excepted), all of the material
properties useful or necessary to its business, and from time to time such
Guarantor will make or cause to be made all appropriate repairs, renewals and
replacements thereto.
10.12 Guarantor Acknowledgment. Each Guarantor hereby acknowledges that the
Purchaser would not have entered into this Agreement or any other Investment
Documents or agreed to consummate the transactions contemplated hereby and
thereby but for the delivery by the Guarantors of this Guaranty and other
covenants and agreements set forth in this Section 10.
11. DEFAULTS AND REMEDIES.
11.1 Events of Default. Any one or more of the following events shall be an
"Event of Default":
(a) Principal and Interest. The Company shall (i) fail to pay as and
when due (whether at stated maturity, upon acceleration or required
prepayment or otherwise) any principal of the Note, or (ii) fail to pay any
interest, premium, if any, fees, costs, expenses or other amounts payable
under this Agreement, the Note or any other Investment Document on the due
date hereunder or thereunder; or
(b) Covenants.
(i) Any Company Party shall breach or fail to perform, comply
with or observe any agreement, covenant or obligation required to be
performed by it under (A) Sections 8.3 (Information Reporting
Requirements), Section 8.4 (Company SEC Documents), 8.9 (Maintenance
of Insurance), 8.10 (Taxes), 8.11 (ERISA Matters) and 8.15
(Environmental Matters) or (B) Sections 9.1 (Limitations on
Indebtedness), 9.3 (Limitations on Investments), 9.4 (Limitations on
Restricted Payments), 9.5 (Change in Business), 9.8 (Transactions with
Affiliates) and 9.9 (Fundamental Changes); or
(ii) The Company shall fail to perform, comply with or observe any
of the covenants set forth in Section 9.14; or
(c) Investment Documents. Any Company Party shall breach or fail to
perform, comply with or observe any agreement, covenant or obligation
required to be performed by it under this Agreement or any other Investment
Document (other than the agreements, covenants and other obligations
covered by Section 11.1(a) and Section 11.1(b)) and, if such breach or
failure may be cured, such breach or failure shall not have been remedied
within ten (10) Business Days after any officer of the Company or any of
its Subsidiaries becomes aware or should have become aware of such failure
or breach; or
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(d) Representations and Warranties. Any representation or warranty
made by any Company Party under, relating to or in connection with this
Agreement or any other Investment Document shall be false or misleading
when made; or
(e) Senior Credit Defaults. Any "Event of Default" (as defined in the
Senior Credit Agreement) shall have occurred and be continuing;
(f) Other Debt Documents. Any Company Party or any of its Subsidiaries
(i) shall default in the payment (whether at stated maturity, upon
acceleration or required prepayment or otherwise), beyond any period of
grace provided therefor, of any principal of or interest on any other
Indebtedness with a principal amount in excess of $100,000, or (ii) shall
commit any breach of or default under any term of any agreement, indenture
or instrument evidencing or governing any other Indebtedness, if the effect
of such breach or default is to cause, or to permit the holder or holders
of such other Indebtedness to cause (upon the giving of notice or the
passage of time or both), such other Indebtedness to become or be declared
due and payable, or required to be prepaid, redeemed, purchased or defeased
(or an offer of prepayment, redemption, purchase or defeasance is made)
prior to its stated maturity, unless such breach or default has been waived
within ten (10) days following such breach or default by the Person or
Persons entitled to give such waiver; or
(g) Repudiation of Investment Documents. Any Investment Document, or
any material provision thereof, shall cease to be of full force and effect
for any reason, or any Company Party shall contest or purport to repudiate
or disavow any of its obligations under or the validity or enforceability
of any Investment Document or any material provision thereof, including by
operation of law; or
(h) Involuntary Bankruptcy. There shall be commenced against any
Company Party or any of its Subsidiaries an involuntary case seeking the
liquidation or reorganization of such Person under the Bankruptcy Law or
any similar proceeding under any other Applicable Law or an involuntary
case or proceeding seeking the appointment of a custodian or to take
possession of all or a substantial portion of its property or to operate
all or a substantial portion of its business, and any of the following
events occur: (i) any such Person consents to such involuntary case or
proceeding; (ii) the petition commencing the involuntary case or proceeding
is not timely controverted; (iii) the petition commencing the involuntary
case or proceeding remains undismissed and unstayed for a period of ninety
(90) days; or (iv) an order for relief shall have been issued or entered
therein; or
(i) Voluntary Bankruptcy. Any Company Party or any of its Subsidiaries
shall institute a voluntary case seeking liquidation or reorganization
under the Bankruptcy Law or any similar proceeding under any other
Applicable Law, or shall consent thereto; or shall consent to the
conversion of an involuntary case to a voluntary case; or shall file a
petition, answer a complaint or otherwise institute any proceeding seeking,
or shall consent or acquiesce to the appointment of, a custodian or to take
