As filed with the Securities and Exchange Commission on April 30, 1999
Registration No. 333--
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
OREGON BAKING COMPANY
(DBA MARSEE BAKING)
(Name of small business issuer in its charter)
OREGON 5812 93-1091480
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) identification No.)
2287 NW PETTYGROVE STREET, PORTLAND, OREGON 97210
(503) 295-4000
(Address and telephone number of registrant's principal executive
offices and principal place of business)
RAYMOND W. LINDSTROM
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Marsee Baking
2287 NW Pettygrove, Portland, Oregon 97210
(503) 295-4000
(Name, address and telephone number
of agent for service)
-------------
Copies to:
THOMAS P. PALMER, ESQ. BERT L. GUSRAE, ESQ.
BRENDAN R. MCDONNELL, ESQ. David A. Carter, P.A.
Tonkon Torp LLP Suite 210, West Tower
888 SW Fifth Avenue, Suite 1600 2300 Glades Road
Portland, Oregon 97204 Boca Raton, Florida 33431
(503) 221-1440 (561) 750-6999
Fax (503) 274-8779 Fax (561) 367-0960
-------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the date on which this Registration Statement becomes
effective.
-------------
o If any of the securities being offered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. / /
o If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. / /
__________
o If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / __________
o If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / __________
o If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================== =================== ======================== ======================== ===============
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered(1) Offering Price Per Aggregate Offering Registration
Share(2) Price(2) Fee
<S> <C> <C> <C> <C>
- ------------------------------- ------------------- ------------------------ ------------------------ ---------------
Common Stock(3) 2,012,500 $ 5.00 $ 10,062,500.00 $2,797.38
- ------------------------------- ------------------- ------------------------ ------------------------ ---------------
Common Stock Purchase
Warrants ("Purchase 2,012,500 0.125 251,562.50 69.93
Warrant")(4)
- ------------------------------- ------------------- ------------------------ ------------------------ ---------------
Common Stock underlying
Purchase Warrant 2,012,500 5.00 10,062,500.00 2,797.38
- ------------------------------- ------------------- ------------------------ ------------------------ ---------------
Common Stock Purchase
Warrants to be issued to the
common stock underwriter
("Common Stock Underwriter
Warrants") 175,000 0.001 175.00 0.05
- ------------------------------- ------------------- ------------------------ ------------------------ ---------------
Common Stock underlying
Common Stock Underwriter
Warrants 175,000 8.25 1,443,750.00 401.36
- ------------------------------- ------------------- ------------------------ ------------------------ ---------------
Warrant Purchase Warrants to
be issued to the warrants
underwriter ("Warrants
Underwriter Warrants") 175,000 0.001 175.00 0.05
- ------------------------------- ------------------- ------------------------ ------------------------ ---------------
Common Stock Purchase
Warrants underlying Warrants
Underwriter Warrants 175,000 0.20625 36,093.75 10.03
- ------------------------------- ------------------- ------------------------ ------------------------ ---------------
Common Stock underlying
Common Stock Purchase
Warrants underlying Warrants
Underwriter Warrants 175,000 8.25 1,443,750.00 401.36
- ------------------------------- ------------------- ------------------------ ------------------------ ---------------
Total $ 23,300,506.25 $6,477.54
=============================== =================== ======================== ======================== ===============
</TABLE>
- -------------------------------
1 Pursuant to Rule 416, there are also registered hereby such additional
indeterminate number of shares of common stock as may become issuable by reason
of stock splits, stock dividends and other adjustments pursuant to anti-dilution
provisions of the warrants registered hereby.
2 Estimated solely for the purpose
of calculating the registration fee pursuant to Rule 457(a) under the Securities
Act of 1933, as amended.
3 Includes 262,500 shares that the underwriter has the option to purchase to
cover over-allotments, if any.
4 Includes 262,500 purchase warrants that the underwriter has the option to
purchase to cover over-allotments, if any.
------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE>
PRELIMINARY PROSPECTUS, DATED APRIL 30, 1999
SUBJECT TO COMPLETION
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
INITIAL PUBLIC OFFERING
PROSPECTUS
[Marsee Baking logo]
1,750,000 SHARES OF COMMON STOCK
1,750,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
-------------
This is an initial public offering of 1,750,000 shares of common stock and
1,750,000 warrants to purchase common stock of Oregon Baking Company, doing
business as Marsee Baking. The common stock and purchase warrants are being
offered separately and not as units, and each are separately transferable. The
anticipated initial public offering price of the common stock is $5.00 per share
and of the purchase warrants is $0.125 per warrant. Each purchase warrant
entitles the holder to purchase, during the five-year period following the
offering, one share of Marsee Baking common stock at a price of $5.00 per share,
subject to prior redemption of the purchase warrant by the company, adjustment
of the warrant exercise price under certain circumstances, and other
limitations. See "Description of Securities" for a complete description of
important features of the common stock and purchase warrants.
There is currently no public market for the common stock or the purchase
warrants. Marsee Baking has applied to include the shares of common stock, under
the symbol "MSEE," and the purchase warrants, under the symbol "MSEEW," for
quotation on the Nasdaq SmallCap Market. Marsee Baking has also applied to list
the common stock and purchase warrants on the Boston Stock Exchange under the
symbols "[__]" and "[__]W."
-------------
<TABLE>
<CAPTION>
Underwriting
Initial public discount Proceeds to Marsee
offering price and commissions Baking before expenses
-------------- --------------- ----------------------
<S> <C> <C> <C>
Per Share............... $5.00 $0.50 $7,875,000
Per Purchase Warrant.... $0.125 $0.0125 $196,875
Total............. $8,968,750 $896,875 $8,071,875
</TABLE>
We have granted the underwriter a 45-day option to purchase up to an
additional 262,500 shares of common stock and up to an additional 262,500
purchase warrants to cover over-allotments. See "Underwriting."
-------------
INVESTING IN THESE SECURITIES INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
-------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BARRON CHASE SECURITIES, INC. [LOGO]
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary.........................................4
Risk Factors...............................................7
Use of Proceeds...........................................12
Dividend Policy...........................................12
Capitalization............................................13
Dilution..................................................14
Management's Discussion and Analysis of
Financial Condition and Results of Operations...........15
Business..................................................22
Management................................................30
Certain Transactions......................................37
Principal Shareholders....................................39
Description of Securities.................................40
Shares Eligible for Future Sale...........................46
Underwriting..............................................48
Legal Matters.............................................50
Experts...................................................50
Where You Can Find More Information.......................50
Index to Financial Statements............................F-1
<PAGE>
[INSIDE FRONT COVER]
[Photos and captions]
2
<PAGE>
-------------
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events, including, among other things:
o Implementation of our operating model,
o Management of our growth, our expenditures and our profitability,
o Expansion of our customer base,
o Integration of new stores into our operating model, and
o Competition in the bakery-cafe segment of the specialty restaurant
industry.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue" or the negative of these
terms or other comparable terminology.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance, achievements and prospects to be materially different
from those expressed or implied by the forward-looking statements. These risks,
uncertainties and other factors include, among others, those identified under
"Risk Factors" and elsewhere in this prospectus.
We do not intend to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties, and assumptions, the forward-looking
events discussed in this prospectus might not occur.
You should rely only on the information contained in this prospectus. We
have not, and the underwriter has not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriter is not, making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information
appearing in this prospectus is accurate only as of the date on the front cover
of this prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.
-------------
We are an Oregon corporation. Our principal executive offices are located
at 2287 NW Pettygrove Street, Portland, Oregon, 97210, and our telephone number
is (503) 295-4000. In this prospectus, the "company," "Marsee Baking," "we,"
"us" and "our" refer to Oregon Baking Company, doing business as Marsee Baking
(but not to the underwriter listed in this prospectus), including the businesses
acquired by us, unless the context otherwise requires. In addition, "common
stock" refers to our common stock with no par value; "purchase warrants" refers
to the redeemable common stock purchase warrants sold in this offering. See
"Description of Securities." The underwriter for this offering is Barron Chase
Securities, Inc.
-------------
Marsee Baking -registered trademark- and BagelMax -registered trademark-
are trademarks, registered trademarks, service marks or registered service marks
of Marsee Baking. This prospectus also includes product names, trade names,
trademarks and service marks of other companies.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE
IMPORTANT TO YOU. BEFORE MAKING AN INVESTMENT DECISION, YOU SHOULD READ THIS
ENTIRE PROSPECTUS. UPON THE COMPLETION OF THIS OFFERING, THE ONLY CLASS OF OUR
CAPITAL STOCK OUTSTANDING WILL BE OUR COMMON STOCK. EXCEPT WHERE OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES (1) THE AUTOMATIC
CONVERSION OF SERIES A, B, C AND D PREFERRED STOCK INTO COMMON STOCK UPON THE
CLOSING OF THIS OFFERING, AND (2) THE UNDERWRITER'S OVER-ALLOTMENT OPTIONS WILL
NOT BE EXERCISED.
THE COMPANY
Marsee Baking owns and operates 18 bakery-cafes in the Pacific Northwest
that offer more than 100 artisan bakery products, as well as made-to-order
sandwiches, soups and salads, in a friendly, neighborhood atmosphere. Each
bakery-cafe operates as a premium bakery, providing a relaxing cafe experience
that addresses the morning, lunch and late-afternoon day-parts. For 1998, the
six bakery-cafes operating in the company's format for more than a year had
average revenues of approximately $790,000 per store. Marsee Baking also
distributes its products and builds brand awareness through its wholesale
operations, providing specialty retailers and other institutions with a complete
line of Marsee Baking products.
Marsee Baking, which began with one Portland bakery-cafe in 1993, grew to
eight bakery-cafes before acquiring additional stores in the greater Portland,
Oregon and Seattle, Washington metropolitan areas through an acquisition in
early 1998. Nine of the stores acquired were converted to the Marsee Baking
concept during 1998 and have been integrated into Marsee Baking's operations.
Marsee Baking operates a commissary in each of its two markets that serves as a
central production and distribution facility. The commissaries together produce
a full line of artisan-baked goods based on authentic recipes for daily
distribution to each of the bakery-cafes.
We believe that we can expand our presence in our current areas of
operation and replicate the Marsee Baking concept in other metropolitan areas
for the following reasons:
o WE OFFER A WIDE VARIETY OF PREMIUM QUALITY, ARTISAN BAKERY PRODUCTS.
Marsee Baking differentiates itself in the bakery-cafe segment of the
specialty restaurant industry by offering over 100 different varieties of
premium quality, artisan-crafted products based on authentic recipes for
eat-in or take-out dining. We believe that a diverse and evolving product
menu engenders customer loyalty and encourages repeat business. Our broad
range of products creates a competitive advantage over other stores
offering a single product line (such as bagels) and over bakeries or cafes
that focus only on a single day-part.
o OUR CENTRAL PRODUCTION FACILITIES SERVE MULTIPLE OUTLETS AND PROMOTE COST
EFFICIENCIES, PRODUCT QUALITY AND CONSISTENCY. Our commissaries, which are
strategically located in each market, serve as central production
facilities to our bakery-cafes. The use of central production facilities
permits better quality control, maximum labor efficiency and higher-volume
production of baked goods, using modern processes, while adhering to
traditional artisan-style baking techniques.
o WE HAVE CREATED A DISTINCTIVE DESTINATION THAT SUPPORTS OUR BRAND IMAGE.
We seek to create an authentic neighborhood cafe atmosphere with upscale
decor and uniform interior designs that are unique to the Marsee Baking
concept. We believe that our retail bakery-cafes and wholesale distribution
work together to reinforce our image as a provider of high quality,
artisan-baked goods. The wholesale operation provides Marsee Baking's
complete line of baked goods to quality grocery stores, specialty
retailers, hotels and fine restaurants in order to promote our local
bakery-cafes and to create brand recognition associated with premium
quality baked goods in our markets.
4
<PAGE>
o WE HAVE RECRUITED A NEW, EXPERIENCED MANAGEMENT TEAM. We have recently
recruited a new Chief Executive Officer and a new Chief Financial Officer.
The company's new Chief Executive Officer has over 25 years' experience in
the specialty restaurant industry, including experience in expanding
nationally a specialty baking concept. In addition, we have also recently
recruited a new Chief Financial Officer who has experience in the
management of rapid-growth manufacturing companies.
o THE MARSEE BAKING CONCEPT COMPLEMENTS TODAY'S CONSUMER LIFESTYLE AND
PREFERENCE FOR A HASSLE-FREE, CONVENIENT AND AFFORDABLE DINING EXPERIENCE.
The bakery-cafe offers a shopping destination for gourmet breads and
special occasion cakes, a place for a light lunch or a relaxing spot for an
afternoon cappuccino. Our bakery-cafes offer an authentic dining
experience, hassle-free convenience and an affordable indulgence for our
customers.
o THE MARSEE BAKING CONCEPT HAS SIGNIFICANT BUILT-IN BARRIERS TO ENTRY. Our
broad line of complex products, central baking facilities and the high
"stand-alone" product quality create barriers to entry to competing
bakery-cafe concepts.
THE OFFERING
Common stock offered................ 1,750,000 shares of common stock
Warrants offered.................... 1,750,000 purchase warrants
Common stock to be
outstanding after this offering... 5,366,470 shares
Warrants to be outstanding
after this offering............... 2,137,668 warrants
Use of proceeds..................... Retirement of bridge financing,
new store expansion, reduction
of trade payables, payment of
accrued dividends, and working
capital and general corporate
purposes. See "Use of
Proceeds."
Proposed Nasdaq SmallCap Symbols:
Common stock................... MSEE
Purchase warrants.............. MSEEW
Proposed Boston Stock Exchange Symbols:
Common stock................... [____]
Purchase warrants.............. [____W]
The information as to the common stock outstanding presented above is as of
April 30, 1999. It includes 502,800 shares of common stock included in units
sold in a bridge financing that closed April 27, 1999 and 150,000 shares of
common stock issued on April 29, 1999 in connection with an agreement to provide
a personal guarantee of our line of credit. You should also be aware that we may
be required to issue up to 1,729,513 additional shares of common stock as a
result of the possible future exercise of stock options and warrants, excluding
the purchase warrants sold in this offering. The information as to the
securities outstanding does not include the underwriter's warrants to purchase
up to 175,000 shares of common stock and up to 175,000 purchase warrants. If and
when we issue these shares, the percentage of our common stock you own may be
diluted. PLEASE SEE "CAPITALIZATION" FOR A DISCUSSION OF THE OUTSTANDING SHARES
OF MARSEE BAKING COMMON STOCK, WARRANTS AND OPTIONS TO PURCHASE COMMON STOCK,
"DILUTION" FOR A DISCUSSION OF THE DILUTION OF YOUR INVESTMENT AS A RESULT OF
INVESTING IN THIS OFFERING, AND "DESCRIPTION OF SECURITIES" FOR A DISCUSSION OF
IMPORTANT FEATURES OF THE COMMON STOCK AND PURCHASE WARRANTS.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary historical financial information as of and for the years ended
December 31, 1997 and 1998 are derived from our financial statements, which have
been audited by KPMG Peat Marwick LLP, our independent auditors. The summary
statement of operations data for the year ended December 31, 1996 and the
balance sheet information as of December 31, 1996 were derived from unaudited
financial statements of the company. The unaudited summary historical financial
statements as of and for the year ended December 31, 1996 include all
adjustments, consisting only of normal recurring accruals, which, in the opinion
of management, are necessary for a fair presentation of the information. You
should read this information together with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," our audited financial
statements and related notes, and the other financial information which appears
elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997 1998
---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Bakery-cafes................................................. $3,662 $4,140 $9,761
Wholesale.................................................... 399 808 2,895
--------- -------- --------
Total revenues........................................... 4,061 4,948 12,656
Cost of goods sold................................................ 2,112 2,887 7,579
Store operating expenses.......................................... 1,248 1,621 5,281
Wholesale operating expenses...................................... 164 328 599
Depreciation and amortization..................................... 84 213 817
General and administrative expenses............................... 563 965 1,959
Store closure expense............................................. -- -- 253
-------- -------- --------
Loss from operations.............................................. (110) (1,066) (3,832)
Interest expense.................................................. (118) (129) (472)
-------- -------- --------
Net loss.......................................................... (228) (1,195) (4,304)
Cumulative dividends on preferred stock series D and A............ (32) (32) (100)
-------- -------- --------
Net loss attributed to common shares.............................. $(260) $(1,227) $(4,404)
======== ======== ========
Net loss per common share--basic and diluted...................... $(0.30) $(1.41) $(5.07)
Shares used in computing
net loss per common share--basic and diluted................. 868 869 869
BALANCE SHEET DATA:
Cash (including restricted cash).................................. $ 687 $ 91 $ 129
Working capital (deficit)......................................... (27) (1,487) (4,148)
Total assets...................................................... 2,059 3,007 8,674
Long-term obligations............................................. 388 1,423 2,921
Total shareholders' equity (deficit).............................. 900 (158) 820
</TABLE>
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK AND PURCHASE WARRANTS INVOLVES A HIGH
DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE
MAKING AN INVESTMENT DECISION. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE
NOT THE ONLY ONES FACING OUR COMPANY. ADDITIONAL RISKS AND UNCERTAINTIES NOT
PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR
BUSINESS OPERATIONS. THESE FACTORS, AMONG OTHERS, MAY CAUSE ACTUAL RESULTS,
EVENTS OR PERFORMANCE TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY
FORWARD-LOOKING STATEMENTS MADE IN THIS PROSPECTUS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, OUR BUSINESS, FINANCIAL
CONDITION OR OPERATING RESULTS COULD BE MATERIALLY AND ADVERSELY AFFECTED. IN
SUCH CASE, THE VALUE OF YOUR INVESTMENT MAY DECLINE AND YOU MAY LOSE ALL OR PART
OF YOUR INVESTMENT.
RISKS RELATED TO THE COMPANY
- ----------------------------
WE HAVE A LIMITED We began operations in 1993. As a result,
OPERATING HISTORY your evaluation of us and our prospects will be
UPON WHICH YOU MAY based on a limited operating history. In addition,
EVALUATE US we have recently recruited a new Chief Executive
Officer and a new Chief Financial Officer, and our
operating model and business strategy are being
revised. Consequently, our historical results of
operations may not give you an accurate indication
of our future results of operation or prospects.
WE HAVE AN We have incurred substantial losses since
ACCUMULATED DEFICIT, inception, and we anticipate that we will continue
AND ANTICIPATE FUTURE to incur substantial losses. As of December 31,
LOSSES 1998, we had an accumulated deficit of approximately
$6.5 million. We have experienced significant
losses in connection with our expansion into the
greater Seattle market and with the opening of
in-fill stores in the greater Portland market. We
expect our losses to continue until we can reduce
expenses and can operate the Seattle commissary at
capacity. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
WE MAY CEASE DOING Our audited financial statements have been
BUSINESS WITHOUT THE prepared assuming that we will continue as a going
PROCEEDS OF THE concern. We have suffered recurring losses from
OFFERING operations that raise substantial doubt about our
ability to continue as a going concern. Without the
proceeds of the offering, we may not be able to
continue to operate our business.
WE DO NOT GENERATE At our current level of development, we do
ENOUGH CASH FROM not generate net cash from operations. For the years
OPERATIONS TO FUND ended December 31, 1997 and 1998, we incurred net
OUR GROWTH PLAN OR losses of $1.2 million and $4.3 million,
OUR CONTINUED respectively. To fund our operations, we require
OPERATIONS either additional financing or a substantial
increase in the number of bakery-cafes to generate
additional operating revenue. We have developed a
specific liquidity plan to meet the ongoing
liquidity needs of our operations. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and
Capital Resources." There can be no assurance,
however, that our liquidity goals will be reached in
the immediate future, if ever.
WE HAVE SIGNIFICANT We may need to raise significant additional
FUTURE CAPITAL NEEDS funds in the near future to support our growth. If
WHICH ARE SUBJECT TO adequate funds are not available, on acceptable
THE UNCERTAINTY OF terms or at all, we may be unable to complete our
ADDITIONAL FINANCING expansion program, which would have a material
adverse effect on our business, results of
operations and financial condition. If additional
funds are raised through the issuance of equity
securities, your percentage ownership in the
company's equity will be reduced, you may experience
additional dilution in net book value per share, and
the equity securities may have rights, preferences
or privileges senior to those of yours.
7
<PAGE>
WE HAVE A LIMITED We presently operate 18 retail
BASE OF OPERATIONS bakery-cafes, two central production facilities and
AND A HIGH GEOGRAPHIC a wholesale division, all serving the greater
CONCENTRATION Portland and Seattle metropolitan areas. Because of
our small existing retail base, many events,
including a decline in the profitability of even one
or two stores, the opening of an unsuccessful new
store or delays in the planned opening of new
stores, could materially and adversely affect the
profitability of the entire company. Moreover, the
concentration of our retail bakery-cafes in limited
geographic markets exposes the company to a greater
risk from certain events or conditions, such as a
regional economic downturn, than would be the case
if our stores were not geographically concentrated.
WE RELY ON OPENING Our continued growth depends on our ability
NEW STORES FOR GROWTH to open, acquire or convert new retail bakery-cafes,
WHICH SUBJECTS US TO to operate these stores profitably, and to increase
RISKS same-store sales. This growth is likely to place a
significant strain on our resources and systems.
To manage our growth, we must implement
OUR INABILITY TO systems, and train and manage our employees. We may
MANAGE GROWTH not be able to implement these action items in a
COULD HURT OUR timely manner or at all. Our inability to manage
BUSINESS growth effectively could have a material adverse
effect on our business, operating results and
financial condition. There can be no assurance that
we will achieve our planned expansion goals, convert
acquired stores to the Marsee Baking format, manage
our growth effectively, or operate our existing and
new stores profitably.
NEW STORES MAY The opening of additional stores in current
COMPETE WITH OUR markets could have the effect of competing with
EXISTING STORES certain of our existing stores. The effect of
opening new in-fill stores may be to divert sales
from existing stores, resulting in a decrease in
same-store sales for the previously existing units.
WE FACE SUBSTANTIAL The specialty restaurant industry is
COMPETITION fragmented and highly competitive. The competition
in the retail bakery-cafe segment is increasing. We
compete with other local bakeries, grocery stores,
and bread-only stores that supply high quality baked
MANY COMPETITORS goods, and with other restaurants that seek to use
HAVE SUBSTAINTIALLY quality baked goods to define breakfast, lunch and
GREATER FINANCIAL late-afternoon menus. Actual and potential
AND OTHER RESOURCES competitors include regional and national chains as
well as locally owned companies. Many of our
competitors are well-established and have
substantially greater financial and other resources
than we do, which may place us at a competitive
disadvantage in responding to our competitors'
pricing trends, advertising campaigns and other
initiatives. Additional competition may develop in
the future and increased competition may erode the
potential for same-store sales growth.
We also compete against other specialty
retailers and restaurants for suitable sites for new
retail stores. There can be no assurance that
management will be able to continue to secure
adequate sites at acceptable costs and terms.
OUR SUCCESS IS We believe that our success will depend on
DEPENDENT ON OUR KEY continued employment of our senior management team.
PERSONNEL If one or more members of our senior management team
were unable or unwilling to continue in their
present positions, our business, financial condition
and operating results could be materially adversely
affected. Our success also depends on having
trained mid-level managers and retail employees. We
will need to continue to hire additional personnel
as our business grows. Competition for personnel in
the Pacific Northwest is strong. Our business,
financial condition and operating results will be
materially adversely affected if we cannot hire and
retain suitable personnel.
8
<PAGE>
WE HAVE NOT PAID, AND We have not paid cash dividends on our
WILL NOT PAY, CASH common or preferred stock (other than required
DIVIDENDS cumulative cash and stock dividends payable to the
holders of the Series A and D Preferred Stock upon
the closing of this offering) and have no present
intention of paying cash dividends in the
foreseeable future. It is the present policy of the
Board of Directors to retain all earnings to
reinvest in the company. See "Dividends."
WE MAY EXPERIENCE We rely on food wholesalers for the bulk of
PRICE VOLATILITY IN our raw ingredients. Our primary raw ingredients
RAW INGREDIENTS include commodity items such as butter, flour, sugar
and chocolate. The prices of these commodities are
subject to volatility. Further, some raw
ingredients such as chocolate are imported, and are
subject to potential exchange rate and supply
volatility. We do not engage in hedging activities
and, with the exception of certain volume purchase
discounts, cannot control the price of our raw
materials. We may experience decreased profit
margins if we are unable to pass any increased cost
of new ingredients on to our customers.
PROVISIONS OF OUR Marsee Baking is an Oregon corporation.
ARTICLES OF Anti-takeover provisions of Oregon law could make it
INCORPORATION, more difficult for a third party to acquire control
BYLAWS, AND OREGON of us, even if such change in control would be
LAW COULD MAKE beneficial to shareholders. In addition, our
ACQUISITION OF US amended and restated articles of incorporation,
DIFFICULT which become effective upon the closing of this
offering, will provide that our Board of Directors
may issue preferred stock without shareholder
approval. Our amended and restated articles of
incorporation will also require a classified board
of directors, with each board member serving a
staggered three-year term. The issuance of
preferred stock and the existence of a classified
board could make it more difficult for a third-party
to acquire us, even if doing so would be beneficial
for our shareholders.
YEAR 2000 COMPLIANCE We have either tested, are in the process
ISSUES MAY ADVERSELY of testing, or have obtained assurances of
AFFECT OUR BUSINESS compliance regarding, the Year 2000 compliance of
our business systems, including microcontrollers,
and the Year 2000 compliance of our suppliers.
Based on recent assessments, we have determined that
our retail reporting software system is not
currently Year 2000 compliant. As a result of this
problem, some of our internal computer systems could
fail to operate or fail to produce correct results
beginning in the year 2000. We have adopted a plan
to upgrade this system by August 31, 1999. We
presently believe our internal computer systems will
be Year 2000 compliant in a timely manner, but
undetected errors may remain. In addition, we
cannot be certain that any of the remedial measures
adopted will prevent the occurrence of Year 2000
problems, which could have a material adverse affect
on our business, financial condition or results of
operations. See "Management's Discussion and
Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."
GOVERNMENT The specialty restaurant industry is
REGULATION COULD subject to extensive federal, state and local
ADVERSELY AFFECT government regulations relating to the development
OUR BUSINESS and operation of food service outlets, including
laws and regulations relating to building and
seating requirements, the preparation and sale of
food, cleanliness, safety in the work place,
accommodations for the disabled, and our
relationship with our employees, such as
discriminatory practices, overtime and working
conditions and citizenship requirements. The
failure to abide by these laws or regulations, and
the failure to obtain or retain necessary food
licenses, could adversely affect the operations and
profitability of the company. In addition,
significant numbers of our food service and
commissary personnel are paid at rates governed by
the state minimum wage laws. Further increases in
the minimum wage will increase our retail and
commissary labor costs, and may adversely affect our
results of operations and financial condition.
9
<PAGE>
RISKS RELATED TO THE OFFERING
- -----------------------------
THE OFFERING PRICE MAY Although set in good faith, the offering
BE ARBITRARY price per share of common stock or per purchase
warrant may not bear a direct relationship to Marsee
Baking's assets, earnings, book value, results of
operation or any other objective standard.
YOU WILL EXPERIENCE You will experience immediate and
IMMEDIATE AND substantial dilution. As of December 31, 1998, the
SUBSTANTIAL DILUTION company had an adjusted pro forma net tangible book
value of $0.30 per share derived from the company's
balance sheet as of December 31, 1998 and taking
into account (1) the issuance of stock dividends and
the conversion of preferred stock into shares of
common stock, (2) the private sale of common stock
in a bridge financing in January-April 1999, and (3)
the issuance of common stock in connection with an
agreement to provide a personal guarantee of our
line of credit in April 1999. After giving effect
to the sale of the securities sold in this offering,
and after deducting underwriting discounts and
estimated offering expenses, the adjusted pro forma
net tangible book value will be $1.50 per share.
The result will be an immediate increase in book
value to existing shareholders of $1.20 per share
and an immediate dilution to you of $3.50 per share.
As a result, you will bear most of the risk of loss
since your shares are being purchased at a cost
substantially above the price at which existing
shareholders acquired their shares. See "Dilution"
We also have outstanding a large number of
stock options to purchase common stock with exercise
prices significantly below the estimated initial
public offering price of the common stock. To the
extent these options are exercised, there will be
further dilution. We intend to grant substantial
stock options to our employees in the future.
YOUR PURCHASE If you are acquiring warrants to purchase
WARRANTS ARE SUBJECT our common stock in this offering, your purchase
TO REDEMPTION BY US warrants are subject to redemption by the company on
30-days prior written notice if the daily trading
price for the shares is above $10.00 for at least 30
consecutive trading days ending not more than ten
days before the date of the notice of redemption.
If the purchase warrants are redeemed, you will lose
your right to exercise your purchase warrants except
during the 30-day redemption period. Any redemption
of the purchase warrants by us during the one-year
period following the offering will require the prior
written consent of the underwriter. See
"Description of Securities--Warrants."
WE MUST COMPLY WITH We will be able to issue the shares of
THE FEDERAL common stock upon the exercise of the purchase
REGISTRATION AND warrants only if there is a current prospectus
STATE BLUE SKY relating to the common stock under an effective
REQUIREMENTS TO registration statement filed with the Securities and
PERMIT EXERCISE OF Exchange Commission. In addition, the common stock
YOUR PURCHASE WARRANTS must be qualified for sale or exempt under
applicable state securities laws of the
jurisdictions in which the various holders of
purchase warrants reside.
NON-REGISTRATION IN There can be no assurance that we will be
YOUR STATE OF THE successful in maintaining a current registration
COMMON STOCK statement. The company intends to qualify the sale
UNDERLYING THE of the purchase warrants in a limited number of
PURCHASE WARRANTS AT states, although certain exemptions under certain
THE TIME OF EXERCISE state securities laws may permit the purchase
MAY PREVENT YOU FROM warrants to be transferred to purchasers in states
EXERCISING YOUR other than those in which the purchase warrants were
PURCHASE WARRANTS initially qualified. We can make no assurances that
we will be able to qualify our securities in any
state. If we have not qualified the issuance of the
common stock in the states in which the ultimate
purchasers of the purchase warrants reside and no
exemption from the qualification is available, the
purchase warrants of those purchasers will expire
and have no value if the purchase warrants cannot be
exercised or sold. Accordingly, the market for the
purchase warrants may be limited because of the
company's inability to fulfill these requirements.
See "Description of Securities" and "Underwriting."
10
<PAGE>
A MARKET FOR THE Before this offering, there has been no
SECURITIES DID NOT public market for our common stock or purchase
EXIST BEFORE AND MAY warrants. We cannot predict the extent to which
NOT EXIST IN THE investor interest in Marsee Baking will lead to the
FUTURE development of a trading market or how liquid that
trading market might become. If a trading market
does not develop or is not sustained, it may be
difficult for you to sell your shares of common
stock or purchase warrants at a price that is
attractive to you.
EXTERNAL FACTORS Variations in the trading price of our
COULD AFFECT OUR common stock and purchase warrants may result from a
COMMON STOCK AND number of factors, some of which are beyond our
PURCHASE WARRANT control, including:
TRADING PRICE
o general economic and stock market
conditions;
o actual or anticipated fluctuations in our
operating results;
o changes in expectations as to our future
financial performance or changes in
financial estimates by securities
analysts;
o earnings and other announcements by, and
changes in market valuations of, other
comparable companies; and
o trading of our common stock and purchase
warrants.
OUR STOCK PRICE MAY In addition, the stock market in general
BE EXTREMELY VOLATILE has experienced extreme volatility that often has
AND YOU MAY NOT BE been unrelated to the operating performance of
ABLE TO RESELL YOUR particular companies. These broad market and
SHARES OR WARRANTS AT industry fluctuations may adversely affect the
OR ABOVE THE OFFERING trading price of our common stock and purchase
PRICE warrants, regardless of our actual operating
performance. You may not be able to resell your
shares or warrants at or above the offering price.
EXERCISE OF OPTIONS In connection with this offering, we will
MAY HAVE A DILUTIVE issue to the underwriter, for nominal consideration,
EFFECT ON OUR OTHER options to purchase 175,000 shares of common stock
SHAREHOLDERS and 175,000 options to purchase warrants from the
company. These options will be exercisable for a
four-year period beginning one year after this
offering at an exercise price of 165% of the price
at which the common stock and purchase warrants are
sold to the public, subject to adjustment. These
options may have certain dilutive effects because
the holders of the options will be given the
opportunity to profit from a rise in the market
price of the underlying securities with a resulting
dilution in the interests of our other security
holders and future investors.
We have also agreed, at the request of the
holders of the options, under certain circumstances,
that we will register under federal and state
securities laws the options or the securities
underlying the options. Exercise of these
registration rights may involve substantial expense
to us at a time when we may not be able to afford
cash expenditures. Exercise of these registration
rights may also adversely affect the terms upon
which we may obtain additional funding, and may
adversely affect the price of the common stock. See
"Underwriting."
11
<PAGE>
USE OF PROCEEDS
Marsee Baking will receive estimated net proceeds of $7,165,000 from the
sale of 1,750,000 shares of common stock and 1,750,000 purchase warrants at an
assumed initial public offering price of $5.00 per share and $0.125 per purchase
warrant, after deducting underwriting discounts and commissions of $897,000 and
estimated expenses of $906,000. If the underwriter's over-allotment options are
exercised in full, we will receive an additional $1,170,000 from the sale of
262,500 shares of common stock and 262,500 purchase warrants, after deducting
underwriting discounts and commissions.
The following table describes the expected allocation of the net proceeds
of the offering, assuming that the underwriter does not exercise its
over-allotment options:
Retirement of bridge financing............ $2,585,000
New store expansion....................... 2,000,000
Reduction of trade payables............... 1,000,000
Payment of series A preferred dividends... 107,000
Working capital and
general corporate purposes............... 1,473,000
Total ................................. $7,165,000
Pending these uses, we intend to invest the net proceeds of the offering in
investment grade, interest-bearing securities.
In a bridge financing completed before this offering, we issued certain
demand notes and sold privately to investors certain units, each unit consisting
of one share of common stock and a promissory note in the principal amount of
$5.00, bearing interest at the rate of 8% per year. The principal and accrued
interest are due and payable nine months after the date of the promissory notes
or the closing of this offering, whichever is earlier. We intend to use
approximately $2,585,000 of the proceeds of this offering to repay the principal
and interest owing under the promissory notes. See "Description of Securities."
DIVIDEND POLICY
Other than cumulative cash dividends to holders of Series A Preferred Stock
and cumulative stock dividends to holders of Series D Preferred Stock, Marsee
Baking has never declared or paid any dividends on shares of its preferred or
common stock. See "Description of Securities" for a description of the dividends
payable on certain series of preferred stock. We intend to retain any future
earnings for future growth and do not anticipate paying any other cash dividends
in the foreseeable future. In addition, the company's loan agreement with its
bank prohibits the payment or declaration of dividends other than the Series A
dividends and stock dividends.
12
<PAGE>
CAPITALIZATION
The table below sets forth the capitalization of the company as follows:
o Actual as of December 31, 1998, giving retroactive effect to the
increase in the number of authorized shares of common stock to
15,000,000 and preferred stock to 4,000,000, which was approved by
the shareholders in February 1999;
o Pro forma, giving effect to the private sale of 502,800 shares of
common stock and promissory notes in a bridge financing which
closed on April 27, 1999, and the issuance of 150,000 shares of
common stock in connection with an agreement to provide a personal
guarantee of a line of credit on April 29, 1999; and
o As adjusted, giving effect to the sale of the 1,750,000 shares of
common stock and 1,750,000 purchase warrants sold in this
offering, net of offering expenses; the conversion of Series A, B,
C and D Preferred Stock into 2,077,421 shares of common stock; and
the payment of accrued Series D Preferred Stock dividends by the
issuance of 17,288 shares of common stock.
<TABLE>
<CAPTION>
Actual Pro Forma As Adjusted
------ --------- -----------
<S> <C> <C> <C>
Long-term liabilities, net of current portion.................... $2,921 $2,921 $2,753
Shareholders' equity
Preferred stock, no par value - 4,000,000 shares
authorized, actual, pro forma and as adjusted:
Cumulative Preferred Stock Series D - 22,507 shares
authorized; 16,667 shares outstanding, actual and pro
forma; no shares outstanding, as adjusted.................... 1,000 1,000 --
Cumulative Preferred Stock Series A - 100,000 shares
authorized; 52,667 shares outstanding, actual and pro
forma; no shares outstanding as adjusted..................... 281 281 --
Preferred Stock Series B - 510,575 shares
authorized; 510,575 shares outstanding, actual and pro
forma; no shares outstanding, as adjusted.................... 1,143 1,143 --
Preferred Stock Series C - 168,000 shares authorized;
129,121 shares outstanding, actual and pro forma; no
shares outstanding, as adjusted.............................. 4,117 4,117 --
Common stock, no par value - 15,000,000 shares authorized,
actual, pro forma and as adjusted; 868,961 shares
outstanding, actual; 1,521,761 shares outstanding, pro
forma; 5,366,470 shares outstanding, as adjusted............. 626 952 14,570
Warrants......................................................... 156 156 346
Retained deficit................................................. (6,503) (6,503) (6,503)
--------- -------- --------
Total shareholders' equity.............................. 820 1,146 8,413
---------- -------- --------
Total capitalization.................. $ 3,741 $ 4,067 $11,166
========== ======== ========
</TABLE>
The outstanding securities information excludes the following:
o The underwriter's warrants to purchase up to 175,000 shares of common
stock and up to 175,000 purchase warrants;
o Currently outstanding warrants to purchase 387,668 shares of common
stock; and
o Currently outstanding stock options to purchase 1,341,845 shares of
common stock at a per share weighted average exercise price of $1.44.
13
<PAGE>
DILUTION
When you purchase a share of common stock, you will suffer immediate per
share "dilution" in respect of the share in an amount equal to the difference
between the price you paid per share (less the underwriting discount) and the
net tangible book value per share after the offering. Net tangible book value
per share represents the amount of the company's tangible assets less the amount
of its liabilities divided by the number of shares of common stock outstanding.
As of December 31, 1998, the net tangible book value of Marsee Baking was
approximately $820,000 or $0.26 per share of common stock, giving effect to the
following: (1) the issuance of approximately 17,288 shares of common stock to
holders of Series D Preferred Stock as accrued dividend; and (2) the conversion
of the outstanding Series A, B, C and D Preferred Stock into 2,077,421 shares of
common stock.
Giving effect to the recent private sale of 502,800 shares of common stock
during January through April 1999, the net tangible book value of Marsee Baking
on a pro forma basis, as of December 31, 1998, would have been approximately
$0.29 per shares. Giving effect to the issuance of 150,000 shares of common
stock in connection with an agreement to provide a personal guarantee of a line
of credit on April 29, 1999, the net tangible book value on a pro forma basis,
as of December 31, 1998, would have been approximately $0.30 per share.
Giving effect to the issuance of 1,750,000 shares of common stock offered
by the company at an assumed initial public offering price of $5.00 per share
(after the deduction of estimated underwriting discounts and offering expenses
payable by the company), the net tangible book value of Marsee Baking on a pro
forma basis, as of December 31, 1998, would have been approximately $1.50 per
share. This represents an immediate increase in net tangible book value of $1.20
per share to existing shareholders and an immediate dilution of $3.50 per share
to purchasers of the shares of common stock in this offering.
The following table illustrates this per-share dilution of your equity as
of the closing of this offering in an adjusted pro forma net tangible book value
per share of common stock, and assuming no exercise of the warrants, the
underwriter's over-allotment options or the underwriter's options to purchase
shares of common stock and warrants:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share................... $5.00
Net tangible book value per share as of December 31, 1998....... $0.26
Increase per share attributable to bridge financing............. 0.03
Increase per share attributable to line of credit guarantee..... 0.01
Increase per share attributable to new investors................ 1.20
----
Adjusted net tangible book value per share after this offering.... 1.50
----
Dilution per share to new investors in this offering.............. $3.50
</TABLE>
The following table shows the number of shares of common stock to be owned
following the offering by existing shareholders and the new investors (assuming
the maximum number of shares of common stock sold in this offering is
purchased):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing Shareholders....... 3,616,470(1) 67% $7,595,000 46% $2.10
New Investors............... 1,750,000 33% 8,750,000 54% 5.00
---------- --- --------- ---
Total.............. 5,366,470 100% $16,345,000 100%
========== ==== =========== ====
</TABLE>
-------------------------
1 To the extent that any shares are issued upon exercise of options or
warrants that were outstanding at December 31, 1998, there will be further
dilution to new investors. See "Management--Employee Benefit Plans."
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
- --------
Since opening its first bakery-cafe in 1993, Marsee Baking has expanded to
become the owner and operator of 18 bakery-cafes and two central commissaries in
the Pacific Northwest. Twelve bakery-cafes are located in Oregon and six in
Washington. In 1998, revenue grew 156% to $12,656,000 as we expanded the number
of retail stores over the prior year from six to eighteen bakery-cafes,
primarily due to the acquisition discussed below. We currently derive
approximately 77% of our revenue from these retail outlets, while the remaining
revenue is derived from wholesale operations. Most baking operations are
conducted at the commissaries, and fresh product is delivered to the retail
stores daily.
Since inception, Marsee Baking has incurred losses in each fiscal year and
had an accumulated deficit of $6,503,000 as of December 31, 1998. The majority
of these losses occurred in the last two years, with losses of $1,195,000 in
1997 and $4,304,000 in 1998. The losses are attributable primarily to relatively
high costs of goods sold and store labor expenses, exacerbated in 1998 by the
operation of ten newly-acquired stores compared to the operation of only six
mature stores during 1997. We have not generated sufficient cash from operations
to fund continued operations or our growth plan, and will require significant
additional future financing.
Since November 1998, we have focused on revising our operating model to
emphasize revenue improvements through better merchandising, significant cost
and expense reductions and the addition of new wholesale customers. We have not
yet had sufficient experience with this operating model to provide any assurance
that it will generate increased revenue or profits in future periods.
Accordingly, it is not yet clear that we have developed an operating strategy
that will accomplish the goal of reducing and eliminating our losses. If we
cannot develop a profitable strategy and losses continue, we will further
deplete our financial resources and shareholders' equity.
ACQUISITION. During the first quarter of 1998, we completed the acquisition
of the assets of a Seattle-based retailer of bagels in exchange for the issuance
of two new series of preferred stock. The assets acquired included seven retail
store locations and a commissary in Washington and three retail locations in
Oregon. The acquisition of ten new retail locations represented a significant
increase in the scale of retail operations, as we operated only four retail
locations at the end of 1996 and six at the end of 1997, and opened three new
stores in 1998. The additional retail locations increased the requirements
placed on our management personnel and operations and financial control systems,
as well as on our ability to train and manage our retail employees. Throughout
1998, we renovated the retail locations we acquired and reopened them under the
Marsee Baking brand at a cost of $2,303,000 above the acquisition cost. We made
an additional capital investment of approximately $538,000 to convert and equip
the Seattle commissary for baking Marsee products. Due to capital constraints,
we were unable to renovate all the acquired stores as quickly as planned or
provide the necessary marketing support in the Seattle market to launch properly
the Marsee Baking brand. As a consequence, neither revenue nor results of
operations met management expectations for 1998.
15
<PAGE>
1999 OPERATING PLAN. In November 1998, we recruited a director of the
company to serve as our new Chief Executive Officer. He has had significant
experience in operating and expanding multi-store bakery concepts. Actions taken
since assumption of his responsibilities as CEO have focused on increasing
revenue while reducing costs. The 1999 operating plan includes:
o Focusing employee efforts on profitable activities,
o Better merchandising of product in the bakery-cafes,
o Improving the speed and quality of customer service,
o Reducing ingredient costs,
o Improving management of daily bakery-cafe waste,
o Expanding the wholesale customer base,
o Implementing better inventory control and management,
o Further developing store operating controls, and
o Improving utilization of existing information systems.
More specifically, the 1999 operating plan targets significant reductions
in ingredient costs and further reductions in commissary labor expenses to
reduce costs of goods sold as a percentage of total revenue to below 45% by
year-end 1999. In addition, the 1999 operating plan establishes a target
store-labor-expense to bakery-cafe-revenue ratio of 27.4% for 1999.
As part of these improvements in operations, we closed one bakery-cafe in
the Seattle area, and terminated the leases and the planned build-out of two new
stores in the Portland area in 1999. In addition, we have reduced expenses
associated with the operation of the Seattle commissary by supplying the Seattle
stores with most products from the Portland commissary until an increased volume
of sales in the Seattle market warrants full-scale operation of the Seattle
commissary.
1999 LIQUIDITY PLAN. In view of our accumulated deficit and recurring
losses, our auditors have added an explanatory paragraph to their report on our
financial statements stating that there is substantial doubt about our ability
to continue as a going concern. In this regard, management has adopted a 1999
liquidity plan, the principal features of which include:
o Execution of the 1999 operating plan,
o Reduction of costs and expenses,
o Completion of a bridge financing on April 27, 1999 in the form of
a $2.514 million private placement of units, each unit consisting
of one share of common stock and a $5.00 promissory note bearing
interest at 8%, payable upon the earlier of nine months of the date
of the promissory note or the closing of this offering;
o Increase in the working capital line of credit; and
o Completion of this offering of 1,750,000 shares of common stock and
1,750,000 purchase warrants.
Although the bridge financing has been completed, there is no assurance that
this offering will be completed or that we will achieve profitable operations.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty. See "Risk Factors," "Use of Proceeds" and
"--Liquidity and Capital Resources."
16
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
1997 COMPARED TO 1998. The following table sets forth the percentage
relationship of certain items to net revenues included in the company's
statements of operations:
<TABLE>
<CAPTION>
December 31,
1997 1998
------------- ------------
<S> <C> <C>
Revenue
Bakery-Cafe.......................... 83.7% 77.1%
Wholesale............................ 16.3 22.9
------------- ------------
100.0% 100.0%
Cost of goods sold..................... 58.3% 59.9%
Store operating expenses............... 32.8 41.7
Wholesale operating expenses........... 6.6 4.7
Depreciation and amortization.......... 4.3 6.5
General and administrative expenses.... 19.5 15.5
Store closure expenses................. -- 2.0
Interest expense....................... 2.6 3.7
------------- ------------
Loss before provision for taxes........ (24.1)% (34.0)%
Provision for income taxes............. -- --
------------- ------------
Net loss (24.1)% (34.0)%
============= ============
</TABLE>
Total revenues increased $7,708,000, or 156%, from $4,948,000 in 1997 to
$12,656,000 in 1998. Bakery-Cafe revenue increased $5,621,000, or 136%, from
$4,140,000 in 1997 to $9,761,000 in 1998. The increase in bakery-cafe revenue is
attributable primarily to the increase in the number of store locations. Stores
opened in 1998 totaled thirteen, ten of which were acquired. Total revenue for
the new stores accounted for $5,018,000 of the increase in bakery-cafe sales.
Capital constraints prevented the immediate renovation of the stores acquired,
and six of the ten stores were not renovated until the third quarter of 1998. As
a result of this delay and our inability to market cost-effectively the Marsee
Baking brand in the Seattle market, the seven bakery-cafes in Washington did not
meet management's revenue expectations in 1998. We closed one underperforming
store in this market in February 1999.
Revenue for the four retail locations open for the entire year during both
1997 and 1998 decreased 3.1% from $3,740,000 in 1997 to $3,624,000 in 1998. We
attribute such decrease primarily to the diversion of sales from existing stores
as a result of opening three new bakery-cafes in the downtown Portland area. The
two stores opened in the second half of 1997 contributed revenue of $400,000 in
1997 and $1,119,000 in 1998.
Wholesale revenue grew $2,087,000, or 258%, from $808,000 in 1997 to
$2,895,000 in 1998. The major reason for the growth was our expansion into
Washington, which contributed $830,000 in wholesale revenue in 1998. Sales to
third party distributors grew $924,000, or 142%, from $652,000 in 1997 to
$1,576,000 in 1998. These distributors, who are responsible for delivery,
invoicing and customer service, contributed 81% of wholesale revenue in 1997
compared to 54% in 1998. The other principal component of wholesale revenue in
1998 was derived from $1,071,000 in sales to one warehouse retailer, Costco
Companies Inc., that began in late 1997 in certain Portland- and Seattle-area
Costco stores.
Cost of goods sold grew $4,692,000, or 162%, from $2,887,000 in 1997 to
$7,579,000 in 1998. The principal components of cost of goods sold are
ingredients, commissary labor and commissary operating expenses. Ingredients, as
a percentage of total revenue, were 31.7% in 1997 and 32.4% in 1998. As volume
increased, we were able to experience labor efficiencies. Commissary labor was
20.0% of total revenue in 1997 compared to 18.7% in 1998. During 1998, the
company expanded into two commissaries and now operates one facility in Portland
and one in Seattle, which conducts limited activities at the present time. As a
17
<PAGE>
result of this doubling of capacity, commissary operating expenses increased
from $329,000 in 1997 to $1,104,000 in 1998. These costs represented 6.6% of
total revenue in 1997 and 8.7% in 1998. The principal factors contributing to
this increase in commissary operating expenses in 1998 included depreciation,
which increased from $52,000 in 1997 to $224,000 in 1998; rent, which increased
from $47,000 in 1997 to $190,000 in 1998; and transportation expenses related
to the movement of product between the two commissaries and the bakery-cafes,
which increased from $5,000 in 1997 to $112,000 in 1998.
As a percentage of revenue, cost of goods sold was 58.3% of revenue in 1997
compared to 59.9% in 1998. The percentage increase is due in part to the revenue
mix between retail and wholesale revenue. Wholesale activities increased from
16.3% of revenue in 1997 to 22.9% in 1998, but do not command the higher profit
margin of retail activities.
Store operating expenses increased $3,660,000, or 226%, from $1,621,000 in
1997 to $5,281,000 in 1998. Store operating expenses were 39.1% of bakery-cafe
revenue in 1997 compared to 54.1% in 1998. The largest component of store
operating expenses is labor. Bakery-cafe labor increased $2,046,000, or 210%,
from $971,000 in 1997 to $3,017,000 in 1998. Bakery-cafe labor was 23.4% of
bakery-cafe revenue in 1997, compared to 30.9% in 1998. This significant
percentage increase in store labor expense is due primarily to the opening of 13
new stores in 1998. For the 13 stores opened in 1998, labor was 36.9% of
bakery-cafe revenue, while for established stores it was 24.6%. New stores
require a base level of labor to operate. The sales from the stores acquired in
Washington did not meet expectations as discussed above and, therefore, fixed
labor costs were higher as a percentage of bakery-cafe revenue.
The next largest component of store operating expenses is occupancy
expenses, consisting primarily of rent and utility expenses. These expenses
increased $947,000, or 356%, from $266,000 in 1997 to $1,213,000 in 1998. This
increase is due to the number of new stores. While we believe we can manage
these expenses in the Washington operations in the future, we need retail store
revenue growth to substantially reduce occupancy expense ratios to acceptable
levels.
Marketing expenses are included in store operating expenses and were
$27,000 in 1997 compared to $184,000 in 1998. The 1998 marketing expenses
primarily related to media advertising for new store openings, a logo redesign
and related paper goods repackaging effort, a holiday catalog and store signage.
The company utilized an outside consultant to coordinate these efforts. The
remainder of store operating expenses grew proportionally in relation to
revenue.
General and administrative expenses increased $994,000, or 103%, from
$965,000 in 1997 to $1,959,000 in 1998, primarily as a result of increases in
general business activity. These expenses represented 19.5% of total revenue in
1997 compared to 15.5% in 1998. General and administrative salaries increased
$568,000, or 105%, from $543,000 in 1997 to $1,111,000 in 1998, as additional
personnel were added to support the growth in wholesale and retail activities.
Employee expenses related to managing two geographic areas grew from $21,000 in
1997 to $100,000 in 1998. Professional fees and service grew $240,000, from
$123,000 in 1997 to $364,000 in 1998.
Interest expense increased from $129,000 in 1997 to $472,000 in 1998,
primarily as a result of loans obtained to renovate new stores and the
Washington commissary.
In the fourth quarter of 1998, we had $253,000 of accelerated-depreciation
expenses related to the closure of one bakery-cafe in Washington and costs
related to the abandoned efforts to open two new stores in the Portland area due
to financial constraints. In addition, in 1998 we recognized additional
compensation expenses related to the issuance of options and warrants of
$199,000, and severance benefits payable to former employees of $130,000.
Due to our losses before the provision for income taxes in each year, there
has been no provision for federal and state income taxes for the years ended
December 31, 1997 and 1998. We have deferred tax assets totaling $575,000 and
18
<PAGE>
$2,218,000 as of December 31, 1997 and 1998, respectively, for which we have
recorded a full valuation allowance.
Marsee Baking lost $1,227,000 in 1997 compared to a loss of $4,404,00 in
1998. The principal reason for the increased operating losses in 1998 was the
addition of 13 new stores which in their initial years of operation have
relatively high costs and expenses compared to mature stores.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
LIQUIDITY. We had negative working capital of $1,487,000 at December 31,
1997 compared to negative working capital of $4,148,000 at December 31, 1998.
Cash used by operating activities for 1998 totaled $1,412,000. This use of
cash resulted primarily from the $4,304,000 in losses sustained during the year,
offset principally by non-cash charges of $1,295,000 from depreciation and
$1,335,000 from trade vendors due to increases in volume and extended terms. In
1997, cash used by operating activities was $239,000. Other changes in current
accounts between the two years make up the difference in cash used by
operations. Accounts receivable increased from $54,000 at year-end 1997 to
$253,000 at year-end 1998 due to the increase in wholesale sales. Inventories
were $64,000 at December 31, 1997 and $269,000 at December 31,1998. This
increase was due to inventory requirements to cover increases in baking volume
and bakery-cafe inventory increases due to the number of new stores. Prepaid
expenses also increased from $46,000 at December 31, 1997 to $134,000 at
December 31, 1998 as a result of lease deposits and prepaid rent on new stores.
Accounts payable increased from $915,000 at December 31, 1997 to $2,250,000
at December 31, 1998. This increase is due in part to increased volume as well
as cash flow difficulties in meeting current terms with vendors. Since December
31, 1998, we have continued to obtain additional debt financing, with the
proceeds in part being used to bring trade vendors closer to normal payment
terms. Accrued liabilities increased from $232,000 at December 31, 1997 to
$735,000 at December 31, 1998. This increase results from increases in, and the
timing of, payments for payroll liabilities, primarily as a result of increased
headcount and vacation accruals.
Our independent auditors have included in their audit report an explanatory
paragraph which states that our recurring losses from operations raise
substantial doubt as to our ability to continue as a going concern. Our working
capital requirements for the next twelve months consist primarily of funding
operating losses until break-even is realized. See "Risk Factors."
CAPITAL RESOURCES. Prior to completion of the bridge financing described
below, our primary sources of funds were shareholder loans, private placements
of stock and equipment financing, and to a lesser extent cash provided by
operating activities and a bank line of credit. The increased amount of our
outstanding payables in 1998 also served as an additional source of interim
financing.
Net cash provided by financing activities in 1997 and 1998 was $1,021,000
and $3,604,000, respectively. During 1998, the company paid down debt
obligations of $528,000 while incurring $227,000 of long-term debt and issuing
$3,027,000 in preferred stock.
During November and December 1998, we issued $525,000 in demand notes.
Subsequent to the end of the year, we issued an additional $95,000 in demand
notes, and on April 27, 1999, we completed a bridge financing in the form of a
private placement of units, each unit consisting of one share of common stock
and a $5.00 promissory note bearing interest at 8%, payable upon the earlier of
nine months from the date of the promissory notes or the closing of this
offering. See "Description of Securities." After expenses, the notes have an
effective rate of interest of 22%. The previously issued demand notes were
subsequently combined with the 1999 bridge financing, for an aggregate offering
of $2,514,000 million.
Our bank line of credit was fully utilized at $250,000 on both December 31,
1997 and 1998.
19
<PAGE>
We have not generated sufficient cash from operations to fund continued
operations or our growth plan, and will require significant additional future
funding. We believe that our 1999 operating and financing plans will, if carried
out successfully, be sufficient to meet our liquidity needs for the balance of
1999, based on our current expense calculations and our current and anticipated
revenue streams, including the proceeds of this offering. The operating and
financing plans assume certain same-store growth projections can be met, our
costs can be reduced as a percentage of revenue, and our overall cost structure
remains stable, of which there can be no assurance. There also can be no
assurance that our liquidity goals will be reached in the near future, if ever.
In the event that additional capital is required, we may seek to raise that
capital through private or public equity financing. Future financing
transactions may dilute the value of your investment in this offering. There can
be no assurance that such capital will be available on favorable terms, if at
all.
CAPITAL EXPENDITURES. Additions to property and equipment were $1,638,000
in 1997 and $6,127,000 in 1998. Additions relate directly to the number of new
stores opened in each year. In 1997, most capital expenditures were funded
through general financing activities. In 1998, capital expenditures were funded
by $2,139,000 from a preferred stock financing, $2,066,000 from capital leases
and notes payable assumed, and $1,922,000 from an acquisition paid for primarily
by issuance of preferred stock.
During 1997, we invested in the construction of four new stores, two of
which began operation in 1997 and two of which opened in January of 1998. In
addition, we upgraded our point of purchase systems in all stores.
In addition to opening one new store and adding to its computer systems
capability, the majority of 1998 capital expenditures relate to the purchase and
renovation of properties acquired in the acquisition of the assets of the
Seattle-based bagel retailer. Throughout 1998, the retail locations were
renovated and reopened under the Marsee Baking name at a cost of $2,303,000
above the acquisition cost. Additional capital investments of approximately
$538,000 were made to convert and equip the Seattle commissary for baking Marsee
products.
Although no assurances can be given, we believe that proceeds from this
offering will be sufficient to fund certain planned capital expenditures,
including ongoing maintenance and renovation of existing bakery-cafes, and the
addition of five new bakery-cafes in the greater Portland and Seattle
metropolitan area markets. The cost to acquire and renovate a new store is
estimated at approximately $400,000 per location. See "Business--Unit
Economics." There are presently no material commitments for capital expenditures
in 1999.
OTHER COMMITMENTS. In connection with the issuance of the Series A
Preferred Stock in 1995, the company is obligated to pay cumulative dividends
which accrue at the rate of $0.60 per share per year. At December 31, 1998,
these dividends were accrued and aggregated approximately $101,000. The amount
of accrued dividends at June 1, 1999 is estimated to be approximately $107,000
and are to be paid with proceeds from this offering.
We lease retail stores, office and commissary facilities under operating
leases expiring through the year 2007. These leases contain renewal options and
rent escalation clauses. Commitments under these operating leases aggregate
$5,382,000, the current portion of which is $1,009,000
Subsequent to the end of the year, the company entered into an agreement
with its principal supplier providing for the payment of approximately $250,000
in respect of past due accounts payable on or before June 30, 1999. The company
plans to make such payment from the proceeds of this offering. See "Use of
Proceeds."
YEAR 2000 COMPLIANCE
- --------------------
We depend on our networked computer systems to process point of sale
transactions, collect transaction data, manage inventory and accounts
receivable, and process other financial data on a timely basis. In addition, we
use several desktop personal computers in our headquarters office and
commissaries. The production equipment in our commissaries is generally not
computer or microprocessor controlled.
20
<PAGE>
We are in the process of assessing the Year 2000 readiness of our internal
computer systems. Our retail reporting software is not Year 2000 compliant and
the process of upgrading our system will begin in June 1999 at an aggregate cost
of approximately $5,000. The required software upgrade is readily available from
the system vendor and is expected to be installed in all stores by August 31,
1999. Our general ledger and inventory control systems have been tested and are
Year 2000 compliant. In addition, we are in the process of completing our
inventory and assessment of our desktop personal computers and will use standard
"off the shelf" vendor-supplied upgrades as required. As a result of these
activities, we presently believe our internal computer systems will be Year 2000
compliant in a timely manner, but undetected errors may remain. In addition, we
cannot be certain that any of the remedial measures adopted will prevent the
occurrence of Year 2000 problems, which could have a material adverse affect on
our business, financial condition or results of operations.
We do not employ an electronic order interface with any of our third-party
suppliers, and we have initiated communications with our other major suppliers
to identify and resolve issues involving Year 2000 compliance. While we expect
we will be able to resolve any significant problems with our suppliers, any
failure of third parties to resolve any difficulties that arise could have a
material adverse effect on our business, financial condition or results of
operations.
No Year 2000 compliance expenses have been incurred to date. All future
compliance expenses will be funded from general working capital. Although there
can be no assurance, we do not expect the cost of these efforts to be material
to our results of operations.
We currently do not have any contingency plans and have not determined our
most reasonably likely worst-case scenario with respect to Year 2000 compliance.
We are determining what contingency plans, if any, will be appropriate
subsequent to the expected upgrading and testing of all internal systems by
August 31, 1999. We are considering contingency plans to address possible
business interruptions, including temporary use of manual point of sale devices.
We expect any necessary contingency plans to be completed by October 1999. If we
are required to implement a contingency plan, such plan could have a material
adverse effect on our business, financial condition or results of operations.
21
<PAGE>
BUSINESS
Marsee Baking owns and operates 18 bakery-cafes in the Pacific Northwest
that offer more than 100 artisan bakery products, as well as made-to-order
sandwiches, soups and salads, in a friendly, neighborhood atmosphere. Each
bakery-cafe operates as a premium bakery, providing a relaxing cafe experience
that addresses the morning, lunch and late-afternoon day-parts. For 1998, the
six bakery-cafes operating in the company's format for more than a year had
average revenue of approximately $790,000 per store. Marsee Baking also
distributes its products and builds brand awareness through its wholesale
operations, providing specialty retailers and other institutions with a complete
line of Marsee Baking products.
Marsee Baking, which began with one Portland bakery-cafe in 1993, grew to
eight bakery-cafes before acquiring additional stores in the greater Portland
and Seattle metropolitan areas through an acquisition in early 1998. Nine of the
stores acquired were converted to the Marsee Baking concept during 1998 and have
been integrated into Marsee Baking's operations. Marsee Baking operates a
commissary in each of its two markets that serves as a central production and
distribution facility. The commissaries together produce a full line of
artisan-baked goods based on authentic recipes for daily distribution to each of
the bakery-cafes.
Marsee Baking believes that it can expand its presence in its current areas
of operation and replicate the Marsee Baking concept in other metropolitan areas
for the following reasons:
WE OFFER A WIDE o Marsee Baking differentiates itself in the
VARIETY OF PREMIUM bakery-cafe segment of the specialty restaurant
QUALITY, ARTISAN industry by offering over 100 different varieties of
BAKERY PRODUCTS. premium quality, artisan-crafted products based on
authentic recipes for eat-in or take-out dining. We
strive to make every item "stand alone" in quality
such that any bakery item by itself might be the
product line of a successful bakery or cafe. Marsee
Baking's diverse product line includes complex
products such as delicate, hand-crafted pastries,
slowly fermented breads and gourmet European tortes
to satisfy not only varying consumer tastes but also
to address different day parts. We believe that a
diverse and evolving product menu engenders customer
loyalty and encourages repeat business. Our broad
range of products creates a competitive advantage
over other stores offering a single product line
(such as bagels) and over bakeries or cafes that
focus only on a single day-part.
OUR CENTRAL o Marsee Baking's commissaries, which are
PRODUCTION FACILITIES strategically located in each market, serve as
SERVE MULTIPLE central production facilities to Marsee Baking's
OUTLETS AND PROMOTE bakery-cafes. The use of central production
COST EFFICIENCIES, facilities permits better quality control, maximum
PRODUCT QUALITY AND labor efficiency and higher-volume production of
CONSISTENCY. baked goods, using modern processes, while adhering
to traditional artisan-style baking techniques.
Marsee Baking's fresh artisan-baked goods, based on
traditional European and American recipes, are
provided daily by Marsee Baking's commissaries to
all of its bakery-cafes for selected on-site baking
(bagels and cookies), for use in a variety of menu
items (soups and sandwiches), and for immediate
sale. Marsee Baking believes that it will be able
to replicate the central commissary concept in other
markets.
WE HAVE CREATED A o We seek to create an authentic neighborhood cafe
DISTINCTIVE atmosphere with upscale decor and uniform interior
DESTINATION THAT designs that are unique to the Marsee Baking
SUPPORTS OUR BRAND concept. Design elements, which may include
IMAGE. hammered tin ceilings, slate floors, marble bars,
mahogany trim, custom designed cabinetry and display
cases, are selected to evoke the charm and elegance
of a grand cafe. Items consumed on premises are
served on china or glass plates. We believe that
our retail bakery-cafes and wholesale distribution
work together to reinforce our image as a provider
of high quality, artisan-baked goods. The wholesale
operation provides Marsee Baking's complete line of
baked goods to quality grocery stores, specialty
retailers, hotels and fine restaurants to promote
our local bakery-cafes and to create brand
recognition associated with premium quality baked
goods in our markets.
22
<PAGE>
WE HAVE RECRUITED A o We have recently recruited a new Chief Executive
NEW, EXPERIENCED Officer and a new Chief Financial Officer. Mr.
MANAGEMENT TEAM. Raymond W. Lindstrom, the company's New Chief
Executive Officer, has over 25 years' experience in
the specialty restaurant industry, beginning with
his role as one of the founders of Restaurants
Unlimited, Inc., where he oversaw the rapid-growth
of upscale dinner house restaurants. Mr. Lindstrom
later joined Cinnabon, a subsidiary of Restaurants
Unlimited, Inc., where he led the development of
the Cinnabon concept nationwide.
In addition, we have also recently recruited a new
Chief Financial Officer, Mr. Stephen A. Aanderud,
who has experience in the management of rapid-
growth manufacturing companies. Mr. Aanderud was
the President and Chief Executive Officer of
ThrustMaster, Inc., a sophisticated computer toy
and accessory manufacturing company, which he
helped take public in 1995.
The core competencies of the new management team
are reinforced by the working knowledge of the
founders who remain active in Marsee Baking's
operations.
THE MARSEE BAKING o We believe that our concept complements today's
CONCEPT COMPLEMENTS consumer lifestyles and preferences. The
TODAY'S CONSUMER bakery-cafe offers a shopping destination for
LIFESTYLE AND gourmet breads and special occasion cakes, a place
PREFERENCE FOR A for a light lunch or a relaxing spot for an
HASSLE-FREE, afternoon cappuccino. The bakery-cafe's atmosphere
CONVENIENT AND is intended to be suitable for takeout or eat-in
AFFORDABLE DINING dining in a variety of meal occasions. By offering
EXPERIENCE. high quality, artisan-made food, a distinctive
atmosphere and superior service, Marsee Baking is
able to provide customers with a more authentic
dining experience than may be available from other
quick-service restaurants in the specialty
restaurant industry, without substantially higher
prices. Our bakery-cafes provide hassle-free
convenience and an affordable indulgence for our
customers.
THE MARSEE BAKING o Our broad line of complex products, central baking
CONCEPT HAS facilities and the high "stand-alone" product
SIGNIFICANT BUILT-IN quality create barriers to entry to competing
BARRIERS TO ENTRY. bakery-cafe concepts. Marsee Baking's complex
product line is diverse and difficult to duplicate,
in whole or by individual item. The central baking
facility requires a significant capital investment
and a sufficient critical mass of bakery-cafes to
support its operation. Unlike many specialty
restaurants, the Marsee Baking concept creates and
delivers high quality products on a consistent
basis to more stores than is possible through
alternative methods. Marsee Baking is also able to
stay competitive throughout the day by addressing
four sub-businesses: the morning, lunch and
late-afternoon day parts, and the specialty
take-out segment.
UNIT ECONOMICS
- --------------
We introduced the Marsee Baking concept to the Portland market in 1993 and
then to the greater Seattle market in 1998. The operating model, which is based
on a central production and multiple outlet model, is intended to be capable of
rapid expansion through proven unit economics. In the company's experience, the
more mature stores typically have higher unit revenues. For 1998, the six mature
Portland-based bakery-cafes had average revenues of approximately $790,000 per
unit, average sales of $458 per square foot and an average check of $4.19. The
four bakery-cafes that have been in operation for more than 18 months had
average revenues of approximately $906,000 per unit, average sales of $610 per
square foot and an average check of $4.20 in 1998. Company-wide average revenues
for all stores open in 1998, including revenue from the ten newly-acquired
stores both before and after conversion to the Marsee Baking format, were
$513,730 per unit, average sales were $254 per square foot and the average check
was $4.46.
23
<PAGE>
Our approach to opening new bakery-cafes has been to minimize our required
investment by leasing all of our locations. Our bakery-cafes range in size from
360 square feet to 3,600 square feet. Since 1993, our total investment per
bakery-cafe, net of landlord contributions, has averaged approximately $350,000
to $375,000, with additional average pre-opening costs per bakery-cafe of
approximately $25,000. We expect that most of our planned future bakery-cafes
will range in size from 1,500 to 2,200 square feet and that our total investment
and pre-opening costs per bakery-cafe will be similar to these historical
averages.
EXPANSION STRATEGY AND SITE SELECTION
- -------------------------------------
Marsee Baking intends to continue to expand its operations in both existing
and new geographic markets. We have already invested the necessary capital in
the commissaries that serve the greater Portland and Seattle metropolitan areas.
In addition to serving Marsee Baking's wholesale operations, the Portland
commissary is able to serve up to approximately 20 bakery-cafes and the Seattle
commissary is able to serve approximately 35 bakery-cafes. We plan to open
additional bakery-cafes in the greater Portland and Seattle metropolitan areas
to fully utilize the capacities of the central baking facilities. Our expansion
plans for 1999 include the opening of up to five new stores in the greater
Portland and Seattle metropolitan markets, if adequate financing can be
obtained. We expect that new bakery-cafes will be profitable within two months
of their opening based on their earnings before interest, taxes, depreciation
and amortization.
Our expansion strategy is to enter a new market with a significant critical
mass of stores and wholesale business sufficient to support our central
commissary for that market. This expansion strategy presumes that we will
quickly become the dominant operator in our niche in the markets we enter.
Management will evaluate the company's ability to establish a dominant presence
within a particular area to create entry barriers to other bakery-cafe
competitors.
We believe that the location of each bakery-cafe is critical to our
long-term success and devote significant effort to finding appropriate sites.
Our site selection strategy takes into account a variety of local factors,
including anticipated demand and consumer preferences, competition, availability
of suitable locations and personnel, local demographics and household income
levels, as well as specific site characteristics, such as visibility,
accessibility and traffic volume. The "look" of the bakery-cafe is designed to
be suitable for any locality, and to provide the perception of an urban
neighborhood cafe experience, wherever its actual location. Many of the
company's bakery-cafes also feature outdoor cafe seating. The general site
location criteria for a neighborhood bakery-cafe are as follows:
o 1,500-2,200 square feet,
o Adequate configuration for retail bakery and cafe use,
o Location on morning commute side of major street,
o Substantial visibility to vehicular and pedestrian traffic,
o Easy in and out access,
o Neighborhood setting in residential/commercial area,
o Strong weekday lunch business potential (adequate commercial density),
o Strong weekend business potential,
o Adequate parking,
o 50,000-70,000 population within a three-mile radius with adequate
household incomes, and
o Adequate labor pool.
Our success in implementing our expansion plans will depend, in each case,
on our ability to effectively address a number of risks. There can be no
assurance that we will be able to open all of our new operations on a timely
basis, if at all, or, if opened, that those operations will be operated
profitably. See "Risk Factors."
24
<PAGE>
WHOLESALE OPERATIONS
- --------------------
In addition to our retail operations, we sell a complete line of our
products in baked form through wholesale distributors that service specialty
grocers, restaurants, and institutions. The wholesale distribution arrangement
requires the distributor to provide invoicing, collection, customer service and
marketing, in addition to daily deliveries and inventory management. By
contracting with independent distributors, we have been able to limit wholesale
inventory management, additional investment in secondary distribution equipment,
and a wholesale marketing and managerial structure to oversee the wholesale
accounts, allowing us to focus our managerial and financial resources on growing
our retail operations through the bakery-cafes. In addition, we wholesale bagels
in frozen, boxed form to major regional food distributors under the Marsee
Baking -registered trademark- name and logo, and other brand names.
In October 1997, we reached an agreement with a warehouse discount chain
for the introduction of portable Marsee Baking booths in its discount warehouse
stores which are near a Marsee Baking bakery-cafe. These "bread fairs" last four
to seven days and are rotated weekly among six store locations in Portland and
Seattle. The company hopes to increase brand awareness and to promote the nearby
bakery-cafe through the "bread fair" demonstrations. The initial capital
investment per traveling booth was approximately $6,000. Annual sales from the
bread fairs were $1,071,000 in 1998, which sales are included in our wholesale
revenue.