possession of all or a substantial portion of its property or to operate
all or a substantial portion of its business; or shall make a general
assignment for the benefit of creditors; or shall generally not pay its
debts as they become due; or the
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Board of Directors of any such Person (or any committee thereof) adopts any
resolution or otherwise authorizes action to approve any of the foregoing;
or
(j) Undischarged Judgments. Any Company Party or any of its
Subsidiaries shall suffer any money judgment, writ, warrant of attachment
or other order that involves an amount or value in excess of the sum of (i)
$250,000, plus (ii) the amount of any applicable deductible under any
insurance policies insuring such Company Party or any such Subsidiary
against such money judgment, writ, warrant or other order, provided that
(A) such excess amount or value shall not be fully covered by insurance
(and, if requested by the Purchaser, the Company shall cause a letter to be
furnished to the Purchaser from the relevant insurance company confirming
that such excess amount or value is fully covered by insurance) and (B)
such judgment, writ, warrant or other order shall continue unsatisfied and
unstayed for a period of thirty (30) days; or
(k) Material Adverse Change. There shall occur any Material Adverse
Change; or
(l) Change in Control. There shall occur any Change in Control; or
(m) LLCP Representative. The LLCP Representative (as such term is
defined in the Investor Rights Agreement), if appointed to the Board of
Directors of the Company pursuant to Section 1 of the Investor Rights
Agreement, shall be removed from the Board of Directors of the Company, or
the LLCP Representative shall not be elected or appointed to such Board at
any future election of directors, and, in each such case, the Company shall
not have caused any other individual designated by the Purchaser as the
LLCP Representative to have been nominated and elected or appointed as a
member of such Board within five (5) days after the Purchaser shall have
designated such other LLCP Representative (provided, however, that the
voluntary resignation of the LLCP Representative shall not be deemed to
constitute an Event of Default under this clause (m)).
The foregoing Events of Default shall be deemed to have occurred,
respectively, and any adjustments in the interest rate under the Note or the
right to exercise any other rights, powers or remedies by the Purchaser
hereunder or thereunder shall arise or accrue, at the following times:
(i) in the case of the clause (a) above, as of 12:00 p.m. (noon)
(Los Angeles time) on the day on which such payment is due but has not been
paid;
(ii) in the case of clause (b) above, immediately upon the occurrence
of such breach or failure;
(iii) in the case of clause (c) above, as of the close of business on
such tenth (10th) Business Day, if such breach or failure shall not have been
cured, or as of the close of business on the day on which such breach or
violation occurs, if such breach or failure cannot be cured;
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(iv) in the case of clause (d) above, as of the close of business on
the day on which the Company first became aware, or should have become aware,
that such representation or warranty was false or misleading when made;
(v) in the case of clause (e) above, as of the occurrence of such
"Event of Default";
(vi) in the case of clause (f)(i) above, as of the close of business
on the day on which such payment of principal or interest is due, or in the case
of clause (f)(ii), as of the close of business on the tenth (10th) day following
such breach or default if such breach or default has not been waived by the
Person or Persons entitled to give such waiver;
(vii) in the case of clause (g) above, as of the close of business on
the day such provision ceases to be enforceable or is repudiated, revoked,
renounced or terminated;
(viii) in the case of clause (j) above, as of the close of business on
the last day of such thirty (30) day period if such judgment, writ, warrant or
other order remains unsatisfied or unstayed;
(ix) in the case of clauses (h) and (i) above, immediately prior to
the occurrence of any of the events enumerated therein;
(x) in the case of clause (k) above, immediately upon the
occurrence of the Material Adverse Change;
(xi) in the case of clause (l) above, immediately upon the
occurrence of the Change in Control; and
(xii) in the case of clause (m) above, as of the close of business on
the last day of such five (5) day period if the Board of Directors of the
Company shall not have duly elected or appointed such other LLCP Representative
to the Board.
11.2 Acceleration. If any Event of Default (other than an Event of Default
specified in clause (h) or (i) of Section 11.1 occurs and is continuing, the
Purchaser may, by written notice to the Company, declare all outstanding
principal of, premium, if any, accrued and unpaid interest on, and all other
amounts under the Note, and all other Obligations, to be due and payable. Upon
any such declaration of acceleration, such principal, premium, if any, interest
and other amounts shall become immediately due and payable. If an Event of
Default specified in clause (h) or (i) of Section 11.1 occurs, all outstanding
principal of, premium, if any, accrued and unpaid interest on, and all other
amounts under the Note, and all other Obligations, shall become immediately due
and payable without any declaration or other act on the part of the Purchaser.