PRODUCTS
- --------
The key product groups are fresh baked goods, made-to-order sandwiches,
soups and cafe beverages. Marsee Baking's commissaries supply the bakery-cafes
with approximately 100 varieties of fresh baked goods from a selection of more
than 200 recipes. These products include the following:
DANISH AND PASTRIES:
MERENDINE BUN o Marsee Baking's signature pastry, a flaky butter
bun infused with high quality Mexican vanilla
APPLE CANOE AND o Flaky butter puff pastries, filled with pastry
CHERRY FAZOLETTIS cream and fresh Granny Smith apples or tart sour
cherries
CROISSANTS o Traditional slow rising, Parisian-style butter
croissants in plain, almond- or chocolate-filled
flavors
DANISH o Breakfast buns and daytime treats based on
delicate danish dough, including orange-glazed
blackberry buns, pecan sticky buns and classic
cinnamon twists
ARTISAN-CRAFTED BREADS:
CALABRESE o A moist porous Italian white bread with a crunchy
crust, made with slow rising starters
OLIVE PUGLIESE o An Italian bread infused with Kalamata olives and
olive oil
FOCACCIA o An Italian "pizza bread" infused with extra
virgin olive oil, and topped with roasted red
peppers, roma tomatoes, artichoke hearts and
other toppings
WHOLE WHEAT WALNUT o A sourdough whole wheat bread enhanced with
toasted walnuts and a hint of malt
STRUAN o A Scottish multigrain bread enhanced with
buttermilk, brown rice, wheat berries, and
polenta
SAVORY ONION RYE o A slow fermented rye bread with caramelized
BREAD onions and exotic Chernuska seeds
BAGELS: o Varieties of bagels include traditional flavors
of plain, poppy seed, sesame seed and cinnamon
raisin, as well as more exotic flavors of orange
cranberry, pesto, jalepeno, multigrain, chocolate
chip and corn-rye
25
<PAGE>
CAKES AND DESSERTS:
MARJOLINE CAKES o A French classic made of four layers of
hazelnut-almond meringue cake separated with one
layer of velvety chocolate ganache, a layer of
praline whipped cream, and a final layer of
vanilla whipped cream
CARROT CAKES o An old-fashioned American spice cake full of
freshly grated carrots, fresh pineapple,
toasted walnuts, coconut and currants, iced with
a smooth cream cheese icing and decorated with
handmade miniature marzipan carrots
GATEAU OPERA o Four layers of French almond biscuit cake soaked
in espresso syrup, layered with coffee
buttercream, and chocolate ganache, then covered
with a thin layer of chocolate glaze, and
decorated with chocolate espresso beans
DOLCE FRAGOLE o An Italian strawberry cake with layers of vanilla
genoise filled with berry cream and fresh cut
strawberries, and decorated with toasted almonds
and glazed strawberries
COOKIES: o Classic chocolate chip, Treasure Islands, black
and whites, chocolate-dipped coconut macaroons,
lemon bars and ginger snaps
Daily assortments also include seasonal scones, muffins, seasonal fresh fruit
tarts, petite eclairs and cream puffs. Marsee Baking also has a line of reduced
fat and all-natural, sugar-free products for health-conscious customers.
We also offer light lunch and dinner items, including deli sandwiches,
focaccia, Italian-style pannini sandwiches, green salads, pasta salads, and
homemade-style soups. Generally, the deli sandwiches are prepared by hand at the
bakery-cafe based on the customer's selection, using fresh deli meats and our
bread and bagel products. In certain locations, due to space and time
constraints, the sandwiches are pre-made. The soups and salads are made fresh
from scratch by a gourmet food company and delivered directly to store locations
where they are prepared for sale the same day.
Our bakery-cafes offer most typical espresso drinks, including lattes,
mochas, cappuccinos, and americanos. In addition, Marsee Baking offers fruit
smoothies and a selection of premium teas, premium juices and other soft drinks.
We regularly review and revise our product offerings to respond to changing
customer preferences, seasonal opportunities, and to maintain customer interest
among our target customer groups.
PRODUCTION AND PRODUCTION FACILITIES
- ------------------------------------
The central commissary is designed to provide efficiencies in production
and distribution, to ensure product quality and consistency, and to be
expandable as the demand for our products grows. The central facilities permit
the company to employ modern processes, which enhance quality and consistency,
while maintaining the Marsee Baking commitment to artisan breads and other
specialty baked goods. Our commissaries operate seven days a week and produce
80 to 120 varieties of baked goods daily based on a recipe book containing more
than 200 regional European and American recipes. Recipes are standardized to
ensure consistency.
Marsee Baking seeks to obtain ingredients of high quality at competitive
prices from reliable sources. To ensure freshness and quality, maintain low
inventory levels and facilitate the preparation of individual menu items, we
purchase most of our ingredients in an unprocessed state. To maintain the high
quality of our bakery products, we also maintain strict criteria for our recipe
ingredients, which often requires importing certain specialty ingredients from
distant places, including foreign sources. For example, we import seedless
raspberry preserves from France, gourmet chocolate from Belgium and France,
natural German fruit compounds, vanilla from Papantla, Mexico. Our purchasing
specialist seeks to obtain the lowest possible prices available to us without
compromising on quality by negotiating bulk purchasing contracts for a number of
the ingredients we use.
Each stage of the production process is managed by a separate team to
increase productivity and protect against the conversion of our proprietary
recipes. These stages include weighing, mixing, shaping and baking.
26
<PAGE>
The production staff consists of a production manager and team leaders. The
production manager carries responsibility for day-to-day results of production.
Each production manager and team leader is required to have significant bakery
experience in his or her respective areas of expertise, in addition to other
general baking and management skills.
Most of the baked goods sold at the bakery-cafes are baked at the
commissary. Some items, such as bagels and cookies, are baked on the store
premises from dough supplied by the commissary. These items are baked in the
bakery-cafes to foster the "fresh-baked" concept and create the atmosphere and
aroma of an authentic neighborhood bakery. We are currently supplying the
Seattle-area stores from the Portland commissary for products other than bagels.
After opening additional stores in the Seattle area, we plan to operate the
Seattle commissary at full capacity. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
We maintain a small fleet of vehicles for delivery of our products to our
neighborhood bakery-cafes. All products are packed and delivered before store
openings every day to all bakery-cafe locations to provide fresh-baked products
for sale and consumption that day.
MANAGEMENT INFORMATION SYSTEMS
- ------------------------------
Each bakery-cafe has computerized cash registers to collect point-of-sale
transaction data. Our systems include a MICROS point of sale system and a MAS 90
financial and inventory control system. Our computer-based cash register system
is also designed to assist in labor scheduling and production management, to
provide corporate and retail operations management quick access to retail data
and to reduce store managers' administrative time. We use this data to generate
daily consolidated reports regarding sales and other trends, as well as detailed
profit and loss statements for each bakery-cafe. Additionally, we monitor the
average check, customer count, product mix, unused inventory and waste. We
continue to assess the Year 2000 readiness of our computer systems. See
"Management's Discussion and Analyses of Financial Condition and Results of
Operations--Year 2000 Compliance."
MARKETING
- ---------
To date, we have not attempted to create brand awareness through extensive
advertising; rather, we rely on location, word of mouth, customer satisfaction
and promotional sampling programs to encourage trial by new customers and to
make existing customers aware of new menu offerings. We have employed an outside
marketing consultant to develop a brand image for Marsee Baking by creating a
distinctive logo, a characteristic "look" for our bakery-cafes and a uniform
product packaging and labeling system. We have produced from time-to-time a
colorful "HOLIDAY ORDER GUIDE" for special orders for Thanksgiving, Christmas
and Hanukah celebrations, and for gift baskets and specialty cakes during the
holiday season. We also attempt to increase our per-location sales through menu
development, promotions and by sponsorship of local community, charitable and
business organizations.
COMPETITION
- -----------
Our bakery-cafes compete with other local bakeries, grocery stores, and
bread-only stores that supply high quality baked goods, and with other
restaurants that seek to use quality baked goods to define breakfast, lunch and
late-afternoon menus. While we believe that our products and bakery-cafes are
distinctive in design and operating concept, other companies may develop
restaurants and bakeries that operate with similar concepts. There are, in
addition, many well-established regional and national competitors with
substantially greater financial, marketing, personnel and other resources than
we do, which may provide additional competition for us as we attempt to expand
into other geographic locations. Marsee Baking also competes for leased space in
desirable locations.
Despite the presence of these competitors, we are not aware of any Pacific
Northwest competitor that is similar to Marsee Baking in terms of the overall
concept. We compete primarily with respect to food quality, price-value
relationships, ambiance, service and location. We believe that we compete on the
basis of value-added experience rather than on price, and that we distinguish
27
<PAGE>
ourselves from our other competitors in terms of the quality and variety of
baked goods we provide. Management believes that the company's broad and complex
product line, the high "stand alone" quality of our products, our central
production facilities, and our ability to address multiple day parts create
barriers to entry. However, there can be no assurance that the proliferation of
non-direct competitors will not have a negative effect on our comparable-store
sales growth, product sales mix, or profitability. Competition may have a
material adverse effect on us.
The specialty restaurant business is often affected by changes in consumer
tastes, national, regional or local economic conditions, demographic trends,
consumer confidence in the economy, discretionary spending priorities, the
weather, tourist travel, traffic patterns, and the type, number and location of
competing restaurants. Changes in these factors could also have a material
adverse effect on our business, financial condition and results of operations.
See "Risk Factors."
GOVERNMENT REGULATION
- ---------------------
Each bakery-cafe is subject to licensing and regulation by state and local
health, sanitation, safety, fire, and other departments. Additionally, the
specialty restaurant industry in general is subject to extensive federal, state
and local government regulations relating to the development and operation of
food service outlets, including laws and regulations relating to building and
seating requirements, the preparation and sale of food, cleanliness, safety in
the work place and accommodations for the disabled. Difficulties in obtaining or
failure to obtain the required licenses or approvals could adversely affect
currently operating bakery-cafes and could delay or prevent the development of a
new bakery-cafe in a particular area or location. Our Portland and Seattle
commissaries are subject to various federal, state and local environmental
regulations, and the operation of our trucks is subject to Department of
Transportation regulations. To date, compliance with applicable environmental
regulations and Department of Transportation regulations has not had any
material effect on our capital expenditures, earnings or competitive position.
We are also subject to state and federal labor laws that govern our
relationship with our employees, such as minimum wage requirements, overtime and
working conditions, citizenship requirements and prohibitions against
discrimination. Significant numbers of our food service and commissary personnel
are paid at rates governed by the state minimum wage laws. Accordingly, further
increases in the minimum wage will increase our labor costs.
The development and construction of additional commissaries and
bakery-cafes will be subject to compliance with applicable zoning, land use and
environmental regulations. There can be no assurance that we will be able to
obtain necessary licenses or other approvals on a cost effective and timely
basis to construct and develop commissaries and bakeries in the future.
TRADEMARKS
- ----------
The "Marsee Baking" name is of material importance to us, and we have
registered the name and our logo as a trademark with the United States Patent
and Trademark Office. We also own the "BagelMax" trademark. We regard our
trademarks and related rights as having substantial value and as being an
important factor in the marketing of Marsee Baking bakery-cafes and branded
items.
EMPLOYEES
- ---------
As at December 31, 1998 we had 382 employees, of whom 12 were employed in
general and administrative functions principally at or from our executive
offices in Portland, Oregon; approximately 75 of whom were employed at the
Portland commissary; approximately 30 of whom were employed at the Seattle
commissary; and approximately 265 of whom were employed in the retail and
wholesale operations. A significant number of employees at the retail outlets
work part-time. The full-time equivalent number of employees working in these
operations is 151. None of our employees is represented by a labor union. We
consider our employee relations to be good.
28
<PAGE>
PROPERTIES
- ----------
All bakery-cafes are located in leased premises with typical lease terms
ranging from five to seven years, with one or two five-year renewal options.
Current leases in force expire between December 31, 1999 and December 31, 2007.
The leases typically have a minimum base occupancy charge, as well as charges
for a proportionate share of building operating expenses and real estate taxes.
We do not anticipate any difficulties renewing existing leases as they expire.
However, there can be no assurance that we will be able to renew any leases on
favorable terms, if at all. Our inability to renew a particular lease or closure
of a facility subject to a long-term non-cancelable lease could have a material
adverse effect on our business, financial condition and results of operations.
In 1995, we established our Portland commissary and headquarters in
Northwest Portland. The executive offices occupy approximately 2,000 square feet
and the commissary occupies approximately 8,800 square feet, including 1,600 of
additional office space. The headquarters lease expires in 2000 and the
commissary lease expires, assuming exercise of renewal options, in 2005. We
assumed a lease for 13,000 square feet for the Seattle commissary. The lease
term expires in January 2002.
The following table provides certain information about our bakery-cafe
locations as of April 30, 1999.
<TABLE>
<CAPTION>
SIZE
LOCATION CITY MONTH/YEAR OPENED (SQ. FT.)
----------------------------------------------------------------------------------------------------
Oregon
------
<S> <C> <C> <C>
NW 23rd Portland January 1993 2,800
Pioneer Tower Portland January 1994 360
SE Bybee Street Portland November 1994 1,479
Portland International Airport Portland October 1995 1,300
A Street Lake Oswego July 1997 2,188
SW Alder Street Portland October 1997 2,224
SW Pine Street Portland January 1998 1,543
NE Broadway Portland January 1998 3,600
Tanasbourne Town Center Hillsboro March 1998 2,000
City Hall Portland April 1998 633
Sherwood Market Center Sherwood May 1998* 2,361
Liberty Plaza Salem July 1998* 2,146
Washington
----------
Main Street Market Place Bellevue April 1998* 1,600
NE 10th Bellevue May 1998* 2,482
Crossroads Shopping Center Bellevue August 1998* 2,000
Factoria Plaza Bellevue August 1998* 2,461
Commons at Issaquah Issaquah September 1998* 2,200
Five Corners Shopping Center Burien September 1998* 2,600
-------
Total 35,977
</TABLE>
------------------------------------------------------
*Date converted to Marsee Baking format.
We consider our physical properties to be in good operating condition and
suitable for the purposes for which they are used.
29
<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to our
executive officers and directors as of the date of this prospectus.
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------
<S> <C> <C>
Name Age Position
---- --- --------
Raymond W. Lindstrom 55 Chairman of the Board, President and Chief Executive Officer
Stephen A. Aanderud 50 Chief Financial Officer and Assistant Secretary
Howard J. Wasserteil 49 Executive Vice President, Secretary, Director and Founder
Joann E. Vazquez 37 Vice President of Product Development and Founder
Karlin M. Conklin 41 Vice President of Bakery Operations
Robert E. Schneider, PhD 51 Director and Founder
Gerald W. Frank 75 Director
Joseph F. Tanous 50 Director
Raymond Zimmerman 66 Director
</TABLE>
All directors hold office until the next annual meeting of shareholders or
until their successors have been duly elected and qualified. With the exception
of Mr. Lindstrom, Mr. Aanderud, Mr. Wasserteil and Ms. Vazquez, who have
employment agreements with the company, our executive officers are appointed and
serve at the discretion of the Board of Directors. There are no family
relationships among any of our directors, executive officers, or key personnel.
RAYMOND W. LINDSTROM has served as Marsee Baking's Chairman of the Board
and Chief Executive Officer since November 1998 and as President since January
1999. From January 1997 to present, Mr. Lindstrom has served as a member of our
Board of Directors. He served as President of Coachmaster International from
July 1996 to November 1998. From January 1994 to June 1996, Mr. Lindstrom served
as President and Chief Executive Officer of Restaurants Unlimited, Inc., which
operated the Cinnabon concept.
STEPHEN A. AANDERUD has served as Chief Financial Officer and Assistant
Secretary of the company since April 1, 1999 and previously served as a
financial consultant to the company since January 1999. From 1994 to 1998, he
served as President, Chief Executive Officer and Director of ThrustMaster, Inc.,
a computer toy and accessories manufacturing company. From 1993 to 1994, he also
served as Vice President, Chief Financial Officer and Secretary of ThrustMaster.
HOWARD J. WASSERTEIL is a co-founder of the company and has served as our
Secretary and a director since our founding in June 1992. He has served as
Executive Vice President since February 1997. He has also served as President of
the company from June 1995 to February 1997 and as Vice President from June 1992
to June 1995
JOANN E. VAZQUEZ is a co-founder of the company and has served as our Vice
President of Product Development since January 1995. Before that, she served as
our lead baker and production manager from January 1993 to January 1995. Ms.
30
<PAGE>
Vazquez graduated from San Francisco City College of Hotel and Restaurant
Management and continued her education as a bakery apprentice in Florence,
Italy, at the II Fornaio Bakery. She helped open the first bakeries for that
company in the United States, and was a contributing author to its cookbook, THE
II FORNAIO BAKING BOOK. She served as head pastry chef for several hotels and
specialty bakeries in the San Francisco area before joining Marsee Baking.
KARLIN M. CONKLIN has served as our Vice President of Bakery Operations
since September 1997. Before joining Marsee Baking, Ms. Conklin served as
business improvement manager for Stream/R.R. Donnelley Financial, overseeing
operations and customer service from February 1996 to September 1997. During
1995, she served as general manager of Nor' Wester Brewing Company. From 1992 to
1994, Ms. Conklin served as director of the University of Oregon Lundquist
Center for Entrepreneurship.
ROBERT E. SCHNEIDER, PH.D. is a co-founder of the company and has served as
a director since our founding in June 1992. From February 1997 to December 1998,
he was our Executive Vice President of Quality Assurance, Product Development
and Retail Merchandise and, from June 1992 to December 1998, he served as our
Chairman of the Board. From June 1995 to February 1997, Dr. Schneider served as
our Chief Executive Officer. From June 1992 to June 1995, he served as our
President. Dr. Schneider is a practicing psychologist.
GERALD W. FRANK has served on the company's Board of Directors since
January 1997. He currently serves as chairman of the Oregon Tourism Commission,
a post he has held since 1996, and as a director of The Coast Airways, since
1997. Mr. Frank is also the president of Gerry's Frankly Speaking, Inc., and a
co-owner of Gerry Frank's Konditorei restaurant since 1982. Mr. Frank has
previously served on the board of directors of U.S. Bancorp from 1960 to 1994
and on the board of directors of Standard Insurance Company from 1962 to 1995.
JOSEPH F. TANOUS has been a member of our Board of Directors since February
1999. He has served as chairman of the board of Templex, Inc., a
telecommunications equipment company, since August 1997. He is also a director
of Infinite Pictures, Inc., a position he has served since September 1997, and a
director of Cascade Oncogenics, a position he has held since June 1996. Mr.
Tanous is also a partner in Bison Ventures, a venture capital fund, which he
co-founded in 1993.
RAYMOND ZIMMERMAN has served on our Board of Directors since May 1998. Mr.
Zimmerman served as Chairman of Service Merchandise Co., Inc., a national
merchandising business, from 1981 to April 1998, and from January 1999 to date.
He was also its Chief Executive Officer from 1984 until April 1997. Mr.
Zimmerman is also currently a director of The Limited, Inc.
BOARD COMMITTEES
- ----------------
Our Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee reviews the internal accounting
procedures of the company and consults with and reviews the services provided by
our independent accountants. The Compensation Committee reviews and recommends
to the Board of Directors the compensation and benefits of all officers of the
company, and will establish and review general policies relating to compensation
and benefits of our employees. The members of the Audit Committee are Mr. Tanous
and Dr. Schneider. The members of the Compensation Committee are Messrs. Tanous,
Frank and Zimmerman.
DIRECTOR COMPENSATION
- ---------------------
We reimburse each member of our Board of Directors for out-of-pocket
expenses incurred in connection with attending board meetings. No member of our
Board of Directors currently receives any additional cash compensation.
In consideration for their services as directors, in March 1998, we granted
to each of Messrs. Frank and Lindstrom options to purchase 20,000 shares of
common stock and to each of Dr. Schneider and Messrs. Tanous and Wasserteil
31
<PAGE>
options to purchase 10,000 shares of common stock. These options have an
exercise price of $1.00 per share. The shares underlying these options vest over
a four-year period commencing on the date the director joined the board. In
December 1998, contingent upon their continued service as directors (or the
commencement of service in the case of Mr. Tanous), we granted to Messrs.
Tanous, Wasserteil and Zimmerman, and Dr. Schneider non-qualified stock options
to purchase the following number of shares of common stock: Tanous (30,000
shares), Wasserteil, (10,000 shares), Zimmerman, (10,000 shares), and Dr.
Schneider (2,500 shares). These options are fully vested upon grant and have an
exercise price of $1.00 per share. Mr. Lindstrom received additional stock
options under the 1997 and 1998 Plans in connection with his employment as
President and Chief Executive Officer. See "--Executive Compensation."
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
- ----------------------------------------------------
We have adopted provisions in our articles of incorporation and bylaws that
will limit the liability of our directors to the fullest extent permitted by the
Oregon Business Corporation Act. Pursuant to such provisions, no director will
be liable to the company or its shareholders for monetary damages for breaches
of certain fiduciary duties as a director of the company. The limitation of
liability will not affect a director's liability for a breach of the director's
duty of loyalty to the company or its shareholders, an act or omission not in
good faith or that involves intentional misconduct or a knowing violation of the
law, any unlawful distributions, or a transaction from which the director
receives an improper personal benefit. The limitation of liability also will not
affect the availability of equitable remedies such as injunctive relief or
rescission.
Our articles of incorporation will permit and our bylaws will require us to
indemnify officers and directors to the fullest extent permitted by law. We have
also entered into agreements to indemnify our directors and executive officers,
in addition to indemnification provided for in our bylaws. These agreements,
among other things, indemnify our directors and executive officers for certain
expenses, judgments, fines and settlement amounts incurred by them in any action
or proceeding, including any action by or in the right of the company, arising
out of the person's services as a director or executive officer of the company
or any other company or enterprise to which the person provides services at our
request. We believe that these provisions and agreements are necessary to
attract and retain qualified directors and executive officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons based on the
foregoing provisions, we have been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy and is,
therefore, unenforceable.
32
<PAGE>
EXECUTIVE COMPENSATION
- ----------------------
The following table sets forth information concerning the compensation we
paid during the year ended December 31, 1998 to Mr. Lindstrom, our current
Chairman, President and Chief Executive Officer, and Mr. Barnett, our former
President and Chief Executive Officer (collectively, the "Named Executive
Officers "):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
AWARDS
------
Securities Underlying All other
Salary Options/SARs compensation
Name and Principal Position Year ($) (#) ($)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Raymond W. Lindstrom,
Chairman, President and
Chief Executive Officer 1998 $ 18,750(1) 540,000 $450(2)
Brad K. Barnett,
former President and
Chief Executive Officer 1998 122,243 161,666(3) --
</TABLE>
-------------------------
1 Reflects $150,000 annualized salary of Mr. Lindstrom, whose employment with
the company began on November 15, 1998.
2 Reflects a monthly car allowance of $300 for 1 1/2 months of service.
3 Subsequent to year end, the company and Mr. Barnett agreed to replace
100,000 of these options with new options to purchase 60,000 shares of common
stock at $1.00 per share as part of Mr. Barnett's separation from the company.
The following table sets forth information concerning the individual grants
of stock options made during the year ended December 31, 1998 to the Named
Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE
---- ----------- ----------- ------ ----
<S> <C> <C> <C> <C>
Raymond W. Lindstrom 140,000 12% $1.00 12/17/08
200,000 17 7.00 12/17/08
200,000 17 11.00 12/17/08
</TABLE>
EMPLOYEE BENEFIT PLANS
- ----------------------
1993 PLAN. In 1993, we adopted a Non-Qualified Stock Option Plan to grant
non-qualified options to our key employees, directors, officers and consultants
to acquire up to 100,000 shares of our common stock. The 1993 Plan was amended
in 1996 to increase the number of shares available from 100,000 to 150,000
shares of common stock. Options to purchase 96,908 shares of common stock were
granted under the 1993 Plan before its termination on February 4, 1997. The
options outstanding under the 1993 Plan at the time of its termination remain
outstanding and exercisable by the optionees until the expiration of the
specific option term. The Board cannot make new grants under the 1993 Plan.
33
<PAGE>
1997 PLAN. On February 4, 1997, our Board of Directors adopted a more
comprehensive plan called the 1997 Stock Option/Issuance Plan. The Board adopted
the 1997 Plan to allow the company to grant incentive stock options as well as
non-qualified stock options. ISOs are entitled to provide a more favorable
treatment under federal and state tax laws. As originally adopted, the 1997 Plan
reserved 400,000 shares of common stock for issuance under it, subject to
shareholder approval. The Board amended the Plan, again subject to shareholder
approval, on November 5, 1997 (the "Plan Amendment") to increase the number of
shares available under the 1997 Plan from 400,000 to 700,000 shares. Our
shareholders approved the 1997 Plan and the Plan Amendment at the annual
shareholders meeting held on January 22, 1998.
The 1997 Plan provides for the issuance of stock options or shares to
eligible participants. Eligible participants include officers, directors, key
employees of or consultants to the company. The 1997 Plan is administered by the
Board of Directors, or in its discretion, by a committee of not less than two
directors. The board established the terms and conditions of options granted
under the 1997 Plan, including the number of shares subject to the options, the
exercise price of the options, and the time at which these options become
exercisable. Options granted under the 1997 Plan are not transferable by the
optionee other than by will or the laws of descent and distribution, and are
exercisable during the lifetime of the optionee only by the optionee. The terms
of options issued under the 1997 Plan may not exceed 10 years. As of the date of
this prospectus, options to purchase up to 479,187 shares of common stock have
been granted under the 1997 Plan at an exercise price of $1.00 per share. All of
the options are immediately exercisable, but the option shares, once acquired,
are subject to repurchase by the company at the exercise price paid per share.
Our repurchase right lapses with respect to a portion of the option shares
according to the optionee's vesting schedule. Most of these options are subject
to three-, four- or five-year vesting provisions.
1998 PLAN. In December 1998, we adopted the 1998 Nonqualified Stock Option
Plan. The purpose of the 1998 Plan is to promote the interests of the company by
providing eligible employees, directors, officers, consultants, agents,
advisors, and independent contractors of the company with the opportunity to
participate in its growth and success, through ownership of equity interests in
the company. The Board of Directors has reserved a total of one million shares
of common stock under the 1998 Plan. The 1998 Plan is administered by the Board
of Directors, or in its discretion, by a committee of not less than two
directors. The Board established the terms and conditions of options granted
under the 1998 Plan, including the number of shares subject to the options, the
exercise price of the options, and the time at which the options become
exercisable. Options granted under the 1998 Plan are not transferable by the
optionee other than by will or the laws of descent and distribution, and are
exercisable during the lifetime of the optionee only by the optionee. The terms
of options issued under the 1998 Plan may not exceed 10 years. As of the date of
this prospectus, options to purchase up to 765,750 shares of the company's
common stock have been granted under the 1998 Plan at exercise prices of $1.00,
$3.00, $6.00, $7.00 and $11.00 per share. All of the options are immediately
exercisable and some are subject to a repurchase right by the company that
lapses with respect to a portion of the option shares according to the
optionee's vesting schedule. Most of these options are subject to three-, four-
or five-year vesting provisions.
CORPORATE TRANSACTIONS. In the event of certain corporate transactions,
such as a merger or sale of the company, each option outstanding under the 1993,
1997 and 1998 Plans will terminate upon the consummation of the corporate
transaction and cease to be exercisable, unless assumed by the successor
corporation or parent of the company. In connection with any corporate
transaction, the Board of Directors may, at its discretion, (1) accelerate each
or any outstanding option under the 1993, 1997 and 1998 Plans so that each
option shall become fully exercisable, (2) arrange for each or any outstanding
option to be assumed by the successor corporation or parent of the company, (3)
arrange for the option to be replaced by a comparable cash incentive program of
the successor corporation or (4) take none of the actions described in clauses
(1), (2) or (3) above and allow the option to terminate.
401(K) PLAN. Marsee Baking maintains a 401(k) tax-qualified employee
savings and retirement plan covering all employees who satisfy certain
eligibility requirements relating to minimum age and length of service. Based on
the terms of the 401(k) Plan, eligible employees may elect to reduce their
current compensation by up to the lesser of 15% of their annual compensation or
the statutorily prescribed annual limit and have the amount of the reduction
contributed to the 401(k) Plan. The 401(k) Plan is intended to qualify under
Section 401 of the Internal Revenue Code so that contributions to the 401(k)
Plan, and income earned on the 401(k) Plan contributions, are not taxable until
34
<PAGE>
withdrawn. The 401(k) Plan is available to our executive officers on terms not
more favorable than those offered to other employees.
EMPLOYMENT AGREEMENTS
- ---------------------
We have entered into an employment agreement, effective as of January 1,
1999, with Raymond W. Lindstrom for a two-year term. The agreement provides for
the continued employment of Mr. Lindstrom as our President and Chief Executive
Officer at a base salary of $150,000 per year. Mr. Lindstrom is also provided
with an automobile expense allowance of $300 per month. Up to 50% of his base
salary may be deferred at Mr. Lindstrom's sole discretion until the earlier of
the company obtaining equity financing of $1,000,000 or more, including this
offering, or October 1, 1999. The base salary will increase to $200,000 per year
on the earlier of (1) two consecutive months during which the company achieves
earnings before interest, taxes, depreciation and amortization of 10% or more of
gross revenues, or (2) October 1, 1999.
As further compensation, the agreement provides Mr. Lindstrom with the
following stock options:
o An incentive stock option to purchase up to 140,000 shares of common
stock at an exercise price equal to the fair market value of the common
stock at the time of grant ("Grant I");
o A nonqualified stock option to purchase up to 200,000 shares of common
stock at an exercise price of $7.00 per share ("Grant II"),
o A nonqualified stock option to purchase up to 200,000 shares of common
stock at an exercise price of $11.00 per share ("Grant III"); and
o A nonqualified stock option to purchase up to 100,000 shares of common
stock upon the company achieving EBITDA of 10% of gross revenues or more
for three consecutive months during 1999 or 2000, at an exercise price
equal to the fair market value at the time the option is earned ("Grant
IV").
Grants I, II and III will vest over a 48-month period. Grant IV will vest
fully as of the date it is earned. Mr. Lindstrom is also eligible for a cash
incentive bonus equal to 40% of his base salary upon meeting performance goals
to be determined by the Board of Directors. If we terminate Mr. Lindstrom's
employment without cause, the option shares underlying Grants I, II and III will
become vested through the end of the two-year term of his employment agreement.
We have also entered into an employment agreement with Howard Wasserteil
for a three-year term ending July 12, 1999. Under the agreement, Mr. Wasserteil
will continue his full-time employment as our Executive Vice President at an
annual salary of $86,400. In addition to cash compensation, Mr. Wasserteil
received a stock option to purchase up to 10,000 shares of the company's common
stock on each of December 31, 1996 and December 31, 1997 at an exercise price of
$1.00 per share.
Other material terms of the Wasserteil employment agreement include:
o Our agreement to consider paying cash bonuses, granting additional stock
options and increasing the salary payable to Mr. Wasserteil if certain
financial performance goals (to be agreed upon) are met;
o Payment of six months severance to Mr. Wasserteil if he is terminated by
us without "cause" (as defined in the agreement) after the three-year
term;
o In the event of Mr. Wasserteil's death or permanent disability or upon
his termination without cause, the payment of his salary through the end
of the three-year term and an additional six months of severance pay;
o Our right to terminate the employment agreement if Mr. Wasserteil is
terminated for "cause" and to pay only his accrued salary and benefits
through the termination date; and
o Our agreement to carry life and disability insurance policies on Mr.
Wasserteil in sufficient amounts to meet the obligations described
above.
We are a party to an Amended Employment and Stock Grant Agreement with
Joann Vazquez, Vice President of Product Development, dated April 9, 1999. In
the agreement, Ms. Vazquez has granted to the company an irrevocable, perpetual
35
<PAGE>
royalty-free license to use her proprietary recipes which she owned prior to her
employment with us. All recipes, processes and techniques developed by Ms.
Vazquez during her employment will become the property of the company. The
agreement prohibits Ms. Vazquez from engaging in the following conduct for a
period of two years following her termination if we terminate her employment for
"cause" (as defined in the agreement):
o Competing with the company, directly or indirectly;
o Making disparaging statements about the company or its products; and
o Soliciting any employee of the company for employment elsewhere.
In addition, Ms. Vazquez is prohibited from engaging in the following
conduct, regardless of time restrictions or whether the termination is with or
without cause:
o Disclosing any of our proprietary and confidential information (as
defined in the agreement); and
o Using our proprietary and confidential information.
Effective December 31, 1998, Mr. Barnett resigned from his position as our
President and Chief Executive Officer. We and Mr. Barnett entered into a
Separation Agreement and Release, dated March 12, 1999, in which, in exchange
for a release of all claims by Mr. Barnett, we agreed to pay his semi-monthly
salary of $5,208 for a period of six months or until he begins employment
elsewhere, whichever is earlier. The Separation Agreement also terminates his
existing stock options to purchase 100,000 shares of common stock and replaces
them with fully vested stock options to purchase 60,000 shares of common stock
under the 1998 Plan at an exercise price of $1.00 per share.
36
<PAGE>
CERTAIN TRANSACTIONS
SHAREHOLDER LOANS
- -----------------
As of December 31, 1998, we owed certain directors, officers and their
family members a total of approximately $229,000 for sums advanced to the
company over the past several years. Most of the loans were made to finance new
stores and to provide for general corporate purposes. The following table sets
forth the names of the lenders who have made loans to the company in excess of
$60,000 in the aggregate, the balance owing as of December 31, 1998, the
interest rates and their maturity dates.
BALANCE AS OF MATURITY
LENDER DECEMBER 31, 1998 INTEREST DATE
------ ------------------ --------- ----
Howard J. Wasserteil 92,601 20.42% June 30, 1999
36,682 * May 31, 1999
Robert E. Schneider 34,957 17.50 June 30, 1999
38,947 * Demand
------------------------------------
*These promissory notes, which secure the payment of certain credit card
debts incurred by Mr. Wasserteil and Dr. Schneider on behalf of the
company, have varying interest rates based on the agreements with the
credit card companies. We are required to make monthly payments of
principal and interest directly to these credit card companies.
We believe that all of the transactions described above were made on terms
no less favorable to the company than could have been obtained from unaffiliated
third parties. Any future transactions between the company and its officers,
directors, and principal shareholders and their affiliates will be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested directors, and will be on terms no less favorable to the company
than could be obtained from unaffiliated third parties.
WARRANT GRANTS FOR BANK LINE AND LETTER OF CREDIT GUARANTEES
- ------------------------------------------------------------
In October 1997, we arranged for a working capital line of credit of
$250,000 with a domestic bank. To secure the line of credit, John Durbetaki, a
former director, and Joseph Tanous, a current director, guaranteed the line of
credit. As consideration for providing the guarantees, we granted to each of
Messrs. Durbetaki and Tanous a warrant to purchase up to 5,000 shares of common
stock at an exercise price of $1.00 per share. The warrants expire on November
4, 2004. In addition, we entered into a Contribution and Indemnity Agreement
with the guarantors that provides for the sharing of liability between
guarantors if the bank elects to enforce the guarantees. Further, we have agreed
based on the agreement (1) to indemnify the guarantors against any losses,
liability and expenses resulting from the collection on the guarantees by the
bank, and (2) to use our best efforts to remove the guarantees by November 1,
2000. On April 29, 1999, Mr. Tanous agreed to personally guarantee an increase
in the amount of our working capital line of credit up to $750,000, for which he
received 150,000 shares of common stock.
In May 1998, we obtained equipment lease financing secured by a letter of
credit. The letter of credit is, in turn, secured by the personal guarantees of
Messrs. Durbetaki and Tanous and by $108,000 in restricted cash provided by a
shareholder. In consideration for the cash, the shareholder received 3,323
shares of Series C Preferred Stock and, in April 1998, he received a warrant to
purchase 5,000 shares of common stock at an exercise price of $3.00 per share.
As consideration for the personal guarantees, in April 1999, Messrs. Durbetaki
and Tanous each received a warrant to purchase 5,000 shares of common stock at
an exercise price of $3.00 per share. The warrants expire on November 1, 2004.
37
<PAGE>
WARRANT GRANTS FOR LEASE GUARANTEES
- -----------------------------------
Mr. Howard J. Wasserteil and Dr. Robert E. Schneider, and their respective
spouses, have personally guaranteed certain real property leases and corporate
loans to the company. In consideration for these personal guarantees, Mr.
Wasserteil and Dr. Schneider received warrants to purchase 48,235 and 44,230
shares of the company's common stock, respectively, at an exercise price of
$1.00 per share. The warrants expire on November 1, 2004.
38
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 30, 1999, the number and
percentage of outstanding shares of common stock beneficially owned by all
persons that own beneficially more than 5% of the company's common stock, by
each director and executive officer of the company individually and by all
directors and executive officers of the company as a group, and as adjusted to
reflect the sale of all of the shares of common stock sold in this offering
(assuming that none of the shares are purchased by these persons).
<TABLE>
<CAPTION>
BEFORE OFFERING AFTER OFFERING
--------------- --------------
NAME AND ADDRESS OF BENEFICIAL SHARES BENEFICIALLY % OF COMMON SHARES BENEFICIALLY % OF COMMON
OWNER OR IDENTITY OF GROUP(1) OWNED(2) STOCK OUTSTANDING(3) OWNED(2) STOCK OUTSTANDING(4)
- --------------------------- -------- -------------------- -------- --------------------
<S> <C> <C> <C> <C>
Raymond W. Lindstrom(5) 561,666 27.0% 561,666 9.5%
Howard J. Wasserteil(6) 422,401 25.8 428,737 7.4
Robert E. Schneider, Ph.D.(7) 418,396 25.8 418,396 7.2
Joseph F. Tanous(8) 285,000 17.4 388,743 6.9
Raymond Zimmerman(9) 10,000 * 348,981 6.5
Gerald W. Frank(10) 24,333 1.6 27,469 *
Gary S. Holmes(11) 10,000 * 348,932 6.5
Roitenberg Investments, Inc.(12) 10,000 * 349,004 6.5
All executive officers and 1,997,368 76.2% 2,449,564 33.3
directors as a group (9 persons)
</TABLE>
- ----------------------------
1 All of the executive officers and directors can be reached at the address
of the company: 2287 NW Pettygrove, Portland, Oregon 97210. The address for Mr.
Holmes is 2575 University Avenue West, St. Paul, Minnesota 55114-1024, and for
Roitenberg Investments is 5500 Wayzata Blvd., #1065, Minneapolis, Minnesota
55416.
2 Beneficially owned shares include shares which may be acquired (i.e.,
through exercise of warrants or options) within 60 days of April 30, 1999.
3 The percentage ownership before the offering is based on 1,521,761 shares
of common stock outstanding.
4 The percentage of ownership after the offering is calculated based on
5,366,470 shares outstanding, which includes the 1,750,000 shares of common
stock sold in this offering, the conversion of all Series A, B, C and D
Preferred Stock into 2,077,421 shares of common stock, and the payment of
accrued Series D Preferred Stock dividends by the issuance of 17,288 shares of
common stock.
5 Mr. Lindstrom is the beneficial owner of options to purchase 561,666 shares
of common stock.
6 Mr. Wasserteil is the beneficial owner of options and warrants to purchase
112,900 shares of common stock.
7 Dr. Schneider is the beneficial owner of options and warrants to purchase
98,396 shares of common stock.
8 Upon the closing of the offering, Mr. Tanous will receive approximately
98,743 shares of common stock from the conversion of his Series B and Series C
Preferred Stock. Mr. Tanous is also the beneficial owner of options and warrants
to purchase 120,000 shares of common stock.
9 Upon the closing of the offering, Mr. Zimmerman will receive approximately
333,828 shares of common stock from the conversion of his Series C and D
Preferred Stock and 5,186 shares of common stock as Series D Preferred Stock
dividend. Mr. Zimmerman is also the beneficial owner of options to purchase
10,000 shares of common stock.
10 Mr. Frank is the beneficial owner of options to purchase 24,333 shares of
common stock. Upon the closing of the offering, Mr. Frank will receive 3,163
shares of common stock from the conversion of his Series C Preferred Stock.
11 Upon the closing of the offering, Mr. Holmes will receive approximately
333,746 shares of common stock from the conversion of his Series C and D
Preferred Stock and 5,186 shares of common stock as Series D Preferred Stock
dividend. Mr. Holmes is also the beneficial owner of options to purchase 10,000
shares of common stock.
12 Upon the closing of the offering, Roitenberg Investments, Inc. will
receive approximately 333,818 shares of common stock from the conversion of its
Series C and D Preferred Stock and 5,186 shares of common stock as Series D
Preferred Stock dividend. It is also the beneficial owner of options to purchase
10,000 shares of common stock.
39
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the company is 19,000,000 shares, consisting
of 15,000,000 shares of common stock, no par value, and 4,000,000 shares of
preferred stock, no par value. Upon the closing of the offering, all shares of
Series A, B, C and D Preferred Stock currently outstanding will be converted to
common stock, and no shares of preferred stock will be outstanding.
COMMON STOCK
- ------------
As of December 31, 1998, there were 868,961 shares of common stock
outstanding. Following this offering, 5,366,470 shares of common stock will be
issued and outstanding. See "Capitalization." Holders of common stock are
entitled to one vote per share on all matters on which shareholders are entitled
to vote. Because holders of common stock do not have cumulative voting rights or
other preemptive or subscription rights, the holders of a majority of the shares
of common stock can elect all of the members of the Board of Directors. The
common stock is not redeemable by the company. Holders of shares of common stock
are entitled to any dividends as may be declared by the Board of Directors out
of legally available funds. If the company is liquidated, dissolved or wound up,
the holders of the common stock are entitled to receive pro rata of all of the
company's assets available for distribution to its shareholders after payment of
liquidation preferences of any outstanding shares of preferred stock. All of the
outstanding shares of common stock are fully paid and non-assessable.
PREFERRED STOCK
- ---------------
OUTSTANDING PREFERRED STOCK. The rights, designations, preferences,
privileges, qualifications and restrictions of the currently outstanding shares
of Series A, B, C and D Preferred Stock are described in our articles of
incorporation and certificates of designations, as amended, which documents have
been filed as exhibits to the registration statement of which this prospectus
is a part. Effective upon the closing of the offering, all outstanding shares of
Series A, B, C and D Preferred Stock will be automatically converted into the
number of shares of common stock required by their respective conversion ratios
(after giving effect to anti-dilution adjustments) set forth below, and no
shares of preferred stock of any series will be outstanding upon the closing of
the offering.
<TABLE>
<CAPTION>
Authorized Shares Conversion Shares of common stock
Designation shares outstanding ratio issuable upon conversion
---------- ------ ----------- ----- ------------------------
<S> <C> <C> <C> <C>
Series A 100,000 52,667 1:1 52,667
Series B 510,575 510,575 1:1.02396 522,808
Series C 168,000 129,121 1:10.30227 1,330,239
Series D 22,507 16,667 1:10.30227 171,707
</TABLE>
The effect of the conversion of the outstanding series of preferred stock
into common stock is to reduce the proportionate interest in the company held by
the holders of the outstanding shares of common stock prior to the offering. See
"Dilution."
BLANK CHECK PREFERRED STOCK. Subject to the provisions of the amended and
restated articles of incorporation, which will become effective upon the closing
of the offering, and to the limitations prescribed by law, the Board of
Directors will have the authority, without further action by the shareholders,
to issue up to 4,000,000 shares of preferred stock in one or more series. The
Board of Directors will have the power and authority to fix the rights,
designations, preferences, privileges, qualifications and restrictions of the
preferred stock, including the number of shares, dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences and sinking
fund terms, any or all of which may be greater than the rights of the common
stock. The company
40
<PAGE>
has no present plans to issue any shares of preferred stock.
One of the effects of the existence of undesignated preferred stock is to
enable the Board of Directors to render more difficult or to discourage a
third party's attempt to obtain control of Marsee Baking by means of a tender
offer, proxy contest, merger, or otherwise, which thereby protects the
continuity of our management. The issuance of shares of preferred stock may also
discourage a party from making a bid for the common stock because the issuance
may adversely affect the rights of the holders of common stock. For example,
preferred stock issued by the company may rank prior to the common stock as to
dividend rights, liquidation preference, or both, may have full or limited
voting rights and may be convertible into shares of common stock. Accordingly,
the issuance of shares of preferred stock may discourage or delay bids for the
common stock or may otherwise adversely affect the market price of the common
stock.
WARRANTS
- --------
PURCHASE WARRANTS SOLD IN THIS OFFERING. The following is a brief summary
of certain provisions of the purchase warrants, but the summary does not purport
to be complete and is qualified in all respects by reference to the actual text
of the purchase warrant agreement between the company and ChaseMellon
Shareholder Services, Inc., the transfer agent. A copy of the purchase warrant
agreement has been filed as an exhibit to the registration statement of which
this prospectus is a part. You are urged to read the purchase warrant agreement
in its entirety. See "Where You Can Find More Information."
EXERCISE PRICE AND TERMS. Each purchase warrant entitles its holder to
purchase, at any time from the closing date of this offering through the fifth
anniversary of this offering, one share of common stock of the company at a
price of $5.00 per share, subject to adjustment according to the antidilution
and other provisions referred to below. The purchase warrants will expire on the
fifth anniversary of this offering.
The holder of a purchase warrant may exercise the purchase warrant by
surrendering the certificate representing the purchase warrant to the transfer
agent, with the subscription form on the reverse side of the certificate
properly completed and executed, together with payment of the exercise price.
Subject to prior redemption as described below, the purchase warrants may be
exercised at any time in whole or in part at the applicable exercise price until
expiration of the purchase warrants. No fractional shares will be issued upon
the exercise of the purchase warrants.
If a market for the purchase warrants develops, the holder may sell the
purchase warrants instead of exercising them. There can be no assurance,
however, that a market for the purchase warrants will develop or continue. If
the company is unable to qualify for sale in particular states the common stock
underlying the purchase warrants, holders of the purchase warrants residing in
such states and desiring to exercise the purchase warrants will have no choice
but to sell such purchase warrants or allow them to expire. See "Risk Factors."
After the offering, the purchase warrants are subject to redemption by the
company upon 30 days' prior written notice at $0.25 per purchase warrant if the
closing bid price of the common stock, as reported on the Nasdaq SmallCap
Market or as reported on a national or regional securities exchange, for 30
consecutive trading days ending within ten days of the notice of redemption,
averages in excess of $10.00 per share, subject to adjustment. The company is
required to maintain an effective registration statement with respect to the
common stock underlying the purchase warrants as a condition to redemption of
the purchase warrants. Before the first anniversary of the closing date of the
offering, the purchase warrants will not be redeemable by the company without
the written consent of the underwriter. If the company exercises the right to
redeem the purchase warrants, the purchase warrants will be exercisable until
the close of business on the date for redemption fixed in the notice. In that
event, any purchase warrant holder may either (1) exercise the purchase warrants
and pay the exercise price at a time when it may be less advantageous
economically to do so, or (2) accept the redemption price in consideration for
cancellation of the purchase warrant, which could be substantially less than the
market value of the purchase warrant at the time of redemption.
41
<PAGE>
The exercise price of the purchase warrants bears no relation to any
objective criteria of value and should in no event be regarded as an indication
of any future market price of the securities offered hereby.
The company has authorized and reserved for issuance a sufficient number of
shares of common stock to accommodate the exercise of all purchase warrants to
be issued in this offering. All shares of common stock issued upon exercise of
the purchase warrants, if exercised according to their terms, will be fully paid
and nonassessable.
ADJUSTMENTS. The exercise price and the number of shares of common stock
purchasable upon exercise of the purchase warrants are subject to adjustment
upon the occurrence of certain events, including stock dividends, stock splits,
combinations or reclassification of the common stock, or sale by the company of
shares of its common stock (or other securities convertible into or exercisable
for common stock) at a price per share or share equivalent below the
then-applicable exercise price of the purchase warrants or the then-current
market price of the common stock. Additionally, an adjustment would be made in
the case of a reclassification or exchange of common stock, consolidation or
merger of the company with or into another corporation, or sale of substantially
all of the assets of the company, to enable purchase warrant holders to acquire
the kind and number of shares of stock or other securities or property
receivable in that event by a holder of that number of shares of common stock
that would have been issued upon exercise of the purchase warrant immediately
before that event. No adjustments will be made until the cumulative adjustments
in the exercise price per share amount to $0.05 or more. No adjustments to the
exercise price of the purchase warrants will be made for dividends (other than
stock dividends) paid on the common stock or upon exercise of the purchase
warrants, the underwriter's warrant or any other options or warrants outstanding
as of the date of this prospectus.
WARRANT HOLDER NOT A SHAREHOLDER. The purchase warrants do not confer upon
their holders any dividend, voting, preemption or any other rights as
shareholders of the company.
OUTSTANDING WARRANTS. As of April 30, 1999, there were outstanding 13
warrants to purchase an aggregate of 372,215 shares of common stock of the
company at exercise prices ranging from $1.00 to $3.00 per share. Each warrant
entitles its holder to purchase shares of common stock in the number and price
as specified in the warrant. The exercise price and number of shares are subject
to adjustment proportionately for any increase or decrease in the number of
issued shares of common stock resulting from a subdivision or consolidation of
shares of common stock or the payment of stock dividends or any other increase
or decrease in the number of issued shares of common stock effected without
receipt of consideration by the company. The company will not be required to
issue fractional shares upon exercise of a warrant. The holder of a warrant does
not possess any rights as a shareholder of the company until the holder
exercises the warrant.
In addition, in connection with an equipment lease financing, the company
has issued to the financing company a warrant to purchase up to 1,500 shares of
Series C Preferred Stock at a price of $32.50 per share. The holder may, at its
option, elect to purchase shares of common stock into which the shares of Series
C Preferred Stock are then convertible, at a purchase price as adjusted
according to a specified conversion rate. Upon the closing, the holder will be
entitled to purchase up to 15,393 shares of common stock at an exercise price of
$3.135. If the fair market value of our common stock is greater than the
exercise price then in effect, then the warrant will be deemed automatically
exercised. The number of shares subject to the warrant and the warrant price are
subject to adjustment upon reclassification or merger, subdivision or
combination of shares or the payment of stock dividends to the holders of Series
C Preferred Stock or any other increase or decrease in the number of issued
shares of common stock effected without receipt of consideration by the company.
CASH AND STOCK DIVIDENDS TO CURRENT HOLDERS OF PREFERRED STOCK
- --------------------------------------------------------------
CASH DIVIDENDS TO HOLDERS OF SERIES A PREFERRED STOCK. The holders of
Series A Preferred Stock are entitled to receive dividends at the rate of $0.60
per share per year, which accrue from day-to-day, whether or not earned or
declared. The holders of Series A Preferred Stock will be entitled to receive an
42
<PAGE>
aggregate of approximately $107,000 in accrued dividends, assuming a closing
date of June 18, 1999 for this offering. The company intends to pay the full
amount of the accrued dividends upon the closing of the offering.
STOCK DIVIDENDS TO HOLDERS OF SERIES D PREFERRED STOCK. The holders of
Series D Preferred Stock are entitled to receive dividends at the rate of $4.20
per share per year, which accrue day to day, whether or not earned or declared.
These accrued dividends are payable in shares of Series D Preferred Stock at an
assumed value of $60.00 per share. The stock dividend will become payable in
shares of common stock at the election of the company upon the closing of the
offering. The holders of Series D Preferred Stock are entitled to receive
approximately 17,288 shares of common stock, assuming a closing date of June 18,
1999 for this offering.
BRIDGE FINANCING OF PROMISSORY NOTES AND COMMON STOCK
- -----------------------------------------------------
During January 1998 through April 1999, the company sold 502,8000 units of
securities at a price of $5.00 per unit, each unit consisting of one share of
common stock and a promissory note in the principal amount of $5.00 and bearing
interest at a rate of eight percent per year. The principal and accrued interest
on the note are due and payable within nine months of the date of the promissory
note or upon the closing of a public offering of the common stock, whichever is
earlier.
REGISTRATION RIGHTS
- -------------------
After the offering, the current holders of 129,121 shares of Series C
Preferred Stock and 16,667 shares of Series D Preferred Stock may be entitled,
upon expiration of lock-up agreements with underwriter, to certain rights with
respect to registration under the Securities Act of 1,501,946 shares of common
stock into which the shares of Series C and Series D Preferred Stock will be
converted at the closing of this offering. Under the terms of an investors
rights agreement between the company and the holders of these securities, if the
company proposes to register any of its securities under the Securities Act,
either for its own account or for the account of other security holders
exercising registration rights, the holders are entitled to notice of the
registration and are entitled to include their shares of common stock in the
registration statement. Further, holders may require the company to file
registration statements on Form S-3 at the company's expense when the form
becomes available for use to the company. All registration rights are subject to
certain conditions and limitations, including the right of the underwriter of an
offering to limit the number of shares to be included in the registration.
The holder of the warrant to purchase Series C Preferred Stock is also
entitled to notice of a proposed registration of securities by the company, and
may require the company to include in the registration the holder's securities.
The company will bear all expenses of the registration and reimburse the holder
for its reasonable fees (not exceeding $2,500 for each registration) and
disbursement expenses of one counsel chosen by the holder.
The company entered into a consulting agreement dated January 12, 1999 with
two parties to act as financial consultants and advisors to the company. In
connection with the engagement, the company granted to each party a five-year
warrant to purchase up to 125,000 shares of common stock at an exercise price of
$1.00 per share. The shares underlying these warrants have "piggyback"
registration rights on the same terms and conditions granted to the holders of
Series C and Series D Preferred Stock, as described above.
The underwriter has certain registration rights in connection with the
shares of common stock underlying the underwriter's warrants. See
"Underwriting."
CERTAIN ANTITAKEOVER EFFECTS OF OUR ARTICLES OF INCORPORATION, BYLAWS AND
- -------------------------------------------------------------------------
PROVISIONS OF OREGON LAW
- ------------------------
ARTICLES OF INCORPORATION AND BYLAWS. Our amended and restated articles and
bylaws that will become effective upon the closing of this offering will contain
provisions that may have the effect of delaying, deferring or preventing a
change in control. These provisions include:
o The ability of the Board of Directors, without further shareholder
approval, to issue up to 4,000,000 shares of preferred stock;
43
<PAGE>
o The requirement of a classified board whenever there are six or more
directors, with each class containing as nearly as possible one-third of
the total number of directors and the members of each class serving for
staggered three-year terms;
o The prohibition of cumulative voting for the election of directors; and
o The requirement of no less than 60 days' advance notice with respect to
nominations of directors or other matters to be voted on by shareholders
other than by or at the direction of the board of directors.
OREGON CONTROL SHARE AND BUSINESS COMBINATION STATUTES. Oregon law may
restrict the ability of significant shareholders of the company to exercise
voting rights. The law generally applies to a person who acquires voting stock
of an Oregon corporation in a transaction that results in such person holding
more than 20%, 33 1/3% or 50% of the total voting power of the corporation. If
such a transaction occurs, the person cannot vote the shares unless voting
rights are restored to those shares by:
o A majority of the outstanding voting shares, including the acquired
shares, and
o The holders of a majority of the outstanding voting shares, excluding
the acquired shares and shares held by the corporation's officers and
inside directors.
This law is construed broadly and may apply to persons acting as a group.
The restricted shareholder may, but is not required to, submit to the
company a statement setting forth information about itself and its plans with
respect to the company. The statement may request that the company call a
special meeting of shareholders to determine whether voting rights will be
granted to the shares acquired. If a special meeting of shareholders is not
requested, the issue of voting rights of the acquired shares will be considered
at the next annual or special meeting of shareholders. If the acquired shares
are granted voting rights and they represent a majority of all voting power,
shareholders who do not vote in favor of granting such voting rights will have
the right to receive the appraised fair value of their shares. The appraised
fair value will, at a minimum, be equal to the highest price paid per share by
the person for the shares acquired in a transaction subject to this law.
The company is also subject to provisions of Oregon law that govern
business combinations between corporations and interested shareholders. These
provisions generally prohibit a corporation from entering into a business
combination transaction with a person, or affiliate of such person, for a period
of three years from the date such person acquires 15% or more of the voting
stock of the corporation. For the purpose of this law, the prohibition generally
applies to the following:
o A merger or plan of share exchange;
o Any sale, lease, mortgage or other disposition of 10% or more of the
assets of the company; and
o Transactions that result in the issuance of capital stock of the company
to the 15% shareholder.
However, the general prohibition does not apply if:
o The 15% shareholder, as a result of the transaction in which such person
acquired 15% of the shares, owns at least 85% of the outstanding voting
stock of the corporation;
o The board of directors approves the share acquisition or business
combination before the shareholder acquired 15% or more of the company's
outstanding voting stock; or
o The board of directors and the holders of at least two-thirds of the
outstanding voting stock of the company, excluding shares owned by the
15% shareholder, approve the transaction after the shareholder acquires
15% or more of the company's voting stock.
44
<PAGE>
NASDAQ AND EXCHANGE LISTINGS
- ----------------------------
We have applied to list the common stock and the purchase warrants for
quotation on the Nasdaq SmallCap Market under the trading symbols "MSEE" and
"MSEEW." We have also applied to list the common stock and purchase warrants on
the Boston Stock Exchange under the trading symbols of [________] and [______]W.
TRANSFER AGENT AND REGISTRAR
- ----------------------------
We have appointed ChaseMellon Shareholder Services, Inc. of Seattle,
Washington as the transfer and warrant agent and as registrar for the common
stock and purchase warrants.
45
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
SHARES ELIGIBLE
- ---------------
Upon completion of the offering, we will have outstanding an aggregate of
5,366,470 shares of common stock, assuming no exercise of the underwriter's
over-allotment option and no exercise of outstanding warrants, including the
purchase warrants, and no exercise of employee stock options. Of these shares,
the 1,750,000 shares sold in the offering will be freely tradable without
restriction or further registration under the Securities Act, except that any
shares held by our "affiliates," as that term is defined in Rule 144 of the
Securities Act, may generally be sold only in compliance with the limitations of
Rule 144 described below. The remaining 3,616,470 shares of common stock are
"restricted securities" as that term is defined in Rule 144. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration under the Securities Act, as
described below.
LOCKUP AGREEMENTS
- -----------------
A number of holders of currently outstanding common stock, options and
warrants, and all executive officers and directors of the company, have agreed
that they will not offer, sell or otherwise dispose of any shares of common
stock, options or warrants to acquire shares of common stock or securities
exchangeable for or convertible into common stock, for a period of six months,
fourteen months and twenty-four months after the date of this prospectus. The
lock-up period and the number of securities subject to the lock-up, stated in
terms of common stock equivalents, are set forth below:
LOCK-UP PERIOD COMMON STOCK OPTIONS WARRANTS
-------------- ------------ ------- ---------
6 months 297,619 -- --
14 months 809,203 -- 125,000
24 months 2,347,981 1,335,613 247,215
Not covered by lock-up 161,667 6,232 15,453
The underwriter, in its sole discretion, may release these persons from
their lock-up agreements at any time without notice. See "Underwriting."
SALE OF RESTRICTED SECURITIES UNDER RULE 144
- --------------------------------------------
IN GENERAL. The 3,616,470 restricted shares may be sold in the public
market only if registered or if they qualify for an exemption from registration
under the Securities Act. Due to contractual restrictions, the lock-up
agreements described above and the provisions of the Securities Act, additional
shares will be available for sale under Rule 144 in the public market as
follows:
o 297,619 shares of common stock that have been held for more than one
year will be eligible for sale upon the expiration of the lock-up
agreements expiring six months after the date of the final prospectus
prepared in this offering;
o An additional 161,667 shares of common stock (plus 6,232 shares issuable
upon exercise of stock options and 15,453 shares issuable upon exercise
of warrants) will be eligible for sale upon the expiration of the
applicable one-year holding period;
o An additional 809,203 shares of common stock (plus 125,000 shares
issuable upon exercise of warrants) will be eligible for sale upon the
expiration of the lock-up agreements expiring 14 months after the date
of the final prospectus; and
o An additional 2,347,981 shares of common stock (plus 1,335,613 shares
issuable upon exercise of stock options and 247,215 shares issuable
upon exercise of warrants) will be eligible for sale upon expiration of
the lock-up agreements expiring 24 months after the date of the final
prospectus.
46
<PAGE>
SALE OF RESTRICTED SHARES UNDER RULE 144. In general, under Rule 144, a
person (or persons whose shares are aggregated), including an affiliate, who has
beneficially owned shares for at least one year can sell, within any three-month
period, beginning after the date of the prospectus, a number of shares of common
stock that does not exceed the greater of
(1) 1% of the then-outstanding shares of common stock (about 53,665 shares
immediately after the offering), or
(2) the average weekly trading volume of the common stock during the four
calendar weeks before the notice of the Rule 144 sale is filed.
Sales under Rule 144 are also subject to certain requirements as to the manner
and notice of sale and the availability of public information about the company.
In addition, any person not deemed to have been our affiliate at any time
during the 90 days before a sale and who has beneficially owned the shares
proposed to be sold for at least two years may sell those shares under Rule
144(k) without regard to the volume limitations described above.
REGISTRATION OF RESTRICTED SHARES IN THE FUTURE. After the closing of the
offering, the holders of approximately 1,767,399 shares of common stock,
including approximately 265,453 shares of common stock issuable upon exercise of
outstanding warrants, will be entitled to certain rights with respect to the
registration of the shares under the Securities Act. See "Description of
Securities--Registration Rights Agreement." The underwriter also has certain
registration rights in connection with the shares of common stock underlying the
underwriter's warrants. In addition, we may file a registration statement under
the Securities Act to register shares of common stock reserved for issuance
under our stock option plans after 24 months from the date of this prospectus.
As of April 30, 1999, options to purchase approximately 1,341,845 shares of
common stock were outstanding under these stock option plans. The effect of
filing registration statements for these shares is that non-affiliates may
resell the registered shares in the public market without restriction under the
Securities Act.
EFFECT OF SALES OF SHARES
- -------------------------
Before this offering, there has been no market for the common stock, and no
precise prediction can be made about any effect that market sales of common
stock or the availability for sale of the common stock will have on the market
price of the common stock. Nevertheless, sales of substantial amounts of common
stock in the public market could adversely affect the market price and could
impair our future ability to raise additional capital through the sale of our
equity securities.
47
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, Barron
Chase Securities, Inc., the underwriter, has agreed to purchase from the company
an aggregate of 1,750,000 shares of common stock and 1,750,000 purchase
warrants. These securities are offered by the underwriter subject to prior sale,
when, as and if delivered to and accepted by the underwriter and subject to
approval of certain legal matters by counsel and certain other conditions. The
underwriter is committed to purchase all of the securities offered by this
prospectus, if any are purchased (other than those covered by the over-allotment
option described below).
The company has been advised by the underwriter that the underwriter
proposes to offer the securities to the public at the offering prices set forth
on the cover page of this prospectus. The underwriter has advised the company
that the underwriter proposes to offer the securities through members of the
National Association of securities Dealers, Inc. ("NASD"), and may allow
concessions, in its discretion, to certain selected dealers who are members of
the NASD and who agree to sell the securities in conformity with the NASD's
Conduct Rules. Such concessions will not exceed the amount of the underwriting
discount that the underwriter is to receive.
The company has granted to the underwriter an over-allotment option,
exercisable for 45 days from the date the registration statement becomes
effective, to purchase up to an additional 262,500 shares of common stock and an
additional 262,500 purchase warrants at the respective public offering prices
less the underwriting discounts set forth on the cover page of this prospectus.
Officers and directors of the company may introduce the underwriter to
persons to consider this offering and to purchase securities either through the
underwriter or through participating dealers. In this connection, no securities
have been reserved for those purchases, and officers and directors will not
receive any commissions or any other compensation.
The company has agreed to pay to the underwriter a commission of 10% of the
gross proceeds of this offering as the underwriting discount, including the
gross proceeds from the sale of the over-allotment option, if exercised. In
addition, the company has agreed to pay to the underwriter a non-accountable
expense allowance of three percent of the gross proceeds of this offering,
including proceeds from any securities purchased through the over-allotment
option. The company has paid to the underwriter a $50,000 advance in respect of
the non-accountable expense allowance. The underwriter's expenses in excess of
the non-accountable expense allowance will be paid by the underwriter. If the
expenses of the underwriter are less than the amount of the non-accountable
expense allowance received, then the excess will be deemed to be additional
compensation to the underwriter. The underwriter has informed the company that
it does not expect sales to discretionary accounts to exceed five percent of the
total number of securities offered by the company in this offering.
The company has agreed to engage the underwriter as a financial advisor at
a fee of $108,000, which is payable to the underwriter on the closing date of
this offering. Pursuant to the terms of a financial advisory agreement, the
underwriter has agreed to provide, at the company's request, advice to the
company concerning potential merger and acquisition and financing proposals,
whether by public financing or otherwise. The company has also agreed that if
the company participates in any transaction which the underwriter has introduced
to the company during a period of five years after the closing (including
mergers, acquisitions, joint ventures and any other business transaction for the
company introduced by the underwriter), and which is consummated after the
closing (including an acquisition of assets or stock for which it pays, in whole
or in part, with shares or other securities of the company), or if the company
retains the services of the underwriter in connection with any such transaction,
then the company will pay for the underwriter's services an amount equal to five
percent of up to one million dollars of value paid or received in the
transaction, four percent of the next million of such value, three percent of
the next million of such value, two percent of the next million of such value,
and one percent of the next million dollars of such value and of all such value
above $4 million.
Prior to this offering, there has been no public market for the shares of
common stock or the purchase warrants. Consequently, the initial public offering
prices for the securities, and the terms of the purchase warrants (including the
exercise price of the purchase warrants), have been determined by negotiation
48
<PAGE>
between the company and the underwriter. Among the factors considered in
determining the public offering prices were the history of, and the prospects
for, the company's business, an assessment of the company's management, the
company's past and present operations, its development and the general condition
of the securities market at the time of this offering. The initial public
offering prices do not necessarily bear any relationship to the company's
assets, book value, earnings, or other established criteria of value. These
prices are subject to change as a result of market conditions and other factors,
and no assurance can be given that a public market for the common stock or the
purchase warrants will develop after the offering, or if a public market in fact
develops, that such public market will be sustained, or that the common stock or
the purchase warrants can be resold at any time at the offering or any other
price. See "Risk Factors."
At the closing, the company will issue to the underwriter and/or persons
related to the underwriter, for nominal consideration, common stock underwriter
warrants to purchase up to 175,000 shares of common stock and warrant
underwriter warrants to purchase up to 175,000 warrants. The common stock
underwriter warrants and the warrant underwriter warrants are sometimes referred
to in this prospectus as the "underwriter warrants". The underwriter warrants
and the securities underlying the underwriter warrants are registered pursuant
to this registration statement. The underwriter warrants will be exercisable for
a five-year period commencing on the effective date of the registration
statement. The initial exercise price of each common stock underwriter warrant
shall be $8.25 per underlying share (165% of the public offering price). The
initial exercise price of each warrant underwriter warrant shall be $0.20625 per
underlying warrant (165% of the public offering price). The underwriter warrants
will be restricted from sale, transfer, assignment or hypothecation for a period
of twelve months from the effective date by the holder, except (1) to officers
of the underwriter and members of the selling group and officers and partners
thereof; (2) by will; or (3) by operation of law.
The underwriter warrants contain provisions providing for appropriate
adjustment in the event of any merger, consolidation, recapitalization,
reclassification, stock dividend, stock split or similar transaction. The
underwriter warrants contain net issuance provisions permitting the holders
thereof to elect to exercise the underwriter warrants in whole or in part and
instruct the company to withhold from the securities issuable upon exercise, a
number of securities, valued at the current fair market value on the date of
exercise, to pay the exercise price. The net exercise provision has the effect
of requiring the company to issue shares of common stock without a corresponding
increase in capital. A net exercise of the underwriter warrants will have the
same dilutive effect on the interests of the company's shareholders as will a
cash exercise. The underwriter warrants do not entitle the holders of the
underwriter warrants to any rights as shareholders of the company until the
underwriter warrants are exercised and shares of common stock are purchased
thereunder.
The underwriter warrants and the securities issuable thereunder may not be
offered for sale except in compliance with the applicable provisions of the
Securities Act of 1933. The company has agreed that if it causes a
post-effective amendment, a new registration statement, or similar offering
document to be filed with the Securities and Exchange Commission, the holders
will have the right, for seven years from the effective date, to include in the
registration statement or offering statement the underwriter warrants or the
securities issuable upon their exercise at no expense to the holders.
Additionally, the company has agreed that, upon request by the holders of fifty
percent or more of the underwriter warrants during the period commencing one
year from the effective date and expiring four years thereafter, the company
will, under certain circumstances, register the underwriter warrants and/or any
of the securities issuable upon their exercise.
In order to facilitate the offering of the common stock and purchase
warrants, the underwriter may engage in transactions that stabilize, maintain or
otherwise affect the price of the common stock and purchase warrants.
Specifically, the underwriter may overallot in connection with the offering,
creating a short position in the common stock and purchase warrants for its own
account. In addition, to cover overallotments or to stabilize the price of the
common stock and purchase warrants, the underwriter may bid for, and purchase,
shares of common stock and purchase warrants in the open market. Finally, the
underwriter may reclaim selling concessions allowed to a dealer for distributing
the common stock and purchase warrant in the offering, if the underwriter
repurchases previously distributed common stock or purchase warrants in
transactions to cover the underwriter's short position, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
market price of the common stock and purchase warrants above independent market
49
<PAGE>
levels. The underwriter is not required to engage in these activities, and may
end any of these activities at any time.
The company has agreed to indemnify the underwriter against any costs or
liabilities incurred by the underwriter by reason of misstatements or omissions
to state material facts in connection with the statements made in the
registration statement and this prospectus filed by the company with the
Securities and Exchange Commission. The underwriter has in turn agreed to
indemnify the company against any costs or liabilities by reason of
misstatements or omissions to state material facts in connection with the
statements made in the registration statement and this prospectus, based on
information relating to the underwriter and furnished in writing by the
underwriter. To the extent that these provisions may purport to provide
exculpation from possible liabilities arising under the federal securities laws,
in the opinion of the SEC, such indemnification is contrary to public policy and
therefore unenforceable.
The discussion above is merely a summary of the principal terms of the
agreements mentioned above, and does not purport to be complete. You should
review each of the referenced documents which have been filed as exhibits to the
registration statement. See "Where You Can Find More Information."
LEGAL MATTERS
The validity of the common stock and purchase warrants offered hereby will
be passed upon for the company by Tonkon Torp LLP, Portland, Oregon. Certain
legal matters will be passed upon for the underwriter by David A. Carter, P.A.,
Boca Raton, Florida.
EXPERTS
The financial statements of Oregon Baking Company dba Marsee Baking as of
December 31, 1997 and 1998, and for the years then ended, have been included
herein and in the registration statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the December 31, 1998
financial statements contains an explanatory paragraph that states that the
company's recurring losses from operations raise substantial doubt about the
entity's ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of that uncertainty.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a Registration Statement on Form SB-2 relating to the common
stock and purchase warrants being offered for sale through this offering with
the Securities and Exchange Commission. As permitted by the rules and
regulations of the SEC, this prospectus does not contain all the information
described in the registration statement. For further information about the
company and its securities, you should read our registration statement,
including the exhibits and schedules. In addition, we will be subject to the
requirements of the Securities Exchange Act of 1934 following this offering and
thus will file annual, quarterly and special reports, proxy statements and other
information with the SEC. These SEC filings and the registration statement are
available to you over the Internet at the SEC's web site at http://www.sec.gov.
You may also read and copy any document we file with the SEC at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms. Statements contained in this prospectus as to the contents of
any contract or other document are not necessarily complete and, in each
instance, you should review the contract or document which has been filed as an
exhibit to the registration statement.
We intend to furnish our shareholders with annual reports containing
audited financial statements.
50
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report.................................................F-2
Balance Sheets as of December 31, 1997 and 1998 .............................F-3
Statements of Operations for the years December 31, 1997 and 1998 ...........F-4
Statements of Shareholders' (Deficit) Equity
for the years ended December 31, 1997 and 1998 ...........................F-5
Statements of Cash Flows for the years ended December 31, 1997 and 1998......F-6
Notes to Financial Statements................................................F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Oregon Baking Company
dba Marsee Baking:
We have audited the accompanying balance sheets of Oregon Baking Company dba
Marsee Baking (the Company) as of December 31, 1997 and 1998, and the related
statements of operations, shareholders' (deficit) equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Oregon Baking Company dba
Marsee Baking as of December 31, 1997 and 1998, and results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 2 to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
February 23, 1999
F-2
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Balance Sheets
(Dollars in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
ASSETS 1997 1998
------------------------- ------------------------
<S> <C> <C>
Current assets:
Cash $ 91 $ 21
Restricted cash -- 108
Accounts receivable 54 253
Inventories 64 269
Prepaid and other assets 46 134
------------------------- ------------------------
Total current assets 255 785
Property and equipment, net 2,634 7,511
Other assets, net 118 378
------------------------- ------------------------
Total assets $ 3,007 8,674
========================= ========================
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Line of credit $ 250 250
Accounts payable 915 2,250
Accrued liabilities 232 735
Notes payable -- 525
Current portion of capital lease obligations 88 574
Current portion of long-term debt 168 370
Current portion of long-term debt to related parties 89 229
------------------------- ------------------------
Total current liabilities 1,742 4,933
Capital lease obligations, net of current portion 221 1,019
Long-term debt, net of current portion 1,006 1,544
Long-term debt to related parties, net of current portion 128 190
Cumulative dividends payable on preferred stock series D and A 68 168
------------------------- ------------------------
Total liabilities 3,165 7,854
------------------------- ------------------------
Commitments and contingencies
Shareholders' (deficit) equity:
Preferred stock, authorized 4,000,000 shares (liquidation
preference of $6,541):
Cumulative preferred stock series D, no par value; authorized
22,507 shares, -0- and 16,667 issued outstanding at December 1,000
31, 1997 and 1998, respectively --
Cumulative preferred stock series A, no par value; authorized
100,000 shares; 52,667 issued and outstanding at December 31, 281
1997 and 1998, respectively 281
Preferred stock series B, no par value; authorized 510,575
shares, 510,575 issued and outstanding at December 31, 1997 1,143
and 1998, respectively 1,143
Preferred stock series C, no par value; authorized 168,000
shares, -0- and 129,121 issued and outstanding at December 31, 4,117
1997 and 1998, respectively --
Common stock, no par value; authorized 15,000,000 shares, 868,961
issued and outstanding at December 31, 1997 and 1998, 626
respectively 476
Warrants 41 156
Accumulated deficit (2,099) (6,503)
------------------------- ------------------------
Total shareholders' (deficit) equity (158) 820
------------------------- ------------------------
Total liabilities and shareholders' (deficit) equity $ 3,007 8,674
========================= ========================
See accompanying notes to financial statements.
</TABLE>
F-3
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Statements of Operations
(Dollars in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1997 1998
-------------------- -----------------
<S> <C> <C>
Revenues:
Bakery-Cafes $ 4,140 $ 9,761
Wholesale 808 2,895
-------------------- -----------------
Total revenues 4,948 12,656
-------------------- -----------------
Cost of goods sold 2,887 7,579
Store operating expenses 1,621 5,281
Wholesale operating expenses 328 599
Depreciation and amortization 213 817
General and administrative expenses 965 1,959
Store closure expenses -- 253
-------------------- -----------------
Loss from operations (1,066) (3,832)
Interest expense (interest expense to
related parties of $20 and $23) 129 472
-------------------- -----------------
Loss before provision for income taxes (1,195) (4,304)
Provision for income taxes -- --
-------------------- -----------------
Net loss (1,195) (4,304)
Cumulative dividends on preferred stock series D and A 32 100
-------------------- -----------------
Net loss attributed to common shareholders $ (1,227) $ (4,404)
==================== =================
Net loss per common share - basic and diluted $ (1.41) $ (5.07)
Shares used in computing net loss per common
share - basic and diluted 868,588 868,961
See accompanying notes to financial statements.
</TABLE>
F-4
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Statements of Shareholders' (Deficit) Equity
Years ended December 31, 1997 and 1998
(Dollars in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
CUMULATIVE PREFERRED CUMULATIVE PREFERRED
STOCK SERIES D STOCK SERIES A PREFERRED STOCK PREFERRED STOCK SERIES
SERIES B C
--------------------- --------------------- ------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- --------- --------- ---------- --------- ---------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 -- $ -- 52,667 $ 281 442,032 $ 1,020 -- $ --
Issuance of common stock -- -- -- -- -- -- -- --
Issuance of preferred stock -- -- -- -- 68,543 123 -- --
Consulting expense on stock
option grants -- -- -- -- -- -- -- --
Warrants issued in
connection with acquisition
loan and guarantees -- -- -- -- -- -- -- --
Cumulative dividends on
preferred stock series A -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- --
---------- --------- --------- ---------- --------- ----------- --------- -----------
Balance, December 31, 1997 -- -- 52,667 281 510,575 1,143 -- --
Issuance of preferred stock
net of offering costs of $79 -- -- -- -- -- -- 95,583 3,027
Issuance of preferred stock
in connection with
acquisition 16,667 1,000 -- -- -- -- 33,538 1,090
Compensation and consulting
expense on stock option
grants -- -- -- -- -- -- -- --
Warrants issued in connection
with acquisition
and debt financing -- -- -- -- -- -- -- --
Cumulative dividends on
preferred stock series D
and A -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- --
---------- --------- --------- ---------- --------- ----------- --------- -----------
Balance, December 31, 1998 16,667 $ 1,000 52,667 $ 281 510,575 $ 1,143 129,121 $ 4,117
========== ========= ========= ========== ========= =========== ========= ===========
See accompanying notes to financial statements.
<PAGE>
<CAPTION>
COMMON STOCK ACCUMULATED
SHARES AMOUNT WARRANTS DEFICIT TOTAL
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 867,961 $ 471 -- $ (872) $ 900
Issuance of common stock 1,000 2 -- -- 2
Issuance of preferred stock -- -- -- -- 123
Consulting expense on stock
option grants -- 3 -- -- 3
Warrants issued in
connection with acquisition
loan and guarantees -- -- 41 -- 41
Cumulative dividends on
preferred stock series A -- -- -- (32) (32)
Net loss -- -- -- (1,195) (1,195)
Balance, December 31, 1997 868,961 476 41 (2,099) (158)
Issuance of preferred stock
net of offering costs of $79 -- -- -- -- 3,027
Issuance of preferred stock
in connection with
acquisition -- -- -- -- 2,090
Compensation and consulting
expense on stock option
grants -- 150 -- -- 150
Warrants issued in connection
with acquisition
and debt financing -- -- 115 -- 115
Cumulative dividends on
preferred stock series D
and A -- -- -- (100) (100)
Net loss -- -- -- (4,304) (4,304)
Balance, December 31, 1998 868,961 $ 626 156 $ (6,503) $ 820
- ----------------------------- ========== ========= ========= ========== =========
</TABLE>
F-5
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Statements of Cash Flows
(Dollars in Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1997 1998
---------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,195) $ (4,304)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 265 1,295
Compensation and consulting expense on stock option grants 5 113
Warrants issued in connection with debt financing 21 86
Change in assets and liabilities, excluding acquisition:
Accounts receivable (33) (199)
Inventories (45) (100)
Prepaid and other assets (70) (59)
Accounts payable 743 1,335
Accrued liabilities 70 421
---------------------- ------------------
Net cash used in operating activities (239) (1,412)
---------------------- ------------------
Cash flows related to investing activities:
Purchases of property and equipment (1,377) (2,139)
Purchase of business -- --
Increase in other assets -- (123)
---------------------- ------------------
Net cash used in investing activities (1,377) (2,262)
---------------------- ------------------
Cash flows related to financing activities:
Principal payments on long-term debt to related parties (39) (25)
Proceeds from long-term debt to related parties -- 227
Principal payments on capital lease obligations (107) (285)
Principal payments on notes payable and long-term debt (62) (218)
Proceeds from notes payable and long-term debt 856 986
Borrowing on line of credit, net 250 --
Restricted cash -- (108)
Issuance of preferred stock, net of offering costs 123 3,027
---------------------- ------------------
Net cash provided by financing activities 1,021 3,604
---------------------- ------------------
Net decrease in cash (595) (70)
Cash, beginning of year 686 91
---------------------- ------------------
Cash, end of year $ 91 $ 21
====================== ==================
Supplemental cash flow information:
Cash paid for:
Interest $ 115 $ 362
Income taxes -- --
Non-cash activities:
Property and equipment acquired under capital lease
obligations 261 1,569
Property and equipment acquired by assumption of note
payable -- 497
Warrants issued in connection with loan guarantees -- 29
Other assets acquired by issuance of common stock -- 23
Cumulative dividends payable on preferred stock series D
and A 32 100
Assets acquired and liabilities assumed in connection with acquisitions:
Property and equipment -- 1,922
Inventories -- 105
Goodwill 23 159
Accrued liabilities -- 82
Equity issued for purchase of goodwill relating to
business acquired 3 --
Issuance of preferred stock series C -- 1,090
Issuance of cumulative preferred stock series D -- 1,000
Granted options 20 --
Warrants issued -- 14
See accompanying notes to financial statements.
</TABLE>
F-6
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements
December 31, 1997 and 1998
(Dollars in Thousands, Except Share and Per Share Data)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
Oregon Baking Company dba Marsee Baking (Marsee Baking or the
Company), an Oregon corporation, owns and operates 18 bakery-cafe's
in the Pacific Northwest. Marsee Baking also distributes its products
through its wholesale operations, providing specialty retailers and
other institutions with a complete line of the Company's products.
(B) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(C) SEGMENT REPORTING
The Company adopted SFAS No. 131, "DISCLOSURE ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION." SFAS 131 requires public
companies to report certain information about their operating
segments in a complete set of financial statements to shareholders.
It also requires reporting of certain enterprise-wide information
about the Company's products and services, its activities in
different geographic areas and its reliance on major customers. The
basis for determining the Company's operating segments is the manner
in which management operates the business. The Company operates one
segment as defined by SFAS No. 131.
(D) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts
receivable, accounts payable and debt instruments. At December 31,
1997 and 1998, the fair value of the Company's receivables and debt
and capital lease obligations approximated carry value.
(E) ADVERTISING
Advertising costs are expensed as incurred. For the years ended
December 31, 1997 and 1998, advertising costs were approximately $43
and $241, respectively.
(F) ACCOUNTS RECEIVABLE
The accounts receivable balance is made up of trade receivables net
of allowance for doubtful accounts. As of December 31, 1997 and 1998,
the allowance for doubtful accounts was $60 and $10, respectively.
(G) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market, and consists primarily of raw ingredients, deli products and
finished bakery products.
F-7
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
(H) PROPERTY AND EQUIPMENT
Property and equipment is carried at cost less accumulated
depreciation and amortization. Depreciation of property and
equipment, which includes amortization of assets under capital
leases, is provided on the straight-line method over estimated useful
lives or the life of the lease, whichever is shorter, generally
ranging from 3 to 12 years.
Leasehold improvements are amortized over the shorter of their
estimated useful lives or the related life of the lease, generally 10
years. The portion of depreciation expense related to production and
distribution facilities is included in cost of goods sold.
When facts and circumstances indicate that the cost of long-lived
assets may be impaired, an evaluation of recoverability is performed
by comparing the carrying value of the asset to projected future cash
flows. Upon indication that the carrying value of such assets may not
be recoverable the Company recognizes an impairment loss by a charge
against current operations. For the years ended December 31, 1997 and
1998, there were no impairment losses.
Maintenance and repairs are charged to expense as incurred. Major
repairs and improvements are capitalized.
(I) OTHER ASSETS
Other assets consists primarily of goodwill, security deposits and
last months rent required under certain operating lease agreements.
Goodwill as of December 31, 1997 and 1998 was $33 and $192,
respectively. Amortization of goodwill is computed on the
straight-line basis over a period of 18 months to 10 years.
Accumulated amortization as of December 31, 1997 and 1998 was $2 and
$47, respectively.
Management's policy is to review the ongoing value of the goodwill on
a periodic basis by comparing undiscounted future projected earnings
to the carrying value of goodwill. Any difference would be recorded
as an impairment adjustment. Management is of the opinion that there
has been no decline in the value assigned to goodwill.
(J) STORE OPENING COSTS
Costs incurred in connection with start-up and promotion of new store
openings are expensed as incurred.
(K) DEFERRED RENT
Certain of the Company's lease agreements provide for scheduled rent
increases during the lease term, or for rental payments commencing
at a date other than the date of initial occupancy. Rent expenses are
recognized on a straight-line basis over the terms of the leases.
Deferred rent has been included in accrued liabilities in the
accompanying financial statements.
(L) INCOME TAXES
The Company accounts for income taxes using the asset and liability
method. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between financial statements carrying
amounts of existing assets and liabilities and their respective tax
F-8
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established to reduce
deferred tax assets to the amount expected to be realized.
(M) STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using Statement of
Financial Accounting Standards No. 123 (SFAS 123), ACCOUNTING FOR
STOCK-BASED COMPENSATION. This statement permits a company to choose
either a fair-value based method of accounting for its stock-based
compensation arrangements or to comply with the current Accounting
Principles Board Opinion 25 (APB Opinion 25) intrinsic-value-based
method adding pro-forma disclosures of net loss computed as if the
fair-value-based method had been applied in the financial statements.
The Company applies SFAS 123 by retaining the APB Opinion 25 method
of accounting for stock-based compensation for employees with annual
pro-forma disclosures of net loss. Stock-based compensation for
non-employees is accounted for using the fair-value-based method.
(N) NET LOSS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement
No. 128, EARNINGS PER SHARE (SFAS 128). SFAS 128 replaced the
calculation of primary and fully diluted earnings (loss) per share
with basic and diluted earnings (loss) per share. Unlike primary and
fully diluted earnings (loss) per share, outstanding nonvested shares
are not included in the computations of basic and diluted earnings
(loss) per share until the time-based vesting restriction has lapsed.
Basic earnings (loss) per share also excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings (loss)
per share is very similar to the previously reported fully diluted
earnings (loss) per share. The Company's common stock equivalents
were antidilutive and therefore were not included in the computation
of weighted average shares used in computing diluted loss per common
share.
(O) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 133 (SFAS 133),
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS
133 establishes accounting and reporting standards requiring that
every derivative instrument be recorded in the balance sheet as
either an asset or liability at its fair value. The standard also
requires that changes in the derivatives' fair value be recognized
currently in the results of operations unless specific hedge
accounting criteria are met. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. The Company does not expect SFAS 133
to have a material impact on its financial statements.
F-9
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
(2) LIQUIDITY
To meet the cash flow needs of the Company in 1999, the Company will need
to issue additional equity securities, borrow additional funds, or obtain
other financing. The Company has no commitments for additional financing,
other than financing obtained subsequent to year end as described in note
14, and there can be no assurance that further financing will be
available on satisfactory terms, if at all. The accompanying financial
statements have been prepared on the basis that the Company will be able
to meet its cash needs and continue as a going concern.
(3) ACQUISITIONS
During May 1997, the Company acquired the recipes, trademark, customer
list, and copyrights on advertising and promotional items of a bakery
located in Portland, Oregon. The purchase price of $33 was paid in cash,
issuance of common stock and common stock warrants. The acquisition was
accounted for using the purchase method of accounting. The excess of the
total acquisition costs over the fair value of the net assets acquired is
being amortized over eighteen months using the straight-line method. The
results of operations of the acquired company have been included in the
financial statements of the Company since the date of acquisition.
During the first quarter of 1998, the Company acquired certain assets
consisting of property and equipment for 10 stores (the Acquired Stores)
and a commissary located in Washington (the Commissary). The Company also
assumed certain operating lease obligations. The acquisition was
accounted for using the purchase method of accounting. The results of the
operations of the Acquired Stores and the Commissary have been included
in the Company's results of operations since the acquisition date.
The following is the purchase price allocation:
Preferred stock, series C $ 1,090
Preferred stock, series D 1,000
Granted options 14
Direct acquisition costs 82
-------------------
Total purchase price 2,186
Assets acquired:
Inventories 105
Property and equipment 1,922
-------------------
Cost in excess of net assets acquired $ 159
===================
The excess of the total acquisition cost over the fair value of the net
assets acquired is being amortized over 10 years, the average life of the
operating lease obligations acquired, using the straight-line method.
The Company financed the purchase by issuing 33,538 shares of preferred
series C stock and 16,667 shares of cumulative preferred series D stock.
The Company also granted 15,000 stock options for professional services
rendered relating to the acquisition.
F-10
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
The following pro-forma information is presented to show the results of
operations had the acquisition occurred January 1, 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------------
(UNAUDITED)
<S> <C>
Total revenues $ 10,051
Loss from operations (1,704)
Net loss (1,942)
Cumulative dividends on preferred series D and A (102)
Net loss attributed to common shareholders (2,044)
Net loss per common share - basic and diluted (2.35)
</TABLE>
The above results of operations are not intended to be indicative of the
results of operations which actually would have been realized had the
acquisition occurred as of January 1, 1997, nor of the future results of
operations of the combined Company.
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, consists of the following:
<TABLE>
<CAPTION>
1997 1998
-------------------- --------------------
<S> <C> <C>
Leasehold improvements $ 1,328 $ 4,237
Furniture and equipment 1,159 3,288
Equipment under capital leases 499 1,952
Construction in progress 364 --
-------------------- --------------------
3,350 9,477
Less accumulated depreciation and amortization (716) (1,966)
-------------------- --------------------
$ 2,634 $ 7,511
==================== ====================
</TABLE>
F-11
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
(5) LINE OF CREDIT
The Company has $250 outstanding at December 31, 1997 and 1998 under an
operating line of credit secured by the assets of the Company. The credit
line bears interest at prime plus 1% (9.50% and 8.75% at December 31,
1997 and 1998, respectively) and the Company may borrow a maximum of
$250. All unpaid principal and interest is due and payable February 23,
1999. The line of credit is collateralized by the Company's assets. The
line also contains covenants which the Company was in compliance with at
December 31, 1998. (See note 14).
(6) NOTES PAYABLE
At December 31, 1998, the Company was in the process of obtaining bridge
financing through a private offering. The terms of the offering are that
for each $5.00 of financing provided, the investor is entitled to receive
one share of common stock together with a promissory note in the face
amount of $5.00 bearing interest at 8% and payment is due the earlier of
nine months from investment or at the time the Company's stock becomes
publicly traded. At December 31, 1998, there were outstanding promissory
notes with a face value of $525,000 related to the bridge financing. At
December 31, 1998, the Company had an obligation to issue 105,000 shares
of common stock purchased in connection with the bridge financing. (See
note 14).
F-12
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
(7) LONG-TERM DEBT AND DEBT TO RELATED PARTIES
<TABLE>
<CAPTION>
1997 1998
-------------------- --------------------
<S> <C> <C>
Note payable to supplier due in monthly installments of
$2, including interest at 12%, maturing 2000, unsecured $ 53 $ 36
Construction loans related to leasehold improvements due in
monthly installments of between $4 and $2 including
interest at 11% - 12% maturing by 2000, unsecured 126 115
Note payable to bank due in monthly installments of $1
including interest at 10.50% maturing in 2001, unsecured -- 24
Note payable to finance company due in monthly installments
of $11, including interest at prime plus 2.75%
(10.5% at December 31, 1998), maturing 2003, secured
by lien and security interest in property. -- 462
Construction loan related to leasehold improvements due in
monthly installments of $2 including interest at 6%,
maturing in 2003, unsecured -- 106
Construction loans related to leasehold improvements due in
monthly installments of between $1 and $3 including
interest at 10% - 12.6% maturing by 2004, unsecured 95 348
Note payable to finance company due in monthly installments
of $16, including interest at prime plus 2.75% (10.5%
at December 31, 1998), maturing 2004, guaranteed by
certain shareholders 900 822
Notes payable to related party shareholders due in quarterly
installments of interest only at 10%, due on demand,
unsecured 26 26
Notes payable to related party shareholders with no stated
installments, interest varying, unsecured, due on demand 39 39
Notes payable to related party shareholders due in monthly
installments of principal and interest at between 17.5%
and 20.4%, unsecured, maturing June 1999 152 128
Notes payable to related party shareholders with no stated
installments, interest varying, unsecured, maturing
May 1999 -- 37
Notes payable to related party shareholders due in quarterly
installments of interest only at 12%, due by August 2000,
unsecured -- 190
-------------------- --------------------
1,391 2,333
Less current portion (257) (599)
-------------------- --------------------
$ 1,134 $ 1,734
==================== ====================
</TABLE>
F-13
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
The principal payments on long-term debt are as follows at December 31,
1998:
1999 $ 599
2000 549
2001 336
2002 365
2003 306
Thereafter 178
-------------------
$ 2,333
===================
(8) LETTER OF CREDIT
At December 31, 1998, the Company had a letter of credit for $325
outstanding. The letter of credit is collateral for the Company's
obligations to a finance company. The letter of credit is collateralized
by two shareholders and by $108 of restricted cash by the Company.
(9) CAPITAL LEASE OBLIGATIONS
The Company has entered into certain capital lease obligations related to
the purchase of equipment. The leases bear interest at rates ranging from
10% to 15% and require monthly payments of principal and interest. The
leases are secured by the equipment and mature during 2001 through 2002.
Future minimum payments on capital lease obligations are as follows at
December 31, 1998:
1999 $ 740
2000 707
2001 386
2002 48
-------------------
1,881
Less-portion representing interest (288)
-------------------
Present value of net minimum lease payments 1,593
Less-current portions (574)
-------------------
Long-term obligations under capital leases $ 1,019
===================
F-14
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
(10) INCOME TAXES
Due to the Company's losses before provision for income taxes in each
period, there has been no provision for federal and state income taxes
for the years ended December 31, 1997 and 1998.
The reconciliation of the statutory federal income tax rates to the
Company's effective income tax rate for the years ended December 31, are
as follows:
<TABLE>
<CAPTION>
1997 1998
------------------- -------------------
<S> <C> <C>
Federal statutory rate 34.0% 34.0%
State income taxes, net of federal benefit 4.4 4.4
Change in valuation allowance (38.2) (38.3)
Other, net (0.2) (0.1)
------------------- -------------------
-- % -- %
=================== ===================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The tax effects of significant items comprising the Company's
deferred tax assets as of December 31, are as follows:
<TABLE>
<CAPTION>
1997 1998
------------------- -------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 482 $ 1,824
Stock option compensation 12 89
Deferred rent 10 20
Depreciation and amortization 48 281
Bad debt expense 23 4
------------------- -------------------
575 2,218
Valuation allowance (575) (2,218)
------------------- -------------------
Net deferred tax assets $ -- $ --
=================== ===================
</TABLE>
The valuation allowance for deferred tax assets as of December 31, 1996
was $118. The net change in the total valuation allowance for years ended
December 31, 1997 and 1998, was an increase of $457 and $1,643,
respectively.
At December 31, 1998, the Company has net operating loss carryforwards of
approximately $4,755 to offset future federal taxable income and income
taxes, if any, through 2013. As defined in Internal Revenue Code Section
382, the utilization of a portion of the net operating loss and credit
carryforwards may be limited due to a change in ownership caused by
additional investors. A formal analysis has not been completed, but it
appears a change of ownership has occurred.
F-15
<PAGE>
(11) COMMITMENTS AND CONTINGENCIES
(A) OPERATING LEASES
The Company leases certain retail store, office and commissary
facilities under operating leases expiring through the year 2007.
Most lease agreements contain renewal options and rent escalation
clauses. Certain leases provide for contingent rentals based upon
gross sales.
Rental expense under these lease agreements for the years ended
December 31, was as follows:
<TABLE>
<CAPTION>
1997 1998
------------------- -------------------
<S> <C> <C>
Minimum rentals $ 270 $ 977
Contingent rentals 18 172
------------------- -------------------
$ 288 $ 1,149
=================== ===================
</TABLE>
Minimum future rental payments under non-cancelable operating lease
obligations as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 1,009
2000 901
2001 815
2002 691
2003 633
Thereafter 1,333
-------------------
$ 5,382
===================
</TABLE>
(B) OPTION ISSUANCE
The Board has approved 100,000 options to be issued to the Company's
President and Chief Executive Officer at the current fair market
value at the time the options are earned. The options are earned once
the Company shows three consecutive months of EBITDA (earnings before
interest, income taxes, depreciation and amortization) of 10% or more
(percentage of gross revenues). All shares are fully vested when the
options are earned.
(C) SUPPLY AGREEMENT
The Company has an agreement with a supplier to purchase at least 80%
of certain products, as defined, from this supplier. The agreement
may be terminated by either party with 60 days prior written notice
to the other party. Management believes that other suppliers could
provide similar products. A change in suppliers, however, could
affect the terms currently received by the Company. Such a change
could have a negative impact on results from operations.
F-16
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
(D) LEGAL PROCEEDINGS
In the normal course of business, the Company has various legal
claims and other contingent matters outstanding. Management believes
that any ultimate liability arising from these actions would not have
a material adverse effect on the Company's results of operations or
financial condition as of and for the year ended December 31, 1998.
(E) GEOGRAPHIC CONCENTRATION
All of the Company's bakery-cafe's are located in the greater
Portland and Seattle metropolitan areas. The concentration of limited
geographic markets exposes the Company to certain risks in the event
of a change in the economies in these markets which could have a
material adverse affect on the financial results of the Company.
(12) SHAREHOLDERS' (DEFICIT) EQUITY
During 1997, to raise funds, the Company sold 68,543 shares of Series B
preferred stock. In addition, 1,000 shares of common stock were issued in
connection with the purchase of assets (see note 3).
During 1998, in connection with an asset purchase (see note 3), the
Company issued 33,538 shares of Series C preferred stock and 16,667
shares of Series D preferred stock. To raise funds, the Company also sold
95,583 shares of Series C preferred stock at $32.50 per share during the
year. The Company's proceeds included in the financial statements are net
of offering costs.
(A) COMMON STOCK
The authorized number of shares of common stock, no par value, totals
15,000,000. Each share of common stock has voting rights of one vote
per share. Such voting rights are limited in certain circumstances.
F-17
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
(B) PREFERRED STOCK
The Company has authorized 4,000,000 shares of no par value preferred
stock. The Company has authorized and issued shares of Series A, B, C
and D preferred stock. The terms of each series of preferred stock
are summarized below:
Dividends
---------
The Series D preferred stock is entitled to an annual cumulative
cash dividend, out of legally available funds, at the per annum
rate of $4.20 per share. Series D preferred stock dividends shall
accrue but not be paid during 1998 and 1999. On a quarterly basis,
Series D preferred stock dividends from 1998 and 1999 shall be
paid during 2000 out of legally available funds. At the option of
the holder of Series D preferred stock or the Company, the Series
D preferred stock's accruing dividends may be paid in the form of
shares of Series D preferred stock valued at $60 per share
(regardless of the fair market value of such shares at the time
the dividend is declared by the Company's Board of Directors);
provided, however, no more than an aggregate of 5,840 shares of
the Company's Series D preferred stock may be issued in lieu of
cash to satisfy the accruing Series D dividends.
The Series A preferred stock is entitled to an annual cumulative
cash dividend, out of legally available funds, at the per annum
rate of $0.60 per share. Dividends accrue from the date of
purchase and are payable only when (1) declared by the Company's
Board of Directors; (2) upon liquidation or dissolution of the
Company; and (3) upon conversion to common stock.
The Series B and C preferred shareholders are not entitled to
cumulative dividends. Series B and C shareholders are entitled to
receive dividends when and if declared by the Board of Directors.
As of December 31, 1998, no dividends have been declared or paid.
Liquidation Preferences
-----------------------
In the event of any liquidation, dissolution or winding up of the
Company, holders of Series D preferred stock shall be entitled to
be paid first out of the assets of the Company available for
distribution to holders of the Corporation's capital stock of all
classes (whether such assets are capital, surplus or earnings)
before any sums shall be paid or any assets distributed among the
holders of Series A, B, or C preferred stock. After payment of the
Series D preferred shareholders, holders of the other preferred
series shall be entitled to be paid out of the assets of the
Company available for distribution to holders of the Company's
capital stock before any sum shall be paid or any assets
distributed among the holders of common stock.
Voting
------
The Series A, B, and C preferred stock will vote with the common
stock of the Company as a single class and will be entitled to the
number of votes equal to the number of shares of common stock
issuable upon conversion of the Series A, B, and C preferred
stock. The Series D preferred stock has no voting rights.
F-18
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
Conversion
----------
Any shares of the Series C and D preferred stock may, at the
option of the holder, be converted any time or from time to time
into fully paid common stock at a conversion rate of 10:1. The
holders of Series C and D preferred stock also have anti-dilution
protection. The anti-dilution protection provides for a favorable
adjustment to the conversion ratio of Series D preferred stock in
the event the Company issues any shares of preferred stock, common
stock, options or warrants at a price below $4.00.
The Series A preferred stock is convertible into common stock at
the option of the holder, at a conversion rate of 1:1. The holders
of the Series A may convert their shares into common stock any
time after December 31, 2000.
The Series B preferred stock is convertible into common stock at
the option of the holder, at a conversion rate of 1:1. The holder
of the Series B preferred stock shall have anti-dilution
protection. The anti-dilution provision provides for a favorable
adjustment to the conversion rate in the event the Company issues
any shares of preferred stock, common stock, option or warrants,
at a price below $2.50 per share.
As of December 31, 1998, the Company has reserved a total of
2,020,122 shares of its common stock pursuant to the conversion
privileges of outstanding preferred stock.
(C) STOCK WARRANTS
In May 1997, in connection with the acquisition of assets (see note
3), the Company issued 10,000 common stock purchase warrants
(Warrants). Each warrant represents the right to purchase one share
of the Company's common stock at an exercise price of $2.50, until
May 16, 2003.
In October 1997, in connection with securing debt financing, the
Company issued 10,000 warrants to related party shareholders for
personally guaranteeing loans of the Company. Each warrant represents
the right to purchase one share of the Company's common stock at an
exercise price of $1.00, until November 1, 2004.
In August 1998, in connection with securing debt financing, the
Company issued a total of 92,465 warrants to related party
shareholders for personally guaranteeing loans of the Company in
prior years. Each warrant represents the right to purchase one share
of the Company's common stock at an exercise price of $1.00, until
November 1, 2004.
In August 1998, in connection with securing debt financing, the
Company issued 4,750 warrants. Each warrant represents the right to
purchase one share of the Company's common stock at an exercise price
of $1.00, until November 1, 2004.
In March 1998, in connection with securing debt financing the Company
issued 1,500 warrants. Each warrant represents the right to purchase
one share of the Company's Preferred Series C stock at an exercise
price of $32.50, until November 1, 2004.
All warrants were valued using the Black-Scholes model. As of
December 31, 1998, no warrants had been exercised.
F-19
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
(D) STOCK OPTIONS
At December 31, 1998, the Company had three Stock Option Plans: the
1993 Stock Option Plan adopted in September 1993, the 1997 Stock
Option Plan adopted in February 1997, and the 1998 Stock Option Plan
adopted in December 1998 (collectively, the Plans). Under the Plans,
key employees and consultants may be granted either incentive stock
options or nonqualified stock options. Incentive stock options must
comply with the requirements of the Internal Revenue Code (the Code),
may be granted only to employees. Nonqualified stock options may be
granted to employees and consultants at not less than 85% of the fair
market value of the stock at the date of grant. Canceled options are
available for future grant. The Company has reserved 1,796,908 shares
of its common stock for issuance under the Plans.
As of December 31, 1998, 1,690,440 options had been granted pursuant
to the Plans. The per share weighted-average fair value of stock
options granted during the years ended 1997 and 1998 were $0.92 and
$0.86, respectively, on the date of grant using the Black-Scholes
pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1997 1998
------------------- --------------------
<S> <C> <C>
Dividend yield -- --
Expected volatility 100% 100%
Risk-free interest rate 6.5% 5.75%
Expected life 10 years 10 years
</TABLE>
The total value of options granted during the years ended December
31, 1997 and 1998 were approximately $211 and $867, respectively,
which will be amortized on a straight-line basis over the vesting
period of the options (typically four years).
The Company applies Accounting Principle Bulletin Opinion No. 25 in
accounting for stock options issued to employees and directors under
the Plans, accordingly, no compensation cost has been recognized for
these stock options in the financial statements. Had the Company
determined compensation cost based on the fair value at the grant
date for its stock options under Statement of Financial Accounting
Standards (SFAS) No. 123, the Company's net loss would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1998
------------------- --------------------
<S> <C> <C>
As reported:
Net loss $ (1,195) $ (4,404)
Net loss per common share (1.41) (5.07)
Pro forma:
Net loss (1,254) (4,545)
Net loss per common share (1.48) (5.23)
</TABLE>
F-20
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
The following table summarizes the activity for the aforementioned
stock option plans:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF PRICE
SHARES PER SHARE
-------------------- --------------------
<S> <C> <C>
Outstanding at December 31, 1996 96,908 $ 0.87
Granted 404,990 1.65
Canceled (174,995) 2.50
Exercised -- --
-------------------- --------------------
Outstanding at December 31, 1997 326,903 0.96
Granted 1,153,542 1.00
Canceled (328,500) 1.00
Exercised -- --
-------------------- --------------------
Outstanding at December 31, 1998 1,151,945 $ 0.99
==================== ====================
</TABLE>
At December 31, 1998, the weighted-average exercise price and
weighted-average remaining contractual life of outstanding options
were $0.99 and 9 years, respectively.
At December 31, 1998, 424,278 outstanding options were currently
exercisable, and the weighted-average exercise price of these
options was $0.97.
At December 31, 1998, the range of exercise prices on outstanding
stock options was $0.50 to $1.00.
(13) RETIREMENT PLAN
Effective January 1, 1998, the Company adopted a tax deferred savings
plan (the 401(k) Plan). All employees age 21 years or over are eligible
to participate in the 401(k) Plan. Enrollment periods are semi-annually,
on January 1 and July 1 of each year. Participants who choose to
participate may contribute up to 15% of their pretax compensation to the
401(k) Plan subject to the statutorily prescribed annual limits. All
employee contributions to the 401(k) Plan are fully vested at all times.
Company contributions are made annually. The Company matches 25% of the
first 4% employees contribute through their salary deferral. Company
contributions vest at 20% per year starting the first year.
(14) SUBSEQUENT EVENTS
In February 1999, the Company amended the Company's Articles of
Incorporation and increased the number of authorized shares of common
stock to 15,000,000 and preferred stock to 4,000,000. The effect of the
revised number of authorized shares has been retroactively applied to the
accompanying financial statements.
F-21
<PAGE>
OREGON BAKING COMPANY
DBA MARSEE BAKING
Notes to Financial Statements, Continued
(Dollars in Thousands, Except Share and Per Share Data)
In February 1999, the Company granted warrants to purchase 250,000
shares of common stock at an exercise price of $1.00 per share in
connection with the Company obtaining additional financing. The
warrants will be valued using the Black-Scholes model.
Since December 31, 1998, the Company has received $1,055 in
additional bridge financing (see note 6), and has issued 316,000
shares of common stock pursuant to the bridge financing.
The Company's $250 line of credit and the $325 letter of credit were
renewed in March 1999. The line of credit was extended to February
2000. The letter of credit was extended to March 2000. Rates on the
line of credit are substantially the same as they were prior to the
renewal.
F-22
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C>
Marsee Baking
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS [LOGO]
PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. WE
ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF COMMON 1,750,000 Shares of
STOCK AND PURCHASE WARRANTS ONLY IN THOSE JURISDICTIONS WHERE Common Stock
OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS 1,750,000 Redeemable Warrants
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS to Purchase Common Stock
OR ANY SALE OF THE COMMON STOCK OR PURCHASE WARRANT.
----------
---------- PROSPECTUS
----------
TABLE OF CONTENTS
PAGE
Barron Chase Securities
Prospectus Summary........................................4 [Logo]
Risk Factors..............................................7
Use of Proceeds..........................................12 7700 W. Camino Real
Dividend Policy..........................................12 Boca Raton, Florida 33433
Capitalization...........................................13 (561)347-1200
Dilution.................................................14
Management's Discussion and Analysis of Beverly Hills, California
Financial Condition and Results of Operations..........15 Boston, Massachusetts
Business.................................................22 Brooklyn, New York
Management...............................................30 Buffalo, New York
Certain Transactions.....................................37 Chicago, Illinois
Principal Shareholders...................................39 Clearwater, Florida
Description of Securities................................40 Duluth, Georgia
Shares Eligible for Future Sale..........................46 West Boca Raton, Florida
Underwriting.............................................48 Edison, New Jersey
Legal Matters............................................50 Eureka Springs, Arkansas
Experts..................................................50 Fort Lauderdale, Florida
Where You Can Find More Information......................50 Hasbrouck Heights, New Jersey
Index to Financial Statements.......................... F-1 La Jolla, California
Naples, Florida
---------- New York, New York
Orlando, Florida
Sarasota, Florida
Tampa, Florida
UNTIL _______ __, 1999 (25 DAYS AFTER COMMENCEMENT OF THE
OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN MARSEE BAKING
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE , 1999
REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
====================================================================================================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Oregon Business Corporation Act (the "Act") authorizes the
indemnification of an officer or director made party to a proceeding because the
officer or director is or was an officer or director against liability
(including amounts paid in settlement) incurred in the proceeding and against
expenses with respect to the proceeding (including attorney fees) if: (a) the
conduct of the officer or director was in good faith, (b) the officer or
director reasonably believed that his conduct was in the best interests of the
corporation or at least not opposed to its best interests, and (c) in the case
of a criminal proceeding, the officer or director had no reasonable cause to
believe his conduct was unlawful; PROVIDED, HOWEVER, neither a director nor an
officer may be indemnified in connection with (1) a proceeding by or in the
right of the corporation in which the director or officer was adjudged liable or
(2) any other proceeding charging improper personal benefit to the director or
officer in which the director or officer was adjudged liable on the basis that
personal benefit was improperly received by the director or officer. The
Registrant's Amended and Restated Articles of Incorporation (the "Articles")
allow and the company's Amended and Restated Bylaws (the "Bylaws") require the
Registrant to indemnify officers and directors to the fullest extent permissible
by law. The Articles and Bylaws become effective upon the closing of the public
offering.
The Act further provides that the articles of incorporation of a
corporation may provide that no director shall be personally liable to a
corporation or its shareholders for monetary damages for conduct as a director,
except that the provision does not eliminate the liability of a director (a) for
any breach of the director's duty of loyalty to the corporation or its
shareholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (c) for any unlawful
distribution as defined under the Act, or (d) for any transaction from which the
director derived an improper personal benefit. The Registrant's Articles and
Restated Bylaws provide that, to the fullest extent permissible by law, no
director shall be personally liable to the Registrant or its shareholders for
monetary damages.
Reference is also made to Section 6(b) of the Underwriting Agreement filed
as Exhibit 1.1 hereto, indemnifying directors and officers of the Registrant
against certain liabilities, including certain liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), in certain
circumstances by the underwriter.
Reference is also made to the form of Indemnification Agreement filed as
Exhibit 10.30 hereto, which the Registrant intends to enter into with its
directors and officers, providing indemnification to the fullest extent provided
by law.
The effect of these provisions is to indemnify the directors and officers
of the Registrant against all costs and expenses of liability incurred by them
in connection with any action, suit or proceeding in which they are involved by
reason of their affiliation with the Registrant, to the fullest extent permitted
by law.
II-2
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
common stock and purchase warrants being registered. All amounts are estimates
except the SEC registration fee, the NASD review filing fee, the Nasdaq filing
and membership fees, and Boston Stock Exchange filing and listing fees.
AMOUNT
TO BE PAID
----------
SEC Registration Fee............................ $6,478
NASD Review Filing Fee.......................... ______
Nasdaq Filing and Listing Fee................... ______
Boston Exchange Filing and Listing Fees......... ______
Printing and Engraving Expenses................. ______
Legal Fees and Expenses......................... ______
Accounting Fees and Expenses.................... ______
Blue Sky Fees and Expenses...................... ______
Transfer Agent and Registrar Fees............... ______
Nonaccountable Expense Allowance................ ______
Miscellaneous Expenses.......................... ______
Total $______
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of transactions by the Registrant since December
31, 1995 involving sales of the Registrant's securities that were not registered
under the Securities Act:
1. During September 1995 through January 1996, the Registrant sold an
aggregate of 52,667 shares of Series A Preferred Stock to 19
individuals or entities at a price of $6 per share. The Registrant
received $316,002 as total proceeds from the offering.
2. During December 1996 through February 1997, the Registrant sold an
aggregate of 510,575 shares of Series B Preferred Stock to 24
individuals and entities, at a price per share of $2.50. Jensen
Securities Co. acted as the placement agent for the offering. The
company received total proceeds of $1,250,000 after deducting
$53,305 as commissions and fees paid to the placement agent.
Jensen Securities also received 10,575 shares of Series B
Preferred Stock as consideration for its services.
3. During January through April 1998, upon the terms of an asset
purchase agreement, the Registrant issued 33,538 shares of Series
C Preferred Stock and 16,667 shares of Series D Preferred Stock to
the shareholders of Bernie's Bagels, Inc.
4. During January through October 1998, the Registrant sold an
aggregate of 95,583 shares of Series C Preferred Stock to 19
individuals and entities, at a price per share of $32.50.
Registrant received proceeds of approximately $3,106,433.
5. During January through April 1999, the Registrant sold 502,800
Units, each Unit consisting of one share of common stock and a
promissory note in the principal amount of $5.00 and bearing
interest of 8% to 37 purchasers. The principal and accrued
interest are due and payable nine months of the date of the
promissory note or upon the closing of a public offering of the
II-3
<PAGE>
common stock, whichever is earlier. The Registrant received
proceeds of $1,960,920 after deducting $301,680 in commissions and
fees to Barron Chase Securities, Inc., the Registrant's placement
agent.
6. On April 29, 1999, the Registrant issued to Mr. Joseph Tanous, a
director of the Registrant, 150,000 shares of common stock in
consideration for agreeing to personally guarantee up to $750,000
of the Registrant's working capital line of credit.
7. Since 1994, the Registrant has issued 26 warrants to purchase up
to an aggregate of 387,548 shares of common stock at an exercise
price ranging from $1.00 to $6.00 per share. These warrants have
been granted to individuals and entities who have made valuable
contributions to the company in the form of providing loans,
personal guarantees, assets and financial consulting services. One
warrant to purchase 500 shares of commons stock was exercised in
February 1996. As of April 30, 1999, 13 warrants have expired
representing warrants to purchase 14,833 shares of common stock
and 13 warrants remain outstanding representing warrants to
purchase 372,215 shares of common stock at exercise prices ranging
from $1.00 to $3.00 per share.
The Registrant has also issued a warrant to a equipment lease
financing company to purchase up to 1,500 shares of Series C
Preferred Stock or 15,453 shares of common stock into which the
Series C Preferred stock is currently convertible.
8. Since September 1993, the Registrant has granted incentive stock
options and non-qualified stock options to purchase an aggregate
of 1,707,745 shares of common stock under individual stock option
agreements and its 1993, 1997 and 1998 Stock Option Plans to
eligible officers, directors, employees and consultants of the
Registrant. Of those options granted, options to purchase 365,900
shares have expired or have been terminated by their terms, and
there are currently outstanding options to purchase 1,341,845
shares, as of the filing date. Since September 1993, the
Registrant has not issued any shares of common stock upon the
exercise of options.
Each of these sales were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, Regulation D,
Section 3(a)(9) or Rule 701 promulgated under the Securities Act, as
transactions by an issuer not involving a public offering, transactions
involving an exchange of securities by the issuer with its security holders
where no commission or remuneration is paid or given directly or indirectly for
soliciting the exchange, or transactions pursuant to compensatory benefit plans
and contracts relating to compensation. The recipients of securities in each
transaction represented their intention to acquire the securities in each
transaction not with a view to, or for sale in connection with, any distribution
thereof, and appropriate legends were affixed to share certificates and
instruments issued in the transactions.
ITEM 27. EXHIBITS
(a) Exhibits
Exhibit No. Description
---------- -----------
1.1 Form of Underwriting Agreement
1.2 Form of Selected Dealer Agreement
3.1 Proposed Amended and Restated Articles of
Incorporation
3.2 Articles of Incorporation (filed June 26, 1992)
3.3 Amendment to Article II of the Articles of
Incorporation (filed December 13, 1996)
3.4 Certificate of Designation of Series C Convertible
Preferred Stock and Series D Convertible and
Redeemable Preferred Stock (filed January 7,
1998)
3.5 Amendment to Article II of the Articles of
Incorporation (filed March 6, 1998)
3.6 Articles of Correction (filed June 3, 1998)
3.7 Amendment to Certificate of Designation of Series
C Convertible Preferred Stock and Series D
Convertible and Redeemable Preferred Stock
(filed October 7, 1998)
3.8 Amendment to Article II of the Articles of
Incorporation (filed March 16, 1999)
3.9 Proposed Amended and Restated Bylaws
II-4
<PAGE>
3.10 Bylaws
4.1 See Articles II and IV of Exhibit 3.1 and Articles
I and V of Exhibit 3.9
4.2* Form of Common Stock Certificate
4.3* Form of Purchase Warrant Certificate
4.4* Form of Purchase Warrant Agreement with Transfer
Agent
5.1* Opinion of Tonkon Torp LLP as to legality of the
securities being registered, including consent
10.1 Registrant's 1993 Non-Qualified Stock Option Plan
and Amendments Nos. 1 and 2
10.2 Form of Stock Option Agreement under the 1993
Non-Qualified Stock Option Plan
10.3 Registrant's 1997 Stock Option/Stock Issuance Plan
10.4 Form of Notice of Grant under the 1997 Stock
Option/Stock Issuance Plan
10.5 Registrant's 1998 Non-Qualified Stock Option Plan
10.6 Form of Notice of Grant under the 1998
Non-Qualified Stock Option Plan
10.7** SYSCO Master Distribution Agreement dated April
13, 1998
10.8 SYSCO Agreement dated February 19, 1999
10.9 Silicon Valley Bank Loan and Security Agreement
dated October 28, 1997 and Loan Modification
Agreements
10.10 Contribution and Indemnity Agreement dated October
28, 1997 with Tanous and Durbetaki
10.11 LINC Capital Inc. Master Lease Agreement dated
April 17, 1998 and Schedules 1, 2 and 3
10.12 LINC Capital Inc. Warrant and Warrant Purchase
Agreement dated April 17, 1998
10.13 Form of the Registrant's currently outstanding
Warrant Agreement
10.14 Heller First Capital Corp. Promissory Note dated
June 20, 1996 [sic]
10.15 Heller First Capital Corp. Authorization and Loan
Agreement dated May 16, 1997
10.16 Heller First Capital Corp. Security Agreement
dated June 20, 1997
10.17 Heller Financial Leasing, Inc.
Promissory Note dated April 28, 1998
10.18 Heller Financial Leasing, Inc. Security Agreement
dated April 28, 1998
10.19 Heller Financial Leasing, Inc. Letter Agreement
dated May 5, 1998
10.20 Heller Financial Leasing, Inc. Promissory Note
dated May 19, 1998
10.21 Heller Financial Leasing, Inc. Promissory Note
dated August 26, 1998
10.22 Heller Financial Leasing, Inc. Cross-Collateral
and Cross-Default Agreement dated August 26,
1998
10.23 Heller Financial Leasing, Inc. Promissory Note
dated November 6, 1998
10.24 Employment Agreement with Raymond W. Lindstrom
dated January 1, 1999
10.25 Employment Agreement with Howard Wasserteil dated
July 12, 1996
10.26 Amended Employment and Stock Grant Agreement with
Joann Vazquez dated April 8, 1999
10.27 Real Estate Lease dated May 1995 for Portland
Commissary
10.28 Industrial Real Estate Lease dated November 28,
1994 for Seattle Commissary and Assignment and
Consent to Assignment of Lease dated December
26, 1997
10.29 Investor's Rights Agreement dated January 9, 1998
and Amendment dated September 11, 1998
II-5
<PAGE>
10.30 Form of Officers and Directors Indemnification
Agreement
10.31 Separation Agreement dated as of March 12, 1999
with Brad K. Barnett
10.32 Consulting Agreement dated January 12, 1999 with
Viking Group, LLC and Anthony Kamin
10.33 Form of Underwriter's Warrant Agreement and form
of Warrant Certificate
10.34 Form of Financial Advisory Agreement
10.35 Form of Merger and Acquisition Agreement
10.36 Agreement to Provide Guaranty
23.1 Consent of KPMG Peat Marwick LLP
23.2* Consent of Tonkon Torp LLP (included in Exhibit
5.1)
24.1 Power of Attorney (see Page II-8 of the
Registration Statement)
27.1 Financial Data Schedule
* To be filed by amendment.
** Certain portions of this exhibit are omitted pursuant to a request for
confidential treatment.
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the Underwriting Agreement certificates in the
denominations and registered in the names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
the indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. If a claim for indemnification against these
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by the
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether the indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of the issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A under the Securities Act and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of these securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned in the City of Portland,
State of Oregon, on April 30, 1999.
OREGON BAKING COMPANY, DBA MARSEE BAKING
By /s/ Raymond W. Lindstrom
------------------------
Raymond W. Lindstrom
Chairman of the Board, President and Chief
Executive Officer
By /s/ Stephen A. Aanderud
-----------------------
Stephen A. Aanderud
Chief Financial Officer and Assistant
Secretary
By Howard J. Wasserteil*
--------------------
Howard J. Wasserteil
Executive Vice President, Secretary
and Director
By Robert E. Schneider*
-------------------
Robert E. Schneider, Ph.D.
Director
By Gerald W. Frank*
---------------
Gerald W. Frank
Director
By Joeseph F. Tanous*
-----------------
Joseph F. Tanous
Director
By Raymond Zimmerman*
-----------------
Raymond Zimmerman
Director
*By /s/ Raymond W. Lindstrom
------------------------
Raymond W. Lindstrom
(Attorney-in-Fact)
II-7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Raymond W. Lindstrom, Stephen A.
Aanderud and Howard J. Wasserteil, and each of them, his or her true and lawful
attorney-in-fact and agent, each with the power of substitution, to sign on his
or her behalf, individually and in each capacity stated below, all amendments
and post-effective amendments to this registration statement on Form SB-2
(including registration statements filed pursuant to Rule 462(b) under the
Securities Act of 1933, and all amendments thereto) and to file the same, with
all exhibits thereto and any other documents in connection therewith, with the
Securities and Exchange Commission under the Securities Act of 1933, granting
unto said attorneys-in-fact and agent, or their substitute or substitutes, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents and
purposes as each might or could do in person, hereby ratifying and confirming
each act that said attorneys-in-fact and agent, or their substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Raymond W. Lindstrom Chairman of the Board, President and April 8, 1999
- ------------------------
Raymond W. Lindstrom Chief Executive Officer
/s/ Stephen A. Aanderud Chief Financial Officer and Assistant April 8, 1999
- -----------------------
Stephen A. Aanderud Secretary
/s/ Howard J. Wasserteil Executive Vice President, Secretary and April 8, 1999
- ------------------------
Howard J. Wasserteil Director
/s/ Joann E. Vazquez Vice President of Product Development April 8, 1999
- --------------------
Joann E. Vazquez
/s/ Karlin M. Conklin Vice President of Bakery Operations April 8, 1999
- ---------------------
Karlin M. Conklin
/s/ Robert E. Schneider Director April 8, 1999
- -----------------------
Robert E. Schneider, Ph.D.
/s/ Gerald W. Frank Director April 8, 1999
- -------------------
Gerald W. Frank
/s/ Joseph F.Tanous Director April 8, 1999
- -------------------
Joseph F. Tanous
/s/ Raymond Zimmerman Director April 8, 1999
- ---------------------
Raymond Zimmerman
</TABLE>
II-8
<PAGE>
Oregon Baking company
Exhibit Index
-------------
Exhibit No. Description
- ---------- -----------
1.1 Form of Underwriting Agreement
1.2 Form of Selected Dealer Agreement
3.1 Proposed Amended and Restated Articles of
Incorporation
3.2 Articles of Incorporation (filed June 26, 1992)
3.3 Amendment to Article II of the Articles of
Incorporation (filed December 13, 1996)
3.4 Certificate of Designation of Series C Convertible
Preferred Stock and Series D Convertible and
Redeemable Preferred Stock (filed January 7,
1998)
3.5 Amendment to Article II of the Articles of
Incorporation (filed March 6, 1998)
3.6 Articles of Correction (filed June 3, 1998)
3.7 Amendment to Certificate of Designation of Series
C Convertible Preferred Stock and Series D
Convertible and Redeemable Preferred Stock
(filed October 7, 1998)
3.8 Amendment to Article II of the Articles of
Incorporation (filed March 16, 1999)
3.9 Proposed Amended and Restated Bylaws
3.10 Bylaws
4.1 See Articles II and IV of Exhibit 3.1 and Articles
I and V of Exhibit 3.9
4.2* Form of Common Stock Certificate
4.3* Form of Purchase Warrant Certificate
4.4* Form of Purchase Warrant Agreement with Transfer
Agent
5.1* Opinion of Tonkon Torp LLP as to legality of the
securities being registered, including consent
10.1 Registrant's 1993 Non-Qualified Stock Option Plan
and Amendments Nos. 1 and 2
10.2 Form of Stock Option Agreement under the 1993
Non-Qualified Stock Option Plan
10.3 Registrant's 1997 Stock Option/Stock Issuance Plan
10.4 Form of Notice of Grant under the 1997 Stock
Option/Stock Issuance Plan
10.5 Registrant's 1998 Non-Qualified Stock Option Plan
10.6 Form of Notice of Grant under the 1998
Non-Qualified Stock Option Plan
10.7** SYSCO Master Distribution Agreement dated April
13, 1998
10.8 SYSCO Agreement dated February 19, 1999
10.9 Silicon Valley Bank Loan and Security Agreement
dated October 28, 1997 and Loan Modification
Agreements
10.10 Contribution and Indemnity Agreement dated October
28, 1997 with Tanous and Durbetaki
10.11 LINC Capital Inc. Master Lease Agreement dated
April 17, 1998 and Schedules 1, 2 and 3
10.12 LINC Capital Inc. Warrant and Warrant Purchase
Agreement dated April 17, 1998
10.13 Form of the Registrant's currently outstanding
Warrant Agreement
10.14 Heller First Capital Corp. Promissory Note dated
June 20, 1996 [sic]
10.15 Heller First Capital Corp. Authorization and Loan
Agreement dated May 16, 1997
10.16 Heller First Capital Corp. Security Agreement
dated June 20, 1997
10.17 Heller Financial Leasing, Inc.
Promissory Note dated April 28, 1998
10.18 Heller Financial Leasing, Inc. Security Agreement
dated April 28, 1998
E-1
<PAGE>
10.19 Heller Financial Leasing, Inc. Letter Agreement
dated May 5, 1998
10.20 Heller Financial Leasing, Inc. Promissory Note
dated May 19, 1998
10.21 Heller Financial Leasing, Inc. Promissory Note
dated August 26, 1998
10.22 Heller Financial Leasing, Inc. Cross-Collateral
and Cross-Default Agreement dated August 26,
1998
10.23 Heller Financial Leasing, Inc. Promissory Note
dated November 6, 1998
10.24 Employment Agreement with Raymond W. Lindstrom
dated January 1, 1999
10.25 Employment Agreement with Howard Wasserteil dated
July 12, 1996
10.26 Amended Employment and Stock Grant Agreement with
Joann Vazquez dated April 8, 1999
10.27 Real Estate Lease dated May 1995 for Portland
Commissary
10.28 Industrial Real Estate Lease dated November 28,
1994 for Seattle Commissary and Assignment and
Consent to Assignment of Lease dated December
26, 1997
10.29 Investor's Rights Agreement dated January 9, 1998
and Amendment dated September 11, 1998
10.30 Form of Officers and Directors Indemnification
Agreement
10.31 Separation Agreement dated as of March 12, 1999
with Brad K. Barnett
10.32 Consulting Agreement dated January 12, 1999 with
Viking Group, LLC and Anthony Kamin
10.33 Form of Underwriter's Warrant Agreement and form
of Warrant Certificate
10.34 Form of Financial Advisory Agreement
10.35 Form of Merger and Acquisition Agreement
10.36 Agreement to Provide Guaranty
23.1 Consent of KPMG Peat Marwick LLP
23.2* Consent of Tonkon Torp LLP (included in its Exhibit 5.1)
24.1 Power of Attorney (see Page II-8 of the
Registration Statement)
27.1 Financial Data Schedule
* To be filed by amendment.
** Certain portions of this exhibit are omitted pursuant to a request for
confidential treatment.
E-2
OREGON BAKING COMPANY
1,750,000 SHARES OF COMMON STOCK AND
1,750,000 COMMON STOCK PURCHASE WARRANTS
UNDERWRITING AGREEMENT
----------------------
Boca Raton, Florida
_____________, 1999
Barron Chase Securities, Inc.
7700 West Camino Real
Boca Raton, Florida 33433
Gentlemen:
Oregon Baking Company (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein, hereby
proposes to issue and sell to Barron Chase Securities, Inc. (the "Underwriter"
or "you") for sale in a proposed public offering pursuant to the terms of this
Underwriting Agreement (the "Agreement"), on a "firm commitment" basis,
1,750,000 shares of Common Stock (the "Shares") at $5.00 per Share and 1,750,000
Redeemable Common Stock Purchase Warrants (the "Warrants") at $.125 per Warrant.
The Shares and the Warrants are collectively referred to as the "Securities".
Each Warrant is exercisable to purchase one (1) share of Common Stock (the
"Common Stock") at $5.00 per share at any time during the period between the
Effective Date and five (5) years from the Effective Date. The date upon which
the Securities and Exchange Commission ("Commission") shall declare the
Registration Statement of the Company effective shall be the "Effective Date".
The Warrants are subject to redemption under certain circumstances. In addition,
the Company proposes to grant to the Underwriter the option referred to in
Section 2(b) to purchase all or any part of an aggregate of 262,500 additional
Shares and/or 262,500 additional Warrants (the "Option Securities").
You have advised the Company that you desire to purchase the
Securities, and that you are authorized to execute this Agreement. The Company
confirms the agreements made by it with respect to the purchase of the
Securities by the Underwriter, as follows:
1
<PAGE>
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to, and agrees with the Underwriter
as of the Effective Date (as defined above), the Closing Date (as hereinafter
defined) and the Option Closing Date (as hereinafter defined) that:
(a) A registration statement (File No. _________) on Form SB-2 relating
to the public offering of the Securities, including a preliminary form of the
prospectus, copies of which have heretofore been delivered to you, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Commission thereunder, and has been filed with the
Commission under the Act. The Company has prepared in the same manner and
proposes to file, prior to the Effective Date of such registration statement, an
additional amendment or amendments to such registration statement, including a
final form of Prospectus, copies of which shall be delivered to you.
"Preliminary Prospectus" shall mean each prospectus filed pursuant to the Rules
and Regulations under the Act prior to the Effective Date. The registration
statement (including all financial schedules and exhibits) as amended at the
time it becomes effective and the final prospectus included therein are
respectively referred to as the "Registration Statement" and the "Prospectus",
except that (i) if the prospectus first filed by the Company pursuant to Rule
424(b) of the Rules and Regulations shall differ from said prospectus as then
amended, the term "Prospectus" shall mean the prospectus first filed pursuant to
Rule 424(b), and (ii) if such registration statement or prospectus is amended or
such prospectus is supplemented, after the effective date of such registration
statement and prior to the Option Closing Date (as hereinafter defined), the
terms "Registration Statement" and "Prospectus" shall include such registration
statement and prospectus as so amended, and the term "Prospectus" shall include
the prospectus as so supplemented, or both, as the case may be.
(b) At the Effective Date and at all times subsequent thereto up to the
Option Closing Date, if any, and during such longer period as the Prospectus may
be required to be delivered in connection with sales by the Underwriter or
Selected Dealers: (i) the Registration Statement and Prospectus will in all
respects conform to the requirements of the Act and the Rules and Regulations;
and (ii) neither the Registration Statement nor the Prospectus will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
the Company makes no representations, warranty or agreements as to information
contained in or omitted from the Registration Statement or Prospectus in
reliance upon, and in conformity with, written information furnished to the
Company by the Underwriter specifically for use in the preparation thereof. It
2
<PAGE>
is understood that the statements set forth in the Prospectus with respect to
stabilization, under the heading "Underwriting" and regarding the identity of
counsel to the Underwriter under the heading "Legal Matters" constitute the only
information furnished in writing by the Underwriter for inclusion in the
Registration Statement and Prospectus.
(c) Each of the Company and each subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus and is duly qualified to do business as a foreign corporation and is
in good standing in all other jurisdictions in which the nature of its business
or the character or location of its properties requires such qualification,
except where failure to so qualify will not materially affect the Company's
business, properties or financial condition.
(d) The authorized, issued and outstanding securities of the Company as
of the date of the Prospectus is as set forth in the Prospectus under
"Capitalization"; all of the issued and outstanding securities of the Company
have been, or will be when issued as set forth in the Prospectus, duly
authorized, validly issued and fully paid and non-assessable; the issuances and
sales of all such securities complied in all material respect with, or were
exempt from, applicable Federal and state securities laws; the holders thereof
have no rights of rescission against the Company with respect thereto, and are
not subject to personal liability by reason of being such holders; none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company; except as set forth in the Prospectus, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or agreements or
other rights to convert any obligation into, any securities of the Company have
been granted or entered into by the Company; and all of the securities of the
Company, issued and to be issued as set forth in the Registration Statement,
conform to all statements relating thereto contained in the Registration
Statement and Prospectus.
(e) The Shares are duly authorized, and when issued, delivered and paid
for pursuant to this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights of any security holder of
the Company. Neither the filing of the Registration Statement nor the offering
or sale of the Securities as contemplated in this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or relating to
the registration of any securities of the Company, except as described in the
Registration Statement.
The Warrants have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will have been duly authorized, validly
3
<PAGE>
issued and delivered and will constitute valid and legally binding obligations
of the Company entitling the holders to the benefits provided by the warrant
agreement pursuant to which such Warrants are to be issued (the "Warrant
Agreement"), which will be substantially in the form filed as an exhibit to the
Registration Statement. The shares of Common Stock issuable upon exercise of the
Warrants have been reserved for issuance and when issued in accordance with the
terms of the Warrants and Warrant Agreement will be duly and validly authorized,
validly issued, fully paid and non-assessable, free of pre-emptive rights, and
no personal liability will attach to the ownership thereof. The Warrant exercise
period and the Warrant exercise price may not be changed or revised by the
Company without the prior written consent of the Underwriter. The Warrant
Agreement has been duly authorized and, when executed and delivered pursuant to
this Agreement, will have been duly executed and delivered and will constitute
the valid and legally binding obligation of the Company enforceable in
accordance with its terms.
The Common Stock Underwriter Warrants, the Warrant Underwriter
Warrants, the Underlying Warrants, the shares of Common Stock issuable upon
exercise of the Common Stock Underwriter Warrants, and the shares of Common
Stock issuable upon exercise of the Underlying Warrants (all as defined in the
Underwriter's Warrant Agreement described in Section 11 herein), have been duly
authorized and, when issued, delivered and paid for, will be validly issued,
fully paid, non-assessable, free of pre-emptive rights and no personal liability
will attach to the ownership thereof, and will constitute valid and legally
binding obligations of the Company enforceable in accordance with their terms
and entitled to the benefits provided by the Underwriter's Warrant Agreement.
(f) This Agreement, the Warrant Agreement, the Financial Advisory
Agreement, the Merger and Acquisition Agreement (the "M/A Agreement") and the
Underwriter's Warrant Agreement have been duly and validly authorized, executed
and delivered by the Company, and assuming due execution of this Agreement by
the other party hereto, constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally. The Company has full power and authority to
authorize, issue and sell the Securities to be sold by it hereunder on the terms
and conditions set forth herein, and no consent, approval, authorization or
other order of any governmental authority is required in connection with such
authorization, execution and delivery or with the authorization, issue and sale
of the Securities or the securities to be issued pursuant to the Underwriter's
Warrant Agreement, except such as may be required under the Act or state
securities laws, or as otherwise have been obtained.
4
<PAGE>
(g) Except as described in the Prospectus, neither the Company nor any
subsidiary is in material violation, breach of or default under, and
consummation of the transactions herein contemplated and the fulfillment of the
terms of this Agreement will not conflict with, or result in a breach of, or
constitute a material default under, or result in the creation or imposition of
any material lien, charge or encumbrance upon any property or assets of the
Company or any subsidiary or any of the terms or provisions of any material
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any subsidiary is a party or by which the
Company or any subsidiary may be bound or to which any of the property or assets
of the Company or any subsidiary is subject, nor will such action result in any
material violation of the provisions of the Articles of Incorporation or By-Laws
of the Company or any subsidiary, as amended, or any statute or any order, rule
or regulation applicable to the Company or subsidiary of any court or of any
regulatory authority or other governmental body having jurisdiction over the
Company or each subsidiary.
(h) Subject to the qualifications stated in the Prospectus, the Company
and each subsidiary have good and marketable title to all properties and assets
described in the Prospectus as owned by each of them, free and clear of all
liens, charges, encumbrances or restrictions, except such as are not material to
its business, financial condition or results of operation; all of the material
leases and subleases under which the Company or each subsidiary is the lessor or
sublessor of properties or assets or under which the Company or each subsidiary
holds properties or assets as lessee or sublessee as described in the Prospectus
are in full force and effect, and, except as described in the Prospectus,
neither the Company nor each subsidiary is in default in any material respect
with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by anyone adverse to rights of the
Company or any subsidiary as lessor, sublessor, lessee, or sublessee under any
of the leases or subleases mentioned above, or affecting or questioning the
right of the Company or any subsidiary to continued possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus; and the Company and each subsidiary
owns or leases all such properties described in the Prospectus as are necessary
to its operations as now conducted and, except as otherwise stated in the
Prospectus, as proposed to be conducted as set forth in the Prospectus.
(i) KPMG Peat Marwick, LLP, who has given its report on certain
financial statements filed and to be filed with the Commission as part of the
Registration Statement, and which are included in the Prospectus, is with
respect to the Company, independent public accountants as required by the Act
and the Rules and Regulations.
(j) The financial statements and schedules, together with related
5
<PAGE>
notes, set forth in the Prospectus and the Registration Statement present fairly
the financial condition, results of operations and cash flows of the Company on
the basis stated in the Registration Statement, at the respective dates and for
the respective periods to which they apply. Said financial statements and
related notes and schedules have been prepared in accordance with generally
accepted accounting principles applied on a basis which is consistent during the
periods involved. The Company's internal accounting controls and procedures are
sufficient to cause the Company and each subsidiary to prepare financial
statements which comply in all material respects with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved. During the preceding five (5) year period, nothing has been brought to
the attention of the Company's management that would result in any material
reportable condition relating to the Company's internal accounting procedures,
weaknesses or controls.
(k) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus and to and including the
Option Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, (i) neither the Company nor any subsidiary has
incurred and will not have incurred any material liabilities or obligations,
direct or contingent, and has not entered into and will not have entered into
any material transactions other than in the ordinary course of business and/or
as contemplated in the Registration Statement and the Prospectus; (ii) neither
the Company nor any subsidiary has and will not have paid or declared any
dividends or have made any other distribution on its capital stock; (iii) there
has not been any change in the capital stock of, or any incurrence of long-term
debt by, the Company or any subsidiary; (iv) neither the Company nor any
subsidiary has issued any options, warrants or other rights to purchase the
capital stock of the Company or any subsidiary; and (v) there has not been and
will not have been any material adverse change in the business, financial
condition or results of operations of the Company or any subsidiary, or in the
book value of the assets of the Company or any subsidiary, arising for any
reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending or, to
the knowledge of the Company or any subsidiary, threatened, any material action,
suit, proceeding, inquiry, arbitration or investigation against the Company or
any subsidiary, or any of the officers or directors of the Company or any
subsidiary, or any material action, suit, proceeding, inquiry, arbitration, or
investigation, which might result in any material adverse change in the
condition (financial or other), business prospects, net worth, or properties of
the Company or any subsidiary.
(m) Except as disclosed in the Prospectus, each of the Company and each
subsidiary has filed all necessary federal, state and foreign income and
6
<PAGE>
franchise tax returns and has paid all taxes shown as due thereon; and there is
no tax deficiency which has been or to the knowledge of the Company might be
asserted against the Company or any subsidiary that has not been provided for in
the financial statements.
(n) Except as set forth in the Prospectus, each of the Company and each
subsidiary has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its property as described in the Prospectus and is in all material
respects in compliance therewith and owns or possesses adequate right to use all
material patents, patent applications, trademarks, service marks, trade-names,
trademark registrations, service mark registrations, copyrights, and licenses
necessary for the conduct of such business and has not received any notice of
conflict with the asserted rights of others in respect thereof. To the best of
the Company's knowledge, none of the activities or business of the Company or
any subsidiary are in violation of, or cause the Company or any subsidiary to
violate, any law, rule, regulation or order of the United States, any state,
county or locality, or of any agency or body of the United States or of any
state, county or locality, the violation of which would have a material adverse
impact upon the condition (financial or otherwise), business, property,
prospective results of operations, or net worth of the Company and any
subsidiary.
(o) Neither the Company nor any subsidiary has, directly or indirectly,
at any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution, in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public of quasi-public duties, other than
payments or contributions required or allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or other taxes
(including franchise, capital stock or other tax, other than income taxes,
imposed by any jurisdiction) if any, which are required to be paid in connection
with the sale and transfer of the Securities to the Underwriter hereunder will
have been fully paid or provided for by the Company and all laws imposing such
taxes will have been fully complied with.
(q) All contracts and other documents which are required to be
described in or filed as exhibits to the Registration Statement have been so
described and/or filed.
(r) Except as described in the Registration Statement and Prospectus,
no holders of Common Stock or of any other securities of the Company have the
right to include such Common Stock or other securities in the Registration
Statement and Prospectus.
7
<PAGE>
(s) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, neither the Company nor any subsidiary has any
material contingent liabilities.
(t) The Company has no subsidiary corporations except as disclosed in
the Registration Statement and Prospectus, nor has it any equity interest in any
partnership, joint venture, association or other entity except as disclosed in
the Registration Statement or Prospectus. Except as described in the
Registration Statement and Prospectus, the Company owns all of the outstanding
securities of each of its subsidiaries.
(u) The Commission has not issued an order preventing or suspending the
use of any Preliminary Prospectus with respect to the offer and sale of the
Securities and each Preliminary Prospectus, as of its date, has conformed fully
in all material respects with the requirements of the Act and the Rules and
Regulations and did not include any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein not
misleading.
(v) Neither the Company, nor, to the Company's knowledge, any of its
officers, directors, employees or stockholders, have taken or will take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any of the securities of the
Company.
(w) Item 26 of Part II of the Registration Statement accurately
discloses all unregistered securities sold by the Company within the three year
period prior to the date as of which information is presented in the
Registration Statement. All of such securities were sold in transactions which
were exempt from the registration provisions of the Act and not in violation of
Section 5 thereof.
(x) Other than as set forth in the Prospectus, the Company has not
entered into any agreement pursuant to which any person is entitled, either
directly or indirectly, to compensation from the Company for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Underwriter against any losses, claims, damages
or liabilities, which shall include, but not be limited to, all costs to defend
against any such claim, so long as such claim arises out of agreements made or
allegedly made by the Company.
(y) Based upon written representations received by the Company, no
officer, director or beneficial owner of five percent (5%) or more of the
securities of the Company or any subsidiary has any direct or indirect
affiliation or association with any member of the National Association of
Securities Dealers, Inc. ("NASD"), except as disclosed to the Underwriter in
writing, and no beneficial owner of the Company's unregistered securities has
8
<PAGE>
any direct or indirect affiliation or association with any NASD member except as
disclosed to the Underwriter in writing. The Company will advise the Underwriter
and the NASD if any beneficial owner of the securities of the Company or any
subsidiary is or becomes an affiliate or associated person of an NASD member
participating in the distribution.
(z) The Company and each subsidiary is in compliance in all material
respects with all federal, state and local laws and regulations respecting the
employment of its employees and employment practices, terms and conditions of
employment and wages and hours relating thereto. There are no pending
investigations involving the Company or any subsidiary by the U.S. Department of
Labor, or any other governmental agency responsible for the enforcement of such
federal, state or local laws and regulations. There is no unfair labor practice
charge or complaint against the Company or any subsidiary pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or to the knowledge of the Company, threatened
against or involving the Company or any subsidiary or any predecessor entity. No
question concerning representation exists respecting the employees of the
Company or any subsidiary and no collective bargaining agreement or modification
thereof is currently being negotiated by the Company or any subsidiary. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company or any subsidiary, if any.