The Company hereby waives all presentment for payment, demand, protest, notice
of protest and notice of dishonor, and all other notices of any kind to which it
may be entitled under Applicable Law or otherwise.
11.3 Other Remedies. If any Default or Event of Default shall occur and be
continuing, the Purchaser may proceed to protect and enforce its rights and
remedies under this Agreement and any other Investment Document by exercising
all rights and remedies available under this Agreement, any other Investment
Document or Applicable Law (including the Code), either by suit in equity or by
action at law, or both, whether for the
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collection of principal of, premium, if any, or interest on the Note, to enforce
the specific performance of any covenant or other term contained in this
Agreement or any other Investment Document. No remedy conferred in this
Agreement upon the Purchaser is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law or in
equity or by statute or otherwise.
11.4 Appointment of Receiver. In addition to all other rights, powers and
remedies that the Purchaser has under this Agreement, any other Investment
Document or Applicable Law, the Purchaser shall, upon the occurrence of an Event
of Default, be entitled to, and the Company and the Guarantors hereby consent in
advance to, the appointment of a receiver by any court of competent jurisdiction
to take possession of the Collateral and to take control of the Company for the
purpose of operating and thereafter selling the Company to satisfy its
obligations to its creditors, including the Purchaser.
11.5 Waiver of Past Defaults. The Purchaser may, by written notice to the
Company, waive any Default or Event of Default and its consequences with respect
to this Agreement, the Note or any other Investment Document; provided, however,
that no such waiver will extend to any subsequent or other Default or Event of
Default or impair any rights of the Purchaser which may arise as a result of
such Default or Event of Default.
12. GENERAL PROVISIONS.
12.1 Survival of Representations and Warranties. All representations and
warranties of the Company contained herein and in the other Investment
Documents, or made in writing by or on behalf of the Company Parties (or any of
them) pursuant to or in connection herewith or therewith, shall survive the
execution and delivery of this Agreement and the Note, the repayment of the Note
and the sale of the Warrant Shares, and any due diligence or other investigation
made by or on behalf of the Purchaser.
12.2 Waiver. The Purchaser may (a) extend the time for the performance of
any of the obligations or other acts of the Company or any Guarantor, (b) waive
any inaccuracies in the representations or warranties of the Company or any
Guarantor or (c) waive compliance with any of the conditions, covenants or
agreements of the Company or any Guarantor contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument signed by the
Purchaser. Any waiver of the breach of any term or condition shall not be
construed as a waiver of any other breach or subsequent waiver of the same term
or condition, or a waiver of any other term or condition of this Agreement. The
failure of by the Purchaser to assert any of its rights hereunder shall not
constitute a waiver of any such rights.
12.3 Amendments. No amendment, supplement or other modification to this
Agreement or any other Investment Document shall be effective unless the same
shall be in writing and signed by the Purchaser, and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, if, and only if, the Company shall have obtained the prior
written consent of the Purchaser to such action or omission. No course of
dealing between any Company Party or its Subsidiaries, on the one hand, and the
Purchaser, on the other hand, nor any delay in exercising any rights hereunder
or under the Note or any other Investment Document shall operate as a waiver of
any rights of the Purchaser.
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12.4 Entire Agreement. This Agreement, together with the Exhibits and
Disclosure Schedules which are all incorporated herein by this reference and are
an integral part of this Agreement, the Note and the other Investment Documents
constitute the full and entire agreement and understanding between the Purchaser
and the Company relating to the subject matter hereof and thereof, and supersede
all prior oral and written, and all contemporaneous oral, agreements and
understandings relating to the subject matter hereof.