(aa) Except as disclosed in the Prospectus, neither the Company nor any
subsidiary maintains, sponsors nor contributes to, nor is it required to
contribute to, any program or arrangement that is an "employee pension benefit
plan", an "employee welfare benefit plan", or a "multi-employer plan" as such
terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). Except as disclosed in the Prospectus, neither the Company nor any
subsidiary maintained or contributed to a defined benefit plan, as defined in
Section 3(35) of ERISA.
(ab) Based upon written representations received from the officers and
directors of the Company and each subsidiary, except as disclosed in the
Prospectus, during the past five years, none of the officers or directors of the
Company or any subsidiary have been:
(1) The subject of a petition under the federal bankruptcy
laws or any state insolvency law filed by or against them, or
by a receiver, fiscal agent or similar officer appointed by a
court for their business or property, or any partnership in
which any of them was a general partner at or within two years
before the time of such filing, or any corporation or business
association of which any of them was
9
<PAGE>
an executive officer at or within two years before the time of
such filing;
(2) Convicted in a criminal proceeding or a named subject
of a pending criminal proceeding (excluding traffic violations
and other minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining
any of them from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by
the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings
and loan association or insurance company, or
engaging in or continuing any conduct or practice in
connection with any such activity;
(ii) engaging in any type of business practice;
or
(iii) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
federal or state securities law or federal commodity
laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or
state authority barring, suspending or otherwise limiting for
more than sixty (60) days their right to engage in any
activity described in paragraph (3)(i) above, or be associated
with persons engaged in any such activity;
(5) Found by any court of competent jurisdiction in a
civil action or by the Securities and Exchange Commission to
have violated any federal or state securities law, and the
judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
10
<PAGE>
violated any federal commodities law, and the judgment in such
civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(ac) Based upon written representations received from the officers and
directors of the Company, each of the officers and directors of the Company has
reviewed the sections in the Prospectus relating to their biographical data and
equity ownership position in the Company, and all information contained therein
is true and accurate.
2. PURCHASE, DELIVERY AND SALE OF THE SECURITIES.
(a) Subject to the terms and conditions of this Agreement and based
upon the representations, warranties and agreements herein contained, the
Company hereby agrees to issue and sell to the Underwriter an aggregate of
1,750,000 Shares at $4.50 per Share and 1,750,000 Warrants at $.1125 per
Warrant, (the public offering price less ten percent (10%)) at the place and
time hereinafter specified. The price at which the Underwriter shall sell the
Securities to the public shall be $5.00 per Share and $.125 per Warrant.
Delivery of the Securities against payment therefor shall take place at
the offices of Barron Chase Securities, Inc., 7700 West Camino Real, Boca Raton,
Florida 33433 (or at such other place as may be designated by the Underwriter)
at 10:00 a.m., Eastern Time, on such date after the Registration Statement has
become effective as the Underwriter shall designate, but not later than ten (10)
business days (holidays excepted) following the first date that any of the
Securities are released to you, such time and date of payment and delivery for
the Securities being herein called the "Closing Date".
(b) In addition, subject to the terms and conditions of this Agreement,
and based upon the representations, warranties and agreements herein contained,
the Company hereby grants an option to the Underwriter to purchase all or any
part of an aggregate of an additional 262,500 Shares and 262,500 Warrants at the
same price per Share and Warrant as the Underwriter shall pay for the Securities
being sold pursuant to the provisions of subsection (a) of this Section 2 (such
additional Securities being referred to herein as the "Option Securities"). This
option may be exercised within forty-five (45) days after the Effective Date of
the Registration Statement upon notice by the Underwriter to the Company
advising as to the amount of Option Securities as to which the option is being
exercised, the names and denominations in which the certificates for such Option
Securities are to be registered and the time and date when such certificates are
to be delivered. Such time and date shall be determined by the Underwriter but
shall not be later than ten (10) full business days after the exercise of said
option, nor in any event prior to the Closing Date, and such time and date is
referred to herein as the "Option Closing Date". Delivery of the Option
11
<PAGE>
Securities against payment therefor shall take place at the offices of the
Underwriter. The Option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriter of the Securities referred to in
subsection (a) above. In the event the Company declares or pays a dividend or
distribution on its Common Stock, whether in the form of cash, shares of Common
Stock or any other consideration, prior to the Option Closing Date, such
dividend or distribution shall also be paid on the Option Closing Date.
(c) The Company will make the certificates for the Securities to be
sold hereunder available to you for inspection at least two (2) full business
days prior to the Closing Date at the offices of the Underwriter, and such
certificates shall be registered in such names and denominations as you may
request. Time shall be of the essence and delivery at the time and place
specified in this Agreement is a further condition to the obligations of the
Company to each Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered by the Company to you
for the account of the Underwriter against payment of the purchase prices by the
Underwriter by certified or bank cashier's checks in New York Clearing House
funds payable to the order of the Company or by wire transfer in New York
Clearing House funds to the account of the Company.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Securities pursuant
to the provisions of subsection (b) above, payment for such Securities shall be
made payable in New York Clearing House funds at the offices of the Underwriter,
or by wire transfer, at the time and date of delivery of such Securities as
required by the provisions of subsection (b) above, against receipt of the
certificates for such Securities by the Underwriter for the account of the
Underwriter registered in such names and in such denominations as the
Underwriter may request.
It is understood that the Underwriter proposes to offer the Securities
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement is declared
effective by the Commission.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriter that:
(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you and will not at
any time, whether before or after the Effective Date, file any amendment to the
Registration Statement or supplement to the Prospectus of which you shall not
previously been advised and furnished with a copy or to which you or your
counsel shall have objected in writing, acting reasonably, or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to the
12
<PAGE>
later of (i) the completion by the Underwriter of the distribution of the
Securities as contemplated hereby; or (ii) 25 days after the date on which the
Registration Statement shall have become or been declared effective, the Company
will prepare and file with the Commission, promptly upon your request, any
amendments or supplements to the Registration Statement or Prospectus which may
be necessary or advisable in connection with the distribution of the Securities
and as mutually agreed by the Company and the Underwriter.
After the Effective Date and as soon as the Company is advised thereof,
the Company will advise you, and confirm the advice in writing, of the receipt
of any comments of the Commission, of the effectiveness of any post-effective
amendment to the Registration Statement, of the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the Commission for
amendment of the Registration Statement or for supplementing of the Prospectus
or for additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such purposes,
and will use its best efforts to prevent the issuance of any such order, and, if
issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus and Definitive Prospectus, and the Company has consented
and hereby consents to the use of such copies for the purposes permitted by the
Act. The Company authorizes the Underwriter and Selected Dealers to use the
Prospectus in connection with the sale of the Securities for such period as in
the opinion of counsel to the Underwriter the use thereof is required to comply
with the applicable provisions of the Act and the Rules and Regulations. In case
of the happening, at any time within such period as a Prospectus is required
under the Act to be delivered in connection with sales by the Underwriter or
Selected Dealers, of any event of which the Company has knowledge and which in
the opinion of counsel for the Company or counsel for the Underwriter should be
set forth in an amendment to the Registration Statement or a supplement to the
Prospectus, in order to make the statements therein not then misleading, in
light of the circumstances existing at the time the Prospectus is required to be
delivered to a purchaser of the Securities, or in case it shall be necessary to
amend or supplement the Prospectus to comply with law or with the Act and the
Rules and Regulations, the Company will notify you promptly and forthwith
prepare and furnish to you copies of such amended Prospectus or of such
supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
13
<PAGE>
material facts necessary in order to make the statements in the Prospectus, in
the light of the circumstances under which they are made, not misleading. The
preparation and furnishing of any such amendment or supplement to the
Registration Statement or amended Prospectus or supplement to be attached to the
Prospectus shall be without expense to the Underwriter.
The Company will comply with the Act, the Rules and Regulations
thereunder, and the provisions of the Securities Exchange Act of 1934 (the "1934
Act"), and the rules and regulations thereunder in connection with the offering
and issuance of the Securities.
(b) The Company will act in good faith and use its best efforts and
cooperate with you and your counsel to qualify to register the Securities for
sale under the securities or "blue sky" laws of such jurisdictions as the
Underwriter may designate and will make such applications and furnish such
information as may be required for that purpose and to comply with such laws,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities or to execute a general consent to service of process
in any jurisdiction in any action other than one arising out of the offering or
sale of the Securities. The Company will, from time to time, prepare and file
such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriter may reasonably
request.
(c) If the sale of the Securities provided for herein is not
consummated, the Company shall pay all costs and expenses incident to the
performance of the Company's obligations hereunder, including, but not limited
to, all such expenses itemized in Section 8(a) and 8(c) hereof, and either (i)
the out-of-pocket expenses of the Underwriter, not to exceed the $50,000
previously paid if the Underwriter elects to terminate the offering for any
reason; or (ii) the out-of-pocket expenses of the Underwriter if the Company
elects to terminate the offering for any reason. For the purposes of this
sub-section, the Underwriter shall be deemed to have assumed such expenses when
they are billed or incurred, regardless of whether such expenses have been paid.
The Underwriter shall not be responsible for any expenses of the Company or
others, or for any charges or claims relative to the proposed public offering if
it is not consummated.
(d) The Company will deliver to you at or before the Closing Date two
signed copies of the Registration Statement, including all financial statements
and exhibits filed therewith, and of each amendment or supplement thereto. The
Company will deliver to or upon the order of the Underwriter, from time to time
until the Effective Date of the Registration Statement, as many copies of any
Preliminary Prospectus filed with the Commission prior to the Effective Date of
the Registration Statement as the Underwriter may reasonably request. The
Company will deliver to the Underwriter on the Effective Date of the
14
<PAGE>
Registration Statement and thereafter for so long as a Prospectus is required to
be delivered under the Act, from time to time, as many copies of the Definitive
Prospectus, or as thereafter amended or supplemented, as the Underwriter may
from time to time reasonably request.
(e) For so long as the Company is a reporting company under either
Section 12 or 15 of the 1934 Act, the Company, at its expense, will furnish to
the Underwriter during the period ending five (5) years from the Effective Date,
(i) as soon as practicable after the end of each fiscal year, a balance sheet of
the Company and any of its subsidiaries as at the end of such fiscal year,
together with statements of income, surplus and cash flow of the Company and any
subsidiaries for such fiscal year, all in reasonable detail and accompanied by a
copy of the certificate or report thereon of independent accountants; (ii) as
soon as they are available, a copy of all reports (financial or other) mailed to
security holders; (iii) as soon as they are available, a copy of all
non-confidential documents, including annual reports, periodic reports and
financial statements, furnished to or filed with the Commission under the Act
and the 1934 Act; (iv) copies of each press release, news item and article with
respect to the Company's affairs released by the Company; and (v) such other
information as you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) The Company will make generally available to its stockholders and
to the registered holders of its Warrants and deliver to the Underwriter as soon
as it is practicable, but in no event later than the first day of the sixteenth
full calendar month following the Effective Date, an earnings statement (which
need not be audited) covering a period of at least twelve consecutive months
beginning with the Effective Date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the necessary
action to become a reporting company under Section 12 of the 1934 Act, and the
Company will make all filings required to and will have obtained approval for
the listing of the Shares and Warrants on The Nasdaq SmallCap Market System, and
will use its best efforts to maintain such listing for at least seven (7) years
from the date of this Agreement.
(i) For a period of seven (7) years following the Effective Date, the
Company will hold an annual meeting of stockholders for the election of
Directors within 180 days after the end of each of the Company's fiscal years
and, within nine (9) months after the end of each of the Company's fiscal years
15
<PAGE>
will provide the Company's stockholders with the audited financial statements of
the Company as of the end of the fiscal year just completed prior thereto. Such
financial statements shall be those required by Rule 14a-3 under the 1934 Act
and shall be included in an annual report pursuant to the requirements of such
Rule.
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption "Use
of Proceeds" in the Prospectus, and will file such reports with the Commission
with respect to the sale of the Securities and the application of the proceeds
therefrom as may be required by Sections 12, 13 and/or 15 of the 1934 Act and
pursuant to Rule 463 under the Act.
(k) The Company will, promptly upon your request, prepare and file with
the Commission any amendments or supplements to the Registration Statement,
Preliminary Prospectus or Prospectus and take any other action, which in the
reasonable opinion of counsel to the Underwriter and the Company may be
reasonably necessary or advisable in connection with the distribution of the
Securities and will use its best efforts to cause the same to become effective
as promptly as possible.
(l) On the Closing Date, the Company shall execute and deliver to you
the Underwriter's Warrant Agreement. The Underwriter's Warrant Agreement and
Warrant Certificates will be substantially in the form of the Underwriter's
Warrant Agreement filed as an exhibit to the Registration Statement.
(m) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued securities which are issuable upon
exercise of the Underwriter's Warrants outstanding from time to time.
(n) All existing beneficial owners of the Company's securities
(including warrants, options and Preferred Stock of the Company) as of the
Effective Date shall agree in writing, in a form satisfactory to the
Underwriter, not to sell, transfer or otherwise dispose of any of such
securities (or underlying securities) of the Company for a period of twenty-four
(24) months or fourteen (14) months from the Effective Date, as described in the
Prospectus, or any longer period required by the NASD, Nasdaq or any State,
without the written consent of the Underwriter. For a period of four (4) years
following the Effective Date, all sales of the Company's securities by officers
and/or directors of the Company shall be through the Underwriter.
(o) The Company will obtain, on or before the Closing Date, key person
life insurance on the each of the lives of Raymond W. Lindstrom and Stephen
Aanderud in an amount of not less than $2,000,000 each, and will use its best
efforts to maintain such insurance for a period of at least five (5) years from
the Effective Date.
16
<PAGE>
(p) Prior to the Closing Date, the Company shall, at its own expense,
undertake to list the Company's securities in the appropriate recognized
securities manual or manuals published by Standard & Poor's Corporation and such
other manuals as the Underwriter may designate, such listings to contain the
information required by such manuals and the Uniform Securities Act. The Company
hereby agrees to use its best efforts to maintain such listing for a period of
not less than five (5) years. The Company shall take such action as may be
reasonably requested by the Underwriter to obtain a secondary market trading
exemption in such states as may be reasonably requested by the Underwriter.
(q) During the one (1) year day period commencing on the Closing Date,
the Company will not, without the prior written consent of the Underwriter,
grant options or warrants to purchase the Company's Common Stock at a price less
than the initial per share public offering price.
(r) Prior to the Closing Date, neither the Company nor any subsidiary
will issue, directly or indirectly, without your prior consent, any press
release or other communication or hold any press conference with respect to the
Company or its activities or the offering of the Securities other than routine
customary advertising of the Company's products and services, and except as
required by any applicable law or the directives of any relevant regulatory
authority in any relevant jurisdiction.
(s) At the Closing Date, the Company will engage the Underwriter as a
non-exclusive financial advisor to the Company for a period of twelve (12)
months commencing on the first day of the month following the Company's receipt
of the proceeds of this offering, at an aggregate fee of $108,000, all of which
shall be payable to the Underwriter on the Closing Date. The financial advisory
agreement will provide that the Underwriter shall, at the Company's request,
provide advice and consulting services to the Company concerning potential
merger and acquisition proposals and the obtaining of short or long-term
financing for the Company, whether by public financing or otherwise.
(t) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the financial
statements to be included in any registration statement or similar disclosure
document to be filed by the Company hereunder, or any amendment or supplement
thereto. For a period of five (5) years from the Effective Date, the Company, at
its expense, shall cause its regularly engaged independent certified public
accountants to review (but not audit) the Company's financial statements for
each of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information, the filing of the Company's quarterly report
and the mailing of quarterly financial information to stockholders.
17
<PAGE>
(u) The Company shall retain ChaseMellon Shareholder Services, Inc. as
the transfer agent for the securities of the Company, or such other transfer
agent as you may agree to in writing. In addition, the Company shall direct such
transfer agent to furnish the Underwriter with daily transfer sheets as to each
of the Company's securities as prepared by the Company's transfer agent and
copies of lists of stockholders and warrantholders as reasonably requested by
the Underwriter, for a five (5) year period commencing from the Closing Date.
(v) The Company shall cause the Depository Trust Company, or such other
depository of the Company's securities, to furnish security position reports and
special DTC Tracking Reports to the Underwriter on a daily and weekly basis at
the expense of the Company, for a five (5) year period from the Effective Date.
The DTC Tracking Reports will be furnished for the initial two (2) month period
from the Effective Date, after which time the Company's obligation to furnish
such tracking reports will be reviewed by the Company and the Underwriter.
(w) Following the Effective Date, the Company shall, at its sole cost
and expense, prepare and file such Blue Sky applications with such jurisdictions
as the Underwriter shall designate and the Company may reasonably agree.
(x) On the Effective Date and for a period of three (3) years
thereafter, the Company's Board of Directors shall consist of a minimum of five
(5) persons, two (2) of whom shall be independent and not otherwise affiliated
with the Company or associated with any of the Company's affiliates. The
Underwriter shall have the opportunity to invite an observer to attend Board of
Directors meetings of the Company at the expense of the Company.
(y) On the Closing Date, the Company shall execute and deliver to you a
non-exclusive M/A Agreement with the Underwriter in a form satisfactory to the
Underwriter, providing:
(1) that the Underwriter will be paid a finder's fee, of from
five percent (5%) of the first $1,000,000 ranging in $1,000,000
increments down to one percent (1%) of the excess, if any, over
$4,000,000 of the consideration involved in any transaction introduced
by the Underwriter (including mergers, acquisitions, joint ventures,
and any other business for the Company introduced by the Underwriter)
consummated by the Company, as an "Introduced, Consummated
Transaction", by which the Underwriter introduced the other party to
the Company during a period ending five (5) years from the date of the
M/A Agreement; and
(2) that any such finder's fee due to the Underwriter will be
paid in cash or stock as mutually agreed at the closing of the
particular Introduced, Consummated Transaction for which the finder's
fee is due.
18
<PAGE>
(z) After the Closing Date, the Company shall prepare and publish
"tombstone" advertisements of at least 5 x 5 inches in publications to be
designated by the Underwriter at a total cost not to exceed $15,000.
(aa) For such period as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement or a new Registration Statement to become effective in compliance with
the Act and without any lapse of time between the effectiveness of any such
post-effective amendments and cause a copy of each Prospectus, as then amended,
to be delivered to each holder of record of a Warrant and to furnish the
Underwriter and each dealer as many copies of each such Prospectus as the
Underwriter or such dealer may reasonably request. Such post-effective
amendments or new Registration Statement shall also include the Underwriter's
Warrants and all the securities underlying the Underwriter's Warrants. The
Company shall not call for redemption any of the Warrants unless a Registration
Statement covering the securities underlying the Warrants has been declared
effective by the Commission and remains current at least until the date fixed
for redemption. In addition, the Warrants shall not be redeemable during the
first year after the Effective Date without the written consent of the
Underwriter.
(ab) Until such time as the securities of the Company are listed or
quoted on either the New York Stock Exchange or the American Stock Exchange, the
Company shall deliver to the Underwriter a written opinion detailing those
states in which the Shares and Warrants of the Company may be traded in
non-issuer transactions under the Blue Sky laws of the fifty states ("Secondary
Market Trading Opinion"). The initial Secondary Market Trading Opinion shall be
delivered to the Underwriter on the Effective Date, and the Company shall
continue to update such opinion and deliver same to the Underwriter on a timely
basis, but in any event at the beginning of each fiscal quarter, for a five (5)
year period, if required.
(ac) As promptly as practicable after the Closing Date, the Company
will prepare, at its own expense, hard cover "bound volumes" relating to the
offering, and will distribute such volumes to the individuals designated by the
Underwriter or counsel to the Underwriter.
4. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligation of the
Underwriter to purchase and pay for the Securities which the Underwriter has
agreed to purchase hereunder from the Company is subject, as of the date hereof
and as of the Closing Date and the Option Closing Date, to the execution of this
Agreement by the Underwriter, to the continuing accuracy of, and compliance
with, the representations and warranties of the Company herein, to the accuracy
of statements of officers of the Company made pursuant to the provisions hereof,
19
<PAGE>
to the performance by the Company of its obligations hereunder, and to the
following additional conditions:
(a) (i) The Registration Statement shall have become effective not
later than 5:00 p.m., Eastern Time, on the date of this Agreement, or at such
later time or on such later date as you may agree to in writing; (ii) at or
prior to the Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceeding for that purpose shall have been initiated or pending, or shall be
threatened, or to the knowledge of the Company, contemplated by the Commission;
(iii) no stop order suspending the effectiveness of the qualification or
registration of the Securities under the securities or "blue sky" laws of any
jurisdiction (whether or not a jurisdiction which you shall have specified)
shall be threatened or to the knowledge of the Company contemplated by the
authorities of any such jurisdiction or shall have been issued and in effect;
(iv) any request for additional information on the part of the Commission or any
such authorities shall have been complied with to the satisfaction of the
Commission and any such authorities, and to the satisfaction of counsel to the
Underwriter; and (v) after the date hereof no amendment or supplement to the
Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to the Underwriter and the Underwriter did not
object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus, (i)
there shall not have been any material change in the capital stock or other
securities of the Company or any subsidiary or any material adverse change in
the long-term debt of the Company or any material subsidiary except as set forth
in or contemplated by the Registration Statement, (ii) there shall not have been
any material adverse change in the general affairs, business, properties,
condition (financial or otherwise), management, or results of operations of the
Company or any subsidiary, whether or not arising from transactions in the
ordinary course of business, in each case other than as set forth in or
contemplated by the Registration Statement or Prospectus; (iii) neither the
Company nor any subsidiary shall have sustained any material interference with
its business or properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree, which is not set
forth in the Registration Statement and Prospectus; and (iv) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all material respects
conform to the requirements thereof, and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
20
<PAGE>
circumstance under which they are made, not misleading.
(c) Except as set forth in the Prospectus, there is not pending or, to
the knowledge of the Company or any subsidiary, threatened, any material action,
suit, proceeding, inquiry, arbitration or investigation against the Company or
any subsidiary, or any of the officers or directors of the Company or any
subsidiary, or any material action, suit, proceeding, inquiry, arbitration, or
investigation, which might result in any material adverse change in the
condition (financial or other), business prospects, net worth, or properties of
the Company or any subsidiary.
(d) Each of the representations and warranties of the Company contained
herein shall be true and correct as of this date and at the Closing Date as if
made at the Closing Date, and all covenants and agreements herein contained to
be performed on the part of the Company and all conditions herein contained to
be fulfilled or complied with by the Company at or prior to the Closing Date
shall have been duly performed, fulfilled or complied with.
(e) At the Closing Date, the Underwriter shall have received the
opinion, dated as of the Closing Date, from Tonkon Torp, LLP, counsel for the
Company, in form and substance satisfactory to counsel for the Underwriter,
which in the aggregate shall state:
(i) the Company and each subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with full corporate power
and authority to own its properties and conduct its business as
described in the Registration Statement and Prospectus and is duly
qualified or licensed to do business as a foreign corporation and is in
good standing in each other jurisdiction in which the ownership or
leasing of its properties or conduct of its business requires such
qualification except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company and
each subsidiary as a whole;
(ii) the authorized capitalization of the Company is as set
forth under "Capitalization" in the Prospectus; all shares of the
Company's outstanding stock and other securities requiring
authorization for issuance by the Company's Board of Directors have
been duly authorized, validly issued, are fully paid and non-assessable
and conform to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock of the Company and other securities
have not been issued in violation of the preemptive rights of any
shareholder and the shareholders of the Company do not have any
preemptive rights or, to such counsel's knowledge, other rights to
subscribe for or to purchase securities of the Company, nor, to such
counsel's knowledge, are there any restrictions upon the voting or
transfer of any of the securities of the Company, except as disclosed
21
<PAGE>
in the Prospectus; the Common Stock, the Shares, the Warrants, and the
securities contained in the Underwriter's Warrant Agreement conform to
the respective descriptions thereof contained in the Prospectus; the
Common Stock, the Shares, the Warrants, the shares of Common Stock to
be issued upon exercise of the Warrants and the securities contained in
the Underwriter's Warrant Agreement, have been duly authorized and,
when issued, delivered and paid for, will be duly authorized, validly
issued, fully paid, non-assessable, free of pre-emptive rights and no
personal liability will attach to the ownership thereof; all prior
sales by the Company of the Company's securities complied in all
material respects with, or were exempt from, applicable federal and
state securities laws; no shareholders of the Company have any
rescission rights against the Company with respect to the Company's
securities; a sufficient number of shares of Common Stock has been
reserved for issuance upon exercise of the Warrants and the Underwriter
Warrants, and to the best of such counsel's knowledge, neither the
filing of the Registration Statement nor the offering or sale of the
Securities as contemplated by this Agreement gives rise to any
registration rights or other rights, other than those which have been
waived or satisfied or described in the Registration Statement;
(iii) this Agreement, the Underwriter's Warrant Agreement, the
Warrant Agreement, the Financial Advisory Agreement, and the M/A
Agreement have been duly and validly authorized, executed and delivered
by the Company and, assuming the due authorization, execution and
delivery of this Agreement by the Underwriter, are the valid and
legally binding obligations of the Company, enforceable in accordance
with their terms, except (a) as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws from time to time in effect which effect creditors' rights
generally; and (b) no opinion is expressed as to the enforceability of
the indemnity provisions or the contribution provisions contained in
this Agreement;
(iv) the certificates evidencing the outstanding securities of
the Company, the Shares, the Common Stock and the Warrants are in valid
and proper legal form;
(v) to the best of such counsel's knowledge, except as set
forth in the Prospectus, there is not pending or threatened any
material action, suit, proceeding, inquiry, arbitration or
investigation against the Company or any subsidiary or any of the
officers of directors of the Company or any subsidiary, nor any
material action, suit, proceeding, inquiry, arbitration, or
investigation, which might materially and adversely affect the
condition (financial or otherwise), business prospects, net worth, or
22
<PAGE>
properties of the Company or any subsidiary;
(vi) the execution and delivery of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement, the Financial
Advisory Agreement, and the M/A Agreement, and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated, will not result in a
violation of, or constitute a default under (a) the Articles of
Incorporation or By-Laws of the Company and each subsidiary; (b) to the
best of such counsel's knowledge, any material obligations, agreement,
covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to
which the Company or any subsidiary is a party or by which it or any of
its material properties is bound; or (c) to the best of such counsel's
knowledge, any material order, rule, regulation, writ, injunction, or
decree of any government, governmental instrumentality or court,
domestic or foreign;
(vii) the Registration Statement has become effective under
the Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or are
pending before, or threatened by, the Commission; the Registration
Statement and the Prospectus (except for the financial statements and
other financial data contained therein, or omitted therefrom, as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Rules and Regulations; and
(viii) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or delivery
of the Securities by the Company in connection with the execution,
delivery and performance of this Agreement by the Company or in
connection with the taking of any action contemplated herein, or the
issuance of the Underwriter's Warrants or the Securities underlying the
Underwriter's Warrants, other than registrations or qualifications of
the Securities under applicable state or foreign securities or Blue Sky
laws and registration under the Act.
Such opinion shall also cover such matters incident to the transactions
contemplated hereby as the Underwriter or counsel for the Underwriter shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact; and may rely as to all matters of law, upon opinions of counsel
satisfactory to you and counsel to the Underwriter. The opinion of such counsel
23
<PAGE>
to the Company shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and that the Underwriter and they are justified in
relying thereon.
Such counsel shall also include a statement to the effect that such
counsel has participated in the preparation of the Registration Statement and
the Prospectus and nothing has come to the attention of such counsel to lead
such counsel to believe that the Registration Statement or any amendment thereto
at the time it became effective contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading or that the Prospectus or any supplement
thereto contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make
statements therein, in light of the circumstances under which they are made, not
misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other financial information and
statistical data contained therein, as to which such counsel need express no
opinion).
(f) You shall have received on the Closing Date, a certificate dated as
of the Closing Date, signed by the Chief Executive Officer and the Chief
Financial Officer of the Company and such other officers of the Company as the
Underwriter may reasonably request, certifying that:
(i) No Order suspending the effectiveness of the Registration
Statement or stop order regarding the sale of the Securities is in
effect and no proceedings for such purpose are pending or are, to their
knowledge, threatened by the Commission;
(ii) They do not know of any litigation instituted or, to
their knowledge, threatened against the Company or any subsidiary or
any officer or director of the Company or any subsidiary of a character
required to be disclosed in the Registration Statement which is not
disclosed therein; they do not know of any contracts which are required
to be summarized in the Prospectus which are not so summarized; and
they do not know of any material contracts required to be filed as
exhibits to the Registration Statement which are not so filed;
(iii) They have each carefully examined the Registration
Statement and the Prospectus and, to the best of their knowledge,
neither the Registration Statement nor the Prospectus nor any amendment
or supplement to either of the foregoing contains an untrue statement
of any material fact or omits to state any material fact required to be
stated therein or necessary to make the statement therein, in light of
24
<PAGE>
the circumstances under which they are made, not misleading; and since
the Effective Date, to the best of their knowledge, there has occurred
no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth;
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change in the condition of the Company or any
subsidiary, financial or otherwise, or in the results of its
operations, except as reflected in or contemplated by the Registration
Statement and the Prospectus;
(v) The representations and warranties set forth in this
Agreement are true and correct in all material respects, and the
Company has complied with all of its agreements herein contained;
(vi) Neither the Company nor any subsidiary is delinquent in
the filing of any federal, state and other tax return or the payment of
any federal, state or other taxes; they know of no proposed
redetermination or re-assessment of taxes, adverse to the Company or
any subsidiary, and the Company and each subsidiary has paid or
provided by adequate reserves for all known tax liabilities;
(vii) They know of no material obligation or liability of the
Company, contingent or otherwise, not disclosed in the Registration
Statement and Prospectus;
(viii) This Agreement, the Underwriter's Warrant Agreement,
the Warrant Agreement, the Financial Advisory Agreement, and the M/A
Agreement, the consummation of the transactions therein contemplated,
and the fulfillment of the terms thereof, will not result in a breach
by the Company of any terms of, or constitute a default under, the
Company's Articles of Incorporation or By-Laws, any indenture,
mortgage, lease, deed of trust, bank loan or credit agreement or any
other material agreement or undertaking of the Company or any
subsidiary including, by way of specification but not by way of
limitation, any agreement or instrument to which the Company or any
subsidiary is now a party or pursuant to which the Company or any
subsidiary has acquired any material right and/or obligations by
succession or otherwise;
(ix) The financial statements and schedules filed with and as
part of the Registration Statement present fairly the financial
position of the Company as of the dates thereof all in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved. Since the respective dates of such
financial statements, there have been no material adverse change in the
25
<PAGE>
condition or general affairs of the Company, financial or otherwise,
other than as referred to in the Prospectus;
(x) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, except as may
otherwise be indicated therein or contemplated thereby, neither the
Company nor any subsidiary has, prior to the Closing Date, either (i)
issued any securities or incurred any material liability or obligation,
direct or contingent, for borrowed money, or (ii) entered into any
material transaction other than in the ordinary course of business. The
Company has not declared, paid or made any dividend or distribution of
any kind on its capital stock;
(xi) They have reviewed the sections in the Prospectus
relating to their biographical data and equity ownership position in
the Company, and all information contained therein is true and
accurate; and
(xii) Except as disclosed in the Prospectus, during the past
five years, they have not been:
(1) The subject of a petition under the federal
bankruptcy laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which any of them was a general partner
at or within two years before the time of such filing, or any
corporation or business association of which any of them was
an executive officer at or within two years before the time of
such filing;
(2) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining
any of them from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by
the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
26
<PAGE>
or continuing any conduct or practice in connection
with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
federal or state securities law or federal commodity
laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or
state authority barring, suspending or otherwise limiting for
more than sixty (60) days their right to engage in any
activity described in paragraph (3)(i) above, or be associated
with persons engaged in any such activity;
(5) Found by any court of competent jurisdiction in a
civil action or by the Securities and Exchange Commission to
have violated any federal or state securities law, and the
judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to
have violated any federal commodities law, and the judgment in
such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(g) The Underwriter shall have received from KPMG Peat Marwick, LLP,
independent auditors to the Company, certificates or letters, one dated and
delivered on the Effective Date and one dated and delivered on the Closing Date,
in form and substance satisfactory to the Underwriter, stating that:
(i) they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
Rules and Regulations;
(ii) the financial statements and the schedules included in
the Registration Statement and the Prospectus were examined by them
and, in their opinion, comply as to form in all material respects with
the applicable accounting requirements of the Act, the Rules and
Regulations and instructions of the Commission with respect to
Registration Statements on Form SB-2;
(iii) on the basis of inquiries and procedures conducted by
them (not constituting an examination in accordance with generally
27
<PAGE>
accepted auditing standards), including a reading of the latest
available unaudited interim financial statements or other financial
information of the Company (with an indication of the date of the
latest available unaudited interim financial statements), inquiries of
officers of the Company who have responsibility for financial and
accounting matters, review of minutes of all meetings of the
shareholders and the Board of Directors of the Company and other
specified inquiries and procedures, nothing has come to their attention
as a result of the foregoing inquiries and procedures that causes them
to believe that:
(a) during the period from (and including) the date
of the financial statements in the Registration Statement and
the Prospectus to a specified date not more than five days
prior to the date of such letters, there has been any change
in the Common Stock, long-term debt or other securities of the
Company (except as specifically contemplated in the
Registration Statement and Prospectus) or any material
decreases in net current assets, net assets, shareholder's
equity, working capital or in any other item appearing in the
Company's financial statements as to which the Underwriter may
request advice, in each case as compared with amounts shown in
the balance sheet as of the date of the most recent financial
statements in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or will occur;
(b) during the period from (and including) the date
of the financial statements in the Registration Statement and
the Prospectus to such specified date there was any material
decrease in revenues or in the total or per share amounts of
income or loss before extraordinary items or net income or
loss, or any other material change in such other items
appearing in the Company's financial statements as to which
the Underwriter may request advice, in each case as compared
with the fiscal period ended as of the date of the most recent
financial statements in the Prospectus, except in each case
for increases, changes or decreases which the Prospectus
discloses have occurred or will occur;
(c) the unaudited interim financial statements of the
Company appearing in the Registration Statement and the
Prospectus (if any) do not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the Rules and Regulations or are not fairly presented
in conformity with generally accepted accounting principles
and practices on a basis substantially consistent with the
audited financial statements included in the Registration
Statements or the Prospectus.
28
<PAGE>
(iv) they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company and excluding
any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not constitute an
examination in accordance with generally accepted auditing standards)
set forth in the letters and found them to be in agreement; and
(v) they have not during the immediately preceding five (5)
year period brought to the attention of the Company's management any
reportable condition related to the Company's internal accounting
procedures, weaknesses and/or controls.
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriter. Any changes, increases or decreases in
the items set forth in such letters which, in the judgment of the Underwriter,
are materially adverse with respect to the financial position or results of
operations of the Company shall be deemed to constitute a failure of the Company
to comply with the conditions of the obligations to the Underwriter hereunder.
(h) Upon exercise of the option provided for in Section 2(b) hereof,
the obligation of the Underwriter to purchase and pay for the Option Securities
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or, to your knowledge
or the knowledge of the Company, shall be contemplated by the
Commission, and any reasonable request on the part of the Commission
for additional information shall have been complied with to the
satisfaction of counsel to the Underwriter.
(ii) At the Option Closing Date, there shall have been
delivered to you the signed opinion from Tonkon Torp LLP, counsel for
the Company, dated as of the Option Closing Date, in form and substance
satisfactory to counsel to the Underwriter, which opinion shall be
substantially the same in scope and substance as the opinion furnished
to you at the Closing Date pursuant to Section 4(e) hereof, except that
such opinion, where appropriate, shall cover the Option Securities.
29
<PAGE>
(iii) At the Option Closing Date, there shall have been
delivered to you a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company, dated the Option Closing Date, in
form and substance satisfactory to counsel to the Underwriter,
substantially the same in scope and substance as the certificate
furnished to you at the Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been
delivered to you a letter in form and substance satisfactory to you
from KPMG Peat Marwick, LLP, independent auditors to the Company, dated
the Option Closing Date and addressed to the Underwriter confirming the
information in their letter referred to in Section 4(g) hereof and
stating that nothing has come to their attention during the period from
the ending date of their review referred to in said letter to a date
not more than five business days prior to the Option Closing Date,
which would require any change in said letter if it were required to be
dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Securities
shall be satisfactory in form and substance to the Underwriter, and the
Underwriter and counsel to the Underwriter shall have been furnished
with all such documents, certificates, and opinions as you may request
in connection with this transaction in order to evidence the accuracy
and completeness of any of the representations, warranties or
statements of the Company or its compliance with any of the covenants
or conditions contained herein.
(i) No action shall have been taken by the Commission or the NASD, the
effect of which would make it improper, at any time prior to the Closing Date,
for members of the NASD to execute transactions (as principal or agent) in the
Securities and no proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the Underwriter or the
Company, shall be contemplated by the Commission or the NASD. The Company
represents that at the date hereof it has no knowledge that any such action is
in fact contemplated by the Commission or the NASD. The Company shall advise the
Underwriter of any NASD affiliations of any of its officers, directors, or
stockholders or their affiliates in accordance with Section 1(y) of this
Agreement.
(j) At the Effective Date, you shall have received from counsel to the
Company, dated as of the Effective Date, in form and substance satisfactory to
counsel for the Underwriter, a written Secondary Market Trading Opinion
detailing those states in which the Shares and Warrants may be traded in
non-issuer transactions under the Blue Sky laws of the fifty (50) states after
the Effective Date, in accordance with Section 3(ab) of this Agreement.
30
<PAGE>
(k) The authorization and issuance of the Securities and delivery
thereof, the Registration Statement, the Prospectus, and all corporate
proceedings incident thereto shall be satisfactory in all respects to counsel
for the Underwriter, and such counsel shall be furnished with such documents,
certificates and opinions as they may reasonably request to enable them to pass
upon the matters referred to in this sub-section.
(l) Prior to the Effective Date, the Underwriter shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriter, as described in the Registration Statement.
(m) If any of the conditions provided for in this Section shall not
have been fulfilled as of the date indicated, this Agreement and all obligations
of the Underwriter under this Agreement may be canceled at, or at any time prior
to, the Closing Date and/or the Option Closing Date by the Underwriter notifying
the Company of such cancellation in writing or by facsimile at or prior to the
applicable Closing Date or Option Closing Date. Any such cancellation shall be
without liability of the Underwriter to the Company.
5. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligation of the
Company to sell and deliver the Securities is subject to the execution of this
Agreement by the Company, and to the following conditions:
(i) The Registration Statement shall have become effective not
later than 5:00 p.m., Eastern Time, on the date of this Agreement, or
on such later time or date as the Company and the Underwriter may agree
in writing; and
(ii) At the Closing Date and the Option Closing Date, no stop
orders suspending the effectiveness of the Registration Statement shall
have been issued under the Act or any proceedings therefore initiated
or threatened by the Commission.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the Closing Date but are not fulfilled after
the Closing Date and prior to the Option Closing Date, then only the obligation
of the Company to sell and deliver the Securities on exercise of the option
provided for in Section 2(b) hereof shall be affected.
6. INDEMNIFICATION. (a) The Company indemnifies and holds harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include but not be
limited to, all reasonable costs of defense and investigation and all attorneys'
fees), to which the Underwriter or such controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
31
<PAGE>
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
(i) the Registration Statement, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement thereto, (ii) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Securities under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based upon
the omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, Prospectus, or any amendment or supplement thereto, or
in any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such cases to the extent, but only to the
extent, that any such losses, claim, damages or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Underwriter specifically for use in
the Registration Statement or any amendment or supplement thereof or any Blue
Sky Application or any Preliminary Prospectus or the Prospectus or any such
amendment or supplement thereto. Notwithstanding the foregoing, the Company
shall have no liability under this Section if such untrue statement or omission
made in a Preliminary Prospectus is cured in the Prospectus and the Prospectus
is not delivered to the person or persons alleging the liability upon which
indemnification is being sought. This indemnity will be in addition to any
liability which the Company may otherwise have.
(b) The Underwriter indemnifies and holds harmless the Company, each of
its directors, each nominee (if any) for director named in the Prospectus, each
of the persons who have signed the Registration Statement, and each person, if
any, who controls the Company within the meaning of the Act, against any losses,
claims, damages or liabilities (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such director, signer of the
Registration Statement, officer or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statements or alleged
untrue statement or omission or alleged omission was made in the Registration
32
<PAGE>
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by the Underwriter specifically for use in such
Registration Statement or Prospectus. Notwithstanding the foregoing, the
Underwriter shall have no liability under this section if such untrue statement
or omission made in a Preliminary Prospectus is cured in the Prospectus and the
Prospectus is not delivered to the person or persons alleging the liability upon
which indemnification is being sought through no fault of the Underwriter. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, promptly notify in writing the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section. In case any such action is brought against any indemnified
party, and it promptly notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, subject to the provisions herein
stated, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the Underwriter or such
controlling person and the indemnifying party and in the reasonable judgment of
the Underwriter, it is advisable for the Underwriter or such Underwriter or
controlling persons to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Underwriter or such controlling person). No settlement of any
action against an indemnified party shall be made without the consent of the
indemnifying party, which shall not be unreasonably withheld in light of all
33
<PAGE>
factors of importance to such indemnifying and indemnified parties.
7. CONTRIBUTION.
(a) If the indemnification provided for in this Agreement is
unavailable to any indemnified party in respect to any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party, will contribute to the amount paid
or payable by such indemnified party, as a result of such losses, claims,
damages, liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand, and by
the Underwriter on the other hand, from the Offering, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above, but also the relative fault of the Company on the one
hand, and of the Underwriter on the other hand, in connection with any
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations;
provided, that any contribution hereunder by the Underwriter shall not exceed
the amount of consideration received by the Underwriter hereunder. The relative
benefits received by the Company on the one hand, and by the Underwriter on the
other hand, shall be deemed to be in the same proportion as the total proceeds
from the Offering (net of sales commissions, and the non-accountable expense
allowance, but before deducting expenses) received by the Company, bear to the
commissions and the non-accountable expense allowance received by the
Underwriter. The relative fault of the Company on the one hand, and of the
Underwriter on the other hand, will be determined with reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Company, and its relative intent, knowledge, access or information and
opportunity to correct or prevent such statement or omission. The Company and
the Underwriter agree that it would not be just and equitable if contribution
pursuant to this Section were determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to in this paragraph.
(b) Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit, or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party ("Contributing Party"), notify the
Contributing Party of the commencement thereof, but the omission to so notify
the Contributing Party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a Contributing Party or its representative of the commencement thereof within
the aforesaid fifteen (15) days, the Contributing Party will be entitled to
34
<PAGE>
participate therein with the notifying party and any other Contributing Party
similarly notified. Any such Contributing Party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding which was effected by such party seeking contribution on account of
any settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such Contributing Party. The
contribution provisions contained in this Section are intended to supersede, to
the extent permitted by law, any right to contribution under the Act, the
Exchange Act or otherwise available.
8. COSTS AND EXPENSES. (a) Whether or not this Agreement becomes
effective or the sale of the Securities to the Underwriter is consummated, the
Company will pay all costs and expenses incident to the performance of this
Agreement by the Company including but not limited to the fees and expenses of
counsel to the Company and of the Company's accountants; the costs and expenses
incident to the preparation, printing, filing and distribution under the Act of
the Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), Preliminary Prospectus and the Prospectus, as
amended or supplemented; the fee of the National Association of Securities
Dealers, Inc. ("NASD") in connection with the filing required by the NASD
relating to the offering of the Securities contemplated hereby; all state filing
fees, expenses and disbursements and legal fees of counsel to the Underwriter
who shall serve as Blue Sky counsel to the Company in connection with the filing
of applications to register the Securities under the state securities or blue
sky laws (which legal fees shall be payable by the Company in the sum of
$25,000, of which $12,500 has been paid); the cost of printing and furnishing to
the Underwriter copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus, this Agreement, the Selected Dealers Agreement, and
the Blue Sky Memorandum; the cost of printing the certificates evidencing the
securities comprising the Securities; the cost of preparing and delivering to
the Underwriter and its counsel bound volumes containing copies of all documents
and appropriate correspondence filed with or received from the Commission and
the NASD and all closing documents; and the fees and disbursements of the
transfer agent for the Company's securities. The Company shall pay any and all
taxes (including any original issue, transfer, franchise, capital stock or other
tax imposed by any jurisdiction) on sales to the Underwriter hereunder. The
Company will also pay all costs and expenses incident to the furnishing of any
amended Prospectus or of any supplement to be attached to the Prospectus. The
Company shall also engage the Company's counsel to provide the Underwriter with
a written Secondary Market Trading Opinion in accordance with Sections 3(ab) and
4(j) of this Agreement.
(b) In addition to the foregoing expenses, the Company shall at the
Closing Date pay to the Underwriter a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds received from the sale of the
Securities, of which an advance of $50,000 has been paid to date. In the event
35
<PAGE>
the overallotment option is exercised, the Company shall pay to the Underwriter
at the Option Closing Date an additional amount equal to three percent (3%) of
the gross proceeds received upon exercise of the overallotment option.
(c) Other than as disclosed in the Registration Statement, no person is
entitled either directly or indirectly to compensation from the Company, from
the Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify and hold
harmless the Underwriter against any losses, claims, damages or liabilities,
which shall, for all purposes of this Agreement, include, but not be limited to,
all costs of defense and investigation and all attorneys' fees, to which the
Underwriter may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
claim of any person (other than an employee of the party claiming indemnity) or
entity that he or it is entitled to a finder's fee in connection with the
proposed offering by reason of such person's or entity's influence or prior
contact with the indemnifying party.
9. EFFECTIVE DATE. The Agreement shall become effective upon its
execution except that you may, at your option, delay its effectiveness until
11:00 a.m., Eastern time, on the first full business day following the execution
of this Agreement; or at such earlier time after the Effective Date of the
Registration Statement as you in your discretion shall first commence the public
offering of any of the Securities. The time of the public offering shall mean
the time after the effectiveness of the Registration Statement when the
Securities are first generally offered by you to the Selected Dealers and/or the
public. This Agreement may be terminated by you at any time before it becomes
effective as provided above, except that Sections 3(c), 6, 7, 8, 12, 13, 14, 15,
16 and 17 shall remain in effect notwithstanding such termination.
10. TERMINATION. (a) This Agreement, except for Sections 3(c), 6, 7, 8,
12, 13, 14, 15, 16, and 17 hereof, may be terminated at any time prior to the
Closing Date, and the option referred to in Section 2(b) hereof, if exercised,
may be cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriter for the resale of the Securities agreed to be purchased
hereunder by reason of: (i) the Company having sustained a material adverse
loss, whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action, order
or decree; (ii) trading in securities on the New York Stock Exchange or the
American Stock Exchange having been suspended or limited; (iii) material
governmental restrictions having been imposed on trading in securities generally
(not in force and effect on the date hereof); (iv) a banking moratorium having
been declared by Federal or New York or Florida state authorities; (v) an
outbreak of major international hostilities or other national or international
36
<PAGE>
calamity having occurred; (vi) the passage by the Congress of the United States
or by any state legislative body of similar impact, of any act or measure, or
the adoption of any orders, rules or regulations by any governmental body or any
authoritative accounting institute or board, or any governmental executive,
which is reasonably believed likely by the Underwriter to have a material
adverse impact on the business, financial condition or financial statements of
the Company or the market for the Securities offered hereby; (vii) any material
adverse change in the financial or securities markets beyond normal market
fluctuations having occurred since the date of this Agreement; (viii) any
material adverse change having occurred, since the respective dates as of which
information is given in the Registration Statement and Prospectus, in the
earnings, business prospects or general condition of the Company, financial or
otherwise, whether or not arising in the ordinary course of business; (ix) a
pending or threatened legal or governmental proceeding or action relating
generally to the Company's business, or a notification having been received by
the Company of the threat of any such proceeding or action, which could, in the
reasonable judgment of the Underwriter, materially adversely affect the Company;
(x) except as contemplated by the Prospectus, the Company is merged or
consolidated into or acquired by another company or group or there exists a
binding legal commitment for the foregoing or any other material change of
ownership or control occurs; or (xi) the Company shall not have complied in all
material respects with any term, condition or provisions on its part to be
performed, complied with or fulfilled (including but not limited to those set
forth in this Agreement) within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section, the Company shall be
promptly notified by you, by telephone, telegram or facsimile, confirmed by
letter.
11. UNDERWRITER'S WARRANT AGREEMENT. At the Closing Date, the Company
will issue to the Underwriter and/or persons related to the Underwriter, for an
aggregate purchase price of $10, and upon the terms and conditions set forth in
the form of Underwriter's Warrant Agreement annexed as an exhibit to the
Registration Statement, Underwriter Warrants to purchase up to an aggregate of
175,000 Shares and 175,000 Warrants, in such denominations as the Underwriter
shall designate. In the event of conflict in the terms of this Agreement and the
Underwriter's Warrant Agreement, the language of the form of Underwriter's
Warrant Agreement shall control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and its principal officers, where appropriate, and the
Underwriter set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriter, the Company or any of its officers or directors or any controlling
37
<PAGE>
person and will survive delivery of and payment for the Securities and the
termination of this Agreement.
13. NOTICE. All communications hereunder will be in writing and, except
as otherwise expressly provided herein, will be mailed, delivered or telefaxed,
and confirmed:
If to the Underwriter: Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real
Boca Raton, Florida 33433
Copy to: David A. Carter, P.A.
2300 Glades Road, Suite 210W
Boca Raton, Florida 33431
If to the Company: Raymond W. Lindstrom, President
Oregon Baking Company
2287 N.W. Pettygrove
Portland, Oregon 97210
Copy to: Brendan R. McDonnell, Esq.
Tonkon Torp LLP
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204
14. PARTIES IN INTEREST. This Agreement herein set forth is made solely
for the benefit of the Underwriter, the Company and, to the extent expressed,
the holders of the Underwriter Warrants, any person controlling the Company or
the Underwriter, and directors of the Company, nominees for director (if any)
named in the Prospectus, each person who has signed the Registration Statement,
and their respective executors, administrators, successors, assigns and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" shall not include any purchaser of the Securities,
as such purchaser, from the Underwriter.
15. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida applicable to contracts made
and to be performed entirely within the State of Florida. The parties agree that
any action brought by any party against another party in connection with any
rights or obligations arising out of this Agreement shall be instituted properly
in a federal or state court of competent jurisdiction with venue only in the
Fifteenth Judicial Circuit Court in and for Palm Beach County, Florida or the
United States District Court for the Southern District of Florida, West Palm
Beach Division. A party to this Agreement named as a Defendant in any action
brought in connection with this Agreement in any court outside of the above
38
<PAGE>
named designated county or district shall have the right to have the venue of
said action changed to the above designated county or district or, if necessary,
have the case dismissed, requiring the other party to refile such action in an
appropriate court in the above designated county or federal district.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
17. ENTIRE AGREEMENT. This Agreement and the agreements referred to
within this Agreement constitute the entire agreement of the parties, and
supersedes all prior agreements, understandings, negotiations and discussions,
whether written or oral, of the parties hereto.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding Agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
OREGON BAKING COMPANY
BY:
-------------------------------
Raymond W. Lindstrom, President
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
BARRON CHASE SECURITIES, INC.
BY:
------------------------------
Robert T. Kirk, President
OREGON BAKING COMPANY
1,750,000 Shares of Common Stock and
1,750,000 Common Stock Purchase Warrants
SELECTED DEALER AGREEMENT
-------------------------
Boca Raton, Florida
______________, 1999
Gentlemen:
1. Barron Chase Securities, Inc. (the "Underwriter") is offering for
sale an aggregate of 1,750,000 Shares of Common Stock (the "Shares") and
1,750,000 Warrants (the "Warrants") (collectively the "Firm Securities") of
Oregon Baking Company (the "Company"), which the Underwriter has agreed to
purchase from the Company, and which are more particularly described in the
Registration Statement, Underwriting Agreement and Prospectus. In addition, the
Underwriter has been granted an option to purchase from the Company up to an
additional 262,500 Shares and an additional 262,500 Warrants (the "Option
Securities") to cover overallotments in connection with the sale of the Firm
Securities. The Firm Securities and any Option Securities purchased are herein
called the "Securities". The Securities and the terms under which they are to be
offered for sale by the Underwriter is more particularly described in the
Prospectus.
2. The Securities are to be offered to the public by the Underwriter at
the price per Share and price per Warrant set forth on the cover page of the
Prospectus (the "Public Offering Price"), in accordance with the terms of
offering set forth in the Prospectus.
3. The Underwriter, subject to the terms and conditions hereof, is
offering a portion of the Securities for sale to certain dealers who are
actually engaged in the investment banking or securities business and who are
either (a) members in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"), or (b) dealers with their principal places of
business located outside the United States, its territories and its possessions
and not registered as brokers or dealers under the Securities Exchange Act of
1934, as amended (the "1934 Act"), who have agreed not to make any sales within
the United States, its territories or its possessions or to persons who are
nationals thereof or residents therein (such dealers who shall agree to sell
Securities hereunder being herein called "Selected Dealers") at the public
offering price, less a selling concession (which may be changed) of not in
excess of $_____ per Share and/or $_____ per Warrant payable as hereinafter
provided, out of which concession an amount not exceeding $_____ per Share
1
<PAGE>
and/or $_____ per Warrant may be reallowed by Selected Dealers to members of the
NASD or foreign dealers qualified as aforesaid. The Selected Dealers who are
members of the NASD agree to comply with all of the provisions of the NASD
Conduct Rules. Foreign Selected Dealers agree to comply with the provisions of
Rule 2740 of the NASD Conduct Rules, and, if any such dealer is a foreign dealer
and not a member of the NASD, such Selected Dealer also agrees to comply with
the NASD's Interpretation with Respect to Free-Riding and Withholding, and to
comply, as though it were a member of the NASD, with the provisions of Rules
2730 and 2750 of the NASD Conduct Rules, and to comply with Rule 2420 thereof as
that Rule applies to non-member foreign dealers. The Underwriter has agreed
that, during the term of this Agreement, it will be governed by the terms and
conditions hereof.
4. The Underwriter shall act as Underwriter and shall have full
authority to take such action as it may deem advisable in respect to all matters
pertaining to the public offering of the Securities.
5. If you desire to act as a Selected Dealer and purchase any of the
Securities, your application should reach us promptly by facsimile or letter at
the offices of Barron Chase Securities, Inc., 7700 West Camino Real, Boca Raton,
Florida 33433, Attention: Robert T. Kirk. We reserve the right to reject
subscriptions in whole or in part, to make allotments, and to close the
subscription books at any time without notice. The Securities allotted to you
will be confirmed, subject to the terms and conditions of this Selected Dealers
Agreement (the "Agreement").
6. The privilege of subscribing for the Securities is extended to you
only on the condition that the Underwriter may lawfully sell the Securities to
Selected Dealers in your state or other applicable jurisdiction.
7. Any Securities to be purchased by you under the terms of this
Agreement may be immediately reoffered to the public in accordance with the
terms of offering as set forth herein and in the Prospectus, subject to the
securities or Blue Sky laws of the various states or other jurisdictions.
You agree to pay us on demand for the account of the Underwriter an
amount equal to the Selected Dealer concession as to any Securities purchased by
you hereunder which, prior to the completion of the public offering as defined
in paragraph 8 below, we may purchase or contract to purchase for our account
and, in addition, we may charge you with any broker's commission and transfer
tax paid in connection with such purchase or contract to purchase. Certificates
for Securities delivered on such repurchases need not be the identical
certificates originally purchased.
2
<PAGE>
You agree to advise us from time to time, upon request, of the number
of Securities purchased by you hereunder and remaining unsold at the time of
such request, and, if in our opinion any such Securities shall be needed to make
delivery of the Securities sold or overallotted for the account of the
Underwriter, you will, forthwith upon our request, grant to us for the account
of the Underwriter the right, exercisable promptly after receipt of notice from
you that such right has been granted, to purchase, at the Public Offering Price
less the selling concession or such part thereof as we shall determine, such
number of Securities owned by you as shall have been specified in our request.
No expenses shall be charged to Selected Dealers. A single transfer
tax, if payable, upon the sale of the Securities by the Underwriter to you will
be paid when such Securities are delivered to you. However, you shall pay any
transfer tax on sales of Securities by you and you shall pay your proportionate
share of any transfer tax (other than the single transfer tax described above)
in the event that any such tax shall from time to time be assessed against you
and other Selected Dealers as a group or otherwise.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the sale of the
Securities other than as contained in the Prospectus.
8. The first three paragraphs of Section 7 hereof will terminate when
we shall have determined that the public offering of the Securities has been
completed and upon telefax notice to you of such termination, but, if not
theretofore terminated, they will terminate at the close of business on the 30th
full business day after the date hereof; provided, however, that we shall have
the right to extend such provisions for a further period or periods, not
exceeding an additional 30 days in the aggregate upon telefax notice to you.
9. For the purpose of stabilizing the market in the Securities, we have
been authorized to make purchases and sales of the Securities of the Company, in
the open market or otherwise, for long or short account, and, in arranging for
sales, to overallot.
10. On becoming a Selected Dealer, and in offering and selling the
Securities, you agree to comply with all the applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the 1934 Act. You
confirm that you are familiar with Rule 15c2-8 under the 1934 Act relating to
the distribution of preliminary and final prospectuses for securities of an
issuer (whether or not the issuer is subject to the reporting requirements of
Section 13 or 15(d) of the 1934 Act) and confirm that you have complied and will
comply therewith.
3
<PAGE>
We hereby confirm that we will make available to you such number of
copies of the Prospectus (as amended or supplemented) as you may reasonably
request for the purposes contemplated by the 1933 Act or the 1934 Act, or the
rules and regulations thereunder.
11. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Securities are qualified
for sale under the respective securities or Blue Sky laws of such states and
other jurisdictions, but we shall not assume any obligation or responsibility as
to the right of any Selected Dealer to sell the Securities in any state or other
jurisdiction or as to the eligibility of the Securities for sale therein. We
will, if requested, file a Further State Notice in respect of the Securities
pursuant to Article 23-A of the General Business Law of the State of New York.
12. No Selected Dealer is authorized to act as agent for the
Underwriter, or otherwise to act on our behalf, in offering or selling the
Securities to the public or otherwise or to furnish any information or make any
representation except as contained in the Prospectus.
13. Nothing will constitute the Selected Dealers an association or
other separate entity or partners with the Underwriter, or with each other, but
you will be responsible for your share of any liability or expense based on any
claim to the contrary. We shall not be under any liability for or in respect of
value, validity or form of the Securities, or the delivery of the certificates
for the Securities, or the performance by anyone of any agreement on its part,
or the qualification of the Securities for sale under the laws of any
jurisdiction, or for or in respect of any other matter relating to this
Agreement, except for lack of good faith and for obligations expressly assumed
by us or by the Underwriter in this Agreement and no obligation on our part
shall be implied herefrom. The foregoing provisions shall not be deemed a waiver
of any liability imposed under the 1933 Act.
14. Payment for the Securities sold to you hereunder is to be made at
the Public Offering Price less the above-mentioned selling concession on such
time and date as we may advise, at the office of Barron Chase Securities, Inc.,
7700 West Camino Real, Boca Raton, Florida 33433, Attention: Robert T. Kirk, by
wire transfer to the account of the Underwriter or by a certified or official
bank check in current New York Clearing House funds, payable to the order of
Barron Chase Securities, Inc., as Underwriter, against delivery of certificates
for the Securities so purchased. If such payment is not made at such time, you
agree to pay us interest on such funds at the prevailing broker's loan rate.
15. Notices to us should be addressed to us at the offices of Barron
Chase Securities, Inc., 7700 West Camino Real, Boca Raton, Florida 33433,
Attention: Robert T. Kirk. Notices to you shall be deemed to have been duly
4
<PAGE>
given if telephoned, telefaxed or mailed to you at the address to which this
Agreement or accompanying Selected Dealer Letter is addressed.
16. This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida without giving effect to the choice of law
or conflicts of law principles thereof.
17. If you desire to purchase any Securities and act as a Selected
Dealer, please confirm your application by signing and returning to us your
confirmation on the duplicate copy of the Selected Dealer Letter enclosed
herewith, even though you may have previously advised us thereof by telephone or
letter. Our signature hereon may be by facsimile.
Very truly yours,
BARRON CHASE SECURITIES, INC.
BY:
-------------------------------
Authorized Officer
5
<PAGE>
SELECTED DEALER LETTER
----------------------
Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real
Boca Raton, Florida 33433
We hereby subscribe for Shares and/or Warrants of Oregon Baking Company
in accordance with the terms and conditions stated in the foregoing Selected
Dealers Agreement and this Selected Dealer letter. We hereby acknowledge receipt
of the Prospectus referred to in the Selected Dealers Agreement and Selected
Dealer letter. We further state that in purchasing said Shares and/or Warrants
we have relied upon said Prospectus and upon no other statement whatsoever,
whether written or oral. We confirm that we are a dealer actually engaged in the
investment banking or securities business and that we are either (i) a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
or (ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions and not registered as a broker or
dealer under the Securities Exchange Act of 1934, as amended, who hereby agrees
not to make any sales within the United States, its territories or its
possessions or to persons who are nationals thereof or residents therein. As a
member of the NASD, we hereby agree to comply with all of the provisions of NASD
Conduct Rules. If we are a foreign Selected Dealer, we agree to comply with the
provisions of Rule 2740 of the NASD Conduct Rules, and if we are a foreign
dealer and not a member of the NASD, we agree to comply with the NASD's
interpretation with respect to free-riding and withholding, and agree to comply,
as though we were a member of the NASD, with provisions of Rules 2730 and 2750
of the NASD Conduct Rules, and to comply with Rule 2420 of the NASD Conduct
Rules as that Rule applies to non-member foreign dealers.
Firm:
---------------------------------
By:
---------------------------------
(Name and Position)
Address:
---------------------------------
---------------------------------
Telephone No.:
---------------------------------
Dated: , 1999
-------------------
6
[PROPOSED]
RESTATED ARTICLES OF INCORPORATION OF
OREGON BAKING COMPANY
dba MARSEE BAKING
ARTICLE I
Name of Corporation
-------------------
The name of the corporation is Oregon Baking Company.
ARTICLE II.
Capital Stock
-------------
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 19,000,000 shares, consisting of
15,000,000 shares of Common Stock with no par value (the "Common Stock") and
4,000,000 shares of blank check preferred stock with no par value (the
"Preferred Stock").
A description of the respective classes of stock are as follows:
A. COMMON STOCK
1. VOTING RIGHTS. Except as otherwise required by law or expressly
provided in these Articles of Incorporation, each holder of Common Stock shall
have one vote in respect of each share of stock held by such holder of record on
the books of the Corporation on all matters submitted to a vote of shareholders
of the Corporation.
2. DIVIDENDS. Subject to any preferential rights of Preferred Stock
then outstanding, holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefor, dividends payable either in
cash, in property or in shares of capital stock.
3. LIQUIDATION, DISSOLUTION OR WINDING UP. In the event of a
liquidation, dissolution or winding up of the affairs of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
Restated Articles of Incorporation - 1
<PAGE>
the holders of shares of Preferred Stock, holders of Common Stock shall be
entitled, unless otherwise required by law or expressly provided in these
Articles of Incorporation, to receive all of the remaining assets of the
Corporation of whatever kind available for distribution to shareholders ratably
in proportion to the number of shares of Common Stock held by them respectively.
B. PREFERRED STOCK
1. AUTHORITY OF THE BOARD OF DIRECTORS. The Board of Directors of
the Corporation is authorized, subject to limitations prescribed by law and the
provisions of these Articles, to provide for the issuance of shares of Preferred
Stock in one or more series, at such time or times and for such consideration or
considerations as the Board may determine. Each series shall be so designated to
distinguish its shares from the shares of all other series and classes. All
shares of a series of Preferred Stock shall have preferences, limitations, and
relative rights identical with those of other shares of the same series and,
except to the extent otherwise provided in the articles of amendment adopted by
the Board of Directors creating the series and filed with the Oregon Secretary
of State in accordance with the Oregon Business Corporation Act, of those of
other series of the same class. Except as may otherwise be provided in these
Articles of Incorporation, different series of Preferred Stock shall not be
construed to constitute different classes of shares for the purpose of voting by
classes. To the extent not inconsistent with the Oregon Business Corporation Act
and the provisions of these Articles of Incorporation, the authority of the
Board of Directors with respect to each such series shall include, without
limitation of the foregoing, determination of the following:
(i) The number of shares in and the distinguishing
designation of that series;
(ii) Whether the shares of that series shall have full,
special, conditional, or limited voting rights, or no
voting rights, except to the extent otherwise provided
by law;
(iii) Whether the shares of that series are convertible and
the terms and conditions of the conversion, including
provision for adjustment of the conversion rate in
circumstances determined by the Board of Directors of
the Corporation;
(iv) Whether shares of that series shall be redeemable and
the terms and conditions of redemption, including the
date or dates upon or after which they shall be
redeemable and the amount per share payable in case of
redemption, which amount may vary under different
conditions or at different redemption dates;
(v) Entitlement to distributions, calculated in any manner,
including dividends that may be cumulative,
non-cumulative, or partially cumulative and dividends
which, for classes of stock other than Common Stock,
may be participatory or non-participatory;
Restated Articles of Incorporation - 2
<PAGE>
(vi) The rights of shares of that series in the event of
voluntary or involuntary dissolution of the Corporation
and the rights of priority of that series relative to
the Common Stock and any other series of Preferred
Stock on the distribution of assets on dissolution; and
(vii) Any other rights, preferences and limitations of that
series permitted by law.
2. Reservation of Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Preferred Stock. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Preferred Stock, the Corporation shall take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.
ARTICLE III
Liability of Directors
----------------------
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a director;
provided that this Article III shall not eliminate the liability of a director
for any act or omission for which such elimination of liability is not permitted
under the Oregon Business Corporation Act. No amendment to the Oregon Business
Corporation Act that further limits the acts or omissions for which elimination
of liability is permitted shall affect the liability of a director for any act
or omission that occurs prior to the effective date of such amendment.
ARTICLE IV
Classified Board of Directors
-----------------------------
1. Establishment of Classified Board. At any time when the Board of
Directors shall consist of six or more members, in lieu of electing the entire
number of directors annually, the Board of Directors of the corporation shall be
divided into three classes. The classes shall be Class 1, Class 2 and Class 3.
The initial designation of directors to each of the three classes shall be made
by the Chairman of the Board of the Corporation. The term of office of directors
of Class 1 shall expire at the first annual meeting of shareholders after their
election, that of Class 2 shall expire at the second annual meeting after their
election, and that of Class 3 shall expire at the third annual meeting after
their election. When classification of directors is in effect, at each annual
meeting of shareholders the number of directors equal to the number of the class
Restated Articles of Incorporation - 3
<PAGE>
whose term expires at the time of such meeting shall be elected to hold office
until the third succeeding annual meeting of shareholders. No classification of
directors shall be effective in the event the number of members of the Board is
fewer than six.
2. Change in Number of Directors. If the Board of Directors is
divided into classes and in the event of any increase or decrease in the
authorized number of directors, then: (i) each director then serving as such
shall nevertheless continue as a director of the class of which the director is
a member until the expiration of the director's current term, or upon the
director's earlier resignation, removal from office or death; (ii) the newly
created or eliminated directorships resulting from such increase or decrease
shall be allocated by the Chairman of the Board of the Corporation among the
three classes of directors so as to maintain equal classes to the extent
possible; and (iii) in the event such decrease in the authorized number of
directors makes the total number of directors less than six, then the Board of
Directors shall become declassified and the directors remaining in office shall
continue their terms until the next annual meeting of shareholders, at which
time directors shall be elected to serve for one-year terms or until their
successors are duly elected and qualified.
3. Directors Elected by Holders of Preferred Stock. Notwithstanding
the foregoing, whenever the holders of any one or more series of Preferred Stock
issued by the Corporation shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of shareholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of these Articles of Incorporation
applicable thereto, as the same may be amended from time to time, and such
directors so elected shall not be divided into classes pursuant to this Article
IV unless expressly provided by such terms. Further, any such directors shall
not be counted in determining whether the Board of Directors consists of six or
more members for purposes of dividing the Board into classes.
ARTICLE V
Registered Officer and Agent
----------------------------
The address of the registered office of the Corporation is 2287 N.W.
Pettygrove, Portland, Oregon 97210 and the name of the registered agent of the
Corporation is Howard Wasserteil.
Restated Articles of Incorporation - 4
<PAGE>
ARTICLE VI
Address for Notices
-------------------
The mailing address of the Corporation where the Corporation Division
may mail notices is 2287 N.W. Pettygrove, Portland, Oregon 97210.
DATED: the ___ day of ______________________ , 1999.
___________________________________
Ray Lindstrom
Chief Executive Officer
Person to contact about this filing:
Brendan R. McDonnell, Esq.
(503) 802-2054
Restated Articles of Incorporation - 5
FILED
ARTICLES OF INCORPORATION In the Office of the
Secretary of State
OF of the State of Oregon
JUN 26 1992
OREGON BAKING COMPANY Corporation Division
Pursuant to the Oregon Business Corporation Act, the undersigned
incorporator adopts the following articles of incorporation:
ARTICLE I
Name of Corporation
-------------------
The name of the corporation is Oregon Baking Company.
ARTICLE II
Authorized Shares
-----------------
2.01 NUMBER OF SHARES. The aggregate number of shares which the corporation
shall have authority to issue is Two Million (2,000,000) shares of common stock
with no par value.
2.02 RIGHTS OF COMMON STOCK. The holders of the common stock shall have
unlimited voting rights and the right to receive the net assets of the
corporation upon dissolution.
2.03 WAIVER OF PREEMPTIVE RIGHTS. The corporation elects to waive
preemptive rights.
2.04 VOTING OF COMMON STOCK. Except as otherwise required by law, each
outstanding share of common stock is entitled to one vote on each matter voted
on at a shareholders' meeting.
ARTICLE III
Liability of Directors
----------------------
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for conduct as a director;
provided that this Article III shall not eliminate the liability of a director
for any act or omission for which such elimination of liability is not permitted
under the Oregon Business Corporation Act. No amendment to the Oregon Business
<PAGE>
Corporation Act that further limits the acts or omissions for which elimination
of liability is permitted shall affect the liability of a director for any act
or omission that occurs prior to the effective date of such amendment.
ARTICLE IV
Registered Office and Agent
---------------------------
The address of the initial registered office of the corporation is 2075
N.W. 131st Avenue, Portland, Oregon 97229, and the name of the initial
registered agent of the corporation at such address is Robert E. Schneider.
ARTICLE V
Address for Notices
-------------------
The mailing address of the corporation where the Corporation Division may
mail notices is 2075 N.W. 131st Avenue, Portland, Oregon 97229.
ARTICLE VI
Incorporator
------------
The name and address of the incorporator are:
Name Address
---- -------
Samuel R. DeSimone, Jr. 520 S.W. Yamhill Street
Suite 800
Portland, Oregon 97204
DATED the 26th day of June, 1992.
/s/ Samuel R. DeSimone, Jr.
---------------------------
Samuel R. DeSimone, Jr.
Sole Incorporator
Person to contact about this filing:
Samuel R. DeSimone, Jr., Esq.
(503) 226-6151
2
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION FILED
OF DEC 13 1996
OREGON BAKING COMPANY SECRETARY OF STATE
Pursuant to ORS 60.434, OREGON BAKING COMPANY hereby submits for filing
the following Articles of Amendment to its Articles of Incorporation:
1. The name of the Corporation is Oregon Baking Company.
2. The Articles of Incorporation are amended by amending Article II to
read in its entirety as attached hereto as Attachment 1.
3. Shareholder action is not required to adopt the amendment. The
amendment was adopted by the Board of Directors without shareholder action.
4. The amendment was adopted at a meeting of the Board of Directors on
December 11, 1996.
OREGON BAKING COMPANY
By: /s/ Howard J. Wasserteil
------------------------------
Howard J. Wasserteil, President
Person to contact about this filing:
Kaylene Lewis Kirchem, Corporate Securities Paralegal at (503) 778-2191
<PAGE>
ARTICLE II
OF
ARTICLES OF INCORPORATION OF
OREGON BAKING COMPANY
dba MARSEE BAKING
ARTICLE II.
Capital Stock
-------------
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 6,000,000 shares, consisting of
5,000,000 shares of Common Stock with no par value (the "Common Stock") and
1,000,000 shares of Preferred Stock with no par value (the "Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, preferences, voting power (if any), relative, participating,
optional or other special rights and privileges and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
A. PREFERRED STOCK
1. AUTHORITY OF THE BOARD OF DIRECTORS. The Board of Directors of
the Corporation is authorized, subject to limitations prescribed by law and the
provisions of this Article, to provide for the issuance of shares of Preferred
Stock in one or more series, at such time or times and for such consideration or
considerations as the Board may determine. Each series shall be so designated to
distinguish its shares from the shares of all other series and classes. All
shares of a series of Preferred Stock shall have preferences, limitations, and
relative rights identical with those of other shares of the same series and,
except to the extent otherwise provided in the articles of amendment adopted by
the Board of Directors creating the series and filed with the Oregon Secretary
of State in accordance with the Oregon Business Corporation Act, of those of
other series of the same class. Except as may otherwise be provided in these
Articles of Incorporation, different series of Preferred Stock shall not be
construed to constitute different classes of shares for the purpose of voting by
classes. To the extent not inconsistent with the Oregon Business Corporation Act
and the provisions of these Articles of Incorporation, the authority of the
Board of Directors with respect to each such series shall include, without
limitation of the foregoing, determination of the following:
(i) The number of shares in and the distinguishing
designation of that series;
(ii) Whether the shares of that series shall have full,
special, conditional, or limited voting rights, or no
voting rights, except to the extent otherwise provided
by law;
<PAGE>
(iii)Whether the shares of that series are convertible and
the terms and conditions of the conversion, including
provision for adjustment of the conversion rate in
circumstances determined by the Board of Directors of
the Corporation;
(iv) Whether shares of that series shall be redeemable and
the terms and conditions of redemption, including the
date or dates upon or after which they shall be
redeemable and the amount per share payable in case of
redemption, which amount may vary under different
conditions or at different redemption dates;
(v) Entitlement to distributions, calculated in any manner,
including dividends that may be cumulative,
non-cumulative, or partially cumulative and dividends
which, for classes of stock other than Common Stock,
may be participatory or non-participatory;
(vi) The rights of shares of that series in the event of
voluntary or involuntary dissolution of the Corporation
and the rights of priority of that series relative to
the Common Stock and any other series of Preferred
Stock on the distribution of assets on dissolution; and
(vii)Any other rights, preferences and limitations of that
series permitted by law.
2. SERIES A AND SERIES B PREFERRED STOCK DESIGNATION AND AMOUNT.
100,000 shares of the Corporation's authorized Preferred Stock are hereby
designated as the Series A Convertible Preferred Stock (the "Series A Preferred
Stock") and 510,575 shares of the Corporation's authorized Preferred Stock are
hereby designated as the Series B Convertible Preferred Stock ("Series B
Preferred Stock"). No authorized but unissued shares of Series B Preferred Stock
may be issued or sold by the Corporation after February 15, 1997.
3. DIVIDENDS. The holders of shares of the Series A Preferred
Stock shall be entitled to receive, out of funds legally available therefor,
dividends at the rate per annum of $0.60 per share (the "Accruing Dividends").
Accruing Dividends shall accrue from day-to-day, whether or not earned or
declared, and shall be cumulative. The holders of shares of Series B Preferred
Stock shall not be entitled to Accruing Dividends.
4. Liquidation, Dissolution or Winding Up.
a. PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, holders of
shares of Series A Preferred Stock and Series B Preferred Stock shall be
entitled to be paid first out of the assets of the Corporation available for
distribution to holders of the Corporation's capital stock of all classes
(whether such assets are capital, surplus or earnings) before any sums shall be
paid or any assets distributed among the holders of Common Stock, an amount
equal to the greater of:
2
<PAGE>
(1) $6.00 per share of Series A Preferred Stock plus an
amount equal to all Accruing Dividends unpaid thereon (whether or not declared)
and $2.50 per share of Series B Preferred Stock, plus any other dividends
declared but unpaid thereon, computed up to and including the date full payment
shall be tendered to the holders of the Series A Preferred Stock or Series B
Preferred Stock, as the case may be, with respect to such liquidation,
dissolution or winding up, or
(2) the amount per share of Series A Preferred Stock or
Series B Preferred Stock, as the case may be, that would have been payable had
each such share been converted to Common Stock immediately prior to such event
of liquidation, dissolution or winding up pursuant to the provisions of Section
6 hereof plus, in the case of the Series A Preferred Stock only, an amount equal
to all Accruing Dividends unpaid thereon (whether or not declared), and, in the
case of both the Series A Preferred Stock and Series B Preferred Stock, any
other dividends declared but unpaid thereon, computed up to and including the
date full payment shall be tendered to the holders of the Series A Preferred
Stock or Series B Preferred Stock, as the case may be, with respect to such
liquidation, dissolution or winding up.
If the assets of the Corporation shall be insufficient to permit the payment in
full to holders of the Series A Preferred Stock and Series B Preferred Stock of
the amount thus distributable, then the entire assets of the Corporation
available for such distribution shall be distributed among the holders of the
Series A Preferred Stock and Series B Preferred Stock in proportion to the
liquidation preference for such Preferred Stock as set forth above; provided,
however, no series of Preferred Stock shall be entitled to receive an amount
greater than the liquidation preference for such series provided in clause (1)
or clause (2) above, as the case may be. After such payment shall have been made
in full to the holders of the Series A Preferred Stock and Series B Preferred
Stock or funds necessary for such payment shall have been set aside by the
Corporation in trust for the account of holders of the Series A Preferred Stock
and Series B Preferred Stock so as to be available for such payment, holders of
the Series A Preferred Stock and Series B Preferred Stock shall be entitled to
no further participation in the distribution of the assets of the Corporation
and shall have no further rights of conversion, and the remaining assets
available for distribution shall be distributed among the holders of the Common
Stock.
b. TREATMENT OF REORGANIZATIONS, CONSOLIDATIONS, MERGERS, AND
SALES OF ASSETS. A reorganization as provided in Section 6h or a consolidation
or merger of the Corporation or sale of all or substantially all of the assets
of the Corporation shall be regarded as a liquidation, dissolution or winding up
of the affairs of the Corporation within the meaning of this Section 4;
provided, however, that, in any such event, each holder of Series A Preferred
Stock or Series B Preferred Stock, as the case may be, shall have the right to
elect the benefits of the provisions of Section 6h hereof in lieu of receiving
payment in liquidation, dissolution or winding up of the Corporation pursuant to
this Section 4.
c. DISTRIBUTIONS OTHER THAN CASH. Whenever the distribution
provided for in this Section 4 shall be paid in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors of the Corporation.
3
<PAGE>
5. VOTING POWER. Except as otherwise required by law, each holder
of Series A Preferred Stock or Series B Preferred Stock, as the case may be,
shall be entitled to vote on all matters and shall be entitled to that number of
votes equal to the number of votes that would be accorded to the largest number
of whole shares of Common Stock into which such holder's shares of Series A
Preferred Stock or Series B Preferred Stock could be converted, pursuant to the
provisions of Section 6 hereof, at the record date for the determination of
shareholders entitled to vote on such matter or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholders is solicited. Except as otherwise required by law, the holders of
shares of Series A Preferred Stock, Series B Preferred Stock and Common Stock
shall vote together as a single class on all matters.
6. CONVERSION RIGHTS. The holders of the Series A Preferred Stock
and Series B Preferred Stock shall have the following conversion rights:
a. GENERAL. Subject to and in compliance with the provisions of
this Section 6, any shares of the Series A Preferred Stock or Series B Preferred
Stock may, at the option of the holder, be converted at any time or from time to
time into fully paid and non-assessable shares (calculated as to each conversion
to the largest whole share) of Common Stock; provided, however, shares of Series
A Preferred Stock may not be converted prior to December 31, 2000. The number of
shares of Common Stock to which a holder of Series A Preferred Stock or Series B
Preferred Stock, as the case may be, shall be entitled upon conversion shall be
the product obtained by multiplying the appropriate Applicable Conversion Rate
(determined as provided in Sections 6c, d and e) by the number of shares of
Series A Preferred Stock or Series B Preferred Stock being converted.
b. CONVERSION UPON PUBLIC OFFERING.
(1) All the outstanding shares of Series A Preferred Stock
and Series B Preferred Stock shall, at the option of the Corporation and upon
written notice to the holders thereof given within 10 days prior to the closing
of an underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation to the public at a price
per share of not less than $10.00 (subject to equitable adjustment in the event
of any stock split, combination or similar event affecting the Common Stock) and
in which the aggregate net proceeds to the Corporation exceed $7,500,000, be
converted, effective upon such closing, into the number of shares of Common
Stock to which a holder of Series A Preferred Stock or Series B Preferred Stock
shall be entitled upon conversion pursuant to Section 6a hereof. Such conversion
shall occur automatically without any further action by such holders and whether
or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent for the Common Stock. Nothing in this Section
6b, however, shall limit or in any way restrict the rights of the holders of
shares of Series A Preferred Stock or Series B Preferred Stock, as the case may
be, to convert such shares into shares of Common Stock at any time pursuant to
Section 6a immediately above.
4
<PAGE>
(2) Upon the occurrence of the conversion specified in
Section 6b(1), the holders of such Series A Preferred Stock and Series B
Preferred Stock shall surrender the certificates representing such shares at the
office of the Corporation or of its transfer agent for the Common Stock.
Thereupon, the Corporation shall issue and deliver to such holder (i) a
certificate or certificates for the number of shares of Common Stock into which
the shares of the Series A Preferred Stock or Series B Preferred Stock, as the
case may be, surrendered were convertible on the date on which such conversion
occurred; (ii) in the case of the Series A Preferred Stock only, cash in the
amount of all unpaid Accruing Dividends on such shares of Series A Preferred
Stock (whether or not declared), (iii) in the case of both the Series A and
Series B Preferred Stock, any other dividends declared but unpaid thereon,
computed up to and including the Conversion Date, and (iv) cash, as provided in
Section 6k, in respect of any fraction of a share of Common Stock issuable upon
such conversion. The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion or pay any
of the amounts required to be paid by the Corporation unless certificates
evidencing such shares of the Series A Preferred Stock or Series B Preferred
Stock, as the case may be, being converted are either delivered to the
Corporation or any such transfer agent or the holder notifies the Corporation or
any such transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith.
(3) Effective upon the conversion of all outstanding shares
of the Corporation's Series B Preferred Stock into Common Stock as provided in
Section 6b(1), the shares so converted shall be retired and, thereafter, shall
not be issuable by the Corporation.
c. APPLICABLE CONVERSION RATE. The conversion rate in effect at
any time (the "Applicable Conversion Rate") shall be, in the case of the Series
A Preferred Stock, the quotient obtained by dividing $6.00 by the Applicable
Conversion Value for the Series A Preferred Stock, or, in the case of the Series
B Preferred Stock, the quotient obtained by dividing $2.50 by the Applicable
Conversion Value for the Series B Preferred Stock, calculated as provided in
Section 6d.
d. APPLICABLE CONVERSION VALUE. The Applicable Conversion Value
for the Series A Preferred Stock and Series B Preferred Stock shall be $6.00 and
$2.50, respectively, except that such amounts shall be adjusted from time to
time in accordance with this Section 6.
e. ADJUSTMENTS TO APPLICABLE CONVERSION VALUE.
(1) UPON ISSUANCES OF ADDITIONAL SHARES OF COMMON STOCK. If,
while there are any shares of Series B Preferred Stock outstanding, the
Corporation issues or sells any Additional Shares of Common Stock (as defined
below) for a consideration or price per share less than the then effective
Series B Applicable Conversion Value, then in such case, the Series B Applicable
Conversion Value shall, upon such issuance or sale, except as hereafter
provided, be adjusted by multiplying the then effective Series B Applicable
Conversion Value by a fraction:
5
<PAGE>
(i) the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to
such issuance or sale, plus (b) the number of shares of
Common Stock which the net aggregate consideration
received by the Corporation for the total number of
shares of Additional Shares of Common Stock so issued
would purchase at the Series B Applicable Conversion
Value, and
(ii) the denominator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to
such issuance or sale, plus (b) the number of
Additional Shares of Common Stock so issued; and the
product so obtained shall thereafter be the Series B
Applicable Conversion Value. The Series B Applicable
Conversion Value, as so adjusted, shall be readjusted
in the same manner upon the happening of each
successive sale or issuance. No adjustment shall be
made under this Section 6e(1) to the Series A
Conversion Value upon the issuance or sale of
Additional Shares of Common Stock.
For purpose of calculating adjustments to the Series B Applicable Conversion
Value under this Section 6e(1), "Common Stock" shall be deemed to include any
class or series of Common Stock or Preferred Stock of the Corporation assuming
full conversion of such Preferred Stock. For purposes of this Section 6e(1), the
term "Additional Shares of Common Stock" shall mean all shares of Common Stock
or Preferred Stock other than (a) the issuance of any shares of Common Stock, or
options therefor, that is approved in writing by the holders of a majority of
the shares of Series B Preferred Stock outstanding as of the date of such
issuance, (b) the issuance of any shares of Common Stock upon the conversion of
any Preferred Stock, or (c) the issuance of any Common Stock upon the exercise
of any options granted under (a) above or upon the exercise of any options or
warrants outstanding as of the date the Articles of Amendment to the
Corporation's Articles of Incorporation creating the Series B Preferred Stock
are filed with the Secretary of State of the State of Oregon.
(2) UPON ISSUANCES OF WARRANTS, OPTIONS OR RIGHTS TO COMMON
STOCK. For the purposes of Section 6e(1), the issuance of any warrants, options,
subscriptions or purchase rights with respect to shares of Common Stock and the
issuance of any securities convertible into or exchangeable for shares of Common
Stock (or the issuance of any warrants, options, subscriptions or purchase
rights with respect to such convertible or exchangeable securities) shall be
deemed an issuance at such time of Additional Shares of Common Stock if the Net
Consideration Per Share (as hereinafter defined) that may be received by the
Corporation for such Additional Shares of Common Stock shall be less than the
Series B Applicable Conversion Value at the time of such issuance. Any
6
<PAGE>
obligation, agreement or undertaking to issue warrants, options, subscriptions
or purchase rights at any time in the future shall be deemed to be an issuance
at the time of such obligation, agreement or undertaking is made or arises. No
adjustment of the Series B Applicable Conversion Value shall be made under
Section 6e(1) upon the issuance of any shares of Common Stock which are issued
pursuant to the exercise of any warrants, options, subscriptions or purchase
rights or pursuant to the exercise of any conversion or exchange rights in any
convertible securities if any adjustment shall previously have been made upon
the issuance of any such warrants, options, or subscriptions or purchase rights
or upon the issuance of any convertible securities (or upon the issuance of any
warrants, options or any rights therefor) as above provided.
If the Net Consideration Per Share of any such warrants, options, subscriptions
or purchase rights or convertible securities is decreased from time to time,
then, upon the effectiveness of each such change, the Series B Applicable
Conversion Value shall be adjusted to the Series B Conversion Value that would
have been obtained (a) had the adjustments made upon the issuance of such
warrants, options, rights or convertible securities been made upon the actual
basis of the actual Net Consideration Per Share of such securities, and (b) had
adjustments made to the Series B Applicable Conversion Value since the date of
issuance of such securities been made to the Series B Conversion Value as
adjusted pursuant to Section 6e(1) above. Any adjustment of the Series B
Applicable Conversion Value with respect to Section 6e(1) which relates to
warrants, options, subscriptions or purchase rights with respect to shares of
Common Stock shall be disregarded if, as, and when all such warrants, options,
subscriptions or purchase rights expire or are canceled without being exercised,
so that such Series B Applicable Conversion Value effective immediately upon
such cancellation or expiration shall be equal to the Series B Conversion Value
in effect at the time of issuance of the expired or canceled warrants, options,
subscriptions or purchase rights, with such additional adjustments as would have
been made to that Series B Applicable Conversion Value had the expired or
canceled warrants, options, subscriptions or purchase rights not been issued.
For purposes of this Section 6e(2), the "Net Consideration Per Share" that may
be received by the Corporation shall be determined as follows;
(i) The "Net Consideration Per Share" shall mean the amount
equal to the total amount of consideration, if any,
received by the Corporation for the issuance of such
warrants, options, subscriptions or purchase rights or
convertible or exchangeable securities, plus the
minimum amount of consideration, if any, payable to the
Corporation upon exercise or conversion thereof,
divided by the aggregate number of shares of Common
Stock that would be issued if all such warrants,
options, subscriptions or other purchase rights or
convertible or exchangeable securities were exercised,
exchanged or converted.
7
<PAGE>
(ii) The "Net Consideration Per Share" that may be received
by the Corporation shall be determined in each instance
as of the date of issuance of warrants, options,
subscriptions, or other purchase rights or convertible
or exchangeable securities without giving effect to any
possible future adjustments which may be applicable
with respect to such warrants, options, subscriptions,
or other purchase rights or convertible or exchangeable
securities.
(3) CONSIDERATION OTHER THAN CASH. For purposes of Section
6e(1), if a part or all of the consideration received by the Corporation in
connection with the issuance of Additional Shares of Common Stock consists of
property other than cash, such consideration shall be deemed to have a fair
market value as is reasonably determined in good faith by the Board of Directors
of the Corporation.
(4) EXCEPTIONS. Section 6e(1) shall not apply under any of
the circumstances that would constitute an Extraordinary Common Stock Event (as
defined in Section 6e(5)).
(5) EXTRAORDINARY COMMON STOCK EVENT. Upon the happening of
an Extraordinary Common Stock Event (as hereinafter defined), the Applicable
Conversion Value for the Series A and Series B Preferred Stock shall,
simultaneously with the happening of such Extraordinary Common Stock Event, be
adjusted by multiplying the then effective Applicable Conversion Value for the
Series A Preferred Stock or Series B Preferred Stock, as the case may be, by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such Extraordinary Common Stock and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Applicable Conversion Value. The Applicable
Conversion Value, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean the (i) issue of additional shares
of the Common Stock as a dividend or other distribution on outstanding Common
Stock, (ii) subdivision of outstanding shares of Common Stock into a greater
number of shares of the Common Stock, or (iii) combination of outstanding shares
of Common Stock into a smaller number of shares of Common Stock.
f. DIVIDENDS. In the event the Corporation shall make or issue,
or fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock or in assets (excluding cash
dividends or distributions), then and in each such event provision shall be made
so that the holders of Series A Preferred Stock and Series B Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the number of securities or such other assets
of the Corporation that they would have received had their Series A Preferred
8
<PAGE>
Stock or Series B Preferred Stock, as the case may be, been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the Conversion Date (as that
term is hereafter defined in Section 6j), retained such securities or such other
assets receivable by them during such period, giving application to all
adjustments called for during such period under this Section 6 with respect to
the rights of the holders of the Series A Preferred Stock or Series B Preferred
Stock, as the case may be.
g. RECAPITALIZATION OR RECLASSIFICATION. If the Common Stock
issuable upon the conversion of the Series A Preferred Stock or Series B
Preferred Stock, as the case may be, shall be changed into the same or different
number of shares of any class or classes of stock of the Corporation, whether by
recapitalization, reclassification or otherwise (other than that a subdivision
or combination of shares, stock dividend, reorganization, merger, consolidation
or sale of assets provided for elsewhere in this Section 6), then and in each
such event the holder of each share of Series A Preferred Stock or Series B
Preferred Stock, as the case may be, shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change
by holders of the number of shares of Common Stock into which such share of
Series A Preferred Stock or Series B Preferred Stock, as the case may be, might
have been converted immediately prior to such reorganization, reclassification
or change, all subject to further adjustment as provided herein.
h. CAPITAL REORGANIZATION, MERGER OR SALE OF ASSETS. If at any
time or from time to time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Section 6) or a merger or consolidation of
the Corporation with or into another corporation or the sale of all or
substantially all of the Corporation's properties and assets to any other
person, then, as a part of such reorganization, merger, consolidation or sale,
provision shall be made so that the holders of the Series A Preferred Stock and
Series B Preferred Stock shall thereafter be entitled to receive upon conversion
of the Series A Preferred Stock or Series B Preferred Stock, as the case may be,
the number of shares of stock or other securities or property of the
Corporation, or of the successor corporation resulting from such reorganization,
merger, consolidation or sale, to which a holder of the same number of shares of
Common Stock issuable to the holders of the Series A Preferred Stock or Series B
Preferred Stock, as the case may be, upon conversion would have been entitled on
such capital reorganization, merger, consolidation or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 6 with respect to the rights of the holders of the Series A
Preferred Stock or Series B Preferred Stock, as the case may be, after the
reorganization, merger, consolidation or sale to the end that the provisions of
this Section 6 (including adjustment of the Applicable Conversion Value then in
effect and the number of shares purchasable upon conversion of the Series A
Preferred Stock or Series B Preferred Stock, as the case may be) shall be
applicable after that event in as nearly equivalent a manner as may be possible.
Each holder of Series A Preferred Stock and Series B Preferred
Stock, upon the occurrence of a capital reorganization, merger or consolidation
of the Corporation, or the sale of all or substantially all the Corporation's
assets and properties as such events are more fully set forth in the first
9
<PAGE>
paragraph of this Section 6h, shall have the option of electing treatment of
such holder's shares of Series A Preferred Stock or Series B Preferred Stock, as
the case may be, under either this Section 6h and Section 6a or Sections 4a and
4b hereof, notice of which election shall be submitted in writing to the
Corporation at its principal offices no later than five (5) days before the
effective date of such transaction.
i. CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment
or readjustment of the Applicable Conversion Rate for the Series A Preferred
Stock or Series B Preferred Stock, the Corporation will furnish each holder of
Series A Preferred Stock or Series B Preferred Stock, as the case may be, with a
certificate showing such adjustment or readjustment, and stating in reasonable
detail the facts upon which such adjustment or readjustment is based.
j. EXERCISE OF CONVERSION PRIVILEGE. To exercise a conversion
privilege, a holder of Series A Preferred Stock or Series B Preferred Stock
shall surrender the certificate or certificates representing the shares being
converted to the Corporation at its principal office, and shall give written
notice to the Corporation at the office that such holder elects to convert such
shares. The certificate or certificates for shares of Series A Preferred Stock
or Series B Preferred Stock, as the case may be, surrendered for conversion
shall be accompanied by proper assignment thereof to the Corporation or in
blank. The date when such written notice is received by the Corporation,
together with the certificate or certificates representing the shares of Series
A Preferred Stock or Series B Preferred Stock, as the case may be, being
converted, is the "Conversion Date." As promptly as practicable after the
Conversion Date, the Corporation shall issue and deliver to the holder of the
shares of Series A Preferred Stock or Series B Preferred Stock, as the case may
be, being converted, (i) such certificate or certificates as it may request for
the number of whole shares of Common Stock issuable upon the conversion of such
shares of Series A Preferred Stock or Series B Preferred Stock, as the case may
be, in accordance with the provisions of this Section 6, (ii) in the case of the
Series A Preferred Stock only, cash in the amount of all unpaid Accruing
Dividends on such shares of Series A Preferred Stock (whether or not declared),
(iii) in the case of both the Series A and Series B Preferred Stock, any other
dividends declared but unpaid thereon, computed up to and including the
Conversion Date, and (iv) cash, as provided in Section 6k, in respect of any
fraction of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Series A Preferred Stock or Series B Preferred
Stock, as the case may be, shall cease and the person or person in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
k. CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of
Common Stock shall be issued upon the conversion of shares of Series A Preferred
Stock or Series B Preferred Stock, as the case may be. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
Series A Preferred Stock or Series B Preferred Stock, as the case may be, the
Corporation shall pay to the holder of the shares of Series A Preferred Stock or
10
<PAGE>
Series B Preferred Stock, as the case may be, which were converted a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the market price per share of the Common Stock (as determined in a
reasonable manner prescribed by the Board of Directors) at the close of business
on the Conversion Date. The determination as to whether or not any fractional
shares are issuable shall be based upon the total number of shares of Series A
Preferred Stock or Series B Preferred Stock, as the case may be, being converted
at any one time by any holder thereof, not upon each share of Series A Preferred
Stock or Series B Preferred Stock, as the case may be, being converted.
l. PARTIAL CONVERSION. In the event some but not all of the
shares of Series A Preferred Stock or Series B Preferred Stock, as the case may
be, represented by a certificate or certificates surrendered by a holder are
converted, the Corporation shall execute and deliver to the holder a new
certificate representing the number of shares of Series A Preferred Stock or
Series B Preferred Stock, as the case may be, that were not converted.
m. RESERVATION OF COMMON STOCK. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series A Preferred Stock and Series B Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock and Series
B Preferred Stock. If at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock and Series B Preferred Stock,
the Corporation shall take such corporate action as may be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
B. COMMON STOCK
1. VOTING RIGHTS. Except as otherwise required by law or expressly
provided in these Articles of Incorporation, each holder of Common Stock shall
have one vote in respect of each share of stock held by such holder of record on
the books of the Corporation on all matters submitted to a vote of shareholders
of the Corporation.
2. DIVIDENDS. Subject to any preferential rights of Preferred
Stock then outstanding, holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefor, dividends payable either in
cash, in property or in shares of capital stock.
3. LIQUIDATION, DISSOLUTION OR WINDING UP. In the event of a
liquidation, dissolution or winding up of the affairs of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of Preferred Stock, holders of Common Stock shall be
entitled, unless otherwise required by law or expressly provided in these
Articles of Incorporation, to receive all of the remaining assets of the
Corporation of whatever kind available for distribution to shareholders ratably
in proportion to the number of shares of Common Stock held by them respectively.
11
[SEAL Phone: (503) 986-2200 ARTICLES OF AMENDMENT-BUSINESS/
OF THE Fax: (503) 378-4387 PROFESSIONAL/NONPROFIT
STATE ====================================================================
OF For office use only
OREGON] Secretary of State CHECK THE APPROPRIATE BOX BELOW
Corporation Division /X/ BUSINESS/PROFESSIONAL CORPORATION
255 Capital St. NE, Suite 151 (Complete only 1, 2, 3, 4, 6, 7)
Salem, OR 97310-1327
NONPROFIT CORPORATION
/ / (Complete only 1, 2, 3, 5, 6, 7)
FILED
JAN - 7 1998
Registry Number: 302163-86 OREGON
------------ SECRETARY OF STATE
Attach Additional Sheet if Necessary
Please Type or Print Legibly in Black Ink
- --------------------------------------------------------------------------------
1) NAME OF CORPORATION PRIOR TO AMENDMENT Oregon Baking Company
--------------------------------------
2) STATE THE ARTICLE NUMBER(S) AND SET FOR THE ARTICLE AS IT IS AMENDED TO READ.
(Attach a separate sheet if necessary)
---------------------------------------
See Attached
- --------------------------------------------------------------------------------
3) THE AMENDMENT WAS ADOPTED ON: December 18, 1997
-----------------------
(If more than one amendment was adopted, identify the date of adoption of each
amendment)
<TABLE>
<CAPTION>
====================================================================================================================================
BUSINESS/PROFESSIONAL CORPORATION ONLY NONPROFIT CORPORATION ONLY
4) CHECK THE APPROPRIATE STATEMENT 5) CHECK THE APPROPRIATE STATEMENT
<S> <C> <C> <C>
/ / Shareholder action was required to adopt the / / Membership approval was not required. The amendment(s)
amendment(s). The vote was as follows was approved by a sufficient vote of the board of directors
or incorporators
- ---------------------------------------------------------------
Class or Number of Number of Number of Number of / / Membership approval was required. The membership vote
series of Shares votes votes votes cast was as follows:
share Outstanding entitled to cast FOR AGAINST -----------------------------------------------------------
be cast Class(es) Number of Number of Number Number
- --------------------------------------------------------------- entitled members votes of votes of votes
to vote entitled to entitled to cast FOR cast
vote be cast AGAINST
- ---------------------------------------------------------------- -----------------------------------------------------------
-----------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
/X/ Shareholder action was not required to adopt the amendment(s).
The amendment(s) was adopted by the board of directors without
shareholder action.
/ / The corporation has not issued any shares of stock. Shareholder
action was not required to adopt the amendment(s). The
amendment(s) was adopted by the incorporators or by the board of
directors
- --------------------------------------------------------------------------------
6) EXECUTION
Printed Name Signature Title
Brad Barnett /s/ Brad Barnett President
----------------- ------------------- --------------------------
- --------------------------------------------------------------------------------
7) CONTACT NAME DAYTIME PHONE NUMBER
Brendan R. McDonnell 503/802-2054
---------------------- ----------------------------
-----------------------------
FEES
-----------------------------
Make check for $10 payable to
"Corporation Division"
NOTE: Filing fees may be paid
with VISA or MasterCard. The
card number and expiration
date should be submitted on a
separate sheet for your
protections
-----------------------------
CR113 (Rev. 6/96)
<PAGE>
FILED
JAN - 7 1998
CERTIFICATE OF DESIGNATION OF OREGON
SECRETARY OF STATE
SERIES C CONVERTIBLE PREFERRED STOCK
AND
SERIES D CONVERTIBLE AND REDEEMABLE PREFERRED STOCK
BY DIRECTORS
PURSUANT TO ARTICLES OF AMENDMENT TO
THE AMENDED ARTICLES OF INCORPORATION
OF
OREGON BAKING COMPANY
dba MARSEE BAKING
Brad Barnett, President of Oregon Baking Company, an Oregon corporation
for profit with its principal location at 2287 NW Pettygrove, Portland, Oregon
97210, does hereby certify that the following resolution was adopted by written
consent of the Board of Directors pursuant to Section 60.134 of the Oregon
Business Corporation Act:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of Chapter 60 of
the Oregon Business Corporation Act, as amended, and by Article II of the
Corporation's Articles of Incorporation, as amended, such Article II is amended
to add sections providing for Series C Convertible Preferred Stock ("Series C
Preferred Stock") and Series D Convertible and Redeemable Preferred Stock
("Series D Preferred Stock"), and that the designations and amounts thereof and
the voting powers, preferences, limitations and relative and special rights of
the shares of each such series, and the qualifications, limitations or
restrictions thereof are as follows:
1. SERIES C AND SERIES D PREFERRED STOCK DESIGNATION AND AMOUNT.
105,000 shares of the Corporation's authorized Preferred Stock are hereby
designated as the Series C Preferred Stock (the "Series C Preferred Stock") and
22,507 shares of the Corporation's authorized Preferred Stock are hereby
designated as the Series D Preferred Stock ("Series D Preferred Stock").
2. DIVIDENDS. The holders of shares of the Series D Preferred
Stock shall be entitled to receive, out of funds legally available therefor,
dividends at the rate per annum of $4.20 per share (the "Accruing Series D
Dividends"). Accruing Series D Dividends shall accrue from day-to-day, whether
or not earned or declared, and shall be cumulative. Accruing Series D Dividends
shall accrue but not be paid during 1998 or 1999. On a quarterly basis, Accruing
Series D Dividends from 1998 and 1999 shall be paid during 2000 out of funds
legally available therefor. At the option of the holder of Series D Preferred
Stock or the Company, the Series D Accruing Dividends may be paid in the form of
shares of Series D Preferred Stock valued at $60.00 per share (regardless of the
fair market value of such shares at the time the dividend is declared by the
Company's Board of Directors); provided, however, no more than an aggregate of
5,840 shares of the Company's Series D Preferred Stock may be issued in lieu of
<PAGE>
cash to satisfy the Series D Accruing Dividends. The holders of shares of Series
C Preferred Stock shall NOT be entitled to accruing dividends.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
a. SERIES D PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
holders of shares of Series D Preferred Stock shall be entitled to be paid first
out of the assets of the Corporation available for distribution to holders of
the Corporation's capital stock of all classes (whether such assets are capital,
surplus or earnings) before any sums shall be paid or any assets distributed
among the holders of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, or Common Stock, an amount equal to the greater of:
(1) $60.00 per share of Series D Preferred Stock plus an
amount equal to all Accruing Series D Dividends unpaid thereon (whether or not
declared); or
(2) the amount per share of Series D Preferred Stock that
would have been payable had each such share been converted to Common Stock
immediately prior to such event of liquidation, dissolution or winding up
pursuant to the provisions of Section 5 hereof plus an amount equal to all
Accruing Series D Dividends unpaid thereon (whether or not declared) (the
preference described in this Section 3a hereafter referred to as the "Series D
Preference").
b. SERIES A, B AND C PREFERENCES. After payment of the Series D
Preferences described in Section 3a above, holders of shares of Series C
Preferred, along with the holders of Series A Preferred Stock and the holders of
Series B Preferred Stock, shall be entitled to be paid out of the assets of the
Corporation available for distribution to holders of the Corporation's capital
stock (whether such assets are capital, surplus or earnings) before any sums
shall be paid or any assets distributed among the holders of Common Stock, an
amount equal to the greater of:
(1) $6.00 per share of Series A Preferred Stock plus an
amount equal to all Accruing Dividends unpaid thereon (whether or not declared),
$2.50 per share of Series B Preferred Stock, plus any other dividends declared
but unpaid thereon, and $4.00 per one tenth of a share of Series C Preferred
Stock, plus any other dividends declared but unpaid thereon, computed up to and
including the date full payment shall be tendered to the holders of the Series A
Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock, as the
case may be, with respect to such liquidation, dissolution or winding up, or
(2) the amount per share of Series A Preferred Stock, Series
B Preferred Stock or Series C Preferred Stock, as the case may be, that would
have been payable had each such share been converted to Common Stock immediately
prior to such event of liquidation, dissolution or winding up pursuant to the
provisions of Section 5 hereof plus, in the case of the Series A Preferred Stock
only, an amount equal to all Accruing Dividends unpaid thereon (whether or not
declared), and, in the case of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, any other dividends declared but unpaid
thereon, computed up to and including the date full payment shall be tendered to
the holders of the Series A Preferred Stock, Series B Preferred Stock or Series
C Preferred Stock, as the case may be, with respect to such liquidation,
dissolution or winding up.
c. INSUFFICIENT ASSETS. If the assets of the Corporation shall
be insufficient to permit the payment in full to holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock of the amount thus distributable, then the entire assets of the
Corporation available for such distribution shall be distributed (i) first to
2
<PAGE>
holders of the Series D Preferred Stock, and (ii) following full payment of the
Series D Preference, among the holders of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock in proportion to the liquidation
preference for a single share of Series A and Series B Preferred Stock and
one-tenth of a share of Series C Preferred Stock as set forth in this Section
3b; provided, however, no series of Preferred Stock shall be entitled to receive
an amount greater than the liquidation preference for such series provided in
Section 3a or 3b above, as the case may be. After such payment shall have been
made in full to the holders of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock or funds necessary
for such payment shall have been set aside by the Corporation in trust for the
account of holders of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock so as to be available for
such payment, holders of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall be entitled to no
further participation in the distribution of the assets of the Corporation and
shall have no further rights of conversion, and the remaining assets available
for distribution shall be distributed among the holders of the Common Stock.
d. TREATMENT OF REORGANIZATIONS, CONSOLIDATIONS, MERGERS, AND
SALES OF ASSETS. A reorganization as provided in Section 5h or a consolidation
or merger of the Corporation or sale of all or substantially all of the assets
of the Corporation shall be regarded as a liquidation, dissolution or winding up
of the affairs of the Corporation within the meaning of this Section 3;
PROVIDED, HOWEVER, that, in any such event, each holder of Series C Preferred
Stock or Series D Preferred Stock, as the case may be, shall have the right to
elect the benefits of the provisions of Section 5h hereof in lieu of receiving
payment in liquidation, dissolution or winding up of the Corporation pursuant to
this Section 3.
e. Distributions Other than Cash. Whenever the distribution
provided for in this Section 3 shall be paid in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors of the Corporation.
4. Voting Power.
a. SERIES C PREFERRED STOCK. Except as otherwise required by
law, each holder of Series C Preferred Stock, shall be entitled to vote on all
matters and shall be entitled to that number of votes equal to the number of
votes that would be accorded to the largest number of whole shares of Common
Stock into which such holder's shares of Series C Preferred Stock could be
converted, pursuant to the provisions of Section 5 hereof, at the record date
for the determination of shareholders entitled to vote on such matter or, if no
such record date is established, at the date such vote is taken or any written
consent of shareholders is solicited. Except as otherwise required by law, the
holders of shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, and Common Stock shall vote together as a single class on all
matters.
b. SERIES D PREFERRED STOCK. To the extent permitted by the
Oregon Business Corporation Act ("Act"), the Series D Preferred Stock shall have
no voting rights. The Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock and the Common Stock shall be entitled to vote as a
class upon any matter that is required under the Act to be submitted to vote of
the Series D Preferred Stock even though such stock is "non-voting."
5. CONVERSION RIGHTS. The holders of the Series C Preferred Stock
and Series D Preferred Stock shall have the following conversion rights:
3
<PAGE>
a. GENERAL. Subject to and in compliance with the provisions of
this Section 5, any shares of the Series C Preferred Stock or Series D Preferred
Stock may, at the option of the holder, be converted at any time or from time to
time into fully paid and non-assessable shares (calculated as to each conversion
to the largest whole share) of Common Stock, provided, however, shares of Series
D Preferred Stock may not be converted prior to July 3, 1998.
b. Conversion Upon Public Offering.
(1) All the outstanding shares of Series C Preferred Stock
and Series D Preferred Stock shall, at the option of the Corporation and upon
written notice to the holders thereof given within 10 days prior to the closing
of an underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation to the public at a price
per share of not less than $10.00 (subject to equitable adjustment in the event
of any stock split, combination or similar event affecting the Common Stock) and
in which the aggregate net proceeds to the Corporation exceed $7,500,000, be
converted, effective upon such closing, into the number of shares of Common
Stock to which a holder of Series C Preferred Stock or Series D Preferred Stock
shall be entitled upon conversion pursuant to Section 5a hereof. Such conversion
shall occur automatically without any further action by such holders and whether
or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent for the Common Stock. Nothing in this Section
5b, however, shall limit or in any way restrict the rights of the holders of
shares of Series C Preferred Stock or Series D Preferred Stock, as the case may
be, to convert such shares into shares of Common Stock at any time (but only
after July 7, 1998 in the case of the same) pursuant to Section 5a above.
(2) Upon the occurrence of the conversion specified in
Section 5b(1), the holders of such Series C Preferred Stock and Series D
Preferred Stock shall surrender the certificates representing such shares at the
office of the Corporation or of its transfer agent for the Common Stock.
Thereupon, the Corporation shall issue and deliver to such holder (i) a
certificate or certificates for the number of shares of Common Stock into which
the shares of the Series C Preferred Stock or Series D Preferred Stock, as the
case may be, surrendered were convertible on the date on which such conversion
occurred; (ii) in the case of the Series D Preferred Stock only, cash in the
amount of all unpaid Accruing Series D Dividends on such shares of Series A
Preferred Stock (whether or not declared), (iii) in the case of both the Series
C and Series D Preferred Stock, any other dividends declared but unpaid thereon,
computed up to and including the Conversion Date, and (iv) cash, as provided in
Section 5k, in respect of any fraction of a share of Common Stock issuable upon
such conversion. The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion or pay any
of the amounts required to be paid by the Corporation unless certificates
evidencing such shares of the Series C Preferred Stock or Series D Preferred
Stock, as the case may be, being converted are either delivered to the
Corporation or any such transfer agent or the holder notifies the Corporation or
any such transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith.
c. APPLICABLE CONVERSION RATE. The conversion rate in effect
at any time (the "Conversion Rate") shall be, in the case of both the Series C
and Series D Preferred Stock, the quotient obtained by dividing $40.00 by the
Conversion Value, calculated as provided in Section 5d.
d. APPLICABLE CONVERSION VALUE. The Conversion Value shall be
$4.00, except that such amount shall be adjusted from time to time in accordance
with this Section 5.
4
<PAGE>
e. ADJUSTMENTS TO APPLICABLE CONVERSION VALUE.
(1) UPON ISSUANCES OF ADDITIONAL SHARES OF COMMON STOCK. If,
while there are any shares of Series C and/or Series D Preferred Stock
outstanding, the Corporation issues or sells any Additional Shares of Common
Stock (as defined below) for a consideration or price per share less than the
then effective Conversion Value, then in such case, the Conversion Value shall,
upon such issuance or sale, except as hereafter provided, be adjusted by
multiplying the then effective Conversion Value by a fraction:
(i) the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to
such issuance or sale, plus (b) the number of shares of
Common Stock which the net aggregate consideration
received by the Corporation for the total number of
shares of Additional Shares of Common Stock so issued
would purchase at the Conversion Value, and
(ii) the denominator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to
such issuance or sale, plus (b) the number of
Additional Shares of Common Stock so issued; and the
product so obtained shall thereafter be the Conversion
Value. The Conversion Value, as so adjusted, shall be
readjusted in the same manner upon the happening of
each successive sale or issuance.
For purpose of calculating adjustments to the Conversion Value under this
Section 5e(1), "Common Stock" shall be deemed to include any class or series of
Common Stock or Preferred Stock of the Corporation assuming full conversion of
such Preferred Stock. For purposes of this Section 5e(1), the term "Additional
Shares of Common Stock" shall mean all shares of Common Stock or Preferred Stock
other than (a) the issuance of any shares of Common Stock, or options therefor,
to any directors, officers, employees or consultants of the Company under any
stock option or issuance plan adopted by the Company's Board of Directors, (b)
any issuance of Common Stock, or options therefor, that is approved in writing
by the holders of a majority of the shares of Series C Preferred Stock
outstanding as of the date of such issuance, (c) the issuance of any shares of
Common Stock upon the conversion of any Preferred Stock, or (d) the issuance of
any Common Stock (x) upon the exercise of any options granted under (a) or (b)
above, or (y) upon the exercise of any options or warrants outstanding as of the
date the Articles of Amendment to the Corporation's Articles of Incorporation
creating the Series C and Series D Preferred Stock are filed with the Secretary
of State of the State of Oregon.
(2) UPON ISSUANCES OF WARRANTS, OPTIONS OR RIGHTS TO COMMON
STOCK. For the purposes of Section 5e(1), the issuance of any warrants, options,
subscriptions or purchase rights with respect to shares of Common Stock and the
issuance of any securities convertible into or exchangeable for shares of Common
Stock (or the issuance of any warrants, options, subscriptions or purchase
rights with respect to such convertible or exchangeable securities) shall be
deemed an issuance at such time of Additional Shares of Common Stock if the Net
Consideration Per Share (as hereinafter defined) that may be received by the
Corporation for such Additional Shares of Common Stock shall be less than the
Conversion Value at the time of such issuance. Any obligation, agreement or
undertaking to issue warrants, options, subscriptions or purchase rights at any
time in the future shall be deemed to be an issuance at the time of such
obligation, agreement or undertaking is made or arises. No adjustment of the
Conversion Value shall be made under Section 5e(1) upon the issuance of any
5
<PAGE>
shares of Common Stock which are issued pursuant to the exercise of any
warrants, options, subscriptions or purchase rights or pursuant to the exercise
of any conversion or exchange rights in any convertible securities if any
adjustment shall previously have been made upon the issuance of any such
warrants, options, or subscriptions or purchase rights or upon the issuance of
any convertible securities (or upon the issuance of any warrants, options or any
rights therefor) as above provided.
If the Net Consideration Per Share of any such warrants, options, subscriptions
or purchase rights or convertible securities is decreased from time to time,
then, upon the effectiveness of each such change, the Conversion Value shall be
adjusted to the Conversion Value that would have been obtained (a) had the
adjustments made upon the issuance of such warrants, options, rights or
convertible securities been made upon the actual basis of the actual Net
Consideration Per Share of such securities, and (b) had adjustments made to the
Conversion Value since the date of issuance of such securities been made to the
Value as adjusted pursuant to Section 5e(1) above. Any adjustment of the
Conversion Value with respect to Section 5e(1) which relates to warrants,
options, subscriptions or purchase rights with respect to shares of Common Stock
shall be disregarded if, as, and when all such warrants, options, subscriptions
or purchase rights expire or are canceled without being exercised, so that such
Conversion Value effective immediately upon such cancellation or expiration
shall be equal to the Conversion Value in effect at the time of issuance of the
expired or canceled warrants, options, subscriptions or purchase rights, with
such additional adjustments as would have been made to that Conversion Value had
the expired or canceled warrants, options, subscriptions or purchase rights not
been issued.
For purposes of this Section 5e(2), the "Net Consideration Per Share" that may
be received by the Corporation shall be determined as follows;
(i) The "Net Consideration Per Share" shall mean the amount
equal to the total amount of consideration, if any,
received by the Corporation for the issuance of such
warrants, options, subscriptions or purchase rights or
convertible or exchangeable securities, plus the
minimum amount of consideration, if any, payable to the
Corporation upon exercise or conversion thereof,
divided by the aggregate number of shares of Common
Stock that would be issued if all such warrants,
options, subscriptions or other purchase rights or
convertible or exchangeable securities were exercised,
exchanged or converted.
(ii) The "Net Consideration Per Share" that may be received
by the Corporation shall be determined in each instance
as of the date of issuance of warrants, options,
subscriptions, or other purchase rights or convertible
or exchangeable securities without giving effect to any
possible future adjustments which may be applicable
with respect to such warrants, options, subscriptions,
or other purchase rights or convertible or exchangeable
securities.
(3) CONSIDERATION OTHER THAN CASH. For purposes of Section
5e(1), if a part or all of the consideration received by the Corporation in
connection with the issuance of Additional Shares of Common Stock consists of
property other than cash, such consideration shall be deemed to have a fair
market value as is reasonably determined in good faith by the Board of Directors
of the Corporation.
6
<PAGE>
(4) EXCEPTIONS. Section 5e(1) shall not apply under any of
the circumstances that would constitute an Extraordinary Common Stock Event (as
defined in Section 5e(5)).
(5) EXTRAORDINARY COMMON STOCK EVENT. Upon the happening of
an Extraordinary Common Stock Event (as hereinafter defined), the Conversion
Value shall, simultaneously with the happening of such Extraordinary Common
Stock Event, be adjusted by multiplying the then effective Conversion Value by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such Extraordinary Common Stock and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Conversion Value. The Conversion Value, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events. "Extraordinary Common
Stock Event" shall mean the (i) issue of additional shares of the Common Stock
as a dividend or other distribution on outstanding Common Stock, (ii)
subdivision of outstanding shares of Common Stock into a greater number of
shares of the Common Stock, or (iii) combination of outstanding shares of Common
Stock into a smaller number of shares of Common Stock.
f. DIVIDENDS. In the event the Corporation shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock or in assets (excluding cash
dividends or distributions), then and in each such event provision shall be made
so that the holders of Series C Preferred Stock and Series D Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the number of securities or such other assets
of the Corporation that they would have received had their Series C Preferred
Stock or Series D Preferred Stock, as the case may be, been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the Conversion Date (as that
term is hereafter defined in Section 5j), retained such securities or such other
assets receivable by them during such period, giving application to all
adjustments called for during such period under this Section 5 with respect to
the rights of the holders of the Series A Preferred Stock or Series B Preferred
Stock, as the case may be.
g. RECAPITALIZATION OR RECLASSIFICATION. If the Common Stock
issuable upon the conversion of the Series C Preferred Stock or Series D
Preferred Stock, as the case may be, shall be changed into the same or different
number of shares of any class or classes of stock of the Corporation, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares, stock dividend, reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 5), then and in each such
event the holder of each share of Series C Preferred Stock or Series D Preferred
Stock, as the case may be, shall have the right thereafter to convert such share
into the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change by holders
of the number of shares of Common Stock into which such share of Series C
Preferred Stock or Series D Preferred Stock, as the case may be, might have been
converted immediately prior to such reorganization, reclassification or change,
all subject to further adjustment as provided herein.
h. CAPITAL REORGANIZATION, MERGER OR SALE OF ASSETS. If at any
time or from time to time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Section 5) or a merger or consolidation of
the Corporation with or into another corporation or the sale of all or
substantially all of the Corporation's properties and assets to any other
person, then, as a part of such reorganization, merger, consolidation or sale,
7
<PAGE>
provision shall be made so that the holders of the Series C Preferred Stock and
Series D Preferred Stock shall thereafter be entitled to receive upon conversion
of the Series C Preferred Stock or Series D Preferred Stock, as the case may be,
the number of shares of stock or other securities or property of the
Corporation, or of the successor corporation resulting from such reorganization,
merger, consolidation or sale, to which a holder of the same number of shares of
Common Stock issuable to the holders of the Series C Preferred Stock or Series D
Preferred Stock, as the case may be, upon conversion would have been entitled on
such capital reorganization, merger, consolidation or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5 with respect to the rights of the holders of the Series C
Preferred Stock or Series D Preferred Stock, as the case may be, after the
reorganization, merger, consolidation or sale to the end that the provisions of
this Section 5 (including adjustment of the Conversion Value then in effect and
the number of shares purchasable upon conversion of the Series C Preferred Stock
or Series D Preferred Stock, as the case may be) shall be applicable after that
event in as nearly equivalent a manner as may be possible.
Each holder of Series C Preferred Stock and Series D Preferred Stock,
upon the occurrence of a capital reorganization, merger or consolidation of the
Corporation, or the sale of all or substantially all the Corporation's assets
and properties as such events are more fully set forth in the first paragraph of
this Section 5h, shall have the option of electing treatment of such holder's
shares of Series C Preferred Stock or Series D Preferred Stock, as the case may
be, under either this Section 5h and Section 5a or Sections 3a and 3b hereof,
notice of which election shall be submitted in writing to the Corporation at its
principal offices no later than five (5) days before the effective date of such
transaction.
i. CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment
or readjustment of the Conversion Rate, the Corporation will furnish each holder
of Series C Preferred Stock and Series D Preferred Stock, with a certificate
showing such adjustment or readjustment, and stating in reasonable detail the
facts upon which such adjustment or readjustment is based.
j. EXERCISE OF CONVERSION PRIVILEGE. To exercise a conversion
privilege, a holder of Series C Preferred Stock or Series D Preferred Stock
shall surrender the certificate or certificates representing the shares being
converted to the Corporation at its principal office, and shall give written
notice to the Corporation at the office that such holder elects to convert such
shares. The certificate or certificates for shares of Series C Preferred Stock
or Series D Preferred Stock, as the case may be, surrendered for conversion
shall be accompanied by proper assignment thereof to the Corporation or in
blank. The date when such written notice is received by the Corporation,
together with the certificate or certificates representing the shares of Series
C Preferred Stock or Series D Preferred Stock, as the case may be, being
converted, is the "Conversion Date." As promptly as practicable after the
Conversion Date, the Corporation shall issue and deliver to the holder of the
shares of Series C Preferred Stock or Series D Preferred Stock, as the case may
be, being converted, (i) such certificate or certificates as it may request for
the number of whole shares of Common Stock issuable upon the conversion of such
shares of Series C Preferred Stock or Series D Preferred Stock, as the case may
be, in accordance with the provisions of this Section 5, (ii) in the case of the
Series D Preferred Stock only, cash in the amount of all unpaid Accruing Series
D Dividends on such shares of Series D Preferred Stock (whether or not
declared), (iii) in the case of both the Series C and Series D Preferred Stock,
any other dividends declared but unpaid thereon, computed up to and including
the Conversion Date, and (iv) cash, as provided in Section 5k, in respect of any
fraction of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Series C Preferred Stock or Series D Preferred
Stock, as the case may be, shall cease and the person or person in whose name or
names any certificate or certificates for shares of Common Stock shall be
8
<PAGE>
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
k. CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of
Common Stock shall be issued upon the conversion of shares of Series C Preferred
Stock or Series D Preferred Stock, as the case may be. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
Series C Preferred Stock or Series D Preferred Stock, as the case may be, the
Corporation shall pay to the holder of the shares of Series C Preferred Stock or
Series D Preferred Stock, as the case may be, which were converted a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the market price per share of the Common Stock (as determined in a
reasonable manner prescribed by the Board of Directors) at the close of business
on the Conversion Date. The determination as to whether or not any fractional
shares are issuable shall be based upon the total number of shares of Series C
Preferred Stock or Series D Preferred Stock, as the case may be, being converted
at any one time by any holder thereof, not upon each share of Series C Preferred
Stock or Series D Preferred Stock, as the case may be, being converted.
l. PARTIAL CONVERSION. In the event some but not all of the
shares of Series C Preferred Stock or Series D Preferred Stock, as the case may
be, represented by a certificate or certificates surrendered by a holder are
converted, the Corporation shall execute and deliver to the holder a new
certificate representing the number of shares of Series C Preferred Stock or
Series D Preferred Stock, as the case may be, that were not converted.
m. RESERVATION OF COMMON STOCK. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series C Preferred Stock and Series D Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series C Preferred Stock and Series
D Preferred Stock. If at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series C Preferred Stock and Series D Preferred Stock,
the Corporation shall take such corporate action as may be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
6. REDEMPTION OF SERIES D SHARES AT OPTION OF THE CORPORATION.
a. Subject to the conversion right of the holders of the Series
D Preferred Stock as provided in Section 5a, this Corporation may redeem, from
any source of funds legally available therefor, the Series D Preferred Stock.
The Corporation shall effect such redemptions by paying in cash in exchange for
the shares of Series D Preferred Stock to be redeemed a sum equal to $60.00 per
share of the Series D Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) plus all declared or
accumulated but unpaid dividends on such shares (the "Series D Preferred
Redemption Price").
b. As used in this Section 6, the term "Redemption Date" shall
refer to each date determined by the Board of Directors for redemption of shares
of Series D Preferred Stock. At least 15 but no more than 30 days prior to each
Redemption Date written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series D Preferred to be
redeemed, at the address last shown on the records of the Corporation for such
holder, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
applicable Series D Preferred Redemption Price, the place at which payment may
be obtained and calling upon such holder to surrender to the Corporation, in the
manner and at the place designated, his certificate or certificates representing
the shares to be redeemed (the "Redemption Notice"). Except as provided in
9
<PAGE>
Section 6c, on or after the Redemption Date, each holder of Series D Preferred
Stock to be redeemed shall surrender to the Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
c. From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Series D Preferred Stock designated for redemption in the Redemption
Notice as holders of Series D Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the Corporation legally
available for redemption of shares of Series D Preferred Stock on any Redemption
Date are insufficient to redeem the total number of shares of Series D Preferred
Stock to be redeemed on such date, those funds which are legally available may
be used to redeem any portion of such shares ratably among the holders of such
shares to be redeemed based upon their holdings of Series D Preferred Stock, or
the Corporation may elect not to redeem any such shares. The shares of Series D
Preferred Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein.
d. On or prior to each Redemption Date, the Corporation shall
deposit the Redemption Price of all shares of Series D Preferred Stock
designated for redemption in the Redemption Notice and not yet redeemed with a
bank or trust corporation as a trust fund for the benefit of the respective
holders of the shares designated for redemption and not yet redeemed, with
instructions and authority to the bank or trust corporation to pay the
Redemption Price for such shares to their respective holders on or after the
Redemption Date upon receipt of notification from the Corporation that such
holder has surrendered his share certificate to the Corporation pursuant to
Section 6b above. As of the Redemption Date, the deposit shall constitute full
payment of the shares to their holders, and from and after the Redemption Date
the shares so called for redemption shall be redeemed and shall be deemed to be
no longer outstanding, and the holders thereof shall cease to be stockholders
with respect to such shares and shall have no rights with respect thereto except
the rights to receive from the bank or trust corporation payment of the
Redemption Price of the shares, without interest, upon surrender of their
certificates therefor. Such instructions shall also provide that any moneys
deposited by the Corporation pursuant to this Section 6d for the redemption of
shares thereafter converted into shares of the Corporation's Common Stock
pursuant to Section 5 hereof prior to the Redemption Date shall be returned to
the Corporation forthwith upon such conversion. The balance of any moneys
deposited by the Corporation pursuant to this Section 6d remaining unclaimed at
the expiration of six months following the Redemption Date shall thereafter be
returned to the Corporation upon its request expressed in a resolution of its
Board of Directors.
10
THIS SPACE FOR OFFICE USE ONLY
Submit the original CORPORATION DIVISION - BUSINESS REGISTRY
and one true copy $10.00 255 Capitol Street NE, Suite 151
Salem, OR 97310-1327
REGISTRY NUMBER: (503) 986-2200 Facsimile (503) 378-4381
302163-80 FILED
- --------------- MAR 06 1998
ARTICLES OF AMENDMENT OREGON
Business Corporation SECRETARY OF STATE
(by Incorporators, Directors or Shareholders)
PLEASE TYPE OR PRINT LEGIBLY IN BLACK INK
1. Name of the corporation prior to amendment:
OREGON BAKING COMPANY .
---------------------------------------------------------------------------
2. State the article number(s) and set forth the article(s) as it is amended
to read or attach a separate sheet.
ARTICLE II, SECTION A, SUBSECTION 6E IS DELETED AND REPLACED
WITH ARTICLE II, SECTION A, SUBSECTION 6E ATTACHED HERETO AS ATTACHMENT A
3. The amendment(s) was adopted on JANUARY 22, 1998. (If more than one
amendment was adopted, identify the date of adoption of each amendment.)
4. Check the appropriate statement:
/X/ Shareholder action was required to adopt the amendment(s). The vote was as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Class or series of Number of shares Number of votes Number of votes Number of votes
shares outstanding entitled to be cast cast for cast against
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common, Series A and 1,432,203 1,233,621 1,226,621 -0-
Series B Preferred
Stock Combined
Series B Preferred 510,575 395,543 395,543 -0-
Stock
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
| | Shareholder action was not required to adopt the amendment(s). The
amendment(s) was adopted by the board of directors without shareholder
action.
| | The corporation has not issued any shares of stock. Shareholder action was
not required to adopt the amendment(s). The amendment(s) was adopted by the
incorporators or by the board of directors.
Execution: /s/ BRAD K. BARNETT BRAD K. BARNETT PRESIDENT AND CEO
----------------------------------------------------------------------
Signature Printed Name Title
Person to contact about this filing: BRENDAN R. MCDONNELL 503/802-2054
--------------------------------------------
Name Daytime phone number
MAKE CHECKS PAYABLE TO THE CORPORATION DIVISION OR INCLUDE YOUR VISA OR
MASTERCARD NUMBER AND EXPIRATION DATE - - - / . SUBMIT THE COMPLETED
-------------- -----
FORM AND FEE TO THE ABOVE ADDRESS OR FAX TO (503) 378-4381
<PAGE>
ARTICLE II
OF
ARTICLES OF INCORPORATION OF
OREGON BAKING COMPANY
dba MARSEE BAKING
(as Amended)
ARTICLE II.
Capital Stock
A. PREFERRED STOCK
* * * * *
6. Conversion Rights.
-----------------
* * * * *
e. Adjustments to Applicable Conversion Value.
------------------------------------------
(1) UPON ISSUANCES OF ADDITIONAL SHARES OF COMMON STOCK. If,
while there are any shares of Series B Preferred Stock outstanding, the
Corporation issues or sells any Additional Shares of Common Stock (as defined
below) for a consideration or price per share less than the then effective
Series B Applicable Conversion Value, then in such case, the Series B Applicable
Conversion Value shall, upon such issuance or sale, except as hereafter
provided, be adjusted by multiplying the then effective Series B Applicable
Conversion Value by a fraction:
(i) the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to
such issuance or sale, plus (b) the number of shares of
Common Stock which the net aggregate consideration
received by the Corporation for the total number of
shares of Additional Shares of Common Stock so issued
would purchase at the Series B Applicable Conversion
Value, and
(ii) the denominator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to
such issuance or sale, plus (b) the number of
Additional Shares of Common Stock so issued; and the
product so obtained shall thereafter be the Series B
Applicable Conversion Value. The Series B Applicable
Conversion Value, as so adjusted, shall be readjusted
in the same manner upon the happening of each
successive sale or issuance. No adjustment shall be
made under this Section 6e(1) to the Series A
Conversion Value upon the issuance or sale of
Additional Shares of Common Stock.
Articles of Amendment - Attachment A
1
<PAGE>
For purpose of calculating adjustments to the Series B Applicable Conversion
Value under this Section 6e(1), "Common Stock" shall be deemed to include any
class or series of Common Stock or Preferred Stock of the Corporation assuming
full conversion of such Preferred Stock. For purposes of this Section 6e(1), the
term "Additional Shares of Common Stock" shall mean all shares of Common Stock
or Preferred Stock other than (a) the issuance of any shares of Common Stock, or
options therefor, to any directors, officers, employees or consultants of the
Company under any stock option or issuance plan adopted by the Company's Board
of Directors, (b) the issuance of any shares of Common Stock, or options
therefor, that is approved in writing by the holders of a majority of the shares
of Series B Preferred Stock outstanding as of the date of such issuance, (c) the
issuance of any shares of Common Stock upon the conversion of any Preferred
Stock, or (d) the issuance of any Common Stock upon the exercise of any options
granted under (a) or (b) above or upon the exercise of any options or warrants
outstanding as of the date the Articles of Amendment to the Corporation's
Articles of Incorporation creating the Series B Preferred Stock are filed with
the Secretary of State of the State of Oregon.
* * * * *
Articles of Amendment - Attachment A
2
[SEAL Phone: (503) 986-2200
OF THE Fax: (503) 378-4381 ARTICLES/CERTIFICATE OF CORRECTION-ALL ENTITIES
=======================================================================
STATE Secretary of State For office use only
OF Corporation Division
OREGON] 255 Capital St. NE, Suite 151 FILED
Salem, OR 97310-1327 JUN 03 1998
OREGON
Registry Number: 302163-86 SECRETARY OF STATE
-----------
Attach Additional Sheet if Necessary
Please Type or Print Legibly in Black Ink
================================================================================
1) NAME OF ENTITY Oregon Baking Company dba Marsee Baking
------------------------------------------------------------
NOTE: The Change of Registered Agent or Office form must be used to change
the registered agent
================================================================================
2) DOCUMENT DESCRIPTION (Describe the document to be corrected, including the
date on which it was filed, or attach a copy of the document to be
corrected)
Articles of Amendment-Certificate of Designation of Series C Convertible
----------------------------------------------------------------------------
Preferred Stock and Series D Convertible and Redeemable Preferred Stock -
----------------------------------------------------------------------------
file date 1/7/98
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
3) INCORRECT STATEMENT (Describe the incorrect statement and indicate the
reason it is incorrect)
----------------------------------------------------------------------------
SEE ATTACHMENT
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4) CORRECTION (The incorrect statement is corrected to read as follows. Attach
additional sheets if necessary)
----------------------------------------------------------------------------
SEE ATTACHMENT
----------------------------------------------------------------------------
----------------------------------------------------------------------------
================================================================================
5) EXECUTION
Signature: /s/ Brad Barnett
----------------------------------------
Printed Name: Brad Barnett
-------------------------------------
Title: President and CEO
--------------------------------------------
Date:
---------------------------------------------
================================================================================
6) CONTACT NAME DAYTIME PHONE NUMBER
Brendan R. McDonnell 503/802-2054
-------------------------- -----------------------
--------------------------------
FEES
--------------------------------
Make check for $10 payable to
"Corporation Division"
NOTE: Filing fees may be paid
with VISA or MasterCard. The
card number and expiration date
should be submitted on a
separate sheet for
your protections
--------------------------------
CR133 (Rev. 5/96)
<PAGE>
Articles of Correction-All Entities (Oregon Baking Company dba Marsee Baking)
continuted
Item 3.
2. DIVIDENDS. The holders of shares of the Series D Preferred
Stock shall be entitled to receive, out of funds legally available therefor,
dividends at the rate per annum of $4.20 per share (the "Accruing Series D
Dividends"). Accruing Series D Dividends shall accrue from day-to-day, whether
or not earned or declared, and shall be cumulative. Accruing Series D Dividends
shall accrue but not be paid during 1998 or 1999. On a quarterly basis, Accruing
Series D Dividends from 1998 and 1999 shall be paid during 2000 out of funds
legally available therefor. AT THE OPTION OF THE HOLDER OF SERIES D PREFERRED
STOCK OR THE COMPANY, THE SERIES D ACCRUING DIVIDENDS MAY BE PAID IN THE FORM OF
SHARES OF SERIES D PREFERRED STOCK VALUED AT $6.00 PER SHARE (REGARDLESS OF THE
FAIR MARKET VALUE OF SUCH SHARES AT THE TIME THE DIVIDEND IS DECLARED BY THE
COMPANY'S BOARD OF DIRECTORS); PROVIDED, HOWEVER, NO MORE THAN AN AGGREGATE OF
5,840 SHARES OF THE COMPANY'S SERIES D PREFERRED STOCK MAY BE ISSUED IN LIEU OF
CASH TO SATISFY THE SERIES D ACCRUING DIVIDENDS. The holders of shares of Series
C Preferred Stock shall not be entitled to accruing dividends.
REASON FOR MISTAKE: The dollar figure in the sentence which has been placed in
bold was mistakenly typed as $6.00, not $60.00 as it should have been.
Item 4.
2. DIVIDENDS. The holders of shares of the Series D Preferred
Stock shall be entitled to receive, out of funds legally available therefor,
dividends at the rate per annum of $4.20 per share (the "Accruing Series D
Dividends"). Accruing Series D Dividends shall accrue from day-to-day, whether
or not earned or declared, and shall be cumulative. Accruing Series D Dividends
shall accrue but not be paid during 1998 or 1999. On a quarterly basis, Accruing
Series D Dividends from 1998 and 1999 shall be paid during 2000 out of funds
legally available therefor. AT THE OPTION OF THE HOLDER OF SERIES D PREFERRED
STOCK OR THE COMPANY, THE SERIES D ACCRUING DIVIDENDS MAY BE PAID IN THE FORM OF
SHARES OF SERIES D PREFERRED STOCK VALUED AT $60.00 PER SHARE (REGARDLESS OF THE
FAIR MARKET VALUE OF SUCH SHARES AT THE TIME THE DIVIDEND IS DECLARED BY THE
COMPANY'S BOARD OF DIRECTORS); PROVIDED, HOWEVER, NO MORE THAN AN AGGREGATE OF
5,840 SHARES OF THE COMPANY'S SERIES D PREFERRED STOCK MAY BE ISSUED IN LIEU OF
CASH TO SATISFY THE SERIES D ACCRUING DIVIDENDS. The holders of shares of Series
C Preferred Stock shall NOT be entitled to accruing dividends.
FILED
302163-86 ARTICLES OF AMENDMENT OCT 07 1998
TO OREGON
AMENDED ARTICLES OF INCORPORATION SECRETARY OF STATE
OF OREGON BAKING COMPANY
DBA MARSEE BAKING COMPANY
Pursuant to ORS 60.437, the undersigned corporation hereby submits for
filing the following articles of amendment to its articles of incorporation.
1. The name of the corporation is Oregon Baking Company.
2. Shareholder action is required to adopt the amendment. The
Shareholder vote was as follows:
<TABLE>
<CAPTION>
Voting Group Common Stock Series A, Series Series C Series D
Entitled to Vote & Series A, B, & Series C Preferred Stock Preferred Stock
on Amendment Series B, Series Preferred Stock
C, & Series D
Preferred Stock
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of 1,534,945 649,317 86,075 16,667
combined shares
outstanding
- ----------------------------------------------------------------------------------------------------------------------
Number of 2,497,859 1,457,859 883,318 171,039
combined votes
entitled to be cast
- ----------------------------------------------------------------------------------------------------------------------
Number of votes 2,069,187 1,047,403 761,454 171,039
cast FOR
- ----------------------------------------------------------------------------------------------------------------------
Number of votes 147,187 147,187 0 0
cast AGAINST
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
3. Section 1, Section 3.b(1) and Sections 5.c and 5.d of the
Certificate of Designation of Series C Convertible Preferred Stock and
Series D Convertible and Redeemable Preferred Stock as amended are
attached hereto as Attachment A.
4. The amendment was adopted on September 10, 1998.
OREGON BAKING COMPANY
By: /s/ Brad Barnett
---------------------------------
Brad Barnett, President
The person to contact about this filing is Darcy Norville at 802-2036.
<PAGE>
ATTACHMENT A
1. SERIES C AND SERIES D PREFERRED STOCK DESIGNATION AND AMOUNT. 168,000 shares
of the Corporation's authorized Preferred Stock are hereby designated as the
Series C Preferred Stock (the "Series C Preferred Stock") and 22,507 shares of
the Corporation's authorized Preferred Stock are hereby designated as the Series
D Preferred Stock ("Series D Preferred Stock").
3.b. SERIES A, B AND C PREFERENCES.
(1) $6.00 per share of Series A Preferred Stock plus an amount equal to
all Accruing Dividends unpaid thereon (whether or not declared), $2.50
per share of Series B Preferred Stock, plus any other dividends
declared but unpaid thereon, and $3.25 per one tenth of a share of
Series C Preferred Stock, plus any other dividends declared but unpaid
thereon, computed up to and including the date full payment shall be
tendered to the holders of the Series A Preferred Stock, Series B
Preferred Stock, or Series C Preferred Stock, as the case may be, with
respect to such liquidation, dissolution or winding up, or
5. CONVERSION RIGHTS.
c. APPLICABLE CONVERSION RATE. The conversion rate in effect at any time
(the "Conversion Rate") shall be, in the case of both the Series C and
Series D Preferred Stock, the quotient obtained by dividing $32.50 by
the Conversion Value, calculated as provided in Section 5d.
d. APPLICABLE CONVERSION VALUE. The Conversion Value shall be $3.25,
except that such amount shall be adjusted from time to time in
accordance with this Section 5.
ARTICLES OF AMENDMENT FILED
TO MAR 16 1999
AMENDED ARTICLES OF INCORPORATION OREGON
OF OREGON BAKING COMPANY SECRETARY OF STATE
DBA MARSEE BAKING COMPANY
Pursuant to ORS 60.437, the undersigned corporation hereby submits for
filing the following articles of amendment to its articles of incorporation.
1. The name of the corporation is Oregon Baking Company.
2. Shareholder action is required to adopt the amendment. The
Shareholder vote was as follows:
<TABLE>
<CAPTION>
Voting Group Common Stock Series A, Series B Series C Series D
Entitled to Vote on & Series A, Preferred Preferred Preferred Preferred
Amendment Series B and Stock Stock Stock Stock
Series C
Preferred Stock
- ------------------------- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Number of combined 1,792,324 52,667 510,575 129,121 16,667
shares outstanding
- ----------------------------------------------------------------------------------------------------------
Number of combined 3,005,675 52,667 522,808 1,330,239 171,707
votes entitled to be
cast
- ----------------------------------------------------------------------------------------------------------
Number of votes 2,192,818 34,417 267,842 1,052,912 171,707
cast FOR
- ----------------------------------------------------------------------------------------------------------
Number of votes cast 0 0 0 0 0
AGAINST
- ----------------------------------------------------------------------------------------------------------
</TABLE>
3. The first paragraph of the Amended Article of Incorporation, Section
s6.b and 6.c of Article II of the Amended Articles of Incorporation
creating the Series B Preferred Stock and Sections, 5.6 and 5.c of the
Certificate of Designation of Series C Convertible Preferred Stock and
Series D Convertible and Redeemable Preferred Stock, as amended, are
attached hereto as Attachment A.
4. The amendment was adopted on February 24, 1999.
OREGON BAKING COMPANY
By: /s/ Howard Wasserteil
----------------------------
Howard Wasserteil, Secretary
The person to contact about this filing is Darcy Norville at 802-2036.
1
<PAGE>
ATTACHMENT A
THE FIRST PARAGRAPH OF THE AMENDED ARTICLES OF INCORPORATION:
The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 16,000,000
shares, consisting of 15,000,000 shares of Common Stock with no par
value (the "Common Stock") and 1,000,000 shares of Preferred Stock with
no par value (the "Preferred Stock").
SECTIONS 6.B AND 6.C OF ARTICLE II OF THE AMENDED ARTICLES OF INCORPORATION,
CREATING SERIES B PREFERRED STOCK:
6.b. Conversion Upon Public Offering.