12.5 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
12.6 Successors and Assigns; Assignments. This Agreement shall inure to the
benefit of, and be binding upon, the parties and their respective successors and
permitted assigns. The Purchaser may, without the consent of any Company Party,
sell, assign or delegate to one or more Persons (each an "Assignee") its rights
and obligations under this Agreement or any other Investment Document and all,
or any part, of the Obligations; provided, however, that the Company Parties may
continue to deal solely and directly with the Purchaser in connection with the
interest so assigned to the Assignee until written notice of such assignment,
together with payment instructions, addresses and related information with
respect to the Assignee shall have been given to the Company. If the Purchaser
assigns to any Assignee a fifty percent (50.0%) or lesser interest in and to the
then outstanding principal amount of the Note, any decisions that the Purchaser
is entitled to make under this Agreement, the Note and the other Investment
Documents shall be made by the Purchaser, and the Company may continue to deal
solely and directly with respect to the Purchaser in connection with the
interests so assigned to the Assignee. If the Purchaser assigns to any Assignee
more than a fifty percent (50.0%) interest in and to the then outstanding
principal amount of the Note, any decisions that the Purchaser is entitled to
make under this Agreement, the Note and the other Investment Documents shall be
made by the Holders of a majority of the principal amount of the Note
outstanding at the time such decision is made.
12.7 Notices. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if transmitted by telecopier with receipt
acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of
seventy-two (72) hours after mailing, if mailed by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
(i) If to the Purchaser, to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Capital Partners II, L.P.
c/o Levine ▇▇▇▇▇▇▇▇▇ Capital Partners, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
Irell & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to the Company Parties (or any one of them), at:
Overhill Farms, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address or addresses as the Purchaser or the Company, as the
case may be, may specify by written notice given in accordance with this Section
12.7.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one instrument.
12.9 Governing Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT REGARD TO THE
CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF).
12.10 Consent to Jurisdiction and Venue. EACH COMPANY PARTY AND THE
PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS AND AGREES THAT ALL
ACTIONS, SUITS OR OTHER PROCEEDINGS ARISING UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER INVESTMENT DOCUMENT SHALL BE TRIED AND LITIGATED IN STATE
OR FEDERAL COURTS LOCATED IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY AND ALL CLAIMS, CONTROVERSIES AND DISPUTES
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ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER INVESTMENT DOCUMENT.
NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED IN THIS SECTION 12.10 SHALL
PRECLUDE THE PURCHASER FROM BRINGING ANY ACTION, SUIT OR OTHER PROCEEDING IN THE
COURTS OF ANY OTHER LOCATION WHERE THE COMPANY PARTIES OR ANY ONE OF THEM OR ANY
OF ITS OR THEIR ASSETS OR THE COLLATERAL MAY BE FOUND OR LOCATED OR TO ENFORCE
ANY JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE PURCHASER.
EACH COMPANY PARTY AND THE PURCHASER HEREBY (A) IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION, SUIT OR OTHER PROCEEDING COMMENCED IN ANY SUCH COURT, (B) WAIVES ANY
RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR ANY
OBJECTION THAT SUCH PERSON MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION OR
IMPROPER VENUE AND (C) CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH COMPANY PARTY AND THE
PURCHASER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT OR OTHER
PROCESS ISSUED IN ANY SUCH ACTION, SUIT OR OTHER PROCEEDING AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN SECTION
12.7 (NOTICES) AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF SUCH PERSON'S ACTUAL RECEIPT THEREOF OR FIVE DAYS AFTER DEPOSIT IN
THE UNITED STATES MAIL, PROPER POSTAGE PREPAID.
TO THE EXTENT PERMITTED UNDER THE APPLICABLE LAWS OF ANY SUCH JURISDICTION,
EACH COMPANY PARTY HEREBY WAIVES, IN RESPECT OF ANY SUCH ACTION, SUIT OR OTHER
PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS THAT NOW OR HEREAFTER,
BY REASON OF SUCH PERSON'S PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE
AVAILABLE TO IT.
12.11 Limitation on Purchaser Liability. No claim shall be made by any
Company Party or any of its Affiliates against the Purchaser, or any Affiliates,
partners, directors, officers, employees, agents, representatives, attorneys,
accountants or advisors of the Purchaser, for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or under any other theory of liability arising out of or related to this
Agreement or any other Investment Document or the transactions contemplated
hereby or thereby, or any act, omission or event occurring in connection
herewith or therewith. Each Company Party hereby waives, releases and agrees not
to ▇▇▇ upon any claim for such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
12.12 Publicity. The Company Parties, on the one hand, and the Purchaser,
on the other hand, will consult with the other before issuing, and provide each
other the opportunity to review, comment upon and concur with and use reasonable
efforts to agree on, any press release or other public statement with respect to
the transactions contemplated by this Agreement, and shall not issue any such
press release or make such other public
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announcement prior to such consultation, except as required under Applicable
Law. The parties agree that the initial press release to be issued with respect
to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties. Notwithstanding anything to the contrary,
the Company hereby consents to the preparation and publication by the Purchaser
of an advertisement "tombstone" publicly disclosing the closing of the
transactions contemplated by this Agreement.