(1) The provisions of Section 6a notwithstanding ,all the
outstanding shares of Series A Preferred Stock and Series B Preferred
Stock shall, automatically upon the closing of a firmly underwritten
public offering pursuant to an effective registration statement under
the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation to the public be
converted, effective upon such closing, into the number of shares of
Common Stock to which a holder of Series A Preferred Stock or Series B
Preferred Stock shall be entitled upon conversion pursuant to Section
6a hereof. Such conversion shall occur automatically without any
further action by such holders and whether or not the certificates
representing such shares are surrendered to the Corporation or its
transfer agent for the Common Stock. Nothing in this Section 6b
however, shall limit or in any way restrict the rights of the holders
of shares of Series A Preferred Stock or Series B Preferred Stock, as
the case may be, to convert such shares into shares of Common Stock at
any time prior to such underwritten public offering pursuant to Section
6a immediately above.
(3) Effective upon the conversion of all outstanding shares of
the Corporation's Series A Preferred Stock and Series B Preferred Stock
into Common Stock as provided in Section 6b(1), the shares so converted
shall be retired and, thereafter, shall not be issuable by the
Corporation.
SECTIONS 5.B AND 5.C OF THE CERTIFICATE OF DESIGNATION OF SERIES C AND SERIES D
PREFERRED STOCK:
5.b. Conversion Upon Public Offering.
(1) All the outstanding shares of Series C Preferred Stock and
Series D Preferred Stock shall, automatically upon the closing of a
firmly underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the
Corporation to the public be converted, effective upon such closing,
into the number of shares of Common Stock to which a holder of Series C
Preferred Stock or Series D Preferred Stock shall be entitled upon
conversion pursuant to Section 5a hereof. Such conversion shall occur
automatically without any further action by such holders and whether or
not the certificates representing such shares are surrendered to the
Corporation or its transfer agent for the Common Stock. Nothing in this
Section 5b, however, shall limit or in any way restrict the rights of
the holders of shares of Series C Preferred Stock or Series D Preferred
Stock, as the case may be, to convert such shares into shares of Common
Stock at any time prior to such underwritten public offering pursuant
to Section 5a above.
(2) Upon the occurrence of the conversion specified in Section
5a, the holders of such Series C Preferred Stock and Series D Preferred
Stock shall surrender the certificates representing such shares at the
office of the Corporation or of its transfer agent for the Common
Stock. Thereupon, the Corporation shall issue and deliver to such
holder (i) a certificate or certificates for the number of shares of
Common Stock into which the shares of the Series C Preferred Stock or
Series D Preferred Stock, as the case may be, surrendered were
convertible on the date on which such conversion occurred; (ii) in the
case of the Series D Preferred Stock only, a certificate or
certificates for the number of shares of Common Stock into which the
number of shares of the Series D Preferred Stock payable as accrued
dividends valued at $60.00 per share are convertible on the date on
which such conversion occurred, (iii) in the case of both the Series C
and Series D Preferred Stock, any other dividends declared but unpaid
thereon, computed up to and including the Conversion Date, and (iv)
2
<PAGE>
cash, as provided in Section 5, in respect of any fraction of a share
of Common Stock issuable upon such conversion. The Corporation shall
not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion or pay any of the amounts required
to be paid by the Corporation unless certificates evidencing such
shares of the Series C Preferred Stock or Series D Preferred Stock, as
the case may be, being converted are either delivered to the
Corporation or any such transfer agent or the holder notifies the
Corporation or any such transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it
in connection therewith.
(3) Effective upon the conversion of all outstanding shares of
the Corporation's Series C Preferred Stock and Series D Preferred Stock
into Common Stock as provided in Section 5b(1), the shares so converted
shall be retired and, thereafter, shall not be issuable by the
Corporation.
3
[PROPOSED]
AMENDED AND RESTATED BYLAWS
OF
OREGON BAKING COMPANY
* * * *
ARTICLE I
SHAREHOLDERS
------------
1.1 ANNUAL MEETING. The annual meeting of the shareholders of
Oregon Baking Company (the "Corporation") shall be held on the last Friday in
the month of April in each year, unless a different date and time are fixed by
the Board of Directors and stated in the notice of the meeting. If the day fixed
for the annual meeting is a legal holiday, the meeting shall be held on the next
succeeding business day. The failure to hold an annual meeting at the time
stated herein shall not affect the validity of any corporate action.
(a) The Chairman of the Board or, in the absence of that
officer, such other officer of the corporation as shall be designated by the
Board of Directors, shall call the annual meeting to order and shall act as
presiding officer thereof. Unless otherwise determined by the Board of Directors
prior to the meeting, the presiding officer shall also have the authority in his
or her sole discretion to regulate the conduct of the annual meeting, including,
without limitation, by imposing restrictions on the persons (other than
shareholders of the corporation or their proxies) who may attend the meeting.
(b) At the annual meeting of the shareholders, only such
matters as shall have been properly brought before the meeting shall be
considered and acted upon. To be properly brought before an annual meeting, a
matter must be (i) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (ii) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (iii) otherwise properly brought before the meeting by a
shareholder (A) who is a shareholder of record on the date of the giving of
notice for such meeting and on the record date for the determination of
shareholders entitled to vote at such meeting and (B) who complies with the
notice procedures set forth in this Section 1.1.
(c) In addition to any other applicable requirements,
including, without limitation, requirements relating to solicitations of proxies
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for
any matter to be properly brought before the annual meeting by a shareholder,
the shareholder must have given timely notice thereof in the proper written form
to the Secretary of the corporation. To be timely, a shareholder notice must be
received at the principal executive offices of the corporation not less than 60
days prior to the anniversary date of the preceding annual meeting of
shareholders. To be in proper written form a shareholder's notice must set forth
as to each matter the shareholder proposes to bring before the annual meeting
BYLAWS - Page 1
<PAGE>
(i) a brief description of the matter proposed to be brought before the annual
meeting, (ii) the name and record address of such shareholder, (iii) the class
or series and number of shares of capital stock of the corporation which are
owned beneficially or of record by such shareholder, and (iv) any material
interest of the shareholder in the matter. Information that is required to be
provided in connection with shareholder nominations for election of directors is
specified in Section 2.15 of these Bylaws. Nothing in this Section 1.1 shall
limit or otherwise restrict the Chairman, or such other officer designated by
the Board of Directors, from refusing to allow a shareholder matter to be
brought before the annual meeting of the shareholders that may properly be
excluded under Exchange Act Rule 14a-8 and that (u) is not a proper subject for
action by shareholders; (v) would, if implemented require the corporation to
violate state or federal law; (w) relates to a personal claim or grievance of a
shareholder; (x) deals with matters relating to the conduct of the ordinary
business operations of the corporation; (y) is not significantly related to the
corporation's business; (z) relates to a proposal that the corporation lacks the
power or authority to implement; or (aa) that may otherwise be excluded under
state law.
(d) No other matter shall be considered or acted upon at an
annual meeting except in accordance with the procedures set forth in this
Section 1.1. The presiding officer at any annual meeting shall determine whether
any matter was properly brought before the meeting in accordance with the
provisions of this section. If the presiding officer should determine that any
matter has not been properly brought before the meeting, he or she shall so
declare at the meeting and any such matter shall not be considered or acted
upon.
(e) Nothing in this Section 1.1 shall require the corporation
to include any shareholder proposal in the notice of meeting or proxy materials
for the annual meeting, except as otherwise required by the Exchange Act and
rules thereunder.
1.2 SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the President or by the Board of Directors and shall be called by the
President (or in the event of absence, incapacity or refusal of the President,
by the Secretary or any other officer) at the request of the holders of not less
than one-tenth of all the outstanding shares of the corporation entitled to vote
at the meeting. The requesting shareholders shall sign, date and deliver to the
Secretary a written demand describing the purpose or purposes for holding the
special meeting.
1.3 PLACE OF MEETINGS. Meetings of the shareholders shall be held
at the principal business office of the corporation or at such other place,
within or without the State of Oregon, as may be determined by the Board of
Directors.
1.4 NOTICE OF MEETINGS. Written notice stating the date, time and
place of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called shall be mailed to each shareholder
entitled to vote at the meeting to the shareholder's address shown in the
corporation's current record of shareholders, with postage thereon prepaid, not
less than 10 nor more than 60 days before the date of the meeting.
1.5 WAIVER OF NOTICE. A shareholder may at any time waive any
notice required by law, the Articles of Incorporation or these Bylaws. The
waiver must be in writing, be signed by the shareholder entitled to the notice
BYLAWS - Page 2
<PAGE>
and be delivered to the corporation for inclusion in the minutes for filing with
the corporate records. A shareholder's attendance at a meeting waives objection
to lack of notice or defective notice of the meeting, unless the shareholder at
the beginning of the meeting objects to holding the meeting or transacting
business at the meeting. The shareholder's attendance also waives object to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
1.6 RECORD DATE.
(a) For the purpose of determining the shareholders entitled to
notice of a shareholders' meeting, to demand a special meeting or to vote or to
take any other action, the Board of Directors of the corporation may fix a
future date as the record date for any such determination of shareholders, such
date in any case to be not more than 70 days before the meeting or action
requiring a determination of shareholders. The record date shall be the same for
all voting groups.
(b) A determination of shareholders entitled to notice of or to
vote at a shareholders' meeting is effective for any adjournment of the meeting
unless the Board of Directors fixes a new record date, which it must do if the
meeting is adjourned to a date more than 120 days after the date fixed for the
original meeting.
(c) If a court orders a meeting adjourned to a date more than
120 days after the date fixed for the original meeting, it may provide that the
original record date continue in effect or it may fix a new record date.
1.7 SHAREHOLDERS' LIST FOR MEETING. After fixing a record date for
a meeting, the Secretary of the corporation shall prepare an alphabetical list
of the names of all its shareholders entitled to notice of a shareholders'
meeting. The list must be arranged by voting group and within each voting group
by class or series of shares and show the address of and number of shares held
by each shareholder. The shareholders' list must be available for inspection by
any shareholder, beginning two business days after notice of the meeting is
given for which the list was prepared and continuing through the meeting, at the
corporation's principal office or at a place identified in the meting [sic]
notice in the city where the meeting will be held. The corporation shall make
the shareholders' list available at the meeting, and any shareholder or the
shareholder's agent or attorney is entitled to inspect the list at any time
during the meeting or any adjournment. Refusal or failure to prepare or make
available the shareholder's list does not affect the validity of action taken at
the meeting.
1.8 QUORUM; ADJOURNMENT. Shares entitled to vote as a separate
voting group may take action on a matter at a meeting only if a quorum of those
shares exists with respect to that matter. A majority of the votes entitled to
be cast on the matter by the voting group constitutes a quorum of that voting
group for action on that matter. A majority of shares represented at the
meeting, although less than a quorum, may adjourn the meeting from time to time
to a different time and place without further notice to any shareholder of any
BYLAWS - Page 3
<PAGE>
adjournment; provided, however, that if the meeting is adjourned more than 120
days after the originally scheduled meeting date, then a new notice of the
meeting shall be required. At such adjourned meeting at which a quorum is
present, any business may be transacted that might have been transacted at the
meeting originally held. Once a share is represented for any purpose at a
meeting, it shall be deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is set
for the adjourned meeting.
1.9 VOTING REQUIREMENTS; ACTION WITHOUT MEETING; MEETING BY
TELEPHONE CONFERENCE.
(a) If a quorum exists, action on a matter, other than the
election of directors, is approved if the votes cast by the shares entitled to
vote favoring the action exceed the votes cast opposing the action, unless a
greater number of affirmative votes is required by law or the Articles of
Incorporation.
(b) Action required or permitted by law to be taken at a
shareholders' meeting may be taken without a meeting if the action is taken by
all the shareholders entitled to vote on the action. The action must be
evidenced by one or more written consents describing the action taken, signed by
all the shareholders entitled to vote on the action and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
Action taken under this section is effective when the last shareholder signs the
consent, unless the consent specified an earlier or later effective date. If the
law requires that notice of proposed action be given to nonvoting shareholders
and the action is to be taken by unanimous consent of the voting shareholders,
the corporation must give its nonvoting shareholders written notice of the
proposed action at least 10 days before the action is taken, the notice must
contain or be accompanied by the same material that, under the Oregon Business
Corporation Act, would have been required to be sent to nonvoting shareholders
in a notice of meeting at which the proposed action would have been submitted to
the shareholders for action.
(c) Shareholder meetings by conference telephone or similar
communications equipment may be held in the manner and with the effect provided
for in the Oregon Business Corporation Act.
1.10 Proxies.
(a) A shareholder may vote shares in person or by proxy by
signing an appointment, either personally or by the shareholder's
attorney-in-fact. An appointment of a proxy shall be effective when received by
the Secretary or other officer of the corporation authorized to tabulate votes.
An appointment is valid for 11 months unless a longer period is provided in the
appointment form. An appointment is revocable by the shareholder unless the
appointment form conspicuously states that it is irrevocable and the appointment
is coupled with an interest that has not been extinguished.
(b) The death or incapacity of the shareholders appointing a
proxy shall not affect the right of the corporation to accept the proxy's
authority unless notice of the death or incapacity is received by the Secretary
BYLAWS - Page 4
<PAGE>
or other officer authorized to tabulated votes before the proxy exercises the
proxy's authority under the appointment.
1.11 CORPORATION'S ACCEPTANCE OF VOTES.
(a) If the name signed on a vote, consent, waiver or proxy
appointment corresponds to the name of a shareholder, the corporation, if acting
in good faith, is entitled to accept the vote, consent, waiver or proxy
appointment and give it effect as the act of the shareholder. (b) If the name
signed on a vote, consent, waiver or proxy appointment does not correspond to
the name of its shareholder, the corporation, if acting in good faith, is
nevertheless entitled to accept the vote, consent, waiver or proxy appointment
and give it effect as the act of the shareholder if:
(i) The shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity;
(ii) The name signed purports to be that of an
administrator, executor, guardian or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver or
proxy appointment;
(iii) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver or proxy appointment;
(iv) The name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's authority to
sign for the shareholder has been presented with respect to the vote, consent,
waiver or proxy appointment; or
(v) Two or more persons are the shareholder as covenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all
co-owners.
(c) The corporation is entitled to reject a vote, consent,
waiver or proxy appointment if the Secretary or other officer or agent
authorized to tabulate votes, acting in good faith, has reasonable basis for
doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
(d) The shares of a corporation are not entitled to vote if
they are owned, directly or indirectly, by a second corporation, and the first
BYLAWS - Page 5
<PAGE>
corporation owns, directly or indirectly, a majority of the shares entitled to
vote for directors of the second corporation, but a corporation may vote any
shares, including its own shares, held by it in a fiduciary capacity.
(e) The corporation and its officer or agent who accepts or
rejects a vote, consent, waiver or proxy appointment in good faith and in
accordance with the standards of this provision are not liable in damages to the
shareholder for the consequences of the acceptance or rejection. Corporate
action based on the acceptance or rejection of a vote, consent, waiver or proxy
appointment under this provision is valid unless a court of competent
jurisdiction determines otherwise.
ARTICLE II
BOARD OF DIRECTORS
------------------
2.1 DUTIES OF BOARD OF DIRECTORS. All corporate powers shall be
exercised by or under the authority of and the business and affairs of the
corporation shall be managed by its Board of Directors.
2.2 NUMBER, ELECTION AND QUALIFICATION. The number of directors of
the corporation shall be at least one (1). The number of directors shall
initially be fixed by the incorporator of the corporation, and thereafter, the
number of directors shall be fixed from time to time by the shareholders or the
Board of Directors pursuant to a resolution adopted at a meeting of shareholders
or the Board of Directors. The directors shall hold office until the next annual
meeting of shareholders, unless the terms are staggered in accordance with the
Articles of Incorporation, and until their successors shall have been elected
and qualified, until earlier death, resignation or removal or until there is a
decrease in the number of directors. If the Board of Directors is classified,
except as otherwise provided in the Articles of Incorporation, directors so
elected shall hold office until the third annual meeting following their
election and until their successors shall be duly elected and qualified or until
their earlier death, resignation or removal. Directors need not be residents of
the State of Oregon or shareholders of the corporation. A decrease in the number
of directors shall not shorten the term of any incumbent director.
2.3 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of Oregon, for the holding of additional regular meetings without notice other
than the resolution.
2.4 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or by a majority of the
directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Oregon, as the place for holding any special meeting of the Board of Directors
called by them.
BYLAWS - Page 6
<PAGE>
2.5 NOTICE. Notice of the date, time and place of any special
meeting of the Board of Directors shall be given at lest two days prior to the
meeting by any means provided by law. If mailed, notice shall be deemed to be
given upon deposit in the United States mail addressed to the director at the
director's business address, with postage thereon prepaid. If by telegram,
notice shall be deemed to be given when the telegram is delivered to the
telegraph company. Notice by all other means shall be deemed to be given when
received by the director or a person at the director's business or residential
address whom the person giving notice reasonably believes will deliver or report
the notice to the director within 24 hours. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, or the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
2.6 WAIVER OF NOTICE. A director may at any time waive any notice
required by law, the Articles of Incorporation or these Bylaws. Unless a
director attends or participates in a meeting, a waiver must be in writing, must
be signed by the director entitled to notice, must specify the meeting or which
notice is waived and must be filed with the minutes or corporate records.
2.7 QUORUM; MAJORITY VOTE. A majority of the number of directors
fixed by or in accordance with Section 2.2 of this Article II shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors.
The act of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors, unless a different number
is provided by law, the Articles of Incorporation or these Bylaws.
2.8 MEETING BY TELEPHONE CONFERENCE; ACTION WITHOUT MEETING.
(a) Members of the Board of directors may hold a board meeting
by conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in
such a meeting shall constitute presence in person at the meeting.
(b) Any action that is required or permitted to be taken by the
directors at a meeting may be taken without a meeting if a consent in writing
setting forth the action so taken shall be signed by all of the directors
entitled to vote on the matter. The action shall be effective on the date when
the last signature is placed on the consent or at such earlier or later time as
is set forth therein. Such consent, which shall have the same effect as a
unanimous vote of the directors, shall be filed with the minutes of the
corporation.
2.9 VACANCIES. Any vacancy, including a vacancy resulting from
an increase in the number of directors, occurring on the Board of Directors may
be filled by the shareholders, the Board of Directors or the affirmative vote of
a majority of the remaining directors if less than a quorum of the Board of
Directors or by a sole remaining director. If the vacant office is filled by the
shareholders and was held by a director elected by a voting group of
BYLAWS - Page 7
<PAGE>
shareholders, then only the holders of shares of that voting group are entitled
to vote to fill the vacancy. Any directorship not so filled by the directors
shall be filled by election at an annual meeting or at a special meeting of
shareholders called for that purpose. A director elected to fill a vacancy shall
be elected to serve until the next annual meeting of shareholders and until a
successor shall be elected and qualified. A vacancy that will occur at a
specific late date, by reason of a resignation or otherwise, may be filled
before the vacancy occurs, and the new director shall take office when the
vacancy occurs.
2.10 COMPENSATION. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
2.11 PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors or a committee of the Board of
Directors shall be presumed to have assented to the action taken (a) unless the
director's dissent to the action is entered in the minutes of the meeting, (b)
unless a written dissent to the action is filed with the person acting as the
secretary of the meeting before the adjournment thereof or forwarded by
certified or registered mail to the Secretary of the corporation immediately
after the adjournment of the meeting or (c) unless the director objects at the
meeting to the holding of the meeting or transacting business at the meeting.
The right to dissent shall not apply to a director who voted in favor of the
action.
2.12 DIRECTOR CONFLICT OF INTEREST.
(a) A transaction in which a director of the corporation has a
direct or indirect interest shall be valid notwithstanding the director's
interest in the transaction if the material facts of the transaction and the
director's interest are disclosed or known to the Board of Directors or a
committee thereof and it authorizes, approves or ratifies the transaction by a
vote or consent sufficient for the purpose without counting the votes or
consents of directors with direct or indirect interest in the transaction; or
the material facts of the transaction and the director's interest are disclosed
or known to shareholders entitled to vote and they, voting as a single group,
authorize, approve or ratify the transaction by a majority vote; or the
transaction is fair to the corporation.
(b) A conflict of interest transaction may be authorized,
approved, or ratified if it receives the affirmative vote of a majority of
directors who have no direct or indirect interest in the transaction. If such a
majority of directors vote to authorize, approve or ratify the transaction, a
quorum is present for the purpose of taking action.
(c) A conflict of interest transaction may be authorized,
approved or ratified by a majority vote of shareholders entitled to vote
thereon. Shares owned by or voted under the control of a director or an entity
controlled by a director who has a director or indirect interest in the
transaction are entitled to vote with respect to a conflict of interest
BYLAWS - Page 8
<PAGE>
transaction. A majority of the shares, whether or not present, that are entitled
to be counted in a vote on the transaction constitutes a quorum for the purpose
of authorizing, approving or ratifying the transaction.
(d) A director has an indirect interest in a transaction if
another entity in which the director has a material financial interest or in
which the director is a general partner is a party to the transaction or another
entity of which the director is a director, officer or trustee is a party to the
transaction and the transaction is or should be considered by the Board of
Directors of the corporation.
2.13 REMOVAL. The shareholders may remove one or more directors
with our without cause at a meeting called expressly for that purpose, unless
the Articles of Incorporation provide for removal for cause only. If a director
is elected by a voting group of shareholders, only those shareholders may
participate in the vote to remove the director.
2.14 RESIGNATION. Any director may resign by delivering written
notice to the Board of Directors, its chairperson or the corporation. Such
resignation shall be effective (a) on receipt, (b) five days after its deposit
in the United States mails, if mailed postpaid and correctly addressed, or (c)
on the date shown on the return receipt, if sent by registered or certified
mail, return receipt requested, and the receipt is signed by addressee, unless
the notice specified a later effective date. Once delivered, a notice of
resignation is irrevocable unless revocation is permitted by the Board of
Directors.
2.15 NOMINATION OF DIRECTORS. (a) Only persons who are nominated in
accordance with the procedures in this Section 2.15 shall be eligible for
election as directors. If the presiding officer at an annual meeting of the
shareholders determines that a nomination was not made in accordance with the
procedures set forth in this Section 2.15, the presiding officer shall declare
to the meeting that the nomination was defective and such defective nomination
shall be disregarded. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of shareholders: (i) by or at the
direction of the Board of Directors; or (ii) by any shareholder of the
corporation (A) who is a shareholder of record on the date of the giving of
notice provided for in this Section 2.15 and on the record date for the
determination of shareholders entitled to vote at such meeting, and (B) who
complies with the notice procedures in this Section 2.15. In addition to any
other applicable requirements, for a nomination to be made by a shareholder,
such shareholder must have given timely notice thereof in proper written form to
the Secretary.
(b) To be timely, a shareholder's notice must be received by
the Secretary at the principal executive offices of the corporation not less
than 60 days prior to the anniversary date of the preceding annual meeting of
shareholders.
(c) To be in proper written form, a shareholder's notice to the
Secretary must: (i) set forth as to each person whom the shareholder proposes to
nominate for election as a director (A) the name, age, business address and
residence address of the nominee, (B) the principal occupation or employment of
the nominee, (C) the class or series and number of shares of capital stock of
the corporation which are owned beneficially or of record by the nominee, and
BYLAWS - Page 9
<PAGE>
(D) any other information relating to the nominee that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act, and the rules and regulations promulgated
thereunder; and (ii) set forth as to the shareholder giving the notice (A) the
name and record address of such shareholder, (B) the class or series and number
of shares of capital stock of the corporation which are owned beneficially or of
record by such shareholder, (C) a description of all arrangements or
understandings between such shareholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination or
nominations are to be made by such shareholder, (D) a representation that such
shareholder intends to appear in person or by proxy at the annual meeting to
nominate the persons named in the notice and (E) any other information relating
to such shareholder that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the Exchange Act and the
rules and regulations promulgated thereunder. Such notice must be accompanied by
a signed written consent of each proposed nominee to being named as a nominee
and to serve as a director if elected.
ARTICLE III
OFFICERS
--------
3.1 ENUMERATION. The officers of the corporation shall consist of a
President and a Secretary and such other officers with such other titles as the
Board of Directors shall determine, including without limitation a Chairman of
the Board, a Vice-Chairman of the Board, a Treasurer, and one or more Vice
Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of
Directors may appoint such other officers as it may deem appropriate, and, if
authorized by the Board, a duly appointed officer may appoint one or more
officers or assistant officers.
3.2 ELECTION. The President and Secretary shall be elected annually
by the board of Directors at its first meeting following the annual meeting of
stockholders. Other officers may be appointed by the Board of Directors at such
meeting or at any other meeting.
3.3 QUALIFICATION. No officer need be a director, stockholder or
Oregon resident. Any two or more offices may be held by the same person.
3.4 TENURE. Except as otherwise provided by law, by the Articles of
Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 RESIGNATION AND REMOVAL. An officer may resign at any time by
delivering notice to the corporation. A resignation is effective on receipt
unless the notice specified a later effective date. If the corporation accepts a
specified later effective date the Board of Directors may fill the pending
BYLAWS - Page 10
<PAGE>
vacancy before the effective date but the successor may not take office until
the effective date. Once delivered, a notice of resignation is irrevocable
unless revocation is permitted by the Board of Directors. Any officer appointed
by the Board of Directors may be removed at any time with or without cause.
Appointment of an officer shall not of itself create contract rights. Removal or
resignation of an officer shall not affect the contract rights, if any, of the
corporation or the officer.
3.6 VACANCIES. The Board of Directors may fill any vacancy
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President and Secretary. Each such successor shall hold office for the unexpired
term of his predecessor and until his successor is elected and qualified, or
until his earlier death, resignation or removal.
3.7 CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD. If the
Board of Directors appoints a Chairman of the Board, he shall, when present,
president at all meetings of the Board of Directors. He shall perform such
duties and possess such powers as are usually vested in the office of the
Chairman of the Board or as may be vested in him by the Board of Directors. If
the Board of Directors appoints a Vice-Chairman of the Board, he shall, in the
absence or disability of the Chairman of the Board, perform the duties and
exercise the powers of the Chairman of the Board and shall perform such other
duties and possess such other powers as may from time to time be vested in him
by the Board of Directors.
3.8 PRESIDENT. The President shall be the chief executive officer
of the corporation. The President shall, subject to the direction of the board
of Directors, have general supervision and control of the business of the
corporation. Unless otherwise provided by the directors, he shall preside at all
meetings of the stockholders and of the Board of Directors (except as provided
in Section 3.7 above). The President shall perform such other duties and shall
have such other powers as the Board of Directors may from time to time
prescribe.
3.9 VICE PRESIDENTS. Any Vice President shall perform such duties
and posses such powers as the Board of Directors or the President may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the President, the Vice president (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 SECRETARY AND ASSISTANT SECRETARIes. The Secretary shall
perform such duties and shall have such powers as the Board of Directors or the
president may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
BYLAWS - Page 11
<PAGE>
and their addresses as required, to be custodian of corporate record and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 TREASURER AND ASSISTANT TREASURERS. If the Board of Directors
appoints a Treasurer, he shall perform such duties and shall have such powers as
may from time to time be assigned to him by the board of Directors or the
President. In addition, the Treasurer shall perform such duties and have such
powers as are incident to the office of treasurer, including without limitation
the duty and power to keep and be responsible for all funds and securities of
the corporation, to deposit funds of the corporation in depositories selected in
accordance with these Bylaws, to disburse such funds as ordered by the Board of
Directors, to make proper accounts of such funds, and to render as required by
the Board of Directors statements of all such transactions and of the financial
condition of the corporation.
Any Assistant Treasurer shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer (or if there shall be more than one, the
assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties ad exercise the powers of the Treasurer.
3.12 SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors, and no officer shall be prevented from
receiving such salary because the officer is also a director of the corporation.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
------------------------------------
4.1 GENERAL. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board of Directors, from time to
time appoint such committees as may be permitted by law. Each committee shall
consist of two or more members of the Board of Directors who shall serve at the
pleasure of the Board of Directors. Article II these Bylaws governing meetings,
actions without meeting, notice and waiver of notice, and quorum and voting
requirements of the Board of Directors apply to committees and their members as
well. Each committee shall have such powers and perform such duties as may be
prescribed by resolution or resolutions of the Board of Directors and these
Bylaws. Each committee shall keep a written record of all actions taken by it.
BYLAWS - Page 12
<PAGE>
In no event shall a committee have the powers denied to the Executive Committee
pursuant to Section 4.2 (a)-(h) below.
4.2 EXECUTIVE COMMITTEE. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, appoint an
Executive Committee consisting of two or more members of the Board of Directors.
The Executive Committee, to the extent permitted by law, shall have and may
exercise all powers of the Board of Directors in the management of the business
and affairs of the corporation; PROVIDED, HOWEVER, that, except as specifically
permitted by the Oregon Business Corporation Act (the "Act"), the Executive
Committee shall not have the power or authority to:
(a) authorize distributions in respect of the capital stock of
the corporation;
(b) approve or propose to shareholders actions that the Act
requires to be approved by shareholders;
(c) fill vacancies on the Board of Directors or on any of its
committees;
(d) amend the Articles (except that the Executive Committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of Preferred Stock adopted by the Board of Directors, fix the
designations and any of the relative rights, preferences and limitations of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation);
(e) adopt, amend or repeal these Bylaws;
(f) approve a plan of merger not requiring shareholder
approval;
(g) authorize or approve reacquisition of shares, except within
limits prescribed by the Board of Directors; or
(h) authorize or approve the issuance or sale or contract for
sale of shares or determine the designation and relative rights, preferences and
limitations of a class or series of shares except as provided in Section 4.2(d)
above.
4.3 AUDIT COMMITTEE. An Audit Committee of the corporation,
composed of at least two members of the Board of Directors, none of whom shall
be an officer or employee of the corporation or any of its subsidiaries, may be
appointed by the Board of Directors. Directors who are appointed to the Audit
Committee shall be free of any relationship that, in the opinion of the Board of
Directors, would interfere with the exercise of independent judgment as a
committee member. The duties of the Audit Committee shall include, in addition
to such other duties as may be specified by resolution of the Board of Directors
from time to time, the following:
BYLAWS - Page 13
<PAGE>
(a) review and make recommendations to the Board of Directors
with respect to the engagement or discharge of the corporation's independent
auditors and the terms of the engagement;
(b) review the policies and procedures of the corporation and
management with respect to maintaining the corporation's books and records; and
(c) review with the independent auditors, upon completion of
their audit, the results of the auditing engagement and any recommendations the
auditors may have with respect to the corporation's financial, accounting or
auditing systems.
The Audit Committee is authorized to employ such experts and personnel,
including those who are already employed or engaged by the corporation, as the
Audit Committee may deem to be reasonably necessary to enable it to ably perform
its duties and satisfy its responsibilities.
4.4 COMPENSATION COMMITTEE. A Compensation Committee of the
corporation, composed of at least two members of the Board of Directors, none of
whom shall be an officer or employee of the corporation or any of its
subsidiaries, may be appointed by the Board of Directors. The duties of the
Compensation Committee shall include, in addition to such other duties as may be
specified by resolution of the Board of Directors from time to time, the
following:
(a) determine salaries and bonuses for elected officers of the
corporation, and prepare such reports with respect thereto as may be required by
law;
(b) consider, review and grant stock options and other
securities under the corporation's stock incentive plans, if any, and administer
such plans; and
(c) consider matters of director compensation, benefits and
other forms of remuneration.
The Compensation Committee is authorized to employ such experts and personnel,
including those who are already employed or engaged by the corporation, as the
Compensation Committee may deem to be reasonably necessary to enable it to ably
perform its duties and satisfy its responsibilities.
4.5 TERM. The members of all committees of the Board of Directors
shall serve as such members at the pleasure of the Board of Directors. The Board
of Directors may at any time and for any reason remove any individual committee
member, and the Board of Directors may fill any committee vacancy created by
death, resignation, removal or increase in the number of members of the
committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
BYLAWS - Page 14
<PAGE>
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
ARTICLE V
ISSUANCE OF SHARES
------------------
5.1 CERTIFICATES FOR SHARES.
(a) Certificates representing shares of the corporation shall
be in form determined by the Board of Directors. Such certificates shall be
signed, either manually or in facsimile, by two officers of the corporation, at
least one of whom shall be the President or a Vice President, and may be sealed
with the seal of the corporation or a facsimile thereof. All certificates for
shares shall be consecutively numbered or otherwise identified.
(b) Every certificate for shares of stock that are subject to
any restriction on transfer pursuant tot he [sic] Articles of Incorporation, the
Bylaws, applicable securities laws, agreements among or between shareholders or
any agreement to which the corporation is a party shall have conspicuously noted
on the face or back of the certificate either the full text of the restriction
or a statement of the existence of such restriction and that the corporation
retains a copy of the restriction. Every certificate issued when the corporation
is authorized to issue more than one class or series of stock shall set forth on
its face or back either the full text of the designations, relative rights,
preferences and limitations of the shares of each class and series authorized to
be issued an the authority of the Board of Directors to determine variations for
future series or a statement of the existence of such designations, relative
rights, preferences and limitations and a statement that the corporation will
furnish a copy thereof to the holder of such certificate upon written request
and without charge.
(c) The name and mailing address of the person to whom the
share represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the corporation. Each
shareholder shall have the duty to notify the corporation of his or her mailing
address. All certificates surrendered to the corporation for transfer shall be
canceled, and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that in case of a lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the corporation as the Board of
Directors prescribes.
5.2 TRANSFER OF SHARES. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by the holder's legal representative, who shall furnish proper
evidence of authority to transfer, or by the holder's attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the corporation. The person in whose name shares stand on the books of the
corporation shall be deemed by the corporation to be the owner thereof for all
purposes.
BYLAWS - Page 15
<PAGE>
5.3 TRANSFER AGENT AND REGISTRAR. The Board of Directors may from
time to time appoint one or more Transfer Agents and one or more Registrars for
the shares of the corporation, with such powers and duties as the Board of
Directors determines by resolution. The signatures of officers upon a
certificate may be facsimiles if the certificate is manually signed on behalf of
a Transfer Agent or by a Registrar other than the corporation itself or an
employee of the corporation.
5.4 OFFICER CEASING TO ACT. If the person who signed a share
certificate, either manually or in facsimile, no longer holds office when the
certificate is issued, the certificate is nevertheless valid.
ARTICLE VI
INDEMNIFICATION
---------------
6.1 DIRECTORS AND OFFICERS.
(a) INDEMNITY IN THIRD-PARTY PROCEEDINGS. To the fullest extent
permitted by law, the Corporation shall indemnify its directors and officers in
accordance with the provisions of this Section 6.1(a) if the director or officer
was or is a party to, or is threatened to be made a party to, any proceeding
(other than a proceeding by or in the right of the Corporation to procure a
judgment in its favor), against all expenses, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by the director or officer in
connection with such proceeding, if the director or officer acted in good faith
and in a manner the director or officer reasonably believed was in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, the director or officer, in addition, had no
reasonable cause to believe that the director's or officer's conduct was
unlawful; PROVIDED, HOWEVER, that the director or officer shall not be entitled
to indemnification under this Section 6.1(a): (i) in connection with any
proceeding charging improper personal benefit to the director or officer in
which the director or officer is adjudged liable on the basis that personal
benefit was improperly received by the director or officer, unless and only to
the extent that the court conducting such proceeding or any other court of
competent jurisdiction determines upon application that, despite such
adjudication of liability, the director or officer is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances of the
case, or (ii) in connection with any proceeding (or part of any proceeding)
initiated by such person or any proceeding by such person against the
Corporation or its directors, officers, employees or other agents unless (A) the
Corporation is expressly required by law to make the indemnification, (B) the
proceeding was authorized by the Board of Directors, (C) the director or officer
initiated the proceeding to enforce his or her right to indemnification or
advances and the director or officer is successful in whole or in part in such
proceeding, or (D) such indemnification is provided by the Corporation, in its
sole discretion, pursuant to the powers vested in the Corporation under the Act.
(b) INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE
CORPORATION. To the fullest extent permitted by law, the Corporation shall
indemnify its directors and officers in accordance with the provisions of this
Section 6.1(b) if the director or officer was or is a party to, or is threatened
to be made a party to, any proceeding by or in the right of the Corporation to
procure a judgment in its favor, against all expenses actually and reasonably
incurred by the director or officer in connection with the defense or settlement
of such proceeding if the director or officer acted in good faith and in a
manner the director or officer reasonably believed was in or not opposed to the
best interests of the Corporation; PROVIDED, HOWEVER, that the director or
BYLAWS - Page 16
<PAGE>
officer shall not be entitled to indemnification under this Section 6.1(b): (i)
in connection with any proceeding in which the director or officer has been
adjudged liable to the Corporation, unless and only to the extent that the court
conducting such proceeding or any other court of competent jurisdiction
determines upon application that, despite such adjudication of liability, the
director or officer is fairly and reasonably entitled to indemnification for
such expenses in view of all the relevant circumstances of the case, or (ii) in
connection with any proceeding (or part thereof) initiated by such person or any
proceeding by such person against the Corporation or its directors, officers,
employees or other agents unless (A) the Corporation is expressly required by
law to make the indemnification, (B) the proceeding was authorized by the Board
of Directors, (C) the director or officer initiated the proceeding to enforce
his or her right to indemnification or advances and the director or officer is
successful in whole or in part in such proceeding, or (D) such indemnification
is provided by the Corporation, in its sole discretion, pursuant to the powers
vested in the Corporation under the Act.
6.2 EMPLOYEES AND OTHER AGENTS. The Corporation may, to the extent
authorized from time to time by the Board of Directors, provide rights to
indemnification and to the advancement of expenses to employees and agents of
the Corporation similar to those conferred in this Article VI to directors and
officers of the Corporation.
6.3 GOOD FAITH.
(a) For purposes of any determination under this Article VI, a
director or officer shall be deemed to have acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe that his or her conduct was unlawful, if his
or her action was based on information, opinions, reports and statements,
including financial statements and other financial data, in each case prepared
or presented by:
(i) one or more officers or employees of the Corporation
whom the director or officer believed to be reliable and competent in the
matters presented;
(ii) counsel, independent accountants or other persons as
to matters which the director or officer believed to be within such
person's professional or expert competence; or
(iii) with respect to a director, a committee of the Board
upon which such director does not serve, as to matters within such
committee's designated authority, which committee the director believes
to merit confidence;
BYLAWS - Page 17
<PAGE>
so long as, in each case, the director or executive officer acts without
knowledge that would cause such reliance to be unwarranted.
(b) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of NOLO CONTENDERE or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he or she reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal
proceeding, that he or she had reasonable cause to believe that his or her
conduct was unlawful.
(c) The provisions of this Section 6.3 shall not be deemed to
be exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the Act.
6.4 ADVANCEMENT OF EXPENSES.
The Corporation may, at the sole discretion of the Corporation's
Board of Directors, pay the expenses incurred by its directors or officers in
any proceeding (other than a proceeding brought for an accounting of profits
made from the purchase and sale by the director or officer of securities of the
Corporation within the meaning of Section 16(b) of the Exchange Act, or similar
provision of any state statutory law or common law) in advance of the final
disposition of the proceeding at the written request of the director or officer,
if the director or officer: (a) furnishes the Corporation a written affirmation
of the director's or officer's good faith belief that the director or officer is
entitled to be indemnified under this Article VI, and (b) furnishes the
Corporation a written undertaking to repay the advance to the extent that it is
ultimately determined that the director or officer is not entitled to be
indemnified by the Corporation. Such undertaking shall be an unlimited general
obligation of the director or officer but need not be secured. Advances may be
made without regard to the director's or officer's ability to repay the amount
advanced and without regard to the director's or officer's ultimate entitlement
to indemnification under this Article VI. The Corporation may establish a trust,
escrow account or other secured funding source for the payment of advances made
and to be made pursuant to this Section 6.4 or of other liability incurred by
the director or officer in connection with any proceeding.
6.5 NON-EXCLUSIVITY OF RIGHTS.
The rights conferred on any person by this Article VI shall not be
exclusive of any other right which such person may have or hereafter acquire
under any statute, provision of the Articles, Bylaws, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
office. The Corporation is specifically authorized to enter into individual
contracts with any or all of its directors, officers, employees or agents
respecting indemnification and advances, to the fullest extent not prohibited by
the Act.
BYLAWS - Page 18
<PAGE>
6.6 SURVIVAL OF RIGHTS.
The rights conferred on any person by this Article VI shall
continue as to a person who has ceased to be a director, officer, employee or
other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
6.7 INSURANCE.
To the fullest extent permitted by law, the Corporation, upon
approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this Article VI.
6.8 AMENDMENTS.
Any repeal or modification of this Article VI shall only be
prospective and shall not affect the rights under this Article VI in effect at
the time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any director, officer, employee or agent of the
Corporation.
6.9 SAVINGS CLAUSE.
If this Article VI or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director and officer to the fullest extent not
prohibited by any applicable portion of this Article VI that shall not have been
invalidated, or by any other applicable law.
6.10 CERTAIN DEFINITIONS.
For the purposes of this Article VI, the following definitions
shall apply:
(a) The term "proceeding" shall include any threatened, pending
or completed action, suit or proceeding, whether formal or informal, whether
brought in the right of the Corporation or otherwise, and whether of a civil,
criminal, administrative or investigative nature, in which the director or
officer may be or may have been involved as a party, witness or otherwise, by
reason of the fact that the director or officer is or was a director or officer
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, whether or not serving in
such capacity at the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under this Article VI.
(b) The term "expenses" includes, without limitation thereto,
expenses of investigations, judicial or administrative proceedings or appeals,
attorney, accountant and other professional fees and disbursements and any
expenses of establishing a right to indemnification under this Article VI, but
shall not include amounts paid in settlement by the director or officer or the
amount of judgments or fines against the director or officer.
BYLAWS - Page 19
<PAGE>
(c) References to "other enterprise" include, without
limitation, employee benefit plans; references to "fines" include, without
limitation, any excise taxes assessed on a person with respect to any employee
benefit plan; references to "serving at the request of the Corporation" include,
without limitation, any service as a director, officer, employee or agent which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants, or its
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
VI.
(d) References to "the Corporation" shall include, in addition
to the resulting Corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer or employee of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under this
Article VI with respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its separate
existence had continued.
(e) The meaning of the phrase "to the fullest extent permitted
by law" shall include, but not be limited to: (i) to the fullest extent
authorized or permitted by any amendments to or replacements of the Act adopted
after the date of this Article VI that increase the extent to which a
corporation may indemnify its directors and officers, and (ii) to the fullest
extent permitted by the provision of the Act that authorizes or contemplates
additional indemnification by agreement, or the corresponding provision of any
amendment to or replacement of the Act.
6.11 NOTIFICATION AND DEFENSE OF CLAIM.
As a condition precedent to indemnification under this Article VI,
not later than 30 days after receipt by the director or officer of notice of the
commencement of any proceeding, the director or officer shall, if a claim in
respect of the proceeding is to be made against the Corporation under this
Article VI notify the Corporation in writing of the commencement of the
proceeding. The failure to properly notify the Corporation shall not relieve the
Corporation from any liability which it may have to the director or officer
unless the Corporation shall be shown to have suffered actual damages as a
result of such failure, or otherwise than under this Article VI. With respect to
any proceeding as to which the director or officer so notifies the Corporation
of the commencement:
(a) The Corporation shall be entitled to participate in the
proceeding at its own expense.
(b) Except as otherwise provided in this Section 6.11, the
Corporation may, at its option and jointly with any other indemnifying party
BYLAWS - Page 20
<PAGE>
similarly notified and electing to assume such defense, assume the defense of
the proceeding, with legal counsel reasonably satisfactory to the director or
officer. The director or officer shall have the right to use separate legal
counsel in the proceeding, but the Corporation shall not be liable to the
director or officer under this Article VI for the fees and expenses of separate
legal counsel incurred after notice from the Corporation of its assumption of
the defense, unless (i) the director or officer reasonably concludes that there
may be a conflict of interest between the Corporation and the director or
officer in the conduct of the defense of the proceeding, or (ii) the Corporation
does not use legal counsel to assume the defense of such proceeding. The
Corporation shall not be entitled to assume the defense of any proceeding
brought by or on behalf of the Corporation or as to which the director or
officer has made the conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to
indemnification from the Corporation, including the director or officer seeking
indemnification, are parties to any proceeding, the Corporation may require the
director or officer to use the same legal counsel as the other parties. The
director or officer shall have the right to use separate legal counsel in the
proceeding, but the Corporation shall not be liable to the director or officer
under this Article VI for the fees and expenses of separate legal counsel
incurred after notice from the Corporation of the requirement to use the same
legal counsel as the other parties, unless the director or officer reasonably
concludes that there may be a conflict of interest between the director or
officer and any of the other parties required by the Corporation to be
represented by the same legal counsel.
(d) The Corporation shall not be liable to indemnify the
director or officer under this Article VI for any amounts paid in settlement of
any proceeding effected without its written consent, which shall not be
unreasonably withheld. The director or officer shall permit the Corporation to
settle any proceeding that the corporation assumes the defense of, except that
the Corporation shall not settle any action or claim in any manner that would
impose any penalty or limitation on the director or officer without such
person's written consent.
6.12 EXCLUSIONS.
Notwithstanding any provision in this Article VI, the
Corporation shall not be obligated under this Article VI to make any
indemnification in connection with any claim made against any director or
officer: (a) for which payment is required to be made to or on behalf of the
director or officer under any insurance policy, except with respect to any
deductible amount, self-insured retention or any excess amount to which the
director or officer is entitled under this Article VI beyond the amount of
payment under such insurance policy; (b) if a court having jurisdiction in the
matter finally determines that such indemnification is not lawful under any
applicable statute or public policy; (c) in connection with any proceeding (or
part of any proceeding) initiated by the director or officer, or any proceeding
by the director or officer against the Corporation or its directors, officers,
employees or other persons entitled to be indemnified by the Corporation,
unless: (i) the Corporation is expressly required by law to make the
indemnification; (ii) the proceeding was authorized by the Board of Directors of
the Corporation; or (d) for an accounting of profits made from the purchase and
sale by the director or officer of securities of the Corporation within the
meaning of Section 16(b) of the Exchange Act, or similar provision of any state
statutory law or common law.
BYLAWS - Page 21
<PAGE>
6.13 SUBROGATION.
In the event of payment under this Article VI the Corporation shall
be subrogated to the extent of such payment to all of the rights of recovery of
the director or officer. The director or officer shall execute all documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Corporation effectively to bring suit to enforce such rights.
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS
----------------------------------------------
7.1 CONTRACTS. The Board of Directors may authorize any officer or
officers and agent or agents to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instance.
7.2 LOANS. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the board of Directors. Such authority may be
general or confined to specific instances.
7.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money and notes or other evidences of indebtedness issued in the name
of the corporation shall be signed by such officer or officers and agent or
agents of the corporation and in such manner a shall from time to time be
determined by resolution of the Board of Directors.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
8.1 SEAL. The seal of the corporation shall be circular in form and
shall have inscribed thereon the name of the corporation and the state of
incorporation and the words "Corporate Seal."
8.2 SEVERABILITY. Any determination that any provision of these
Bylaws is for any reason inapplicable, invalid, illegal or otherwise ineffective
shall not affect or invalidate any other provision of these Bylaws.
BYLAWS - Page 22
<PAGE>
ARTICLE IX
AMENDMENTS
----------
These Bylaws may be altered, amended or repealed ad new Bylaws may
be adopted by the Board of Directors at any regular or special meeting, subject
to repeal or change by action of the shareholders of the corporation.
BYLAWS - Page 23
BYLAWS
OF
OREGON BAKING COMPANY
* * * * *
ARTICLE I
SHAREHOLDERS
------------
1.1 ANNUAL MEETING. The annual meeting of the shareholders shall be
held on the last Friday in the month of April in each year, unless a different
date and time are fixed by the Board of Directors and stated in the notice of
the meeting. If the day fixed for the annual meeting is a legal holiday, the
meeting shall be held on the next succeeding business day. The failure to hold
an annual meeting at the time stated herein shall not affect the validity of any
corporate action.
1.2 SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the President or by the Board of Directors and shall be called by the
President (or in the event of absence, incapacity or refusal of the President,
by the Secretary or any other officer) at the request of the holders of not less
than one-tenth of all the outstanding shares of the corporation entitled to vote
at the meeting. The requesting shareholders shall sign, date and deliver to the
Secretary a written demand describing the purpose or purposes for holding the
special meeting.
1.3 PLACE OF MEETINGS. Meetings of the shareholders shall be held
at the principal business office of the corporation or at such other place,
within or without the State of Oregon, as may be determined by the Board of
Directors.
1.4 NOTICE OF MEETINGS. Written notice stating the date, time and
place of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called shall be mailed to each shareholder
entitled to vote at the meeting to the shareholder's address shown in the
corporation's current record of shareholders, with postage thereon prepaid, not
less than 10 nor more than 60 days before the date of the meeting.
1.5 WAIVER OF NOTICE. A shareholder may at any time waive any
notice required by law, the Articles of Incorporation or these Bylaws. The
waiver must be in writing, be signed by the shareholder entitled to the notice
and be delivered to the corporation for inclusion in the minutes for filing with
the corporate records. A shareholder's attendance at a meeting waives objection
to lack of notice or defective notice of the meeting, unless the shareholder at
<PAGE>
the beginning of the meeting objects to holding the meeting or transacting
business at the meeting. The shareholder's attendance also waives object to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
1.6 RECORD DATE.
(a) For the purpose of determining the shareholders entitled to
notice of a shareholders' meeting, to demand a special meeting or to vote or to
take any other action, the Board of Directors of the corporation may fix a
future date as the record date for any such determination of shareholders, such
date in any case to be not more than 70 days before the meeting or action
requiring a determination of shareholders. The record date shall be the same for
all voting groups.
(b) A determination of shareholders entitled to notice of or to
vote at a shareholders' meeting is effective for any adjournment of the meeting
unless the Board of Directors fixes a new record date, which it must do if the
meeting is adjourned to a date more than 120 days after the date fixed for the
original meeting.
(c) If a court orders a meeting adjourned to a date more than
120 days after the date fixed for the original meeting, it may provide that the
original record date continue in effect or it may fix a new record date.
1.7 SHAREHOLDERS' LIST FOR MEETING. After fixing a record date for
a meeting, the Secretary of the corporation shall prepare an alphabetical list
of the names of all its shareholders entitled to notice of a shareholders'
meeting. The list must be arranged by voting group and within each voting group
by class or series of shares and show the address of and number of shares held
by each shareholder. The shareholders' list must be available for inspection by
any shareholder, beginning two business days after notice of the meeting is
given for which the list was prepared and continuing through the meeting, at the
corporation's principal office or at a place identified in the meting notice in
the city where the meeting will be held. The corporation shall make the
shareholders' list available at the meeting, and any shareholder or the
shareholder's agent or attorney is entitled to inspect the list at any time
during the meeting or any adjournment. Refusal or failure to prepare or make
available the shareholder's list does not affect the validity of action taken at
the meeting.
1.8 QUORUM; ADJOURNMENT. Shares entitled to vote as a separate
voting group may take action on a matter at a meeting only if a quorum of those
shares exists with respect to that matter. A majority of the votes entitled to
be cast on the matter by the voting group constitutes a quorum of that voting
group for action on that matter. A majority of shares represented at the
meeting, although less than a quorum, may adjourn the meeting from time to time
to a different time and place without further notice to any shareholder of any
adjournment; provided, however, that if the meeting is adjourned more than 120
days after the originally scheduled meeting date, then a new notice of the
meeting shall be required. At such adjourned meeting at which a quorum is
2
<PAGE>
present, any business may be transacted that might have been transacted at the
meeting originally held. Once a share is represented for any purpose at a
meeting, it shall be deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is set
for the adjourned meeting.
1.9 VOTING REQUIREMENTS; ACTION WITHOUT MEETING; MEETING BY
TELEPHONE CONFERENCE.
(a) If a quorum exists, action on a matter, other than the
election of directors, is approved if the votes cast by the shares entitled to
vote favoring the action exceed the votes cast opposing the action, unless a
greater number of affirmative votes is required by law or the Articles of
Incorporation.
(b) Action required or permitted by law to be taken at a
shareholders' meeting may be taken without a meeting if the action is taken by
all the shareholders entitled to vote on the actin. The action must be evidenced
by one or more written consents describing the action taken, signed by all the
shareholders entitled to vote on the action and delivered to the corporation for
inclusion in the minutes or filing with the corporate records. Action taken
under this section is effective when the last shareholder signs the consent,
unless the consent specified an earlier or later effective date. If the law
requires that notice of proposed action be given to nonvoting shareholders and
the action is to be taken by unanimous consent of the voting shareholders, the
corporation must give its nonvoting shareholders written notice of the proposed
action at least 10 days before the action is taken, the notice must contain or
be accompanied by the same material that, under the Oregon Business Corporation
Act, would have been required to be sent to nonvoting shareholders in a notice
of meeting at which the proposed action would have been submitted to the
shareholders for action.
(c) Shareholder meetings by conference telephone or similar
communications equipment may be held in the manner and with the effect provided
for in the Oregon Business Corporation Act.
1.10 PROXIES.
(a) A shareholder may vote shares in person or by proxy by
signing an appointment, either personally or by the shareholder's
attorney-in-fact. An appointment of a proxy shall be effective when received by
the Secretary or other officer of the corporation authorized to tabulate votes.
An appointment is valid for 11 months unless a longer period is provided in the
appointment form. An appointment is revocable by the shareholder unless the
appointment form conspicuously states that it is irrevocable and the appointment
is coupled with an interest that has not been extinguished.
3
<PAGE>
(b) The death or incapacity of the shareholders appointing a
proxy shall not affect the right of the corporation to accept the proxy's
authority unless notice of the death or incapacity is received by the Secretary
or other officer authorized to tabulated votes before the proxy exercises the
proxy's authority under the appointment.
1.11 CORPORATION'S ACCEPTANCE OF VOTES.
(a) If the name signed on a vote, consent, waiver or proxy
appointment corresponds to the name of a shareholder, the corporation, if acting
in good faith, is entitled to accept the vote, consent, waiver or proxy
appointment and give it effect as the act of the shareholder.
(b) If the name signed on a vote, consent, waiver or proxy
appointment does not correspond to the name of its shareholder, the corporation,
if acting in good faith, is nevertheless entitled to accept the vote, consent,
waiver or proxy appointment and give it effect as the act of the shareholder if:
(i) The shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity;
(ii) The name signed purports to be that of an
administrator, executor, guardian or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver or
proxy appointment;
(iii) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver or proxy appointment;
(iv) The name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's authority to
sign for the shareholder has been presented with respect to the vote, consent,
waiver or proxy appointment; or
(v) Two or more persons are the shareholder as covenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all
co-owners.
(c) The corporation is entitled to reject a vote, consent,
waiver or proxy appointment if the Secretary or other officer or agent
authorized to tabulate votes, acting in good faith, has reasonable basis for
doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
4
<PAGE>
(d) The shares of a corporation are not entitled to vote if
they are owned, directly or indirectly, by a second corporation, and the first
corporation owns, directly or indirectly, a majority of the shares entitled to
vote for directors of the second corporation, but a corporation may vote any
shares, including its own shares, held by it in a fiduciary capacity.
(e) The corporation and its officer or agent who accepts or
rejects a vote, consent, waiver or proxy appointment in good faith and in
accordance with the standards of this provision are not liable in damages to the
shareholder for the consequences of the acceptance or rejection. Corporate
action based on the acceptance or rejection of a vote, consent, waiver or proxy
appointment under this provision is valid unless a court of competent
jurisdiction determines otherwise.
ARTICLE II
BOARD OF DIRECTORS
------------------
2.1 DUTIES OF BOARD OF DIRECTORS. All corporate powers shall be
exercised by or under the authority of and the business and affairs of the
corporation shall be managed by its Board of Directors.
2.2 NUMBER, ELECTION AND QUALIFICATION. The number of directors of
the corporation shall be at least one (1). The number of directors shall
initially be fixed by the incorporator of the corporation, ad thereafter, the
number of directors shall be fixed from time to time by the shareholders or the
Board of Directors pursuant to a resolution adopted at a meeting of shareholders
or the Board of Directors. The directors shall hold office until the next annual
meeting of shareholders, unless the terms are staggered in accordance with the
Articles of Incorporation, and until their successors shall have been elected
and qualified, until earlier death, resignation or removal or until there is a
decrease in the number of directors. Directors need not be residents of the
State of Oregon or shareholders of the corporation. A decrease in the number of
directors shall not shorten the term of any incumbent director.
2.3 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The board of Directors may
provide, by resolution, the time and place, either within or without the State
of Oregon, for the holding of additional regular meetings without notice other
than the resolution.
5
<PAGE>
2.4 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or by a majority of the
directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Oregon, as the place for holding any special meeting of the Board of Directors
called by them.
2.5 NOTICE. Notice of the date, time and place of any special
meeting of the Board of Directors shall be given at lest two days prior to the
meeting by any means provided by law. If mailed, notice shall be deemed to be
given upon deposit in the United States mail addressed to the director at the
director's business address, with postage thereon prepaid. If by telegram,
notice shall be deemed to be given when the telegram is delivered to the
telegraph company. Notice by all other means shall be deemed to be given when
received by the director or a person at the director's business or residential
address whom the person giving notice reasonably believes will deliver or report
the notice to the director within 24 hours. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, or the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
2.6 WAIVER OF NOTICE. A director may at any time waive any notice
required by law, the Articles of Incorporation or these Bylaws. Unless a
director attends or participates in a meeting, a waiver must be in writing, must
be signed by the director entitled to notice, must specify the meeting or which
notice is waived and must be filed with the minutes or corporate records.
2.7 QUORUM; MAJORITY VOTE. A majority of the number of directors
fixed by or in accordance with Section 2.2 of this Article II shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors.
The act of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors, unless a different number
is provided by law, the Articles of Incorporation or these Bylaws.
2.8 MEETING BY TELEPHONE CONFERENCE; ACTION WITHOUT MEETING.
(a) Members of the Board of directors may hold a board meeting
by conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in
such a meeting shall constitute presence in person at the meeting.
(b) Any action that is required or permitted to be taken by the
directors at a meeting may be taken without a meeting if a consent in writing
setting forth the action so taken shall be signed by all of the directors
entitled to vote on the matter. The action shall be effective on the date when
the last signature is placed on the consent or at such earlier or later time as
6
<PAGE>
is set forth therein. Such consent, which shall have the same effect as a
unanimous vote of the directors, shall be filed with the minutes of the
corporation.
2.9 VACANCIES. Any vacancy, including a vacancy resulting from an
increase in the number of directors, occurring on the Board of Directors may be
filled by the shareholders, the Board of Directors or the affirmative vote of a
majority of the remaining directors if less than a quorum of the Board of
Directors or by a sole remaining director. If the vacant office is filled by the
shareholders and was held by a director elected by a voting group of
shareholders, then only the holders of shares of that voting group are entitled
to vote to fill the vacancy. Any directorship not so filled by the directors
shall be filled by election at an annual meeting or at a special meeting of
shareholders called for that purpose. A director elected to fill a vacancy shall
be elected to serve until the next annual meeting of shareholders and until a
successor shall be elected and qualified. A vacancy that will occur at a
specific late date, by reason of a resignation or otherwise, may be filled
before the vacancy occurs, and the new director shall take office when the
vacancy occurs.
2.10 COMPENSATION. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
2.11 PRESUMPTION OF ASSET. A director of the corporation who is
present at a meeting of the Board of Directors or a committee of the Board of
Directors shall be presumed to have assented to the action taken (a) unless the
director's dissent to the action is entered in the minutes of the meeting, (b)
unless a written dissent to the action is filed with the person acting as the
secretary of the meeting before the adjournment thereof or forwarded by
certified or registered mail to the Secretary of the corporation immediately
after the adjournment of the meeting or (c) unless the director objects at the
meeting to the holding of the meeting or transacting business at the meeting.
The right to dissent shall not apply to a director who voted in favor of the
action.
2.12 DIRECTOR CONFLICT OF INTEREST.
(a) A transaction in which a director of the corporation has a
direct or indirect interest shall be valid notwithstanding the director's
interest in the transaction if the material facts of the transaction and the
director's interest are disclosed or known to the Board of Directors or a
committee thereof and it authorizes, approves or ratifies the transaction by a
vote or consent sufficient for the purpose without counting the votes or
consents of directors with direct or indirect interest in the transaction; or
the material facts of the transaction and the director's interest are disclosed
or known to shareholders entitled to vote and they, voting as a single group,
authorize, approve or ratify the transaction by a majority vote; or the
transaction is fair to the corporation.
7
<PAGE>
(b) A conflict of interest transaction may be authorized,
approved, or ratified if it receives the affirmative vote of a majority of
directors who have no direct or indirect interest in the transaction. If such a
majority of directors vote to authorize, approve or ratify the transaction, a
quorum is present for the purpose of taking action.
(c) A conflict of interest transaction may be authorized,
approved or ratified by a majority vote of shareholders entitled to vote
thereon. Shares owned by or voted under the control of a director or an entity
controlled by a director who has a director or indirect interest in the
transaction are entitled to vote with respect to a conflict of interest
transaction. A majority of the shares, whether or not present, that are entitled
to be counted in a vote on the transaction constitutes a quorum for the purpose
of authorizing, approving or ratifying the transaction.
(d) A director has an indirect interest in a transaction if
another entity in which the director has a material financial interest or in
which the director is a general partner is a party to the transaction or another
entity of which the director is a director, officer or trustee is a party to the
transaction and the transaction is or should be considered by the Board of
Directors of the corporation.
2.13 REMOVAL. The shareholders may remove one or more directors
with our without cause at a meeting called expressly for that purpose, unless
the Articles of Incorporation provide for removal for cause only. If a director
is elected by a voting group of shareholders, only those shareholders may
participate in the vote to remove the director.
2.14 RESIGNATION. Any director may resign by delivering written
notice to the Board of Directors, its chairperson or the corporation. Such
resignation shall be effective (a) on receipt, (b) five days after its deposit
in the United States mails, if mailed postpaid and correctly addressed, or () on
the date shown on the return receipt, if sent by registered or certified mail,
return receipt requested, and the receipt is signed by addressee, unless the
notice specified a later effective date. Once delivered, a notice of resignation
is irrevocable unless revocation is permitted by the Board of Directors.
ARTICLE III
OFFICERS
--------
3.1 ENUMERATION. The officers of the corporation shall consist of a
President and a Secretary and such other officers with such other titles as the
Board of Directors shall determine, including without limitation a Chairman of
the Board, a Vice-Chairman of the Board, a Treasurer, and one or more Vice
Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of
Directors may appoint such other officers as it may deem appropriate, and, if
authorized by the Board, a duly appointed officer may appoint one or more
officers or assistant officers.
8
<PAGE>
3.2 ELECTION. The President and Secretary shall be elected annually
by the board of Directors at its first meeting following the annual meeting of
stockholders. Other officers may be appointed by the Board of Directors at such
meeting or at any other meeting.
3.3 QUALIFICATION. No officer need be a director, stockholder or
Oregon resident. Any two or more offices may be held by the same person.
3.4 TENURE. Except as otherwise provided by law, by the Articles of
Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 RESIGNATION AND REMOVAL. An officer may resign at any time by
delivering notice to the corporation. A resignation is effective on receipt
unless the notice specified a later effective date. If the corporation accepts a
specified later effective date the Board of Directors may fill the pending
vacancy before the effective date but the successor may not take office until
the effective date. Once delivered, a notice of resignation is irrevocable
unless revocation is permitted by the Board of Directors. Any officer appointed
by the Board of Directors may be removed at any time with or without cause.
Appointment of an officer shall not of itself create contract rights. Removal or
resignation of an officer shall not affect the contract rights, if any, of the
corporation or the officer.
3.6 VACANCIES. The Board of Directors may fill any vacancy
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President and Secretary. Each such successor shall hold office for the unexpired
term of his predecessor and until his successor is elected and qualified, or
until his earlier death, resignation or removal.
3.7 CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD. If the
Board of Directors appoints a Chairman of the Board, he shall, when present,
president at all meetings of the Board of Directors. He shall perform such
duties and possess such powers as are usually vested in the office of the
Chairman of the Board or as may be vested in him by the Board of Directors. If
the Board of Directors appoints a Vice-Chairman of the Board, he shall, in the
absence or disability of the Chairman of the Board, perform the duties and
exercise the powers of the Chairman of the Board and shall perform such other
duties and possess such other powers as may from time to time be vested in him
by the Board of Directors.
3.8 PRESIDENT. The President shall be the chief executive officer
of the corporation. The President shall, subject to the direction of the board
of Directors, have general supervision and control of the business of the
corporation. Unless otherwise provided by the directors, he shall preside at all
meetings of the stockholders and of the Board of Directors (except as provided
in Section 3.7 above). The President shall perform such other duties and shall
have such other powers as the Board of Directors may from time to time
prescribe.
9
<PAGE>
3.9 VICE PRESIDENTS. Any Vice President shall perform such duties
and posses such powers as the Board of Directors or the President may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the President, the Vice president (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall
perform such duties and shall have such powers as the Board of Directors or the
president may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate record and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 TREASURER AND ASSISTANT TREASURERS. If the Board of Directors
appoints a Treasurer, he shall perform such duties and shall have such powers as
may from time to time be assigned to him by the board of Directors or the
President. In addition, the Treasurer shall perform such duties and have such
powers as are incident to the office of treasurer, including without limitation
the duty and power to keep and be responsible for all funds and securities of
the corporation, to deposit funds of the corporation in depositories selected in
accordance with these Bylaws, to disburse such funds as ordered by the Board of
Directors, to make proper accounts of such funds, and to render as required by
the Board of Directors statements of all such transactions and of the financial
condition of the corporation.
Any Assistant Treasurer shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer (or if there shall be more than one, the
assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties ad exercise the powers of the Treasurer.
10
<PAGE>
3.12 SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors, and no officer shall be prevented from
receiving such salary because the officer is also a director of the corporation.
ARTICLE IV
ISSUANCE OF SHARES
------------------
4.1 CERTIFICATES FOR SHARES.
(a) Certificates representing shares of the corporation shall
be in form determined by the Board of Directors. Such certificates shall be
signed, either manually or in facsimile, by two officers of the corporation, at
least one of whom shall be the President or a Vice President, and may be sealed
with the seal of the corporation or a facsimile thereof. All certificates for
shares shall be consecutively numbered or otherwise identified.
(b) Every certificate for shares of stock that are subject to
any restriction on transfer pursuant tot he Articles of Incorporation, the
Bylaws, applicable securities laws, agreements among or between shareholders or
any agreement to which the corporation is a party shall have conspicuously noted
on the face or back of the certificate either the full text of the restriction
or a statement of the existence of such restriction and that the corporation
retains a copy of the restriction. Every certificate issued when the corporation
is authorized to issue more than one class or series of stock shall set forth on
its face or back either the full text of the designations, relative rights,
preferences and limitations of the shares of each class and series authorized to
be issued an the authority of the Board of Directors to determine variations for
future series or a statement of the existence of such designations, relative
rights, preferences and limitations and a statement that the corporation will
furnish a copy thereof to the holder of such certificate upon written request
and without charge.
(c) The name and mailing address of the person to whom the
share represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the corporation. Each
shareholder shall have the duty to notify the corporation of his or her mailing
address. All certificates surrendered to the corporation for transfer shall be
canceled, and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that in case of a lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the corporation as the Board of
Directors prescribes.
4.2 TRANSFER OF SHARES. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by the holder's legal representative, who shall furnish proper
evidence of authority to transfer, or by the holder's attorney thereunto
11
<PAGE>
authorized by power of attorney duly executed and filed with the Secretary of
the corporation. The person in whose name shares stand on the books of the
corporation shall e deemed by the corporation to be the owner thereof for all
purposes.
4.3 TRANSFER AGENT AND REGISTRAR. The Board of Directors may from
time to time appoint one or more Transfer Agents and one or more Registrars for
the shares of the corporation, with such powers and duties as the Board of
Directors determines by resolution. The signatures of officers upon a
certificate may be facsimiles if the certificate is manually signed on behalf of
a Transfer Agent or by a Registrar other than the corporation itself or an
employee of the corporation.
4.4 OFFICER CEASING TO ACT. If the person who signed a share
certificate, either manually or in facsimile, no longer holds office when the
certificate is issued, the certificate is nevertheless valid.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS
----------------------------------------------
5.1 CONTRACTS. The Board of Directors may authorize any officer or
officers and agent or agents to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instance.
5.2 LOANS. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the board of Directors. Such authority may be
general or confined to specific instances.
5.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money and notes or other evidences of indebtedness issued in the name
of the corporation shall be signed by such officer or officers and agent or
agents of the corporation and in such manner a shall from time to time be
determined by resolution of the Board of Directors.
ARTICLE VI
MISCELLANEOUS PROVISIONS
------------------------
6.1 SEAL. The seal of the corporation shall be circular in form and
shall have inscribed thereon the name of the corporation and the state of
incorporation and the words "Corporate Seal."
6.2 SEVERABILITY. Any determination that any provision of these
Bylaws is for any reason inapplicable, invalid, illegal or otherwise ineffective
shall not affect or invalidate any other provision of these Bylaws.
12
<PAGE>
ARTICLE VII
AMENDMENTS
----------
These Bylaws may be altered, amended or repealed ad new Bylaws may be
adopted by the Board of Directors at any regular or special meeting, subject to
repeal or change by action of the shareholders of the corporation.
13
OREGON BAKING COMPANY
dba MARSEE BAKING
1993 NON-QUALIFIED STOCK OPTION PLAN
------------------------------------
1. PURPOSE. This 1993 Non-Qualified Stock Option Plan (the "Plan") is
intended to provide incentives to directors, officer,s [sic] employees and
consultants of Oregon Baking Company dba Marsee Baking (the "Company"), its
parent (if any) and any present or future subsidiaries of the Company
(collectively, "Related Corporations") by providing them with opportunities to
purchase stock in the Company pursuant to non-qualified stock options granted
hereunder. These stock options are referred to hereafter individually as an
"Option" and collectively as "Options." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation") as those
terms are defined in Section 424 of the Internal Revenue Code of 1986, as
amended (the "Code").
2. ADMINISTRATION OF THE PLAN.
(a) BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be
administered by the Board of Directors of the Company (the "Board"). The Board
may appoint a stock Plan or Compensation Committee (the "Committee") of three or
more of its members to administer this Plan. All references in this Plan to the
"Committee" shall mean the Board if no Committee has been appointed. Subject to
ratification of the grant of each Option by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the Committee shall
have the authority to (i) determine (from among the class of individuals and
entities eligible under paragraph 3 to receive Options) to whom Options may be
granted; (ii) determine the time or times at which Options may be granted; (iii)
determine the option price of shares subject to each Option, which price shall
not be less than the minimum price specified in paragraph 6; (iv) determine
(subject to paragraph 7) the time or times when each Option shall become
exercisable and the duration of the exercise period; (v) determine whether
restrictions such as repurchase options are to be imposed on shares subject to
Options, and the nature of such restrictions, if any, and (vi) interpret the
Plan and prescribe and rescind rules and regulations relating to it. The
Committee shall take whatever actions it deems necessary, under Section 422 of
the Code and the regulations promulgated thereunder, to ensure that each Option
is not treated as an "incentive stock option" under Section 422 of the Code. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Option granted under it shall be final unless otherwise determined by
the Board. The Committee may from time to time adopt such rules and regulations
for carrying out the Plan as it may deem best. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it.
<PAGE>
(b) COMMITTEE ACTIONS. The Committee may select one of its members
as its chairman, and shall hold meetings at such time and places as it may
determine. Acts by a majority of the Committee, or acts reduced to or approved
in writing by a majority of the members of the Committee, shall be the valid
acts of the Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(c) GRANT OF OPTIONS TO BOARD MEMBERS. Options may be granted to
members of the Board, but any such grant shall be made and approved in
accordance with subparagraph 2(d), if applicable. All grants of Options to
members of the Board shall in all other respects be made in accordance with the
provisions of this Plan applicable to other eligible persons. Members of the
Board who are either (i) eligible for Options pursuant to the Plan or (ii) have
been granted Options may vote on any matters affecting the administration of the
Plan or the grant of any Options pursuant to the Plan, except that no such
member shall act upon the granting to himself of Options but any such member may
be counted in determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to the granting to him of Options.