12.13 Due Diligence Investigation. The Company Parties hereby acknowledge
and agree that neither the Purchaser's review of the books and records or
condition (financial or otherwise) of the Company Parties and their respective
Subsidiaries nor any other due diligence investigation by or on behalf of the
Purchaser or its counsel shall be deemed to constitute knowledge by the
Purchaser of any facts or other matters so as so reduce the Purchaser's right to
rely on the truth or accuracy of the representations and warranties of the
Company and the Guarantors under this Agreement or any other Investment
Document.
12.14 Confidentiality. The Purchaser agrees to maintain the confidentiality
of any of the Company's confidential or proprietary information it receives from
the Company and not to disclose such information to third parties without the
prior consent of the Company, except that the Purchaser may disclose such
confidential or proprietary information (a) to legal counsel, accountants and
other professional advisors to the Purchaser, (b) to the partners, officers,
directors and employees of the Purchaser, (c) to regulatory officials having
jurisdiction over the Purchaser, (d) if required by Applicable Laws or in
connection with any legal proceeding, (e) to any other Person in connection with
any assignment of the Note (or any interest therein) or sale of the Warrant
Shares and (f) that has been previously disclosed publicly without breach of
this Agreement.
12.15 Amendment and Restatement. Effective on and as of the Effective Date,
this Agreement shall supersede the Original Securities Purchase Agreement
insofar as the two are inconsistent. However, the execution and delivery of this
Agreement shall not excuse, or constitute a waiver of, any Defaults or Events of
Default under the Original Securities Purchase Agreement, it being understood
that this Agreement is not a termination of the Original Securities Purchase
Agreement, but is a modification (and, as modified, a continuation) of the
Original Securities Purchase Agreement. The Company Parties acknowledge and
agree that the Original Securities Purchase Agreement, as amended and restated
hereby, is affirmed in all respects.
12.16 WAIVER OF TRIAL BY JURY. EACH PARTY HEREBY KNOWINGLY, INTENTIONALLY
AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES,
RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION,
SUIT OR OTHER PROCEEDING BASED UPON, ARISING OUT OF OR IN ANY WAY RELATING TO
(a) THIS AGREEMENT, THE NOTE, THE COLLATERAL DOCUMENTS OR ANY OTHER INVESTMENT
DOCUMENT, INCLUDING ANY PRESENT OR FUTURE AMENDMENT THEREOF, OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY OR RELATED TO THIS AGREEMENT OR ANY OTHER
INVESTMENT DOCUMENT, OR (b) ANY CONDUCT, ACT OR OMISSION OF THE PARTIES OR THEIR
AFFILIATES (OR ANY OF THEM) WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
INVESTMENT DOCUMENT, INCLUDING ANY PRESENT OR FUTURE AMENDMENT THEREOF, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, REGARDLESS OF WHICH PARTY INITIATES
SUCH ACTION, SUIT
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OR OTHER PROCEEDING; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
ACTION, SUIT OR OTHER PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE
WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized representatives as of the date
first written above.
COMPANY
OVERHILL FARMS, INC., a Nevada corporation
By: _______________________________________
▇▇▇▇▇ ▇▇▇▇▇
President
By: _______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
GUARANTOR
OVERHILL L. C. VENTURES, INC., a California
corporation
By: _______________________________________
▇▇▇▇▇ ▇▇▇▇▇
President and Chief Executive Officer
By: _______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President and Chief Financial
Officer
PURCHASER
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS II, L.P.,
a California limited partnership
By: LLCP California Equity Partners II, L.P.,
a California limited partnership, its
General Partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Capital Partners, Inc.,
a California corporation, its General Partner
By: __________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
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ACKNOWLEDGMENT AND AGREEMENT OF TREECON
The undersigned acknowledges that it has read the foregoing Agreement and
acknowledges and agrees that it will derive substantial benefits from the
transactions contemplated thereby and the other Investment Documents.
Accordingly, the undersigned hereby (a) represents and warrants to the Purchaser
that the representations and warranties set forth in Section 3.19 are true and
correct in all respects and (b) covenants and agrees to perform, comply with and
observe the terms of Section 2.3 (Limited Release of TreeCon), Section 8.10
(Taxes) and Article XII (General Provisions), in each case for the benefit of
the Company and the Purchaser as if the undersigned were a party to the
Agreement.
OVERHILL CORPORATION, INC. (formerly known
as Polyphase Corporation and to be known
from and after the Spin-Off as TreeCon
Resources, Inc.), a Nevada corporation
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
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