(d) COMPLIANCE WITH FEDERAL SECURITIES LAWS. In the event the
Company registers any class of any equity security pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), any grants to
a member of the Board of Options (made at any time from the effective date of
such registration until six months after the termination of such registration)
shall be made only with the approval of a majority of the other members of the
Board; provided, however, that if a majority of the board is eligible to
participate in the Plan or in any other stock option or other stock plan of the
Company or any of its affiliates, or has been so eligible at any time within the
preceding year, any grant to a member of the Board of Options must be made by,
or only in accordance with the recommendation of, a committee consisting of
three or more persons, who may but need not be directors or employees of the
Company, appointed by the Board but having full authority to act in the matter,
none of whom is eligible to participate in this Plan or any other stock option
or other stock plan of the Company or any of its affiliates, or has been
eligible at any time within the preceding year. The requirements imposed by the
preceding sentence shall also apply with respect to grants to officers who are
not also directors. Once appointed, the committee shall continue to serve until
otherwise directed by the Board.
3. ELIGIBLE PERSONS. Options may be granted to any director (whether
or not an employee), officer or consultant of the Company or any Related
Corporation. Granting of any Option to any individual or entity shall neither
entitle that individual or entity to, nor disqualify him from, participation in
any other grant of Options.
2
Non-Qualified Stock Option Plan
<PAGE>
4. STOCK. The stock subject to Options shall be authorized but
unissued shares of Common Stock of the Company, no par value (the "Common
Stock"), or shares of Common Stock reacquired by the Company in any manner. The
aggregate number of shares which may be issued pursuant to the Plan is 50,000(1)
subject to adjustment as provided in paragraph 13. If any Option granted under
the Plan shall expire or terminate for any reason without having been exercised
in full or shall cease for any reason to be exercisable in whole or in part, the
unpurchased shares subject to such Options shall again be available for grants
of Options under the Plan.
5. GRANTING OF OPTIONS. Options may be granted under the Plan at any
time on or after September 1, 1993 and prior to September 1, 2003. The date of
grant of an Option under the Plan will be the date specified by the Committee at
the time it grants the Option; provided, however, that such date shall not be
prior to the date on which the Committee acts to approve the grant.
6. MINIMUM OPTION PRICE. The exercise price per share specified in the
agreement relating to each Option granted under the Plan shall in no event be
less than eighty-five percent (85%) of the fair market value (as determined
under paragraph 16) per share of Common Stock on the date of such grant.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee. However, no Option granted under the Plan to an optionee shall have a
term in excess of ten (10) years from the date of grant.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
(a) VESTING. The Option shall either be fully exercisable on the
date of grant or shall become exercisable thereafter in such installments as the
Committee may specify in the instruments evidencing the Option.
(b) FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
(c) PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
- ----------------------------
(1) On January 2, 1994, the Board approved a 2-for-1 stock split resulting
in an increase in the number of shares which may be issued pursuant to the Plan
from 50,000 to 100,000 shares.
3
Non-Qualified Stock Option Plan
<PAGE>
9. TERMINATION OF BUSINESS RELATIONSHIP. If an optionee ceases to
serve the Company and all Related Corporations in the capacity of a director,
officer, employee or consultant (such service is referred to herein as
maintaining or being involved in a "Business Relationship") other than by reason
of death or disability as defined in paragraph 10, no further installments of
his Options shall become exercisable, and his Options shall terminate after the
passage of sixty (60) days from the date the Business Relationship ceases, but
in no event later than on their specified expiration dates. Nothing in the Plan
shall be deemed to give any optionee the right to be retained in a Business
Relationship by the Company or any Related Corporation for any period of time.
10. DEATH; DISABILITY.
(a) DEATH. If an optionee ceases to maintain a Business Relationship
with the Company and all Related Corporations by reason of his death, any Option
of his may be exercised, to the extent of the number of shares with respect to
which he could have exercised it on the date of his death, by his estate,
personal representative or beneficiary who has acquired the Option by will or by
the laws of descent and distribution, at any time prior to the earlier of the
Option's specified expiration date or 180 days from the date of the optionee's
death.
(b) DISABILITY. If an optionee ceases to maintain a Business
Relationship with the Company and all Related Corporations by reason of his
disability, he shall have the right to exercise any Option held by him on the
date the Business Relationship terminated, to the extent of the number of shares
with respect to which he could have exercised it on that date, at any time prior
to the earlier of the Option's specified expiration date or 180 days from the
date the Business Relationship terminated. For the purposes of the Plan, the
term "disability" shall mean "permanent and total disability" as defined in
Section 22(e)(3) of the Code or successor statute.
11. ASSIGNABILITY. No Option shall be assignable or transferable by
the optionee except by will or by the laws of descent and distribution, and
during the lifetime of the optionee each Option shall be exercisable only by
him. The Committee may impose conditions or limitations with respect to any
transfer of the Option or the shares acquired upon exercise of the Option,
including conditions or limitations intended to assure the retention of the
election of the Company to be treated as an "S corporation" within the meaning
of Section 1361 of the Code.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may from time to time confer
authority and responsibility on one or more of its own members and/or one or
more officers of the Company to execute and deliver such instruments. The proper
officers of the Company are unauthorized and directed to take any and all action
necessary or advisable from time to time to carry out the terms of such
instruments.
4
Non-Qualified Stock Option Plan
<PAGE>
13. ADJUSTMENTS. Upon the happening of any of the following described
events, an optionee's rights with respect to Options granted to him hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or small number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or substantially all
of the Company's assets or otherwise (an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board") shall, with respect to outstanding Options,
take one or more of the following actions: (i) make appropriate provision for
the continuation of such Options by substituting on an equitable basis for the
shares then subject to such Options the consideration payable with respect to
the outstanding shares of Common Stock in connection with the Acquisition; (ii)
accelerate the date of exercise of such Options or of any installment of any
such Options; (iii) upon written notice to the optionees, provide that all
Options must be exercised, to the extent then exercisable, within a specified
number of days of the date of such notice, at the end of which period the
Options shall terminate; or (iv) terminate all Options in exchange for a cash
payment equal to the excess of the fair market value (as determined under
paragraph 16) of the shares subject to such Options (to the extent then
exercisable) over the exercise price thereof.
(c) RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph (b) above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise the securities he would have
received if he had exercised his Option prior to such recapitalization or
reorganization.
(d) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
(e) ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustment shall be made for dividends paid in cash or in
property other than securities of the Company.
5
Non-Qualified Stock Option Plan
<PAGE>
(f) FRACTIONAL SHARES. No fractional shares shall actually be issued
under the Plan, and the optionee shall receive from the Company cash in lieu of
such fractional shares.
(g) ADJUSTMENTS. Upon the happening of any of the foregoing events
described in subparagraphs (a), (b) or (c) above, the class and aggregate number
of shares set forth in paragraph 4 hereof that are subject to Options which
previously have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such paragraphs. The
Committee shall determine the specific adjustments to be made under this
paragraph 13 and, subject to paragraph 2, its determination shall be conclusive.
(h) RESTRICTED COMMON STOCK. If any person or entity owning
restricted Common Stock obtained by exercise of an Option made hereunder
receives new or additional or different shares or securities ("New Securities")
in connection with a corporate transaction described in subparagraph (a), (b) or
(c) above as a result of owning such restricted Common Stock, such New
Securities shall be subject to all of the conditions and restrictions applicable
to the restricted Common Stock with respect to which such New Securities were
issued, unless otherwise determined by the Committee or the Successor Board.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address. Such notice shall identify the Option being exercised
and specify the number of shares as to which such Option is being exercised,
accompanied by full payment of the purchase price therefor either (i) in United
States dollars in cash or by check, or (b) at the discretion of the Committee,
through delivery of shares of Common Stock having a fair market value (as
determined under paragraph 16) equal as of the date of the exercise to the cash
exercise price of the Option, or (c) at the discretion of the Committee, by
delivery of the optionee's personal recourse note bearing interest payable not
less than annually at no less than 100% of the lowest applicable Federal rate,
as defined in Section 1274(d) of the Code, or (d) at the discretion of the
Committee, by any combination of (a), (b) or (c) above. The holder of an Option
shall not have the rights of a shareholder with respect to the shares covered by
his option until the date of issuance of a stock certificate to him for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
September 1, 1993 and was approved by the holders of a majority of the
outstanding shares of voting capital stock of the Company on September 1, 1993.
The Plan shall expire on September 1, 2003 (except as to Options outstanding on
that date). The Board may terminate or amend the Plan in any respect at any
time, except that, in no event may action of the Board alter or impair the
rights of an optionee without his consent, under any Option previously granted
to him.
6
Non-Qualified Stock Option Plan
<PAGE>
16. DETERMINATION OF FAIR MARKET VALUE. If, at the time "fair market
value" is determined under paragraph 6, subparagraph 13(b) or paragraph 14, the
Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such determination is made and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if such Stock is then traded on a national securities exchange;
or (ii) the last reported sale price (on that date) of the Common Stock on the
NASDAQ National Market List, if the Common Stock is not then traded on a
national securities exchange and is then reported on such list; or (iii) the
closing bid price (or average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities, if the Common
Stock is not then traded on a national securities exchange and is reported on
the NASDAQ National Market List. However, if the Common Stock is not publicly
traded at the time such determination is made, "fair market value" shall be
deemed to be the fair value of the Common Stock as determined by the Committee
after taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the Common Stock
in private transactions negotiated at arm's length.
17. APPLICATION OF FUNDS. The proceeds received by the Company from
the sale of shares pursuant to Options granted under the Plan shall be used for
general corporate purposes.
18. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of an
Option, the Company, in accordance with Section 3402(a) of the Code, may require
the optionee, to pay additional withholding taxes in respect of the amount that
is considered compensation includible in such person's gross income. The
Committee in its discretion may condition the exercise of an Option on the
purchaser's or optionee's payment of such additional withholding taxes.
20. GOVERNING LAW; CONSTRUCTION. The validity and construction of the
Plan and the instruments evidencing Options shall be governed by the laws of the
State of Oregon. In construing this Plan, the singular shall include the plural
and the masculine gender shall include the feminine and neuter, unless the
context otherwise requires.
7
Non-Qualified Stock Option Plan
<PAGE>
AMENDMENT NO. 1 TO
1993 NON-QUALIFIED STOCK
OPTION PLAN
December 15, 1993
The 1993 Non-Qualified Stock Option Plan ("Plan") of the Oregon Baking
Company ("Corporation") is hereby amended as follows:
1. The first sentence of paragraph 7 of the Plan is hereby amended
to read in its entirety as follows:
"Each Option shall expire on the date specified by
the Committee."
2. The introductory sentence of paragraph 8 of the Plan is hereby
amended to read as follows:
"Subject to the provisions of paragraphs 11 and
12, each Option granted under the Plan shall be
exercisable as follows:"
3. Paragraphs 9 and 10 are hereby deleted in their entirety and
replaced with the following:
"9. [Deleted]."
"10. [Deleted]."
4. The second sentence of paragraph 12 of the Plan shall is hereby
amended to read as follows:
"Such instrument shall conform to the terms and
conditions set forth in paragraph 6, 7, 8 and 11
hereof and may contain such other provisions as
the Committee advisable which are not inconsistent
with the Plan, including restrictions applicable
to shares of Common Stock issuable upon exercise
of Options."
5. Except as specifically set forth in this Amendment, the Plan
shall remain in full force and effect as written.
<PAGE>
AMENDMENT NO. 2 TO
1993 NON-QUALIFIED STOCK
OPTION PLAN
July 12, 1996
2. The second sentence of paragraph 4 of the 1993 Non-Qualified
Stock Option Plan ("Plan") of the Oregon Baking Company
("Corporation") is hereby amended to read in its entirety as
follows:
"The aggregate number of shares that may be issued
pursuant to the Plan is 150,000 subject to
adjustment as provided in paragraph 13."
3. The number of shares referenced above has already been adjusted
for the stock split effected by the Corporation on January 2,
1994.
4. Except as specifically set forth in this Amendment, the Plan
shall remain in full force and effect as written.
OREGON BAKING COMPANY
DBA MARSEE BAKING
Non-Qualified Stock Option Agreement
------------------------------------
Oregon Baking Company dba Marsee Baking, an Oregon corporation (the
"Company"), hereby grants this ___ day of _______, 199_ to ________________ (the
"Optionee"), an option to purchase a maximum of ______ shares of its Common
Stock, no par value, at the price of $1.00 per share, on the following terms and
conditions:
1. GRANT UNDER 1993 NON-QUALIFIED STOCK OPTION PLAN. This option is
granted pursuant to and is governed by the Company's 1993 Non-Qualified Stock
Option Plan, as amended (the "Plan") and, unless the context otherwise requires,
terms used herein shall have the same meaning as in the Plan. Determinations
made in connection with this option pursuant to the Plan shall be governed by
the Plan as it exists on this date.
2. GRANT AS NON-QUALIFIED OPTION. This option is intended to be a
Non-Qualified Option (rather than an incentive stock option), and the Board of
Directors intends to take appropriate action, if necessary, to achieve this
result.
3. EXERCISE OF OPTION. The Option may, subject to Section 2, exercise
this option at any time within 10 years of the date of the option grant.
4. PARTIAL EXERCISE. Exercise of this option up to the extent above
stated may be made in part at any time and from time to time within the above
limits, except that this option may not be exercised for a fraction of a share
unless such exercise is with respect to the final installment of stock subject
to this option and a fractional share (or cash in lieu thereof) must be issued
to permit the Optionee to exercise completely such final installment. Any
fractional share with respect to which an installment of this option cannot be
exercised because of the limitation contained in the preceding sentence shall
remain subject to this option and shall be available for later purchase by the
Optionee in accordance with the terms hereof.
5. PAYMENT OF PRICE. The option price is payable in United States
dollars and may be paid in cash or by check.
6. AGREEMENT TO PURCHASE FOR INVESTMENT. By acceptance of this option,
the Optionee agrees that a purchase of shares under this option will not be made
with a view to their distribution, as that term is used in the Securities Act of
1933, as amended) the "Securities Act"), unless in the opinion of counsel to the
Company such distribution is in compliance with or exempt from the registration
and prospectus requirements of the Securities Act. The Optionee or other person
rightfully exercising this option shall sign a certificate, letter or other
1
<PAGE>
agreement, in form satisfactory to the Company, to such effect at the time of
exercising this option and the certificate for the shares so purchased may be
inscribed with a legend to ensure compliance with the Securities Act.
7. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Agreement, this option may be exercised by written notice to the Company,
at the principal executive office of the Company, or to such transfer agent as
the Company shall designate. Such notice shall state the election to exercise
this option and the number of shares in respect of which it is being exercised
and shall be signed by the person or persons so exercising this option. Such
notice shall be accompanied by payment of the full purchase price of such
shares, and the Company shall deliver a certificate or certificates representing
such shares as soon as practicable after the notice shall be received. The
certificate or certificates for the shares as to which this option shall have
been so exercised shall be registered in the name of the person or persons so
exercising this option and shall be delivered as provided above to or upon the
written order of the person or persons exercising this option. In the event this
option shall be exercised, pursuant to Section 5 hereof, by any person or
persons other than the Optionee, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise this option. All shares
that shall be purchased upon the exercise of this option as provided herein
shall be fully paid and non-assessable.
8. OPTION NOT TRANSFERABLE. This option is not transferable or
assignable except by will or by the laws of descent and distribution. During the
Optionee's lifetime only the Optionee can exercise this option.
9. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this
option imposes no obligation on the Optionee to exercise it.
10. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. The Optionee shall have
no rights as a shareholder with respect to shares subject to this Agreement
until a stock certificate therefor has been issued to the Optionee and is fully
paid for. Except as is expressly provided in the Plan with respect to certain
changes in the capitalization of the Company, no adjustment shall be made for
dividends or similar rights for which the record date is prior to the date such
stock certificate is issued.
11. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. It is the purpose of
this option to encourage the Optionee to work for the best interests of the
Company and its shareholders. Since for example, those interests might require
the issuance of a stock dividend or a merger with another corporation, the
purpose of this option would not be served if such a stock dividend, merger or
similar occurrence would cause the Optionee's rights hereunder to be diluted or
terminated and thus be contrary to the Optionee's interest. The Plan contains
extensive provisions designed to preserve options at full value in a number of
contingencies. Therefore, provisions in the Plan for adjustment with respect to
stock subject to options and the related provisions with respect to successors
2
<PAGE>
to the business or the Company are hereby made applicable hereunder and are
incorporated herein by reference. In particular, without affecting the
generality of the foregoing, it is understood that for the purposes of Section 3
through 5 hereof, both inclusive, maintaining or being involved in a Business
Relationship with the Company includes maintaining or being involved in a
Business Relationship with a Related Corporation as defined in the Plan. This
Agreement shall not in any way affect the right of the Company or any Related
Corporation to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
12. WITHHOLDING TAXES. The Optionee agrees that the Company may
withhold from the Optionee's wages or other remuneration of the appropriate
amount of federal, state and local taxes attributable to the Optionee's exercise
of any installment of this option. At the Company's discretion, the amount
required to be withheld may be withheld in such from such wages or other
remuneration, or in kind from the Common Stock otherwise deliverable to the
Optionee on exercise of this option. The Optionee further agrees that, if the
Company does not withhold an amount from the Optionee's wages or other
remuneration sufficient to satisfy the Company's withholding obligation, the
Optionee will reimburse the Company on demand, in cash, for the amount
underwithheld.
13. MARKET STAND-OFF PROVISIONS. In connection with any underwritten
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, as amended, including the
Company's initial public offering, the Optionee shall not sell, make any short
sale of, loan, hypothecate, pledge, grant any option for the purchase of, or
otherwise dispose or transfer for value or otherwise agree to engage in any of
the foregoing transactions with respect to, any shares acquired under this
option (the "Purchased Shares") without the prior written consent of the Company
or its underwriters. Such limitations shall be in effect for such period of time
from and after the effective date of such registration statement as may be
requested by the Company or its underwriters; provided, however, that in no
event shall such period exceed one hundred-eighty (180) days. The limitations of
this Section 17 shall remain in effect for the two-year period immediately
following the effective date of the Company's initial public offering and shall
thereafter terminate and ceased to have any force or effect. In the event of any
stock dividend, stock split, recapitalization or other change affecting the
Company's outstanding Common Stock as a class without receipt of consideration,
then any new, substituted or additional securities distributed with respect to
the Purchased Shares shall be immediately subject to the provisions of this
Section 17, to the same extent the Purchased Shares are at such time covered by
such provisions. In order to enforce the limitations of this Section 17, the
Company may impose stop-transfer instructions with respect to the Purchased
Shares until the end of the applicable stand-off period.
14. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the internal laws of State of Oregon.
15. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Company and its successors and
assigns and the Optionee and the Optionee's heirs, legal representatives,
successors, assigns and transferees by operation of law, whether or not any such
3
<PAGE>
person shall have become a party to this Agreement and have agreed in writing to
join herein and be bound by the terms and conditions hereof.
IN WITNESS WHEREOF, the Company and the Optionee have caused this
instrument to be executed, and the Optionee whose signature appears below
acknowledges receipt of a copy of the Plan and acceptance of an original copy of
this Agreement.
OREGON BAKING COMPANY
dba MARSEE BAKING
By_________________________________
Title______________________________
___________________________________
4
OREGON BAKING COMPANY, DBA MARSEE BAKING
1997 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE I
GENERAL PROVISIONS
1. PURPOSE
This Oregon Baking Company, dba Marsee Baking 1997 Stock
Option/Stock Issuance Plan is intended to promote the interests of the
Corporation by providing eligible individuals who are responsible for the
management, growth and financial success of the Corporation or who otherwise
render valuable services to the Corporation with the opportunity to acquire a
proprietary interest, or increase their proprietary interest, in the Corporation
and thereby encourage them to remain in the service of the Corporation.
Capitalized terms used herein shall have the meanings ascribed
to such terms in Paragraph 6 of this Article I.
2. STRUCTURE OF THE PLAN
The Plan shall be divided into two separate components: the
Option Grant Program specified in Article II and the Stock Issuance Program
specified in Article III. The provisions of Articles I and IV of the Plan shall
apply to both the Option Grant Program and the Stock Issuance Program and shall
accordingly govern the interests of all individuals in the Plan.
3. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board. The Board,
however, may at any time appoint a committee ("Committee") of two (2) or more
Board members and delegate to such Committee one or more of the administrative
powers allocated to the Board pursuant to the provisions of the Plan. Members of
the Committee shall serve for such period of time as the Board may determine and
shall be subject to removal by the Board at any time. The Board may also at any
time terminate the functions of the Committee and reassume all powers and
authority previously delegated to the Committee.
(b) The Plan Administrator (either the Board or the Committee,
to the extent the Committee is at the time responsible for the administration of
the Plan) shall have full power and authority (subject to the provisions of the
Plan) to establish such rules and regulations as it may deem appropriate for the
proper plan administration and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding option grants or share
issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option or share issuance.
4. OPTION GRANTS AND SHARE ISSUANCES
(a) The persons eligible to receive option grants pursuant to
the Option Grant Program (each an "Optionee") and/or share issuances under the
Stock Issuance Program (each a "Participant") are limited to the following:
(1) key employees (including officers and directors)
of the Corporation (or its parent or subsidiary corporations, if any)
who render services which contribute to the success and growth of the
Corporation (or any parent or subsidiary corporations) or which may
reasonably be anticipated to contribute to the future success and
growth of the Corporation (or any parent or subsidiary corporations);
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 1
<PAGE>
(2) the non-employee members of the Board or the
non-employee members of the board of directors of any parent or
subsidiary corporations; and
(3) those consultants or independent contractors who
provide valuable services to the Corporation (or any parent or
subsidiary corporations).
(b) The Plan Administrator shall have full authority to
determine, (I) with respect to the option grants made under the Plan, which
eligible individuals are to receive option grants, the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
granted option is to become exercisable and the maximum term for which the
option may remain outstanding, and (II) with respect to share issuances under
the Stock Issuance Program, the number of shares to be issued to each
Participant, the vesting schedule (if any) to be applicable to the issued
shares, and the consideration to be paid by the individual for such shares.
(c) The Plan Administrator shall have the absolute discretion
either to grant options in accordance with Article II of the Plan or to effect
share issuances in accordance with Article III of the Plan.
5. STOCK SUBJECT TO THE PLAN
(a) The stock issuable under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Common Stock, no par value
(the "Common Stock"). The maximum number of shares which may be issued over the
term of the Plan shall not exceed Seven Hundred Thousand (700,000) shares of
Common Stock. The total number of shares issuable under the Plan shall be
subject to adjustment from time to time in accordance with the provisions of
Section 5(c).
(b) Shares subject to (I) the portion of one or more
outstanding options which are not exercised or surrendered prior to expiration
or termination and (II) outstanding options canceled in accordance with the
cancellation-regrant provisions of Section 4 of Article II will be available for
subsequent option grants or stock issuances under the Plan. The shares which
shall NOT be available for subsequent option grants or stock issuances under the
Plan include shares issued under either the Option Grant Program or the Stock
Issuance Program (whether as vested or unvested shares) which are repurchased by
the Corporation.
(c) In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock dividend, stock split,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without receipt of consideration, then
appropriate adjustments shall be made to (I) the aggregate number and/or class
of shares issuable under the Plan and (II) the aggregate number and/or class of
shares and the option price per share in effect under each outstanding option in
order to prevent the dilution or enlargement of benefits thereunder. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
(d) Common Stock issuable under the Plan, whether under the
Option Grant Program or the Stock Issuance Program, may be subject to such
restrictions on transfer, repurchase rights or other restrictions as may be
determined by the Plan Administrator.
6. DEFINITIONS
The following definitions shall apply to the respective
capitalized terms used herein:
BOARD means the Board of Directors of Oregon Baking Company,
dba Marsee Baking.
CODE means the Internal Revenue Code of 1986, as amended.
CORPORATION means Oregon Baking Company, dba Marsee Baking, an
Oregon corporation, and its successors.
CORPORATE TRANSACTION means one or more of the following
transactions:
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 2
<PAGE>
(a) a merger or consolidation in which the Corporation is not
the surviving entity, except for a transaction the principal purpose of which is
to change the state of the Corporation's incorporation,
(b) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation, or
(c) any reverse merger in which the Corporation is the
surviving entity but in which fifty percent (50%) or more of the Corporation's
outstanding voting stock is transferred to holders different from those who held
the stock immediately prior to such merger.
EMPLOYEE means an individual who is in the employ of the
Corporation or one or more Parent or Subsidiary corporations (if any). An
optionee shall be considered to be an Employee for so long as such individual
remains in the employ of the Corporation or one or more Parent or Subsidiary
corporations, subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of performance.
EXERCISE DATE shall be the date on which written notice of the
exercise of an outstanding option under the Plan is delivered to the
Corporation. Such notice shall be in the form of a stock purchase agreement
incorporating any repurchase rights or first refusal rights retained by the
Corporation with respect to the Common Stock purchased under the option.
FAIR MARKET VALUE of a share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(a) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the stock
exchange determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common Stock on
such exchange on the date in question, then the Fair Market Value shall be the
closing selling price on the exchange on the last preceding date for which such
quotation exists.
(b) If the Common Stock is not at the time listed or admitted
to trading on any stock exchange but is traded in the over-the-counter market,
the Fair Market Value shall be the mean between the highest bid and the lowest
asked prices (or if such information is available the closing selling price) per
share of Common Stock on the date in question in the over-the-counter market, as
such prices are reported by the National Association of Securities Dealers
through its NASDAQ National Market System or any successor system. If there are
no reported bid and asked prices (or closing selling price) for the Common Stock
on the date in question, then the mean between the highest bid and lowest asked
prices (or closing selling price) on the last preceding date for which such
quotations exist shall be determinative of Fair Market Value.
(c) If the Common Stock is at the time neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator determines that the valuation provisions of
subparagraphs (a) and (b) above will not result in a true and accurate valuation
of the Common Stock, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator
shall deem appropriate under the circumstances.
INCENTIVE OPTION means an incentive stock option which
satisfies the requirements of Section 422 of the Code.
NON-STATUTORY OPTION means an option not intended to meet the
statutory requirements prescribed under the Code for an Incentive Option.
PARENT corporation means any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each such corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 3
<PAGE>
PERMANENT DISABILITY means the inability of an individual to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.
PLAN means this Oregon Baking Company, dba Marsee Baking 1997
Stock Option/Stock Issuance Plan.
PLAN ADMINISTRATOR means the Board or the Committee, to the
extent the Committee is responsible for plan administration in accordance with
Article I, Section 3.
SERVICE means the performance of services for the Corporation
or one or more Parent or Subsidiary corporations by an individual in the
capacity of an Employee, a non-employee member of the board of directors or an
independent consultant or advisor, unless a different meaning is specified in
the option agreement evidencing the option grant, the purchase agreement
evidencing the purchased option shares or the issuance agreement evidencing any
direct stock issuance. An optionee shall be deemed to remain in Service for so
long as such individual renders services to the Corporation or any Parent or
Subsidiary corporation on a periodic basis in the capacity of an Employee, a
non-employee member of the board of directors or an independent consultant or
advisor.
SUBSIDIARY corporation means each corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
10% SHAREHOLDER means the owner of stock (as determined under
Section 424(d) of the Code) possessing ten percent or more of the total combined
voting power of all classes of stock of the Corporation or any Parent or
Subsidiary corporation.
ARTICLE II
OPTION GRANT PROGRAM
1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by
action of the Plan Administrator and may, at the discretion of the Plan
Administrator, be either Incentive Options or Non-Statutory Options. Each
granted option shall be evidenced by one or more instruments in the form
approved by the Plan Administrator; PROVIDED, HOWEVER, that each such instrument
shall comply with and incorporate the terms and conditions specified below. In
addition, each instrument evidencing an Incentive Option shall be subject to the
applicable provisions of Section 2 of this Article II.
(a) OPTION PRICE.
(1) The option price per share shall be fixed by the
Plan Administrator.
(2) The option price shall become immediately due
upon exercise of the option, and subject to the provisions of Article
IV, Section 1, shall be payable in cash or check drawn to the
Corporation's order. Should the Corporation's outstanding Common Stock
be registered under Section 12(g) of the Securities Exchange Act of
1934, as amended (the "1934 Act") at the time the option is exercised,
then the option price may also be paid as follows:
(A) in shares of Common Stock held by the
optionee for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
(B) through a special sale and remittance
procedure pursuant to which the Optionee (I) is to provide
irrevocable written instructions to a designated brokerage
firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds, an amount
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 4
<PAGE>
sufficient to cover the aggregate option price payable for the
purchased shares plus all applicable Federal and State income
and employment taxes required to be withheld by the
Corporation by reason of such purchase and (II) concurrently
provides written directives to the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to effect the sale transaction.
(b) TERM AND EXERCISE OF OPTIONS. Each option granted under
the Plan shall be exercisable at such time or times, during such period, and for
such number of shares as shall be determined by the Plan Administrator and set
forth in the stock option agreement evidencing such option. However, no option
granted under the Plan shall have a term in excess of ten (10) years from the
grant date. During the lifetime of the Optionee, the option shall be exercisable
only by the Optionee and shall not be assignable or transferable by the Optionee
otherwise than by will or by the laws of descent and distribution following the
Optionee's death.
(c) TERMINATION OF SERVICE.
(1) The Plan Administrator shall have complete
discretion to limit the period of time that an option granted under the
Plan may be exercised should the Optionee cease to remain in Service
for any reason (including death or Permanent Disability). In no event,
however, shall any such option be exercisable after the specified
expiration date of the option term. During such limited period of
exercisability, the option may not be exercised for more than that
number of shares (if any) for which such option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
such period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be exercisable.
(2) Any option granted to an Optionee under the Plan
and exercisable in whole or in part on the date of the Optionee's death
may be subsequently exercised by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution.
(3) Notwithstanding subsections (1) and (2) above,
the Plan Administrator shall have complete discretion, exercisable
either at the time the option is granted or at the time the Optionee
ceases Service, to allow one or more outstanding options held by the
Optionee to be exercised, during the period of exercisability following
the Optionee's cessation of Service, not only with respect to the
number of shares for which the option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one or more
subsequent installments of purchasable shares for which the option
otherwise would have become exercisable had such cessation of Service
not occurred.
(4) Notwithstanding any provision of this Article II
or any other provision of this Plan to the contrary, any options
granted under this Plan shall terminate as of the date the Optionee
ceases to be in the Service of the Corporation if the Optionee was
terminated for "cause" or could have been terminated for "cause." If
the Optionee has an employment or a consulting agreement with the
Corporation, the term "cause" shall have the meaning given that term in
the employment or consulting agreement. If the Optionee does not have
an employment or consulting agreement with the Corporation, or if such
employment or consulting agreement does not define the term "cause,"
the term "cause" shall mean: (A) misconduct or dishonesty that
materially adversely affects the Corporation, including without
limitation (I) an act materially in conflict with the financial
interests of the Corporation, (II) an act that could damage the
reputation or customer relations of the Corporation, (III) an act that
could subject the Corporation to liability, (IV) an act constituting
sexual harassment or other violation of the civil rights of coworkers,
(V) failure to obey any lawful instruction of the Board or any officer
of the Corporation and (VI) failure to comply with, or perform any duty
required under, the terms of any confidentiality, inventions or
non-competition agreement the Optionee may have with the Corporation,
or (B) acts constituting the unauthorized disclosure of any of the
trade secrets or confidential information of the Corporation, unfair
competition with the Corporation or the inducement of any customer of
the Corporation to breach any contract with the Corporation. The right
to exercise any option shall be suspended automatically during the
pendency of any investigation by the Board, or its designee, and/or any
negotiations by the Board, or its designee, and the Optionee, regarding
any actual or alleged act or omission by the Optionee of the type
described in this paragraph.
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 5
<PAGE>
(d) SHAREHOLDER RIGHTS. An Optionee shall have none of the
rights of a shareholder with respect to any shares covered by the option until
such Optionee shall have exercised the option and paid the option price.
(e) REPURCHASE RIGHTS. The Plan Administrator shall have
complete discretion to impose certain repurchase rights on shares of Common
Stock issued under the Plan including the following:
(1) (A) The Plan Administrator shall have the
discretion to authorize the issuance of unvested shares of
Common Stock under the Plan. Should the optionee cease Service
or should the Corporation consummate a Corporate Transaction
while the optionee is holding such unvested shares, the
Corporation may reserve the right to repurchase, at the option
price paid per share or such other repurchase price specified
in the instrument evidencing such repurchase right, all or (at
the discretion of the Corporation and with the consent of the
Optionee) any of those unvested shares. The terms and
conditions upon which such repurchase right shall be
exercisable (including the period and procedure for exercise
and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth
in the instrument evidencing such right.
(B) The repurchase right may be assignable
to any person or entity selected by the Corporation, including
one or more of the Corporation's shareholders. However, if the
selected assignee is other than a Parent or Subsidiary
corporation, then the assignee must make a cash payment to the
Corporation, upon the assignment of the repurchase right, in
an amount equal to the amount by which the Fair Market Value
of the unvested shares at the time subject to the assigned
right exceeds the aggregate repurchase price payable for such
unvested shares.
(C) Upon the occurrence of a Corporate
Transaction, the Plan Administrator may, at its sole
discretion, (I) terminate all or any outstanding repurchase
rights under the Plan and thereby cause the shares subject to
such rights to vest immediately in full, (II) arrange for all
or any of the repurchase rights to be assigned to the
successor corporation (or parent thereof) in connection with
the Corporate Transaction or (III) exercise the Corporation's
right to repurchase any unvested shares contemporaneously with
the consummation of the Corporate Transaction if such right is
provided in the Stock Purchase Agreement pursuant to which
such unvested shares were issued.
(2) Until such time as the Corporation's outstanding
shares of Common Stock are first registered under Section 12(g) of the
1934 Act, the Corporation shall have the right of first refusal with
respect to any proposed sale or other disposition by the Optionee (or
any successor in interest by reason of purchase, gift or other mode of
transfer) of any shares of Common Stock issued under the Plan. Such
right of first refusal shall be exercisable by the Corporation (or its
assignees) in accordance with the terms and conditions established by
the Plan Administrator and set forth in the instrument evidencing such
right.
2. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under the Plan. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designated as Non-Statutory Options when issued under the Plan shall NOT be
subject to such terms and conditions.
(a) OPTION PRICE. The option price per share of the Common
Stock subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value of a share of Common Stock on the grant
date; provided, if the individual to whom the option is granted is at the time a
10% Shareholder, then the option price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value of the Common Stock on the
grant date.
(b) DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the Common Stock for
which one or more options granted to any Employee under this Plan (or any other
option plan of the Corporation or any Parent or Subsidiary corporation) may for
the first time become exercisable as incentive stock options under the Federal
tax laws during any one calendar year shall not exceed the sum of one hundred
thousand dollars ($100,000). To the extent the Employee holds two or more such
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 6
<PAGE>
options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability thereof as Incentive Options
under the Federal tax laws shall be applied on the basis of the order in which
such options are granted.
(c) OPTION TERM FOR 10% SHAREHOLDER. No option granted to
a 10% Shareholder shall have a term in excess of five (5) years from the grant
date.
(d) ACCELERATED TERMINATION OF OPTION TERM. The option term
shall terminate prior to the expiration date established by the Plan
Administrator should any of the following provisions become applicable:
(1) Except as otherwise provided in subparagraph (2)
or (3) below, should an Optionee cease to remain in Service while his/her option
is outstanding, then the period for exercising his/her option shall be reduced
to a three (3) month period commencing with the date of such cessation of
Service, but in no event shall such option be exercisable at any time after the
expiration date. Upon the expiration of such three (3) month period or (if
earlier) upon the expiration date, the option shall terminate and cease to be
outstanding.
(2) Should the Optionee die while his/her option is
outstanding, his/her option shall cease to be exercisable, upon the EARLIER of
(a) the expiration of the twelve (12) month period measured from the date of
Optionee's death or (b) the expiration date of the option. Upon the expiration
of such twelve (12) month period or (if earlier) upon the expiration date, the
option shall terminate and cease to be outstanding.
(3) Should the Optionee become Permanently Disabled
and cease by reason thereof to remain in Service while his/her option is
outstanding, then the Optionee shall have a period of twelve (12) months
(commencing with the date of such cessation of Service) during which to exercise
his/her option, but in no event shall this option be exercisable at any time
after the expiration date of the option. Upon the expiration of such limited
period of exercisability or (if earlier) upon the expiration date, his/her
option shall terminate and cease to be outstanding.
(4) During the limited period of exercisability
applicable under subparagraphs (1), (2), or (3) above, the Optionee's option may
be exercised for any or all of the option shares in which the Optionee, at the
time of cessation of Services, is vested in accordance with the exercise/vesting
provisions specified in his/her stock option documents.
(e) RESTRICTION OF TRANSFER. An option shall not be
transferable otherwise then by will or the laws of descent and distribution and
may be exercisable during the lifetime of the Optionee only by such Optionee or
the Optionee's guardian or legal representative.
Except as modified by the preceding provisions of this Section
2, all the provisions of the Plan shall be applicable to the Incentive Options
granted hereunder.
3. CORPORATE TRANSACTION
(a) In the event of any Corporate Transaction, each option
outstanding under the Plan shall terminate upon the consummation of such
Corporate Transaction and cease to be exercisable, unless assumed by the
successor corporation or parent thereof.
(b) In connection with any such Corporate Transaction, the
Plan Administrator may, at its sole discretion, (I) accelerate each or any
outstanding option under the Plan so that each or any such option shall,
immediately prior to the specified effective date for such Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for all
or any portion of such shares, (II) arrange for each or any outstanding option
to either to be assumed by the successor corporation or parent thereof or to be
replaced with a comparable option to purchase shares of the capital stock of the
successor corporation or parent thereof, (III) arrange for the option to be
replaced by a comparable cash incentive program of the successor corporation
based on the option spread (the amount by which the Fair Market Value of the
shares of Common Stock at the time subject to the option exceeds the option
price payable for such shares) or (IV) take none of the actions described in
clauses (I), (II) or (III) above and allow the option to terminate as provided
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 7
<PAGE>
in Section 3(a) above. The determination of comparability under clauses (II) and
(III) above shall be made by the Plan Administrator, and such determination
shall be final and conclusive.
(c) The exercisability as incentive stock options under the
Federal tax laws of any options accelerated in connection with the Corporate
Transaction shall remain subject to the applicable dollar limitation of
subsection 2(b) of this Article II.
(d) If the outstanding options under the Plan are assumed by
the successor corporation (or parent thereof) in the Corporate Transaction or
are otherwise to continue in effect following such Corporate Transaction, then
each such assumed or continuing option shall, immediately after such Corporate
Transaction, be appropriately adjusted to apply and pertain to the number and
class of securities or other property that would have been issuable to the
option holder, in consummation of the Corporate Transaction, had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the option price payable per share, PROVIDED
the aggregate option price payable for such securities or other property shall
remain the same. In addition, the number and class of securities or other
property available for issuance under the Plan following the consummation of
such Corporate Transaction shall be appropriately adjusted.
(e) The grant of options under this Plan shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
4. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock but having, in the case of an Incentive
Option, an option price per share not less than one hundred percent (100%) of
such Fair Market Value per share of Common Stock on the new grant date, or, in
the case of a 10% Shareholder, not less than one hundred and ten percent (110%)
of such Fair Market Value.
5. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend (either at the time while the option is granted or at any time while the
option remains outstanding) the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service, from the limited
period set forth in the option agreement, to such greater period of time as the
Plan Administrator may deem appropriate under the circumstances. In no event,
however, shall such option be exercisable after the specified expiration date of
the option term.
ARTICLE III
STOCK ISSUANCE PROGRAM
1. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock shall be issuable under the Stock
Issuance Program through direct and immediate issuances without any intervening
stock option grants. Each such stock issuance shall be evidenced by a Stock
Issuance Agreement ("Issuance Agreement") which complies with each of the terms
and conditions of this Article III.
(a) ISSUE PRICE.
(1) In the absolute discretion of the Plan
Administrator, shares may be issued for consideration with a value less
than one-hundred percent (100%) of the Fair Market Value of the issued
shares.
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 8
<PAGE>
(2) Shares shall be issued under the Plan for such
consideration as the Plan Administrator shall from time to time
determine, provided that in no event shall shares be issued for
consideration other than:
(A) cash or check payable to the
Corporation,
(B) promissory note payable to the
Corporation's order, which may be subject to cancellation by
the Corporation in whole or in part upon such terms and
conditions as the Plan Administrator shall specify, or
(C) services rendered, including any
technology or other intellectual property contributed or
assigned by Participant to the Corporation.
(b) VESTING SCHEDULE.
(1) In the absolute discretion of the Plan
Administrator, the interest of a Participant in the shares of Common
Stock issued to such Participant under the Plan may be fully and
immediately vested upon issuance or may vest in one or more
installments in accordance with the vesting provisions of subsection
(b)(4). Except as otherwise provided in subsection (b)(2), the
Participant may not transfer any purchased shares in which he/she does
not have a vested interest. Accordingly, all unvested shares issued
under the Plan shall bear the restrictive legend specified in
subsection (c)(1), until such legend is removed in accordance with
subsection (c)(2). The Participant, however, shall have all the rights
of a shareholder with respect to the shares of Common Stock issued to
Participant hereunder, whether or not Participant's interest in such
shares is vested. Accordingly, the Participant shall have the right to
vote such shares and to receive any cash dividends or other
distributions paid or made with respect to such shares. Any new,
additional or different shares of stock or other property (including
money paid other than as a regular cash dividend) which the holder of
unvested Common Stock may have the right to receive by reason of a
stock dividend, stock split, reclassification or other similar
recapitalization event affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration shall be
issued subject to (I) the same vesting requirements under subsection
(b)(4) applicable to the unvested Common Stock and (II) such escrow
arrangements as the Plan Administrator shall deem appropriate.
(2) As used in this Article III, the term "transfer"
shall include (without limitation) any sale, pledge, encumbrance, gift
or other disposition of such shares. However, the Participant shall
have the right to make a gift of unvested shares acquired under the
Stock Issuance Program to Participant's spouse, parents or issue or to
a trust established for such spouse, parents or issue, provided the
donee of such shares delivers to the Corporation at the time of such
donee's acquisition of the gifted shares a written agreement to be
bound by all the provisions of the Plan and the Purchase Agreement
executed by the Participant.
(3) Should the Participant cease Service for any
reason while Participant's interest in the Common Stock remains
unvested, then the Corporation shall have the right to repurchase, at
the original purchase price paid by the Participant or at such other
repurchase price specified in the instrument evidencing such repurchase
right, all or (at the discretion of the Corporation and with the
consent of the Participant) any shares in which the Participant is not
at the time vested, and the Participant shall thereafter cease to have
any further shareholder rights with respect to the repurchased shares.
(4) Any shares of Common Stock issued under the Stock
Issuance Program which are not vested at the time of such issuance
shall vest in one or more installments thereafter. The elements of the
vesting schedule, namely the performance or service objectives to be
completed or achieved, the number of installments in which the shares
are to vest, the interval or intervals (if any) which are to lapse
between installments and the effect which death, Permanent Disability
or other event designated by the Plan Administrator is to have upon the
vesting schedule, shall be determined by the Plan Administrator and
specified in the Issuance Agreement.
(5) The Plan Administrator may in its discretion
elect not to exercise, in whole or in part, its repurchase rights with
respect to any unvested Common Stock or other assets which would
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 9
<PAGE>
otherwise at the time be subject to repurchase pursuant to the
provisions of subsection (b)(3). Such an election shall result in the
immediate vesting of the Participant's interest in the shares of Common
Stock as to which the election applies.
(6) No shares of Common Stock or other assets shall
be issued or delivered under this Plan unless and until, in the opinion
of counsel for the Corporation (or its successor in the event of any
Corporate Transaction), there shall have been compliance with all
applicable requirements of the Federal and state securities exchange on
which stock of the same class is then listed, and all other
requirements of law or of any regulatory bodies having jurisdiction
over such issuance and delivery.
(c) STOCK LEGENDS.
(1) Each certificate representing unvested shares of
Common Stock (or other securities) issued under the Stock Issuance
Program shall bear a restrictive legend substantially as follows:
"The securities represented by this certificate are subject to
repurchase by the Corporation pursuant to the provisions of
the Stock Issuance Agreement between the Corporation and the
registered holder of the securities (or such holder's
predecessor in interest), a copy of which is on file at the
principal office of the Corporation."
(2) As the interest of the Participant vests with
respect to any stock certificate representing shares acquired under the
Stock Issuance Program, the Corporation, upon the Participant's
delivery of such certificate during the period or periods designated
each year by the Plan Administrator for such certificate reissuance,
shall issue a new certificate for the vested shares without the
restrictive legend of subsection (c)(1) and a second certificate for
the balance of the shares with such legend. If the Corporation
repurchases any unvested shares of the Participant pursuant to the
provisions of subsection (b)(3), the Corporation shall at the time the
repurchase is effected deliver a new certificate, without the
restrictive legend of subsection (c)(1), representing the number of
shares (if any) in which the Participant is vested and which are
accordingly no longer subject to repurchase by the Corporation.
(d) RIGHT OF FIRST REFUSAL. The Plan Administrator may in its
discretion establish as a term and condition of the issuance of one or more
shares of Common Stock under the Stock Issuance Program that the Corporation
shall have a right of first refusal with respect to any proposed disposition by
the Participant (or any successor in interest by reason of purchase, gift or
other mode of transfer) of one or more shares of such Common Stock. Such right
of first refusal shall be exercisable by the Corporation (or its assignees) in
accordance with the terms and conditions specified in the instrument evidencing
such right.
2. CORPORATE TRANSACTION
Upon the occurrence of a Corporate Transaction, the Plan
Administrator may, at its sole discretion, (I) terminate all or any outstanding
repurchase rights under this Article III of the Plan and thereby cause the
shares subject to such rights to vest immediately in full, (II) arrange for all
or any of the repurchase rights to be assigned to the successor corporation (or
parent thereof) in connection with the Corporate Transaction or (III) exercise
the Corporation's right to repurchase any unvested shares contemporaneously with
the consummation of the Corporate Transaction, if such right is provided in the
Stock Issuance Agreement pursuant to which such unvested shares were issued.
ARTICLE IV
MISCELLANEOUS
1. LOANS
(a) The Plan Administrator may assist any Optionee or
Participant (including an Optionee or Participant who is an officer or director
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 10
<PAGE>
of the Corporation) in the exercise of one or more options granted to such
Optionee under the Article II Option Grant Program or the purchase of one or
more shares issued to such Participant under the Article III Stock Issuance
Program, including the satisfaction of any Federal and State income and
employment tax obligations arising therefrom, by:
(1) authorizing the extension of a loan from the
Corporation to such Optionee or Participant, or
(2) permitting the Optionee or Participant to pay the
option price or purchase price for the purchased Common Stock in
installments over a period of years.
(b) The terms of any loan or installment method of payment
(including the interest rate and terms of repayment) shall be established by the
Plan Administrator in its sole discretion. Loans or installment payments may be
granted with or without security or collateral; however, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events, the maximum credit
available to each Optionee or Participant may not exceed the SUM of (I) the
aggregate option price or purchase price payable for the purchased shares less
the aggregate par value for such shares plus (II) any Federal and State income
and employment tax liability incurred by the Optionee or Participant in
connection with such exercise or purchase.
(c) The Plan Administrator may, in its absolute discretion,
determine that one or more loans extended under the financial assistance program
shall be subject to forgiveness by the Corporation in whole or in part upon such
terms and conditions as the Board in its discretion deems appropriate.
2. AMENDMENT OF THE PLAN AND AWARDS
(a) The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, no such amendment or modification shall adversely affect the rights and
obligations of an Optionee with respect to options at the time outstanding under
the Plan, nor adversely affect the rights of any Participant with respect to
Common Stock issued under the Plan prior to such action, unless the Optionee or
Participant consents to such amendment. In addition, the Board shall not,
without the approval of the Corporation's shareholders, amend the Plan to (I)
materially increase the maximum number of shares issuable under the Plan (except
for permissible adjustments under Article I, Section 5(c)), (II) materially
increase the benefits accruing to individuals who participate in the Plan, or
(III) materially modify the eligibility requirements for participation in the
Plan.
(b) Options to purchase shares of Common Stock may be granted
under the Option Grant Program and shares of Common Stock may be issued under
the Stock Issuance Program, which are in both instances in excess of the number
of shares then available for issuance under the Plan, provided any excess shares
actually issued under the Option Grant Program or the Stock Issuance Program are
held in escrow until there is obtained shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such shareholder approval is not obtained within
twelve (12) months after the date the initial excess issuances are made, whether
as stock option grants or direct stock issuances, then (I) any unexercised
options representing such excess shall terminate and cease to be exercisable and
(II) the Corporation shall promptly refund to the Optionees and Participants the
option or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow.
3. EFFECTIVE DATE AND TERM OF PLAN
(a) The Plan shall become effective when adopted by the Board,
but no option granted under the Plan shall become exercisable, and no shares
shall be issuable under the Stock Issuance Program, unless and until the Plan
shall have been approved by the Corporation's shareholders. If such shareholder
approval is not obtained within twelve (12) months after the date of the Board's
adoption of the Plan, then all options previously granted under the Plan shall
terminate, and no further options shall be granted and no shares shall be issued
under the Stock Issuance Program. Subject to such limitation, the Plan
Administrator may grant options under the Plan at any time after the effective
date and before the date fixed herein for termination of the Plan.
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 11
<PAGE>
(b) The Plan shall terminate upon the EARLIER of (I) ten years
after the adoption of the Plan or (II) the date on which all shares available
for issuance under the Plan have been issued or canceled pursuant to the
exercise or surrender of options granted under Article II or the issuance of
shares under Article III. If the date of termination is determined under clause
(I) above, then no options outstanding on such date under Article II and no
shares issued and outstanding on such date under Article III shall be affected
by the termination of the Plan, and such securities shall thereafter continue to
have force and effect in accordance with the provisions of the stock option
agreements evidencing such Article II options and the stock purchase agreements
evidencing the issuance of such Article III shares.
4. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the
issuance of shares of Common Stock under the Plan shall be used for general
corporate purposes.
5. WITHHOLDING
The Corporation's obligation to deliver shares upon the
exercise or surrender of any options granted under Article II or upon the
purchase of any shares issued under Article III shall be subject to the
satisfaction of all applicable Federal, State and local income and employment
tax withholding requirements.
6. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options
under the Option Grant Program, the issuance of any shares under the Stock
Issuance Program, and the issuance of Common Stock upon the exercise or
surrender of the option grants made hereunder shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it, and
the Common Stock issued pursuant to it.
STOCK OPTION/STOCK ISSUANCE PLAN - PAGE 12
OREGON BAKING COMPANY, DBA MARSEE BAKING
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") made to purchase shares of Oregon Baking Company, dba Marsee Baking
(the "Company") common stock (the "Common Stock"):
OPTIONEE: ___________________________________________
GRANT DATE: __________________________________________
VESTING COMMENCEMENT DATE: __________________________
TYPE OF STOCK: Common Stock
OPTION PRICE: $______ per share
NUMBER OF OPTION SHARES: ____________________________
EXPIRATION DATE: 10 years from Grant Date
TYPE OF OPTION: Incentive/Non-Qualified
EXERCISE SCHEDULE: ___________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
REPURCHASE RIGHT: The Option Shares shall be subject to
repurchase by the Company at the Option Price paid per share.
Provided Optionee remains in Service (as defined in the Stock
Purchase Agreement attached hereto as Exhibit B), the
Company's Repurchase Right will lapse with respect to, and the
Optionee shall acquire a vested interest in, _______________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
__________________________________. In no event shall any
additional Option Shares vest after Optionee's cessation of
Service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the express terms and conditions of the
Company's 1997 Stock Option/Stock Issuance Plan (the "Plan"). Optionee further
agrees to be bound by the terms and conditions of the Option as set forth in the
Stock Option Agreement attached hereto as Exhibit A. Optionee understands that
the terms and conditions applicable to any Option Shares purchased thereunder
are as set forth in the Stock Purchase Agreement attached hereto as Exhibit B.
Optionee hereby acknowledges receipt of a copy of the Plan in
the form attached hereto as Exhibit C.
RIGHTS OF FIRST REFUSAL. IN ADDITION TO THE COMPANY'S
REPURCHASE RIGHT SET FORTH ABOVE, THE OPTIONEE HEREBY AGREES THAT ALL OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN
RIGHTS OF FIRST REFUSAL UPON ANY PROPOSED SALE, ASSIGNMENT, TRANSFER,
Notice of Grant
Page 1
<PAGE>
ENCUMBRANCE OR OTHER DISPOSITION OF THE COMPANY'S SHARES. THE TERMS AND
CONDITIONS OF SUCH RIGHTS ARE SPECIFIED IN THE STOCK PURCHASE AGREEMENT ATTACHED
HERETO AS EXHIBIT B.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement
or in the Plan shall confer upon the Optionee any right to continue in the
Service of the Company for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company or the Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason whatsoever, with or without cause.
___________________________
Date
OREGON BAKING COMPANY, DBA MARSEE BAKING
By:_____________________________________
Its:____________________________________
________________________________________
Optionee
Address:_____________________________
________________________________________
Notice of Grant
Page 2
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE>
OREGON BAKING COMPANY, DBA MARSEE BAKING
STOCK OPTION AGREEMENT
WITNESSETH:
----------
RECITALS
A. The Board has adopted the Plan for the purpose of attracting and
retaining the services of selected key employees (including officers and
directors), non-employee members of the Board and consultants and other
independent contractors who contribute to the financial success of the
Corporation.
B. Optionee is an individual who is to render valuable services to the
Corporation, and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation's grant
of a stock option to Optionee.
C. Capitalized terms used in this Agreement shall, unless the context
clearly indicates otherwise, have the meaning assigned to such terms in
Paragraph 21 of this Agreement.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set forth
in this Agreement, the Corporation hereby grants to Optionee, as of the Grant
Date, a stock option to purchase up to that number of Option Shares as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the Option term at the Option Price per share specified in the
Grant Notice.
2. OPTION TERM. This Option shall expire at the close of business on the
Expiration Date specified in the Grant Notice, unless sooner terminated in
accordance with Paragraphs 5, 6, or 18 hereof; provided, in no event shall this
Option have a maximum term in excess of ten (10) years measured from the Grant
Date.
3. OPTION NONTRANSFERABLE; EXCEPTION. This Option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following the Optionee's death and may be exercised,
during Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This Option may not be exercised in whole or in part
at any time prior to the time the Plan is approved by the Corporation's
Stock Option Agreement
Page 1
<PAGE>
shareholders in accordance with Paragraph 18. Provided such shareholder approval
is obtained, this Option shall thereupon become exercisable for the Option
Shares in one or more installments as is specified in the Grant Notice. As the
Option becomes exercisable in one or more installments, the installments shall
accumulate and the Option shall remain exercisable for such installments until
the Expiration Date or the sooner termination of the Option term under Paragraph
5 or Paragraph 6 of this Agreement.
5. ACCELERATED TERMINATION OF OPTION TERM. The option term specified in
Paragraph 2 shall terminate (and this Option shall cease to be exercisable)
prior to the Expiration Date should any of the following provisions become
applicable:
(a) Except as otherwise provided in subparagraph (b) or (c) below, should
Optionee cease to remain in Service while this Option is outstanding, then the
period for exercising this Option shall be reduced to a three (3) month period
commencing with the date of such cessation of Service, but in no event shall
this Option be exercisable at any time after the Expiration Date. Upon the
expiration of such three (3) month period or (if earlier) upon the Expiration
Date, this Option shall terminate and cease to be outstanding.
(b) Should Optionee die while this Option is outstanding, then the personal
representative of the Optionee's estate or the person or persons to whom the
Option is transferred pursuant to the Optionee's will or in accordance with the
law of descent and distribution shall have the right to exercise this Option.
Such right shall lapse, and this Option shall cease to be exercisable, upon the
EARLIER of (i) the expiration of the twelve (12) month period measured from the
date of Optionee's death or (ii) the Expiration Date. Upon the expiration of
such twelve (12) month period or (if earlier) upon the Expiration Date, this
Option shall terminate and cease to be outstanding.
(c) Should Optionee become Permanently Disabled and cease by reason thereof
to remain in Service while this Option is outstanding, then the Optionee shall
have a period of twelve (12) months (commencing with the date of such cessation
of Service) during which to exercise this Option, but in no event shall this
Option be exercisable at any time after the Expiration Date. Upon the expiration
of such limited period of exercisability or (if earlier) upon the Expiration
Date, this Option shall terminate and case to be outstanding.
(d) During the limited period of exercisability applicable under
subparagraphs (a), (b) or (c) above, this Option may be exercised for any or all
of the Option Shares in which the Optionee, at the time of cessation of Service,
is vested in accordance with the exercise/vesting provisions specified in the
Grant Notice or the special acceleration provisions of Paragraph 6 of this
Agreement.
(e) Notwithstanding any provisions of this paragraph 5 or any other
provision of this Agreement or the Plan to the contrary, any options granted
under the Plan shall terminate as of the date Optionee ceases to be in the
Stock Option Agreement
Page 2
<PAGE>
Service of the Corporation if Optionee was terminated for "cause" or could have
been terminated for "cause." If Optionee has an employment or consulting
agreement the Corporation, the term "cause" shall have the meaning given that
term in the employment or consulting agreement. If Optionee does not have and
employment or consulting agreement with the Corporation, or if such employment
or consulting agreement does not define the term "cause," the term "cause" shall
mean: (1) misconduct or dishonesty that materially adversely affects the
Corporation, including without limitation (I) an act materially in conflict with
the financial interests of the Corporation, (ii) an act that could damage the
reputation or customer relations of the Corporation, (iii) an act that could
subject the Corporation to liability, (iv) an act constituting sexual harassment
or other violation of the civil rights of coworkers, (v) failure to obey any
lawful instruction of the Board or any officer of the Corporation and (vi)
failure to comply with, or perform any duty required under, the terms of any
confidentiality, inventions, or noncompetition agreement Optionee may have with
the Corporation, or (2) acts constituting the unauthorized disclosure of any of
trade secrets or confidential information of the Corporation, unfair competition
with the corporation or the inducement of any customer of the Corporation to
breach any contract during the pendency of any investigation by the Board, or
its designee, and/or any negotiations by the Board, or its designee, and
Optionee, regarding any actual or alleged act or omission by Optionee of the
type described in this paragraph.
6. CORPORATE TRANSACTION.
(a) This Option shall terminate upon the consummation of any Corporate
Transaction, unless expressly assumed by the successor corporation or parent
thereof.
(b) In connection with any such Corporate Transaction, the Plan
Administrator may, at its sole discretion, (i) accelerate this Option so that
this Option shall, immediately prior to the specified effective date for such
Corporate Transaction, become fully exercisable with respect to all of the
Option Shares and may be exercised for all or any portion of such shares, (ii)
arrange for this Option either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent thereof, (iii) arrange
for this Option to be replaced by a comparable cash incentive program of the
successor corporation based on the option spread (the amount by which the Fair
Market Value of the shares of Common Stock at the time subject to the Option
exceeds the Option Price payable for such shares) or (iv) take none of the
actions described in clauses (i), (ii) or (iii) above and allow this Option to
terminate as provided in Paragraph 6(a) above. The determination of
comparability under clauses (ii) and (iii) above shall be made by the Plan
Administrator, and its determination shall be final and conclusive.
Stock Option Agreement
Page 3
<PAGE>
(c) The exercisability of this Option as an incentive stock option under
the Federal tax laws (if designated as such in the Grant Notice) shall, in
connection with any such Corporate Transaction, be subject to the applicable
dollar limitation of Paragraph 19.
(d) This Agreement shall not in any way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise make changes in its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES
(a) In the event any change is made to the Corporation's outstanding Common
Stock by reason of any stock split, stock dividend, combination of shares,
exchange or conversion of shares, or other change affecting the outstanding
Common Stock as a class without receipt of consideration, then appropriate
adjustments shall be made to (i) the total number of Option Shares subject to
this Option and (ii) the Option Price payable per share in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder.
(b) If this Option is to be assumed or is otherwise to remain outstanding
after the Corporate Transaction, then this Option shall be appropriately
adjusted to apply and pertain to the number and class of securities that would
have been issuable to the Optionee in the consummation of such Corporation
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Option Price
payable per share, provided the aggregate Option Price payable hereunder shall
remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this Option shall not have
any of the rights of a shareholder with respect to the Option Shares until such
individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this Option with respect to all or any part of the
Option Shares for which this Option is at the time exercisable, Optionee (or in
the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
(1) Execute and deliver to the Secretary of the Corporation the Purchase
Agreement;
Stock Option Agreement
Page 4
<PAGE>
(2) Pay the aggregate Option Price for the purchased shares either by full
payment in cash or check, or any other form approved by the Plan
Administrator at the time of exercise in accordance with the provisions
of Paragraph 15.1
(3) Furnish to the Corporation appropriate documentation that the person or
persons exercising the Option (if other than Optionee) have the right
to exercise this Option.
(b) Should the Corporation's outstanding Common Stock be registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), at the time the Option is exercised, then the Option Price may also be
paid as follows:
(1) in shares of the Common Stock held by the Optionee for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(2) through a special sale and remittance procedure pursuant to which the
Optionee (i) is to provide irrevocable written instructions to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds, an
amount sufficient to cover the aggregate Option Price payable for the
purchased shares plus all applicable Federal and state income and
employment taxes required to be withheld by the Corporation by reason
of such purchase and (ii) concurrently provides written directives to
the Corporation to deliver the certificates for the purchased shares
directly to such broker-dealer in order to effect the sale transaction.
(c) Except to the extent the special sale and remittance procedure is
utilized to exercise this Option, payment of the Option Price must accompany the
delivery of the Purchase Agreement. As soon after such payment is practical, the
Corporation shall mail or deliver to Optionee (or to the other person or persons
exercising this Option) a certificate or certificates representing the shares so
purchased and paid for, with the appropriate legends affixed thereto.
(d) In no event may this Option be exercised for any fractional shares.
10. RIGHTS OF FIRST REFUSAL/REPURCHASE RIGHTS. THE OPTIONEE HEREBY AGREES
THAT ALL OPTION SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE
SUBJECT TO CERTAIN RIGHTS OF
- --------
1 Authorization of a loan or installment payment method under such provisions
may, under currently proposed Treasury Regulations, result in the loss of
incentive stock option treatment under the Federal tax laws.
Stock Option Agreement
Page 5
<PAGE>
FIRST REFUSAL OF THE CORPORATION AND ITS ASSIGNS IN CONNECTION
WITH ANY PROPOSED TRANSFER OF ANY SUCH SHARES IN ACCORDANCE WITH THE TERMS AND
CONDITIONS SPECIFIED IN THE 1998 STOCK OPTION/STOCK ISSUANCE PLAN AND THE STOCK
PURCHASE AGREEMENT. ADDITIONALLY, THE GRANT NOTICE MAY GRANT THE CORPORATION THE
RIGHT TO REPURCHASE ANY SHARES ACQUIRED UNDER THIS OPTION, WHICH RIGHT SHALL
LAPSE OVER TIME BASED UPON THE OPTIONEE'S LENGTH OF SERVICE TO THE CORPORATION.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this Option and the issuance of Option Shares upon such
exercise shall be subject to compliance by the Corporation and the Optionee with
all applicable requirements of law relating thereto and with all applicable
regulations of any stock exchange on which shares of the Corporation's Common
Stock may be listed at the time of such exercise and issuance.
(b) In connection with the exercise of this Option, Optionee shall execute
and deliver to the Corporation such representations in writing as may be
requested by the Corporation in order for it to comply with the applicable
requirements of Federal and state securities laws.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Corporation.
13. LIABILITY OF CORPORATION.
(a) If the Option Shares covered by this Agreement exceed, as of the Grant
Date, the number of shares of Common Stock that may be issued under the Plan
without shareholder approval, then this Option shall be void with respect to
such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the applicable provisions of Article IV of the Plan.
(b) The inability of the Corporation to obtain approval from any regulatory
body having authority the Corporation deems necessary to the lawful issuance and
sale of any Common stock pursuant to this Option shall relieve the Corporation
of any liability with respect to the non-issuance of sale of the Common stock as
to which such approval shall not have been obtained. The Corporation, however,
shall use its best efforts to obtain all such approvals.
Stock Option Agreement
Page 6
<PAGE>
14. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal corporate
offices. Any notices required to be given or delivered to the Optionee shall be
in writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the US Mail,
postage prepaid and properly addressed to the party to be notified.
15. LOANS. The Plan Administrator may, in its absolute discretion and
without any obligation to do so, assist the Optionee in the exercise of this
Option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirement for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
16. CONSTRUCTION. This Agreement and the Option evidenced hereby are made
and granted pursuant to the Plan and are in all respects limited by and subject
to the express terms and provisions of the Plan. All decisions of the Plan
Administrator with respect to any question or issue arising under the Plan or
this Agreement shall be conclusive and binding on all persons having an interest
in this Option.
17. GOVERNING LAW. The interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Oregon.
18. SHAREHOLDER APPROVAL. The grant of this Option is subject to approval
of the Plan by the Corporation's shareholders within twelve (12) months after
the adoption of the Plan by the Board. NOTWITHSTANDING ANY PROVISION OF THIS
AGREEMENT TO THE CONTRARY, THIS OPTION MAY NOT BE EXERCISED IN WHOLE OR IN PART
UNTIL SUCH SHAREHOLDER APPROVAL IS OBTAINED. In the event that such shareholder
approval is not obtained, then this Option shall terminate in its entirety and
the Optionee shall have no further rights to acquire any Option Shares
hereunder.
19. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In the event
this Option is designated an incentive stock option in the Grant Notice, the
following terms and conditions shall also apply to the grant:
Stock Option Agreement
Page 7
<PAGE>
(a) This Option shall cease to qualify for favorable tax treatment as an
incentive stock option under the Federal tax laws if (and to the extent) this
Option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or Permanent Disability or (ii) more than one (1) year after the date
the Optionee ceases to be an Employee by reason of Permanent Disability.
(b) In the event this Option is designated as immediately exercisable in
the Grant Notice, then except in the event of a Corporate Transaction, this
Option shall not become exercisable in the calendar year in which granted if
(and to the extent) the aggregate Fair Market Value (determined at the Grant
Date) of the Common Stock for which this Option would otherwise first become
exercisable in such calendar year would, when added to the aggregate Fair Market
Value (determined as of the respective date or dates of grant) of the Common
Stock for which one or more other post-1986 incentive stock options granted to
the Optionee prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary corporations) first become
exercisable during the same calendar year, exceed one hundred thousand dollars
($100,000) in the aggregate. To the extent the exercisability of this Option is
deferred by reason of the foregoing limitation, the deferred portion will first
become exercisable in the first calendar year or years thereafter in which the
one hundred thousand dollar ($100,000) limitation of this Paragraph 19(b) would
not be contravened.
(c) In the event this Option is designated as an installment option in the
Grant Notice, no installment under this Option (whether annual or monthly) shall
qualify for favorable tax treatment as an incentive stock option under the
Federal tax laws if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which such installment
first becomes exercisable hereunder will, when added to the aggregate Fair
Market Value (determined as of the respective date or dates of grant) of the
Common Stock for which this Option or one or more other post-1986 incentive
stock options granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or Subsidiary
corporations) first become exercisable during the same calendar year, exceed one
hundred thousand dollars ($100,000) in the aggregate.
(d) Should the exercisability of this Option be accelerated upon a
Corporate Transaction, then this Option shall qualify for favorable tax
treatment as an incentive stock option under the Federal tax laws only to the
extent the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which this Option first becomes exercisable in the calendar
year in which the Corporate Transaction occurs does not, when added to the
aggregate Fair Market Value (determined as of the respective date or dates of
grant) of the Common Stock for which this Option or one or more other post-1986
incentive stock options granted to the Optionee prior to the Grant Date (whether
under the Plan or any other option plan of the Corporation or any Parent or
Subsidiary corporations) first become exercisable during the same calendar year,
exceed one hundred thousand (100,000) in the aggregate.
Stock Option Agreement
Page 8
<PAGE>
(e) To the extent this Option should fail to qualify as an incentive stock
option under the Federal tax laws, the Optionee will recognize compensation
income in connection with the acquisition of one or more Option Shares
hereunder, and the Optionee must make appropriate arrangements for the
satisfaction of all Federal, state or local income tax withholding requirements
and Federal Social Security employee tax requirements applicable to such
compensation income.
20. ADDITIONAL TERMS APPLICABLE TO A NON-STATUTORY STOCK OPTION. In the
event this Option is designated a non-statutory stock option in the Grant
Notice, Optionee hereby agrees to make appropriate arrangements with the
Corporation for the satisfaction of all Federal, state or local tax withholding
requirements and Federal Social Security employee tax requirements applicable to
the exercise of this Option.
21. DEFINITIONS. The following definitions shall apply to the respective
capitalized terms used herein:
(a) BOARD means the Board of Directors of Oregon Baking Company, dba Marsee
Baking
(b) CODE means the Internal Revenue Code of 1986, as amended.
(c) COMMON STOCK means the Common Stock of Oregon Baking Company, dba
Marsee Baking
(d) CORPORATION means Oregon Baking Company, dba Marsee Baking, a Delaware
corporation, and any of its successors.
(e) CORPORATE TRANSACTION means one or more of the following transactions:
(1) a merger or consolidation in which the Corporation is not the surviving
entity, except for a transaction the principal purpose of which is to
change the state of the Corporation's incorporation;
(2) the sale, transfer, or other disposition of all or substantially all of
the assets of the Corporation; or
Stock Option Agreement
Page 9
<PAGE>
(3) any reverse merger in which the Corporation is the surviving entity but
in which fifty percent (50%) or more of the Corporation's outstanding
voting stock is transferred to holders different from those who held
stock immediately prior to such merger.
(f) EMPLOYEE means an individual who is in the employ of the Corporation or
any Parent or Subsidiary corporation. An Optionee shall be considered to be an
Employee for so long as such individual remains in the employ of the Corporation
or any Parent or Subsidiary corporation, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
(g) EXERCISE DATE shall be the date on which the executed Purchase
Agreement for one or more Option Shares is delivered to the Corporation in
accordance with Paragraph 9 of this Agreement.
(h) FAIR MARKET VALUE of a share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(1) If the Common Stock is not at the time listed or admitted to trading on
any stock exchange but is traded in the over-the-counter market, the
Fair Market Value shall be the mean between the highest bid and the
lowest asked prices (or if such information is available the closing
selling price) per share of Common Stock on the date in question in the
over-the-counter market, as such prices are reported by the National
Association of Securities Dealers through its NASDAQ National Market
System or any successor system. If there are no reported bid and asking
prices (or closing selling price) for the Common Stock on the date in
question, then the mean between the highest bid and the lowest asked
prices (or closing selling price) on the last preceding date for which
such quotations exist shall be determinative of Fair Market Value.
(2) If the Common Stock is at the time listed or admitted to trading on any
stock exchange then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the stock
exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
reported sale of Common Stock on such exchange on the date in question,
then the Fair Market Value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
Stock Option Agreement
Page 10
<PAGE>
(3) If the Common Stock is at the time neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator otherwise determines that the
valuation provisions of subparagraphs (a) and (b) above will not result
in a true and accurate valuation of the Common Stock, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem
appropriate under the circumstances.
(i) GRANT DATE means the date specified in the Grant Notice as the date on
which the Option was granted to the Optionee under the Plan.
(j) INCENTIVE STOCK OPTION means an option not intended to meet the
statutory requirements of Section 422 of the Code.
(k) NON-STATUTORY STOCK OPTION means an option not intended to meet the
statutory requirements prescribed for in an Incentive Stock Option.
(l) OPTION SHARES means the total number of shares of Common Stock
indicated in the Grant Notice as purchasable under this Option.
(m) OPTIONEE means the individual identified in the Grant Notice as the
person to whom this Option has been granted under the Plan.
(n) OPTION PRICE means the exercise price per share to be paid by the
Optionee for the exercise of this Option. The Option Price is indicated in the
Grant Notice.
(o) PARENT corporation means any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
such corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such claim.
(p) PERMANENTLY DISABLED or Permanent Disability means the inability of an
individual to engage in any substantial gainful activity by reason of any
medically-determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months.
(q) PLAN means the 1998 Stock Option/Stock Issuance Plan of the
Corporation, in the form of Exhibit C to the Grant Notice.
Stock Option Agreement
Page 11
<PAGE>
(r) PLAN ADMINISTRATOR means either the Board or a committee of two or more
Board members, to the extent such committee may at the time be responsible for
plan administration.
(s) PURCHASE AGREEMENT means the stock purchase agreement, in substantially
the form of Exhibit B to the Grant Notice, which is to be executed in connection
with the exercise of this Option for one or more Option Shares.
(t) SERVICE means the performance of services for the Corporation or any
Parent or Subsidiary corporation by an individual in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant or advisor. Accordingly, the Optionee shall be deemed to remain in
Service for so long as such individual renders services to the Corporation or
any Parent or Subsidiary corporation on a periodic basis in the capacity of an
Employee, a non-employee of the board of directors or an independent consultant
or advisor.
(u) SUBSIDIARY corporation means each corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
Stock Option Agreement
Page 12
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
<PAGE>
OREGON BAKING COMPANY, DBA MARSEE BAKING
STOCK PURCHASE AGREEMENT
Agreement made as of this ____ day of __________________, 19__, and
between Oregon Baking Company, dba Marsee Baking, an Oregon corporation (the
"Corporation"), and _________________________________________, the holder of a
stock option ("Optionee") under the Corporation's 1997 Stock Option/Stock
Issuance Plan (the "Plan").
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix, unless otherwise
indicated.
A. EXERCISE OF OPTION
------------------
1. EXERCISE. Optionee hereby purchases shares of Common Stock (the
"Purchased Shares") pursuant to that certain option (the "Option") granted
Optionee on ____________, 19__ (the "Grant Date") to purchase up to
______________ shares of Common Stock under the Plan at the exercise price of
$_____________ per share (the "Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
Corporate Secretary, Optionee shall pay the Exercise Price for the Purchased
Shares in accordance with the provisions of the Option Agreement and shall
deliver whatever additional documents may be required by the Option Agreement as
a condition for exercise, together with a duly-executed blank Assignment
Separate from Certificate (in the form attached hereto as Exhibit I) with
respect to the Purchased Shares.
3. DELIVERY OF CERTIFICATES. The certificates representing the
Purchased Shares hereunder which are subject to the Repurchase Right shall be
held in escrow by the Corporate Secretary in accordance with the provisions of
Article G.
4. SHAREHOLDER RIGHTS. Until such time as the Corporation actually
exercises its Repurchase Right or First Refusal Right under this Agreement,
Optionee (or any successor in interest) shall have all the rights of a
shareholder (including voting, dividend, and liquidation rights) with respect to
the Purchased Shares, including the Purchased Shares held in escrow under
Article G, subject, however, to the transfer restrictions of Article D.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. EXEMPTION FROM REGISTRATION. The Purchased Shares have not been
registered under the 1933 Act and are accordingly being issued to Optionee in
reliance upon the exemption from such registration provided by Rule 701 of the
Employee Stock Purchase Agreement
Page 1
<PAGE>
SEC for stock issuances under compensatory benefit plans such as the Plan.
Optionee hereby acknowledges receipt of a copy of the Plan in the form of
Exhibit C to the Grant Notice.
2. RESTRICTED SECURITIES.
-------------------------
(a) Optionee hereby confirms that Optionee has been informed that the
Purchased Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Purchase Shares are first registered under the
Federal securities laws or unless an exemption from such registration is
available. Accordingly, Optionee hereby acknowledges that Optionee is prepared
to hold the Purchased Shares for an indefinite period and that Optionee is aware
that Rule 144 of the SEC issued under the 1933 Act is not presently available to
exempt the resale of the Purchased Shares from the registration requirements of
the 1933 Act.
(b) Upon the expiration of the ninety (90) day period immediately
following the date on which the Corporation first becomes subject to the
reporting requirements of the Exchange Act, the Purchased Shares, to the extent
vested under Article E, may be sold (without registration) pursuant to the
applicable requirements of Rule 144. If Optionee is at the time of such sale an
affiliate of the Corporation for purposes of Rule 144 or was such an affiliate
during the preceding three (3) months, then the sale must comply with all the
requirements of Rule 144 (including the volume limitation on the number of
shares sold, the broker/market-maker sale requirement and the requisite notice
to the SEC); however, the one (1) year holding period requirement of Rule 144
will not be applicable. If Optionee is not at the time of the sale an affiliate
of the Corporation nor was such an affiliate during the preceding three (3)
months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than two
(2) years following payment in cash of the Exercise Price therefor) will be
applicable to the sale.
(c) Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he/she is not at
the time an affiliate of the Corporation (nor was such an affiliate during the
preceding three (3) months), sell the Purchased Shares (without registration)
pursuant to paragraph (k) of Rule 144 after the Purchased shares have been held
for a period of two (2) years following the payment of the Exercise Price for
such shares.
3. DISPOSITION OF SHARES. Optionee hereby agrees that Optionee shall
make no disposition of the Purchased Shares (other than a permitted transfer
under paragraph D.1) unless and until there is compliance with all of the
following requirements:
(a) Optionee shall have provided the Corporation with a written
summary of the terms and conditions of the proposed disposition.
Employee Stock Purchase Agreement
Page 2
<PAGE>
(b) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(c) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (i) the
proposed disposition does not require registration of the Purchased Shares under
the 1933 Act or (ii) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
(d) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Purchased Shares.
The Corporation shall not be required (i) to transfer on its books any Purchased
Shares which have been sold or transferred in violation of the provisions of
this Agreement or (ii) to treat as the owner of the Purchased Shares, or
otherwise to accord voting, dividend or liquidation rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement.
4. RESTRICTIVE LEGENDS. In order to reflect the restrictions imposed
by this Agreement upon the disposition of the Purchased Shares, the stock
certificates for the Purchased Shares shall be endorsed with restrictive
legends, including one or more of the following legends:
(a) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (i) an effective registration statement for
the shares under such Act, (ii) a 'no action' letter of the Securities and
Exchange Commission with respect to such sale or offer or (iii) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
(b) "The shares represented by this certificate are unvested and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written Stock Purchase
Agreement between the Corporation and the registered holder of the shares (or
the predecessor in interest to the shares). Such agreement grants certain
repurchase rights and rights of first refusal to the Corporation (or its
assignees) upon the sale, assignment, transfer, encumbrances or other
disposition of the Corporation's shares or upon termination of service with the
Corporation. A copy of such agreement is maintained at the Corporation's
principal corporate offices."
Employee Stock Purchase Agreement
Page 3
<PAGE>
C. SPECIAL TAX ELECTION
--------------------
1. SECTION 83(B) ELECTION FOR EXERCISE OF NON-STATUTORY STOCK OPTION.
If the Purchased Shares are acquired hereunder pursuant to the exercise of a
Non-Statutory Option, as specified in the Grant Notice, then Optionee
understands that under Code Section 83, the excess of the Fair Market Value of
the Purchased Shares on the date any forfeiture restrictions applicable to such
shares lapse over the Exercise Price paid for such shares will be reportable as
ordinary income on the lapse date. For this purpose, the term "forfeiture
restrictions" includes the right of the Corporation to repurchase the Purchased
Shares pursuant to the Repurchase Right provided under Article E. Optionee
understands that he/she may elect under Code Section 83(b) to be taxed at the
time the Purchased Shares are acquired hereunder, rather than when and as such
Purchased Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty (30) days
after the date of this Agreement. Even if the Fair Market Value of the Purchased
Shares on the date of this Agreement equals the Exercise Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future. THE FROM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO.
OPTIONEE UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE
THIRTY (30) DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY
OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE.
2. CONDITIONAL SECTION 83(B) ELECTION FOR EXERCISE OF INCENTIVE
OPTION. If the Purchased Shares are acquired hereunder pursuant to the exercise
of an Incentive Option under the Federal tax laws, as specified in the Grant
Notice, then the following tax principles shall be applicable to the Purchased
Shares:
(a) For regular tax purposes, no taxable income will be recognized at
the time the Option is exercised.
(b) The excess of (i) the Fair Market Value of the Purchased Shares on
the date the Option is exercised or (if later) on the date any forfeiture
restrictions applicable to the Purchased Shares lapse over (ii) the Exercise
Price pad for the Purchased Shares will be includable in Optionee's taxable
income for alternative minimum tax purposes.
Employee Stock Purchase Agreement
Page 4
<PAGE>
(c) If Optionee makes a disqualifying disposition of the Purchased
Shares, then Optionee will recognize ordinary income in the year of such
disposition equal in amount to the excess of (i) the Fair Market Value of the
Purchased Shares on the date the Option is exercised or (if later) on the date
any forfeiture restrictions applicable to the Purchased Shares lapse over (ii)
the Exercise Price paid for the Purchased Shares. Any additional gain recognized
upon the disqualifying disposition will be either short-term or long-term
capital gain depending upon the period for which the Purchased Shares are held
prior to the disposition.
(d) For purposes of the foregoing, the term "forfeiture restrictions"
will include the right of the Corporation to repurchase the Purchased Shares
pursuant to the Repurchase Right under Article E. The term "disqualifying
disposition" means any sale or other disposition(1) of the Purchased Shares
within two (2) years after the Grant Date or within one (1) year after the
exercise date of the Option.
(e) In the absence of final Treasury Regulations relating to Incentive
Options, it is not certain whether Optionee may, in connection with the exercise
of the Option for any Purchased Shares at the time subject to forfeiture
restrictions, file a protective election under Code Section 83(b) which would
limit (a) Optionee's alternative minimum taxable income upon exercise and (b)
Optionee's ordinary income upon a disqualifying disposition to the excess of the
Fair Market Value of the Purchased Shares on the date the Option is exercised
over the Exercise Price paid for the Purchased Shares. THE APPROPRIATE FORM FOR
MAKING SUCH A PROTECTIVE ELECTION IS ATTACHED AS EXHIBIT III TO THIS AGREEMENT
AND MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN THIRTY (30) DAYS
AFTER THE DATE OF THIS AGREEMENT. HOWEVER, SUCH ELECTION IF PROPERLY FILED WILL
ONLY BE ALLOWED TO THE EXTENT THE FINAL TREASURY REGULATIONS PERMIT SUCH A
PROTECTIVE ELECTION.
3. FILING RESPONSIBILITY. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S
SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER
SECTION 83(B), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON HIS OR HER BEHALF.
D. TRANSFER RESTRICTIONS.
---------------------
1. RESTRICTION ON TRANSFER. Optionee shall not transfer, assign,
encumber or otherwise dispose of any of the Purchased Shares which are subject
- --------
(1) Generally, a disposition of shares purchased under an Incentive Option
includes any transfer of legal title, including a transfer by sale, exchange or
gift, but does not include a transfer to the Optionee's spouse, a transfer into
joint ownership with right of survivorship if Optionee remains one of the joint
owners, a pledge, a transfer by bequest or inheritance or certain tax free
exchanges permitted under the Code.
Employee Stock Purchase Agreement
Page 5
<PAGE>
to the Repurchase Right under Article E. In addition, Purchased Shares which are
released from the Repurchase Right shall not be transferred, assigned,
encumbered or otherwise made the subject of disposition in contravention of the
First Refusal Right under Article F or the market stand-off provisions of
paragraph D.3. Such restrictions on transfer, however, shall not be applicable
to (a) a gratuitous transfer of the Purchased Shares, provided and only if
Optionee's obtains the Corporation's prior written consent to such transfer, (b)
a transfer of title to the Purchased Shares effected pursuant to Optionee's will
or the laws of intestate succession or (c) a transfer tot he [sic] Corporation
in pledge as security for any purchase-money indebtedness incurred by Optionee
in connection with the acquisition of the Purchased Shares.
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation) to
whom the Purchased Shares are transferred by means of one of the permitted
transfers specified in paragraph D.1 must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Corporation that such
person is bound by the provisions of this Agreement and that the transferred
shares are subject to (a) both the Repurchase Right and the First Refusal Right
granted hereunder and (b) the market stand-off provisions of paragraph D.3, to
the same extent such shares would be so subject if retained by Optionee.
3. MARKET STAND-OFF.
--------------------
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of the final prospectus for the
offering as may be requested by the Corporation or such underwriters. The
limitations of this paragraph D.3 shall in all events terminate two (2) years
after the effective date of the Corporation's initial public offering.
(b) In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange or conversion of shares or other change
affecting the Corporation's outstanding Common Stock effected as a class without
the Corporation's receipt of consideration, then any new, substituted or
additional securities distributed with respect to the Purchased Shares shall be
immediately subject to the provisions of this paragraph D.3, to the same extent
the Purchased Shares are at such time covered by such provisions.
(c) In order to enforce the limitations of this paragraph D.3, the
Corporation may impose stop-transfer instructions with respect to the Purchased
Shares until the end of the applicable stand-off period.
Employee Stock Purchase Agreement
Page 6
<PAGE>
E. REPURCHASE RIGHT.
----------------
1. GRANT. The Corporation is hereby granted the right (the "Repurchase
Right"), exercisable at any time during the sixty (60) day period following the
date Optionee ceases for any reason to remain in Service, (if later) during the
sixty (60) day period following the execution date of this Agreement, or
contemporaneously with the consummation of a Corporate Transaction, to
repurchase at the exercise Price all or (at the discretion of the Corporation
and with the consent of Optionee) any portion of the Purchased Shares in which
Optionee is not, at the time of his or her cessation of Service, vested in
accordance with the vesting provisions of paragraph E.3 (such shares to be
hereinafter called the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase right shall be
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the applicable sixty (60) day period specified in
paragraph E.1, or, in the case of a Corporate Transaction, prior to its
consummation. The notice shall indicate the number of Unvested Shares to be
repurchased and the date on which the repurchase is to be effected, such date to
be not more than thirty (30) days after the date of notice. To the extent one or
more certificates representing Unvested Shares may have been previously
delivered out of escrow to Owner, Owner shall, prior to the close of business on
the date specified for the repurchase, deliver to the Corporate Secretary the
certificates representing the Unvested Shares to be repurchased, each
certificate to be properly endorsed for transfer. The Corporation shall,
concurrently with the receipt of such stock certificates (either from escrow in
accordance with paragraph G.3 or from Owner as herein provided), pay to Owner in
cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Exercise Price previously paid for the
Unvested Shares which are to be repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under paragraph E.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which Optionee vests in accordance with the vesting schedule specified
in the Grant Notice. All Purchased Shares as to which the Repurchase right
lapses shall, however, continue to be subject to (a) the First Refusal Right of
the Corporation and its assignees under Article F, and (b) the market stand-off
provisions of paragraph D.3.
4. AGGREGATE VESTING LIMITATION. If the Option is exercised in more
than one increment so that Optionee is a party to one or more other Stock
Purchase Agreements ("Prior Purchase Agreements") which are executed prior to
the date of this Agreement, then the total number of Purchased Shares as to
which Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which Optionee would otherwise at the time be
vested, in accordance with the vesting provisions of paragraph E.3, had all the
Purchased Shares been acquired exclusively under this Agreement.
Employee Stock Purchase Agreement
Page 7
<PAGE>
5. FRACTIONAL SHARES. No fractional shares shall be repurchased by the
Corporation. Accordingly, should the Repurchase Right extend to a fractional
share (in accordance with the vesting provisions of paragraph E.3) at the time
Optionee ceases Service, then such fractional share shall be added to any
fractional share in which Optionee is at such time vested in order to make one
whole vested share no longer subject to the Repurchase Right.
6. ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock split, stock dividend, recapitalization, combination of shares, exchange
or conversion of shares or other change affecting the outstanding Common Stock
as a class effected without the Corporation's receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as a regular cash dividend) which is by reason of any such
transaction distributed with respect to the Purchased Shares shall be
immediately subject to the Repurchase Right, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
to reflect the distribution of such securities or property shall be made to the
number and/or class of Purchase Shares subject to this Agreement and to the
price per share to be paid upon the exercise of the Repurchase Right in order to
reflect the effect of any such transaction upon the Corporation's capital
structure; provided, however, that the aggregate price shall remain the same.
7. CORPORATE TRANSACTION.
(a) In the event of a Corporate Transaction, the Plan Administrator
may, at its sole discretion, (i) terminate the Corporation's Repurchase Right
under this Agreement and thereby cause the Shares subject to such right to vest
immediately in full, (ii) arrange for the Repurchase Right to be assigned to the
successor corporation (or parent thereof) in connection with the Corporate
Transaction or (iii) exercise the Corporation's Repurchase Right
contemporaneously with the consummation of the Corporate Transaction as provided
in paragraph E.1 above.
(b) To the extent the Repurchase Right remains in effect following
such Corporate Transaction, such right shall apply to the new capital stock or
other property (including cash) received in exchange for the Purchased Shares in
consummation of the Corporate Transaction, but only to the extent the Purchased
Shares are at the time covered by such right. Appropriate adjustments shall be
made to the price per share payable upon exercise of the Repurchase Right to
reflect the effect of the Corporate Transaction upon the Corporation's capital
structure; provided, however, that the aggregate purchase price shall remain the
same.
Employee Stock Purchase Agreement
Page 8
<PAGE>
F. RIGHT OF FIRST REFUSAL
----------------------
1. GRANT. The Corporation is hereby granted the right of first refusal
(the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Optionee has vested in accordance with
the vesting provisions of Article E. For purposes of this Article F, the term
"transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition of the Purchased Shares intended to be made by Owner, but shall not
include any of the permitted transfers under paragraph D.1.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of the
Purchased Shares desires to accept a bona fide third-party offer for the
transfer of any or all of such shares (the Purchased Shares subject to such
offer to be hereinafter called the "Target Shares"), Owner shall promptly (a)
deliver to the Corporate Secretary written notice (the "Disposition Notice") of
the terms and conditions of the offer, including the purchase price and the
identity of the third-party offeror, and (b) satisfactory proof that the
disposition of the Target Shares to such third-party offeror would not be in
contravention of the provisions set forth in Articles B and D.
3. EXERCISE OF RIGHT.
---------------------
(a) The Corporation (or its assignees) shall, for a period of thirty
(30) days following receipt of the Disposition Notice, have the right to
repurchase any or all of the Target Shares subject to the disposition Notice
upon the same terms and conditions as those specified therein or upon such other
terms and conditions (not materially different from those specified in the
Disposition Notice) to which Owner consents. Such right shall be exercisable by
delivery of written notice (the "Exercise Notice") to Owner prior to the
expiration of the thirty (30) day exercise period. If such right is exercised
with respect to all the Target Shares, then the Corporation (or its assignees)
shall effect the repurchase of such shares, including payment of the purchase
price, not more than five (5) business days after delivery of the Exercise
Notice; at such time Owner shall deliver to the Corporation the certificates
representing the Target Shares to be repurchased, each certificate to be
properly endorsed for transfer. To the extent any of the Target Shares are at
the time held in escrow under Article G, the certificates for such shares shall
automatically be released from escrow and delivered to the Corporation for
purchase.
(b) Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation (or its assignees) shall have the right to pay the purchase price in
the form of cash equal in amount to the value of such property. If Owner and the
Corporation (or its assignees) cannot agree on such cash value within ten (10)
days after the Corporation's receipt of the Disposition Notice, the valuation
shall be made by an appraiser of recognized standing selected by Owner and the
Corporation (or its assignees) or, if they cannot agree on an appraiser within
twenty (20) days after the Corporation's receipt of the Disposition Notice, each
shall select an appraiser of recognized standing and the two (2) appraisers
Employee Stock Purchase Agreement
Page 9
<PAGE>
shall designate a third appraiser of recognized standing, whose appraisal shall
be determinative of such value. The cost of such appraisal shall be shared
equally by Owner and the Corporation. The closing shall then be held on the
later of (i) the fifth business day following delivery of the Exercise Notice or
(ii) the fifth business day after such cash valuation shall have been made.
4. NON-EXERCISE OF RIGHT. In the event the Exercise Notice is not
given to Owner within thirty (30) days following the date of the Corporation's
receipt of the Disposition Notice, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms and
conditions (including the purchase price) no more favorable to such third-party
offeror than those specified in the Disposition Notice; provided, however, that
any such sale or disposition must not be effected in contravention of the
provisions of Article B. To the extent any of the Target Shares are at the time
held in escrow under Article G, the certificates for such shares shall
automatically be released from escrow and surrendered to Owner. The third-party
offeror shall acquire the Target Shares free and clear of the Repurchase Right
under Article E and the First Refusal Right hereunder, but the acquired shares
shall remain subject to (a) the securities law restrictions of paragraph B.2(a)
and (b) the market stand-off provisions of paragraph D.3. In the event Owner
does not effect such sale or disposition of the Target Shares within the
specified thirty (30) day period, the First Refusal Right shall continue to be
applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph F.6.
5. PARTIAL EXERCISE OF RIGHT. In the event the Corporation (or its
assignees) makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) days after Owner's receipt of the Exercise Notice, to
effect the sale of the Target Shares pursuant to either of the following
alternatives:
(a) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full compliance
with the requirements of paragraph F.4, as if the Corporation did not exercise
the First Refusal Right hereunder; or
(b) sale to the Corporation (or its assignees) of the portion of the
Target Shares which the Corporation (or its assignees) has elected to purchase,
such sale to be effected in substantial conformity with the provisions of
paragraph F.3.
Failure of Owner to deliver timely notification to the Corporation under this
paragraph F.5 shall be deemed to be an election by Owner to sell the Target
Shares pursuant to alternative (a) above.
Employee Stock Purchase Agreement
Page 10
<PAGE>
6. LAPSE. The First Refusal Right under this Article F shall lapse and
cease to have effect upon the earliest to occur of (a) the first date on which
shares of the Common Stock are held of record by more than five hundred (500)
persons, (b) a determination is made by the Board that a public market exists
for the outstanding shares of Common Stock, or (c) a firm commitment
underwritten public offering, pursuant to an effective registration statement
under the 1933 Act, covering the offer and sale of the Common Stock in the
aggregate amount of a least seven and a half million dollars ($7,500,000).
However, the market stand-off provisions of paragraph D.3 shall continue to
remain in full force and effect following the lapse of the First Refusal Right
hereunder.
G. ESCROW.
------
1. DEPOSIT. Upon issuance, the certificates for any Unvested Shares
purchased hereunder shall be deposited in escrow with the Corporation to be held
in accordance with the provisions of this Article G. Each deposited certificate
shall be accompanied by a duly executed Assignment Separate from Certificate in
the form of Exhibit I. The deposited certificates, together with any other
assets or securities from time to time deposited with the Corporation pursuant
to the requirements of this Agreement, shall remain in escrow until such time or
times as the certificates (or other assets and securities) are to be released or
otherwise surrendered for cancellation in accordance with paragraph G.3. Upon
delivery of the certificates (or other assets and securities) to the
Corporation, the Owner shall be issued an instrument of deposit acknowledging
the number of Unvested Shares (or other assets and securities) delivered in
escrow to the Corporation.
2. RECAPITALIZATION. All regular cash dividends on the Unvested Shares
(or other securities at the time held in escrow) shall be paid directly to the
Owner and shall not be held in escrow. However, in the event of any stock
dividend, stock split, recapitalization, conversion or other change affecting
the Corporation's outstanding Common Stock as a class effected without receipt
of consideration or in the event of a Corporate Transaction, any new,
substituted or additional securities or other property which is by reason of
such transaction distributed with respect to the Unvested Shares shall be
immediately delivered to the Corporation to be held in escrow under this Article
G, but only to the extent the Unvested Shares are at the time subject to the
escrow requirements of paragraph G.1.
3. RELEASE/SURRENDER. The Unvested Shares, together with any other
assets or securities held in escrow hereunder, shall be subject to the following
terms and conditions relating to their release from escrow or their surrender to
the Corporation for repurchase and cancellation:
(a) Should the Corporation (or its assignees) elect to exercise the
Repurchase Right with respect to any Unvested Shares, then the escrowed
certificates for such Unvested Shares (together with any other assets or
securities issued with respect thereto) shall be delivered to the Corporation,
concurrently with the payment to the Owner, in cash or cash equivalent
Employee Stock Purchase Agreement
Page 11
<PAGE>
(including the cancellation of any purchase-money indebtedness), of an amount
equal to the aggregate Purchase Price for such Unvested Shares, and the Owner
shall cease to have any further rights or claims with respect to such Unvested
Shares (or other assets or securities attributable to such Unvested Shares).
(b) Should the Corporation (or its assignees) elect to exercise its
First Refusal Right under this Agreement with respect to any vested Target
Shares held at the time in escrow hereunder, then the escrowed certificates for
such Target Shares (together with any other assets or securities attributable
thereto) shall, concurrently with the payment of the purchase price for such
Target Shares to the Owner, be surrendered to the Corporation and the Owner
shall cease to have any further rights or claims with respect to such Target
Shares (or other assets or securities).
(c) Should the Corporation (or its assignees) elect NOT to exercise
their First Refusal Right under this Agreement with respect to any vested Target
Shares held at the time in escrow hereunder, then the escrowed certificates for
such Target Shares (together with any other assets or securities attributable
thereto) shall be surrendered to the Owner for disposition in accordance with
the provisions of this Agreement.
(d) As the interest of the Participant in Unvested Shares (or any
other assets or securities attributable thereto) vests in accordance with the
provisions of Article E, the certificates for such vested shares (as well as all
other vested assets and securities) may be released from escrow and delivered to
the Owner in accordance with the following schedule:
(i) Upon the written request of the Participant, the initial
release of vested shares (or other vested assets and securities) from escrow
shall be effected within thirty (30) days following the expiration of the
initial twelve (12) month period measured from the initial vesting date under
the Repurchase Right; provided, however, that in no event will vested shares be
released from escrow until shareholder approval authorizing the issuance of such
shares under the Plan has been obtained.
(ii) Upon the written request of the Participant, subsequent
releases of vested shares (or other vested assets and securities) from escrow
shall be effected at annual intervals thereafter.
(iii) Upon the Participant's cessation of Service, any escrowed
Shares (or other assets or securities) in which the Participant is at the time
vested shall be promptly released from escrow.
Employee Stock Purchase Agreement
Page 12
<PAGE>
(iv) Upon any earlier termination of the Corporation's Repurchase
Right in accordance with the applicable provisions of Article E, the Shares (or
other assets or securities) at the time held in escrow hereunder shall promptly
be released to the Owner as fully-vested shares or other property.
(e) All Shares (or other assets or securities) released from escrow in
accordance with the provisions of subparagraph (d) above shall nevertheless
remain subject to this Agreement.
H. GENERAL PROVISIONS
------------------
1. ASSIGNMENT. The Corporation may assign its Repurchase Right and/or
its First Refusal Right to any person or entity selected by the Board, including
(without limitation) one or more shareholders of the Corporation. If the
assignee of the Repurchase Right is other than (a) a wholly-owned subsidiary of
the Corporation or (b) the parent corporation owning one hundred percent (100%)
of the Corporation's outstanding capital stock, then such assignee must make a
cash payment to the Corporation, upon the assignment of the Repurchase Right, in
an amount equal to the excess (if any) of (a) the Fair Market Value of the
Purchased Shares at the time subject to the assigned Repurchased Right over (b)
the aggregate repurchase price payable for the Purchased Shares thereunder.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in
the Plan shall confer upon Optionee any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary) or Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason whatsoever, with or without cause.
3. NOTICES. Any notice required in connection with (a) the Repurchase
Right or the First Refusal Right, or (b) the disposition of any Purchased Shares
covered thereby shall be given in writing and shall be deemed effective upon
personal delivery or upon deposit in the United States mail, registered or
certified, postage prepaid and addressed to the party entitled to such notice at
the address indicated below such party's signature line on this Agreement or at
such other address as such party may designate by ten (10) days advance written
notice under this paragraph 1.3 to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation (or its assignees) in any
instance to exercise the Repurchase Right, or the failure of the Corporation (or
its assignees) in any instance to exercise the First Refusal Right, shall not
constitute a waiver of any other repurchase rights and/or rights of first
refusal that may subsequently arise under the provisions of this Agreement or
any other agreement between the Corporation and Optionee or Optionee's spouse.
No waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
5. CANCELLATION OF SHARES. If the Corporation (or its assignees) shall
make available, at the time and place and in the amount and form provided in
this Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
Employee Stock Purchase Agreement
Page 13
<PAGE>
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Corporation (or its assignees) shall be deemed the owner and holder of such
shares, whether or not the certificates therefor have been delivered as required
by this Agreement.
I. MISCELLANEOUS PROVISIONS.
------------------------
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the express provisions of this Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
This Agreement is made pursuant to the provisions of the Plan and shall in all
respects be construed in conformity with the express terms and provisions of the
Plan.
3. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Oregon without resort to that
State's conflict-of-laws rules. The parties hereto hereby irrevocably submit to
the jurisdiction of any state or federal court sitting in Multnomah County,
Oregon, in any action or proceeding brought to enforce or otherwise arising out
of or relating to this Agreement, and hereby waive any objection to venue in any
such court and any claim that such forum is an inconvenient forum.
4. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon the Corporation and its successors
and assignees and Optionee and Optionee's legal representatives, heirs,
legatees, distributees, assignees, and transferees by operation of law, whether
or not any such person shall have become a party to this Agreement and have
agreed in writing to join herein and be bound by the terms and conditions
hereof.
6. POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee his
or her true and lawful attorney in fact, for him or her and in his or her name,
place and stead, and for his or her use and benefit, to agree to any amendment
or modification of this Agreement and to execute such further instruments and
take such further actions as may reasonably be necessary to carry out the intent
of this Agreement. Optionee's spouse further gives and grants unto Optionee as
his or her attorney in fact full power and authority to do and perform every act
necessary and proper to be done in the exercise of any of the foregoing powers
as fully as he or she might or could do if personally present, with full power
Employee Stock Purchase Agreement
Page 14
<PAGE>
of substitution and revocation, hereby ratifying and confirming all that
Optionee shall lawfully do and cause to be done by virtue of this power of
attorney.
[The remainder of this page intentionally left blank]
Employee Stock Purchase Agreement
Page 15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
OREGON BAKING COMPANY,
dba Marsee Baking
By:_____________________________________
Title:__________________________________
Address:________________________________
OPTIONEE:
________________________________________
Address:________________________________
________________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms and provisions of such Agreement, including
(specifically) the right of the Corporation (or its assignees) to purchase any
and all interest or right the undersigned may otherwise have in such shares.
OPTIONEE'S SPOUSE:
________________________________________
Address:________________________________
________________________________
Employee Stock Purchase Agreement
Page 16
<PAGE>
APPENDIX
--------
DEFINITIONS
- -----------
BOARD shall mean the Corporation's Board of Directors.
CODE shall mean the Internal Revenue Code of 1986, as amended.
COMMON STOCK shall mean the Corporation's Common Stock.
CORPORATE TRANSACTION shall mean one or more of the following
shareholder-approved transactions:
(i) a merger or consolidation in which the Corporation is not
the surviving entity, except for a transaction the
principal purpose of which is to change the state of the
Corporation's incorporation;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation;
(iii) any reverse merger in which the Corporation is the
surviving entity but in which fifty percent (50%) or more
of the Corporation's outstanding voting stock is
transferred to holders different from those who held the
stock immediately prior to such merger.
CORPORATION shall mean Oregon Baking Company, dba Marsee Baking, an
Oregon corporation, and any of its successors.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as
amended.
FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of Common Stock, shall be determined by the
Plan Administrator after taking into account such factors as it shall deem
appropriate.
GRANT NOTICE shall mean the notice of grant of stock option pursuant to
which Optionee has been informed of the basic terms of the Option.
INCENTIVE OPTION shall mean a stock option granted under the Plan which
satisfies the requirements of Code Section 422.
1933 ACT shall mean the Securities Act of 1933, as amended.
Appendix
Page 1
<PAGE>
NON-STATUTORY OPTION shall mean an option not intended to meet the
requirements of Code Section 422.
OPTION AGREEMENT shall mean the agreement between the Corporation and
Optionee evidencing the Option.
OWNER shall mean Optionee and all subsequent holders of the Purchased
Shares who derive their chain of ownership through a permitted transfer from
Optionee in accordance with paragraph D.1.
PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
SEC shall mean the Securities and Exchange Commission.
SERVICE shall mean the provision of services to the Corporation or any
Parent or Subsidiary by an individual in the capacity of an employee, subject to
the control and direction of the employer entity as to both the work to be
performed and the manner and method of performance, a non-employee member of the
board of directors or a consulting or independent contractor.
SUBSIDIARY shall mean each corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
such corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
Appendix
Page 2
<PAGE>
EXHIBIT I
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _________________________ hereby sell(s),
assign(s) and transfer(s) unto ______________________________ ("Assignee"),
(_______) shares of the Common Stock of Oregon Baking Company, dba Marsee Baking
(the "Corporation") standing in his or her name on the books of the Corporation
represented by Certificate No. _________ herewith and do hereby irrevocably
constitute and appoint _______________________ Attorney to transfer the said
stock on the books of the Corporation with full power of substitution in the
premises.
Dated: _____________________
__________________________________
(signature)
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise its Repurchase Right set forth in the Agreement without requiring
additional signatures on the part of Optionee.
Exhibit I
Page 1
<PAGE>
EXHIBIT II
----------
SECTION 83(B) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue
Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: ________________________________________
Address: _____________________________________
Taxpayer ID No: ______________________________
(2) The property with respect to which the election is being made is __________
shares of the Common Stock of Oregon Baking Company, dba Marsee Baking.
(3) The property was issued on ________________, _____.
(4) The taxable year in which the election is being made is the calendar year
_____.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of semi-annual and monthly
installments over a forty-eight (48) month period ending on __________,
______.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_________ per share.
(7) The amount paid for such property is $__________ per share.
(8) A copy of this statement was furnished to Oregon Baking Company, dba Marsee
Baking for whom taxpayer rendered the services underlying the transfer of
property.
(9) This statement is executed as of: ___________________________, __________.
______________________________________ ___________________________________
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
Exhibit II
Page 1
<PAGE>
EXHIBIT III
-----------
SECTION 83(B) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue
Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: ________________________________________
Address: _____________________________________
Taxpayer ID No: ______________________________
(2) The property with respect to which the election is being made is __________
shares of the Common Stock of Oregon Baking Company, dba Marsee Baking.
(3) The property was issued on ________________, _____.
(4) The taxable year in which the election is being made is the calendar year
_____.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of semi-annual and monthly
installments over a forty-eight (48) month period ending on __________,
______.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_________ per share.
(7) The amount paid for such property is $__________ per share.
(8) A copy of this statement was furnished to Oregon Baking Company, dba Marsee
Baking for whom taxpayer rendered the services underlying the transfer of
property.
(9) This statement is executed as of: ___________________________, __________.
______________________________________ ___________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Optionee must retain two (2) copies of the completed form for filing with his or
Exhibit III
Page 1
<PAGE>
her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
The property described in the above Section 83(b) election is comprised of
shares of Common Stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by
the amount by which the fair market value of such shares at the
time of their transfer to the Taxpayer exceeds the purchase price
paid for the shares. In the absence of this election, such
alternative minimum taxable income would be measured by the spread
between the fair market value of the purchased shares and the
purchase price which exists on the various lapse dates in effect
for the forfeiture restrictions applicable to such shares. The
election is to be effective to the full extent permitted under the
Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the
amount paid for such shares. Accordingly, this election is also
intended to be effective in the event there is a "disqualifying
disposition" of the shares, within the meaning of Section 421(b)
of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently,
the Taxpayer hereby elects to have the amount of disqualifying
disposition income measured by the excess of the fair market value
of the purchased shares on the date of transfer to the Taxpayer
over the amount paid for such shares. Since 421(a) presently
applies to the shares which are the subject of this Section 83(b)
election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the
Taxpayer as a result of this election.
THIS PAGE IS TO BE ATTACHED TO ANY SECTION 83(B) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS.
Exhibit III
Page 2
<PAGE>
EXHIBIT C
1997 STOCK OPTION/STOCK ISSUANCE PLAN
[See Exhibit 10.3]
OREGON BAKING COMPANY, DBA MARSEE BAKING
1998 NONQUALIFIED STOCK OPTION PLAN
ARTICLE I
GENERAL PROVISIONS
1. PURPOSE
This Oregon Baking Company, dba Marsee Baking 1998
Nonqualified Stock Option Plan is intended to promote the interests of the
Corporation by providing eligible individuals who are responsible for the
management, growth and financial success of the Corporation or who otherwise
render valuable services to the Corporation with the opportunity to acquire a
proprietary interest, or increase their proprietary interest, in the Corporation
and thereby encourage them to remain in the service of the Corporation.
Capitalized terms used herein shall have the meanings
ascribed to such terms in Paragraph 5 of this Article I.
2. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board. The Board,
however, may at any time appoint a committee ("Committee") of two (2) or more
Board members and delegate to such Committee one or more of the administrative
powers allocated to the Board pursuant to the provisions of the Plan. Members of
the Committee shall serve for such period of time as the Board may determine and
shall be subject to removal by the Board at any time. The Board may also at any
time terminate the functions of the Committee and reassume all powers and
authority previously delegated to the Committee.
(b) The Plan Administrator (either the Board or the Committee,
to the extent the Committee is at the time responsible for the administration of
the Plan) shall have full power and authority (subject to the provisions of the
Plan) to establish such rules and regulations as it may deem appropriate for the
proper plan administration and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding option grants or share
issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option or share issuance.
3. OPTION GRANTS
(a) The persons eligible to receive option grants under the
Plan (each an "Optionee") are limited to the following:
(1) key employees (including officers and directors)
of the Corporation (or its parent or subsidiary corporations, if any)
who render services which contribute to the success and growth of the
Corporation (or any parent or subsidiary corporations) or which may
reasonably be anticipated to contribute to the future success and
growth of the Corporation (or any parent or subsidiary corporations);
(2) the non-employee members of the Board or the
non-employee members of the board of directors of any parent or
subsidiary corporations; and
(3) those consultants or independent contractors who
provide valuable services to the Corporation (or any parent or
subsidiary corporations).
1998 NONQUALIFIED STOCK OPTION PLAN - PAGE 1
<PAGE>
(b) The Plan Administrator shall have full authority to
determine which eligible individuals are to receive option grants, the number of
shares to be covered by each such grant, the time or times at which each granted
option is to become exercisable and the maximum term for which the option may
remain outstanding.
4. STOCK SUBJECT TO THE PLAN
(a) The stock issuable under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Common Stock, no par value
(the "Common Stock"). The maximum number of shares which may be issued over the
term of the Plan shall not exceed One Million (1,000,000) shares of Common
Stock. The total number of shares issuable under the Plan shall be subject to
adjustment from time to time in accordance with the provisions of Section 4(c).
(b) Shares subject to (I) the portion of one or more
outstanding options which are not exercised or surrendered prior to expiration
or termination and (II) outstanding options canceled in accordance with the
cancellation-regrant provisions of Section 3 of Article II will be available for
subsequent option grants under the Plan. The shares which shall NOT be available
for subsequent option grants under the Plan include shares issued under the Plan
(whether as vested or unvested shares) which are repurchased by the Corporation.
(c) In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock dividend, stock split,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without receipt of consideration, then
appropriate adjustments shall be made to (I) the aggregate number and/or class
of shares issuable under the Plan and (II) the aggregate number and/or class of
shares and the option price per share in effect under each outstanding option in
order to prevent the dilution or enlargement of benefits thereunder. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
(d) Common Stock issuable pursuant to the exercise of options
granted under the Plan may be subject to such restrictions on transfer,
repurchase rights or other restrictions as may be determined by the Plan
Administrator.
5. DEFINITIONS
The following definitions shall apply to the respective
capitalized terms used herein:
BOARD means the Board of Directors of Oregon Baking Company,
dba Marsee Baking.
CODE means the Internal Revenue Code of 1986, as amended.
CORPORATION means Oregon Baking Company, dba Marsee Baking, an
Oregon corporation, and its successors.
CORPORATE TRANSACTION means one or more of the following
transactions:
(a) a merger or consolidation in which the Corporation is not
the surviving entity, except for a transaction the principal purpose of which is
to change the state of the Corporation's incorporation,
(b) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation, or
(c) any reverse merger in which the Corporation is the
surviving entity but in which fifty percent (50%) or more of the Corporation's
outstanding voting stock is transferred to holders different from those who held
the stock immediately prior to such merger.
EMPLOYEE means an individual who is in the employ of the
Corporation or one or more Parent or Subsidiary corporations (if any). An
optionee shall be considered to be an Employee for so long as such individual
remains in the employ of the Corporation or one or more Parent or Subsidiary
corporations, subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of performance.
1998 NONQUALIFIED STOCK OPTION PLAN - PAGE 2
<PAGE>
EXERCISE DATE shall be the date on which written notice of the
exercise of an outstanding option under the Plan is delivered to the
Corporation. Such notice shall be in the form of a stock purchase agreement
incorporating any repurchase rights or first refusal rights retained by the
Corporation with respect to the Common Stock purchased under the option.
FAIR MARKET VALUE of a share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(a) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the stock
exchange determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common Stock on
such exchange on the date in question, then the Fair Market Value shall be the
closing selling price on the exchange on the last preceding date for which such
quotation exists.
(b) If the Common Stock is not at the time listed or admitted
to trading on any stock exchange but is traded in the over-the-counter market,
the Fair Market Value shall be the mean between the highest bid and the lowest
asked prices (or if such information is available the closing selling price) per
share of Common Stock on the date in question in the over-the-counter market, as
such prices are reported by the National Association of Securities Dealers
through its NASDAQ National Market System or any successor system. If there are
no reported bid and asked prices (or closing selling price) for the Common Stock
on the date in question, then the mean between the highest bid and lowest asked
prices (or closing selling price) on the last preceding date for which such
quotations exist shall be determinative of Fair Market Value.
(c) If the Common Stock is at the time neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator determines that the valuation provisions of
subparagraphs (a) and (b) above will not result in a true and accurate valuation
of the Common Stock, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator
shall deem appropriate under the circumstances.
NON-STATUTORY OPTION means an option not intended to meet the
statutory requirements prescribed under Section 422 of the Code for an incentive
option.
PARENT corporation means any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each such corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
PERMANENT DISABILITY means the inability of an individual to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.
PLAN means this Oregon Baking Company, dba Marsee Baking 1998
Nonqualified Stock Option Plan.
PLAN ADMINISTRATOR means the Board or the Committee, to the
extent the Committee is responsible for plan administration in accordance with
Article I, Section 2.
SERVICE means the performance of services for the Corporation
or one or more Parent or Subsidiary corporations by an individual in the
capacity of an Employee, a non-employee member of the board of directors or an
independent consultant or advisor, unless a different meaning is specified in
the option agreement evidencing the option grant or the purchase agreement
evidencing the purchased option shares. An optionee shall be deemed to remain in
Service for so long as such individual renders services to the Corporation or
any Parent or Subsidiary corporation on a periodic basis in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant or advisor.
1998 NONQUALIFIED STOCK OPTION PLAN - PAGE 3
<PAGE>
SUBSIDIARY corporation means each corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
ARTICLE II
OPTION GRANTS
1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by
action of the Plan Administrator and shall be Non-Statutory Options. Each
granted option shall be evidenced by one or more instruments in the form
approved by the Plan Administrator; PROVIDED, HOWEVER, that each such instrument
shall comply with and incorporate the terms and conditions specified below.
(a) OPTION PRICE.
(1) The option price per share shall be fixed by the
Plan Administrator.
(2) The option price shall become immediately due
upon exercise of the option, and subject to the provisions of Article
III, Section 1, shall be payable in cash or check drawn to the
Corporation's order. Should the Corporation's outstanding Common Stock
be registered under Section 12(g) of the Securities Exchange Act of
1934, as amended (the "1934 Act") at the time the option is exercised,
then the option price may also be paid as follows:
(A) in shares of Common Stock held by the
optionee for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
(B) through a special sale and remittance
procedure pursuant to which the Optionee (I) is to provide
irrevocable written instructions to a designated brokerage
firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds, an amount
sufficient to cover the aggregate option price payable for the
purchased shares plus all applicable Federal and State income
and employment taxes required to be withheld by the
Corporation by reason of such purchase and (II) concurrently
provides written directives to the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to effect the sale transaction.
(b) TERM AND EXERCISE OF OPTIONS. Each option granted under
the Plan shall be exercisable at such time or times, during such period, and for
such number of shares as shall be determined by the Plan Administrator and set
forth in the stock option agreement evidencing such option. However, no option
granted under the Plan shall have a term in excess of ten (10) years from the
grant date. During the lifetime of the Optionee, the option shall be exercisable
only by the Optionee and shall not be assignable or transferable by the Optionee
otherwise than by will or by the laws of descent and distribution following the
Optionee's death.
(c) TERMINATION OF SERVICE.
(1) The Plan Administrator shall have complete
discretion to limit the period of time that an option granted under the
Plan may be exercised should the Optionee cease to remain in Service
for any reason (including death or Permanent Disability). In no event,
however, shall any such option be exercisable after the specified
expiration date of the option term. During such limited period of
exercisability, the option may not be exercised for more than that
number of shares (if any) for which such option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
such period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be exercisable.
1998 NONQUALIFIED STOCK OPTION PLAN - PAGE 4
<PAGE>
(2) Any option granted to an Optionee under the Plan
and exercisable in whole or in part on the date of the Optionee's death
may be subsequently exercised by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution.
(3) Notwithstanding subsections (1) and (2) above,
the Plan Administrator shall have complete discretion, exercisable
either at the time the option is granted or at the time the Optionee
ceases Service, to allow one or more outstanding options held by the
Optionee to be exercised, during the period of exercisability following
the Optionee's cessation of Service, not only with respect to the
number of shares for which the option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one or more
subsequent installments of purchasable shares for which the option
otherwise would have become exercisable had such cessation of Service
not occurred.
(4) Notwithstanding any provision of this Article II
or any other provision of this Plan to the contrary, any options
granted under this Plan shall terminate as of the date the Optionee
ceases to be in the Service of the Corporation if the Optionee was
terminated for "cause" or could have been terminated for "cause." If
the Optionee has an employment or a consulting agreement with the
Corporation, the term "cause" shall have the meaning given that term in
the employment or consulting agreement. If the Optionee does not have
an employment or consulting agreement with the Corporation, or if such
employment or consulting agreement does not define the term "cause,"
the term "cause" shall mean: (A) misconduct or dishonesty that
materially adversely affects the Corporation, including without
limitation (I) an act materially in conflict with the financial
interests of the Corporation, (II) an act that could damage the
reputation or customer relations of the Corporation, (iii) an act that
could subject the Corporation to liability, (IV) an act constituting
sexual harassment or other violation of the civil rights of coworkers,
(V) failure to obey any lawful instruction of the Board or any officer
of the Corporation and (VI) failure to comply with, or perform any duty
required under, the terms of any confidentiality, inventions or
non-competition agreement the Optionee may have with the Corporation,
or (B) acts constituting the unauthorized disclosure of any of the
trade secrets or confidential information of the Corporation, unfair
competition with the Corporation or the inducement of any customer of
the Corporation to breach any contract with the Corporation. The right
to exercise any option shall be suspended automatically during the
pendency of any investigation by the Board, or its designee, and/or any
negotiations by the Board, or its designee, and the Optionee, regarding
any actual or alleged act or omission by the Optionee of the type
described in this paragraph.
(d) SHAREHOLDER RIGHTS. An Optionee shall have none of the
rights of a shareholder with respect to any shares covered by the option until
such Optionee shall have exercised the option and paid the option price.
(e) REPURCHASE RIGHTS. The Plan Administrator shall have
complete discretion to impose certain repurchase rights on shares of Common
Stock issued pursuant to the exercise of options granted under the Plan
including the following:
(1) (A) The Plan Administrator shall have the
discretion to authorize the issuance of unvested shares of
Common Stock under the Plan. Should the optionee cease Service
or should the Corporation consummate a Corporate Transaction
while the optionee is holding such unvested shares, the
Corporation may reserve the right to repurchase, at the option
price paid per share or such other repurchase price specified
in the instrument evidencing such repurchase right, all or (at
the discretion of the Corporation and with the consent of the
Optionee) any of those unvested shares. The terms and
conditions upon which such repurchase right shall be
exercisable (including the period and procedure for exercise
and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth
in the instrument evidencing such right.
(B) The repurchase right may be assignable
to any person or entity selected by the Corporation, including
one or more of the Corporation's shareholders. However, if the
selected assignee is other than a Parent or Subsidiary
corporation, then the assignee must make a cash payment to the
Corporation, upon the assignment of the repurchase right, in
1998 NONQUALIFIED STOCK OPTION PLAN - PAGE 5
<PAGE>
an amount equal to the amount by which the Fair Market Value
of the unvested shares at the time subject to the assigned
right exceeds the aggregate repurchase price payable for such
unvested shares.
(C) Upon the occurrence of a Corporate
Transaction, the Plan Administrator may, at its sole
discretion, (I) terminate all or any outstanding repurchase
rights under the Plan and thereby cause the shares subject to
such rights to vest immediately in full, (II) arrange for all
or any of the repurchase rights to be assigned to the
successor corporation (or parent thereof) in connection with
the Corporate Transaction or (III) exercise the Corporation's
right to repurchase any unvested shares contemporaneously with
the consummation of the Corporate Transaction if such right is
provided in the Stock Purchase Agreement pursuant to which
such unvested shares were issued.
(2) Until such time as the Corporation's outstanding
shares of Common Stock are first registered under Section 12(g) of the
1934 Act, the Corporation shall have the right of first refusal with
respect to any proposed sale or other disposition by the Optionee (or
any successor in interest by reason of purchase, gift or other mode of
transfer) of any shares of Common Stock issued under the Plan. Such
right of first refusal shall be exercisable by the Corporation (or its
assignees) in accordance with the terms and conditions established by
the Plan Administrator and set forth in the instrument evidencing such
right.
2. CORPORATE TRANSACTION
(a) In the event of any Corporate Transaction, each option
outstanding under the Plan shall terminate upon the consummation of such
Corporate Transaction and cease to be exercisable, unless assumed by the
successor corporation or parent thereof.
(b) In connection with any such Corporate Transaction, the
Plan Administrator may, at its sole discretion, (I) accelerate each or any
outstanding option under the Plan so that each or any such option shall,
immediately prior to the specified effective date for such Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for all
or any portion of such shares, (II) arrange for each or any outstanding option
to either to be assumed by the successor corporation or parent thereof or to be
replaced with a comparable option to purchase shares of the capital stock of the
successor corporation or parent thereof, (III) arrange for the option to be
replaced by a comparable cash incentive program of the successor corporation
based on the option spread (the amount by which the Fair Market Value of the
shares of Common Stock at the time subject to the option exceeds the option
price payable for such shares) or (IV) take none of the actions described in
clauses (I), (II) or (III) above and allow the option to terminate as provided
in Section 2(a) above. The determination of comparability under clauses (II) and
(III) above shall be made by the Plan Administrator, and such determination
shall be final and conclusive.
(c) If the outstanding options under the Plan are assumed by
the successor corporation (or parent thereof) in the Corporate Transaction or
are otherwise to continue in effect following such Corporate Transaction, then
each such assumed or continuing option shall, immediately after such Corporate
Transaction, be appropriately adjusted to apply and pertain to the number and
class of securities or other property that would have been issuable to the
option holder, in consummation of the Corporate Transaction, had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the option price payable per share, PROVIDED
the aggregate option price payable for such securities or other property shall
remain the same. In addition, the number and class of securities or other
property available for issuance under the Plan following the consummation of
such Corporate Transaction shall be appropriately adjusted.
(d) The grant of options under this Plan shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
1998 NONQUALIFIED STOCK OPTION PLAN - PAGE 6
<PAGE>
3. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock.
4. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend (either at the time the option is granted or at any time while the option
remains outstanding) the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service, from the limited
period set forth in the option agreement, to such greater period of time as the
Plan Administrator may deem appropriate under the circumstances. In no event,
however, shall such option be exercisable after the specified expiration date of
the option term.
ARTICLE III
MISCELLANEOUS
1. LOANS
(a) The Plan Administrator may assist any Optionee (including
an Optionee who is an officer or director of the Corporation) in the exercise of
one or more options granted to such Optionee under Article II, including the
satisfaction of any Federal and State income and employment tax obligations
arising therefrom, by:
(1) authorizing the extension of a loan from the
Corporation to such Optionee or Participant, or
(2) permitting the Optionee to pay the option price
in installments over a period of years.
(b) The terms of any loan or installment method of payment
(including the interest rate and terms of repayment) shall be established by the
Plan Administrator in its sole discretion. Loans or installment payments may be
granted with or without security or collateral; however, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events, the maximum credit
available to each Optionee may not exceed the SUM of (I) the aggregate option
price payable for the purchased shares less the aggregate par value for such
shares plus (II) any Federal and State income and employment tax liability
incurred by the Optionee in connection with such exercise.
(c) The Plan Administrator may, in its absolute discretion,
determine that one or more loans extended under the financial assistance program
shall be subject to forgiveness by the Corporation in whole or in part upon such
terms and conditions as the Board in its discretion deems appropriate.
2. AMENDMENT OF THE PLAN AND AWARDS
(a) The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, no such amendment or modification shall adversely affect the rights and
obligations of an Optionee with respect to options at the time outstanding under
the Plan, unless the Optionee consents to such amendment.
(b) A grant of options by the Board to purchase shares which
are in excess of the number of shares then available for issuance under the Plan
shall be deemed to constitute a Board-approved amendment of the Plan increasing
the number of shares available for issuance under the Plan by the number of
excess shares granted.
1998 NONQUALIFIED STOCK OPTION PLAN - PAGE 7
<PAGE>
3. EFFECTIVE DATE AND TERM OF PLAN
(a) The Plan shall become effective when adopted by the Board.
(b) The Plan shall terminate (I) ten years after the adoption
of the Plan or (II) by action of the Board of Directors. No options outstanding
on the termination date shall be affected by the termination of the Plan, and
such securities shall thereafter continue to have force and effect in accordance
with the provisions of the stock option agreements evidencing such options.
4. WITHHOLDING
The Corporation's obligation to deliver shares upon the
exercise or surrender of any options granted under the Plan shall be subject to
the satisfaction of all applicable Federal, State and local income and
employment tax withholding requirements.
5. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options
under the Plan, and the issuance of Common Stock upon the exercise or surrender
of the option grants made hereunder shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it, and the Common
Stock issued pursuant to it.
1998 NONQUALIFIED STOCK OPTION PLAN - PAGE 8
OREGON BAKING COMPANY, DBA MARSEE BAKING
----------------------------------------
NOTICE OF GRANT OF STOCK OPTION
(1998 Nonqualified Stock Option Plan)
Notice is hereby given of the following option grant (the
"Option") made to purchase shares of Oregon Baking Company, dba Marsee Baking
(the "Company") common stock (the "Common Stock"):
OPTIONEE: ___________________________________________
GRANT DATE: __________________________________________
VESTING COMMENCEMENT DATE: __________________________
TYPE OF STOCK: Common Stock
OPTION PRICE: ______ per share
NUMBER OF OPTION SHARES: ____________________________
EXPIRATION DATE: 10 years from Grant Date (subject to earlier
termination pursuant to the terms of the
Stock Option Agreement attached hereto as
Exhibit A.)
TYPE OF OPTION: Nonstatutory
EXERCISE SCHEDULE: The Option is immediately exercisable for
all of the Option Shares.
REPURCHASE RIGHT:
(a) The Company shall have a repurchase right (the "Repurchase
Right"), on the terms and conditions set forth in the
Stock Purchase Agreement attached hereto as Exhibit B, to
repurchase at the price paid per share by such Service
Provider all or any portion of the Unvested Shares.
(b) Provided Optionee continues in service to the Company as a
full-time employee, the Company's Repurchase Right shall
lapse with respect to, and Optionee shall acquire a vested
interest in, the Option Shares with respect to (i) none of
the Option Shares during the six (6) month period
following the Vesting Commencement Date; (ii) twelve and
one-half percent (12.5%) of the Option Shares on the six
month anniversary of the Vesting Commencement Date; and
(iii) the remainder in equal monthly installments for 42
months thereafter, until fully vested in four (4) years.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the express terms and conditions of the
Company's 1998 Nonqualified Stock Option Plan (the "Plan"). Optionee further
agrees to be bound by the terms and conditions of the Option as set forth in the
Stock Option Agreement attached hereto as Exhibit A. Optionee understands that
the terms and conditions applicable to any Option Shares purchased thereunder
are as set forth in the Stock Purchase Agreement attached hereto as Exhibit B.
Optionee hereby acknowledges receipt of a copy of the Plan in
the form attached hereto as Exhibit C.
Notice of Grant
Page 1
<PAGE>
RIGHTS OF FIRST REFUSAL. IN ADDITION TO THE COMPANY'S
REPURCHASE RIGHT SET FORTH ABOVE, THE OPTIONEE HEREBY AGREES THAT ALL OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN
RIGHTS OF FIRST REFUSAL UPON ANY PROPOSED SALE, ASSIGNMENT, TRANSFER,
ENCUMBRANCE OR OTHER DISPOSITION OF THE COMPANY'S SHARES. THE TERMS AND
CONDITIONS OF SUCH RIGHTS ARE SPECIFIED IN THE STOCK PURCHASE AGREEMENT ATTACHED
HERETO AS EXHIBIT B.
No Employment or Service Contract. Nothing in this Agreement
or in the Plan shall confer upon the Optionee any right to continue in the
Service of the Company for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company or the Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason whatsoever, with or without cause.
___________________________
Date
OREGON BAKING COMPANY, DBA MARSEE BAKING
By:_____________________________________
Its:____________________________________
________________________________________
Optionee
Address:________________________________________
________________________________________
Notice of Grant
Page 2
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE>
OREGON BAKING COMPANY, DBA MARSEE BAKING
----------------------------------------
STOCK OPTION AGREEMENT
(1998 Nonqualified Stock Option Plan)
WITNESSETH:
-----------
RECITALS
A. The Board has adopted the Plan for the purpose of attracting
and retaining the services of selected key employees (including officers and
directors), non-employee members of the Board and consultants and other
independent contractors who contribute to the financial success of the Company.
B. Optionee is an individual who is to render valuable services
to the Company, and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Company's grant of a
stock option to Optionee.
C. Capitalized terms used in this Agreement shall, unless the
context clearly indicates otherwise, have the meaning assigned to such terms in
Paragraph 19 of this Agreement.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions
set forth in this Agreement, the Company hereby grants to Optionee, as of the
Grant Date, a stock option to purchase up to that number of Option Shares as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the Option Price per share specified in the
Grant Notice.
2. OPTION TERM.
(a) This Option shall expire at the close of business on the
Expiration Date specified in the Grant Notice, unless sooner terminated in
accordance with Paragraphs 2(b) or 5 hereof; provided, in no event shall this
option have a maximum term in excess of ten (10) years measured from the Grant
Date.
(b) Should Optionee cease to remain in Service while this
Option is outstanding, then the period for exercising this Option shall be
reduced to a three- (3) month period commencing with the date of such cessation
of Service, but in no event shall this Option be exercisable at any time after
the Expiration Date.
(c) Should Optionee die while this Option is outstanding, then
the personal representative of the Optionee's estate or the person or persons to
whom the Option is transferred pursuant to the Optionee's will or in accordance
with the law of descent and distribution shall have the right to exercise this
Option. Such right shall lapse, and this Option shall cease to be exercisable,
upon the earlier of (i) the expiration of the twelve (12) month period measured
from the date of Optionee's death or (ii) the Expiration Date. Upon the
expiration of such twelve (12) month period or (if earlier) upon the Expiration
Date, this Option shall terminate and cease to be outstanding.
(d) During the limited period of exercisability applicable
under subparagraphs (b) or (c) above, this Option may be exercised for any or
all of the Option shares in which the Optionee, at the time of cessation of
Service, is vested in accordance with the exercise/vesting provisions specified
in the Grant Notice or the special acceleration provisions of Paragraph 5(b) of
this Agreement.
3. OPTION NONTRANSFERABLE; EXCEPTION. This option shall be
neither transferable nor assignable by Optionee other than by will or by the
laws of descent and distribution following the Optionee's death and may be
exercised, during Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole
or in part at any time prior to the time the Plan is approved by the Board.
STOCK OPTION AGREEMENT
Page 1
<PAGE>
Provided such approval is obtained, this option shall thereupon become
exercisable for the Option Shares in one or more installments as is specified in
the Grant Notice. As the option becomes exercisable in one or more installments,
the installments shall accumulate and the option shall remain exercisable for
such installments until the Expiration Date or the sooner termination of the
option term under Paragraph 5 of this Agreement.
5. CORPORATE TRANSACTION.
(a) This option shall terminate upon the consummation of any
Corporate Transaction, unless expressly assumed by the successor Company or
parent thereof.
(b) In connection with any such Corporate Transaction, the
Plan Administrator may, at its sole discretion, (i) accelerate this option so
that this option shall, immediately prior to the specified effective date for
such Corporate Transaction, become fully exercisable with respect to all of the
Option Shares and may be exercised for all or any portion of such shares, (ii)
arrange for this option to either to be assumed by the successor Company or
parent thereof or to be replaced with a comparable option to purchase shares of
the capital stock of the successor Company or parent thereof, (iii) arrange for
this option to be replaced by a comparable cash incentive program of the
successor Company based on the option spread (the amount by which the Fair
Market Value of the shares of Common Stock at the time subject to the option
exceeds the Option Price payable for such shares) or (iv) take none of the
actions described in clauses (i), (ii) or (iii) above and allow this option to
terminate as provided in Paragraph 5(a) above. The determination of
comparability under clauses (ii) and (iii) above shall be made by the Plan
Administrator, and its determination shall be final and conclusive.
(c) This Agreement shall not in any way affect the right of
the Company to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
6. ADJUSTMENT IN OPTION SHARES.
(a) In the event any change is made to the Company's
outstanding Common Stock by reason of any stock split, stock dividend,
combination of shares, exchange or conversion of shares, or other change
affecting the outstanding Common Stock as a class without receipt of
consideration, then appropriate adjustments shall be made to (i) the total
number of Option Shares subject to this option and (ii) the Option Price payable
per share in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
(b) If this option is to be assumed or is otherwise to remain
outstanding after the Corporate Transaction, then this option shall be
appropriately adjusted to apply and pertain to the number and class of
securities that would have been issuable to the Optionee in the consummation of
such Corporate Transaction had the option been exercised immediately prior to
such Corporate Transaction, and appropriate adjustments shall also be made to
the Option Price payable per share, provided the aggregate Option Price payable
hereunder shall remain the same.
7. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
not have any of the rights of a shareholder with respect to the Option Shares
until such individual shall have exercised the option and paid the Option Price.
8. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or in the case of exercise after Optionee's death, the Optionee's
executor, administrator, heir or legatee, as the case may be) must take the
following actions:
(1) Execute and deliver to the Secretary of the
Company the Purchase Agreement;
(2) Pay the aggregate Option Price for the purchased
shares either by full payment in cash or check, or any other form
STOCK OPTION AGREEMENT
Page 2
<PAGE>
approved by the Plan Administrator at the time of exercise in
accordance with the provisions of Paragraph 14.
(3) Furnish to the Company appropriate documentation
that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.
(b) Should the Company's outstanding Common Stock be
registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), at the time the option is exercised, then the Option
Price may also be paid as follows:
(1) in shares of the Common Stock held by the
Optionee for the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or
(2) through a special sale and remittance procedure
pursuant to which the Optionee (i) is to provide irrevocable written
instructions to a designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Company, out of the sale
proceeds, an amount sufficient to cover the aggregate Option Price
payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Company by
reason of such purchase and (ii) concurrently provides written
directives to the Company to deliver the certificates for the purchased
shares directly to such broker-dealer in order to effect the sale
transaction.
(c) Except to the extent the special sale and remittance
procedure is utilized to exercise this option, payment of the Option Price must
accompany the delivery of the Purchase Agreement. As soon after such payment as
practical, the Company shall mail or deliver to Optionee (or to the other person
or persons exercising this option) a certificate or certificates representing
the shares so purchased and paid for, with the appropriate legends affixed
thereto.
(d) In no event may this option be exercised for any
fractional shares.
9. RIGHTS OF FIRST REFUSAL. THE OPTIONEE HEREBY AGREES THAT ALL
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE SUBJECT TO
CERTAIN RIGHTS OF FIRST REFUSAL OF THE COMPANY AND ITS ASSIGNS, IN CONNECTION
WITH ANY PROPOSED TRANSFER OF ANY SUCH SHARES, IN ACCORDANCE WITH THE TERMS AND
CONDITIONS SPECIFIED IN THE 1998 NONQUALIFIED STOCK OPTION PLAN AND THE PURCHASE
AGREEMENT.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of Option
Shares upon such exercise shall be subject to compliance by the Company and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the Company's
Common Stock may be listed at the time of such exercise and issuance.
(b) In connection with the exercise of this option, Optionee
shall execute and deliver to the Company such representations in writing as may
be requested by the Company in order for it to comply with the applicable
requirements of Federal and State securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 5, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Company.
STOCK OPTION AGREEMENT
Page 3
<PAGE>
12. LIABILITY OF COMPANY.
(a) If the Option Shares covered by this Agreement exceed, as
of the Grant Date, the number of shares of Common Stock that may be issued under
the Plan, such grant of options by the Board to purchase shares which are in
excess of the number of shares then available for issuance under the Plan shall
be deemed to constitute a Board-approved amendment of the Plan increasing the
number of shares available for issuance under the Plan by the number of excess
shares granted.
(b) The inability of the Company to obtain approval from any
regulatory body having authority the Company deems necessary to the lawful
issuance and sale of any Common Stock pursuant to this option shall relieve the
Company of any liability with respect to the non-issuance or sale of the Common
Stock as to which such approval shall not have been obtained. The Company,
however, shall use its best efforts to obtain all such approvals.
13. NOTICES. Any notice required to be given or delivered to
the Company under the terms of this Agreement shall be in writing and addressed
to the Company in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
14. LOANS. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Company or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
16. GOVERNING LAW. The interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the State of
Oregon.
17. BOARD APPROVAL. The grant of this option is subject to
approval of the Plan by the Board.
18. WITHHOLDING. Optionee hereby agrees to make appropriate
arrangements with the Company for the satisfaction of all Federal, State or
local income tax withholding requirements and Federal social security employee
tax requirements applicable to the exercise of this option.
19. DEFINITIONS. The following definitions shall apply to the
respective capitalized terms used herein:
BOARD means the Board of Directors of Oregon Baking Company,
dba Marsee Baking.
CODE means the Internal Revenue Code of 1986, as amended.
COMMON STOCK means the Common Stock of Oregon Baking Company,
dba Marsee Baking.
COMPANY means Oregon Baking Company, dba Marsee Baking, an
Oregon Company, and any of its successors.
STOCK OPTION AGREEMENT
Page 4
<PAGE>
CORPORATE TRANSACTION means one or more of the following
transactions:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state of the Company's incorporation,
(b) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(c) any reverse merger in which the Company is the surviving
entity but in which fifty percent (50%) or more of the Company's outstanding
voting stock is transferred to holders different from those who held the stock
immediately prior to such merger.
EXERCISE DATE shall be date on which the executed Purchase
Agreement for one or more Option Shares is delivered to the Company in
accordance with Paragraph 8 of this Agreement.
FAIR MARKET Value of a share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(a) If the Common Stock is not at the time listed or admitted
to trading on any stock exchange but is traded in the over-the-counter market,
the Fair Market Value shall be the mean between the highest bid and the lowest
asked prices (or if such information is available the closing selling price) per
share of Common Stock on the date in question in the over-the-counter market, as
such prices are reported by the National Association of Securities Dealers
through its NASDAQ National Market System or any successor system. If there are
no reported bid and asked prices (or closing selling price) for the Common Stock
on the date in question, then the mean between the highest bid and lowest asked
prices (or closing selling price) on the last preceding date for which such
quotations exist shall be determinative of Fair Market Value.
(b) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the stock
exchange determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common Stock on
such exchange on the date in question, then the Fair Market Value shall be the
closing selling price on the exchange on the last preceding date for which such
quotation exists.
(c) If the Common Stock is at the time neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator otherwise determines that the valuation
provisions of subparagraphs (a) and (b) above will not result in a true and
accurate valuation of the Common Stock, then the Fair Market Value shall be
determined by the Plan Administrator after taking into account such factors as
the Plan Administrator shall deem appropriate under the circumstances.
GRANT DATE means the date specified in the Grant Notice as the
date on which the option was granted to the Optionee under the Plan.
GRANT NOTICE means the Notice of Grant of Stock Option which
accompanies this Agreement.
NON-STATUTORY STOCK OPTION means an option not intended to
meet the statutory requirements prescribed under Section 422 of the Code for an
incentive stock option.
OPTION SHARES means the total number of shares of Common Stock
indicated in the Grant Notice as purchasable under this option.
OPTIONEE means the individual identified in the Grant Notice
as the person to whom this option has been granted under the Plan.
STOCK OPTION AGREEMENT
Page 5
<PAGE>
OPTION PRICE means the exercise price per share to be paid by
the Optionee for the exercise of this option. The Option Price is indicated in
the Grant Notice.
PARENT Company means any Company (other than the Company) in
an unbroken chain of Companies ending with the Company, provided each such
Company in the unbroken chain (other than the Company) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other Companies in
such chain.
PLAN means the 1998 Nonqualified Stock Option Plan of the
Company, in the form of Exhibit C to the Grant Notice.
PLAN ADMINISTRATOR means either the Board or a committee of
two or more Board members, to the extent such committee may at the time be
responsible for plan administration.
PURCHASE AGREEMENT means the stock purchase agreement, in
substantially the form of Exhibit B to the Grant Notice, which is to be executed
in connection with the exercise of this option for one or more Option Shares.
SERVICE means the performance of services for the Company or
any Parent or Subsidiary Company by an individual in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant or advisor. Accordingly, the Optionee shall be deemed to remain in
Service for so long as such individual renders services to the Company or any
Parent or Subsidiary Company on a periodic basis in the capacity of an Employee,
a non-employee member of the board of directors or an independent consultant or
advisor.
SUBSIDIARY Company means each Company (other than the Company)
in an unbroken chain of Companies beginning with the Company, provided each such
Company (other than the last Company) in the unbroken chain owns, at the time of
the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other Companies in
such chain.
STOCK OPTION AGREEMENT
Page 6
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
<PAGE>
OREGON BAKING COMPANY, DBA MARSEE BAKING.
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made as of this _____ day of _______________, 19___,
between Oregon Baking Company, dba Marsee Baking, an Oregon corporation (the
"Company"), and ______________________, the holder of a stock option
("Optionee") under the Company's 1998 Nonqualified Stock Option Plan (the
"Plan").
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix, unless otherwise
indicated.
A. EXERCISE OF OPTION
------------------
1. EXERCISE. Optionee hereby purchases shares of Common Stock
(the "Purchased Shares") pursuant to that certain option (the "Option") granted
Optionee on _________________, 199__ (the "Grant Date") to purchase up to
_______________ shares of Common Stock under the Plan at the exercise price of
$_______________ per share (the "Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement
to the Corporate Secretary, Optionee shall pay the Exercise Price for the
Purchased Shares in accordance with the provisions of the Option Agreement and
shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. EXEMPTION FROM REGISTRATION. The Purchased Shares have not
been registered under the 1933 Act and are accordingly being issued to Optionee
in reliance upon the exemption from such registration provided by Rule 701 of
the SEC for stock issuances under compensatory benefit plans such as the Plan.
Optionee hereby acknowledges receipt of a copy of the Plan in the form of
Exhibit C to the Grant Notice.
2. RESTRICTED SECURITIES.
(a) Optionee hereby confirms that Optionee has
been informed that the Purchased Shares are restricted securities under the 1933
Act and may not be resold or transferred unless the Purchased Shares are first
registered under the Federal securities laws or unless an exemption from such
registration is available. Accordingly, Optionee hereby acknowledges that
Optionee is prepared to hold the Purchased Shares for an indefinite period and
that Optionee is aware that Rule 144 of the SEC issued under the 1933 Act is not
presently available to exempt the resale of the Purchased Shares from the
registration requirements of the 1933 Act.
(b) Upon the expiration of the ninety (90) day
period immediately following the date on which the Company first becomes subject
to the reporting requirements of the Exchange Act, the Purchased Shares may be
sold (without registration) pursuant to the applicable requirements of Rule 144.
If Optionee is at the time of such sale an affiliate of the Company for purposes
of Rule 144 or was such an affiliate during the preceding three (3) months, then
the sale must comply with all the requirements of Rule 144 (including the volume
limitation on the number of shares sold, the broker/market-maker sale
requirement and the requisite notice to the SEC); however, the one (1) year
holding period requirement of Rule 144 will not be applicable. If Optionee is
not at the time of the sale an affiliate of the Company nor was such an
affiliate during the preceding three (3) months, then none of the requirements
of Rule 144 (other than the broker/market-maker sale requirement for Purchased
Shares held for less than two (2) years following payment in cash of the
Exercise Price therefor) will be applicable to the sale.
(c) Should the Company not become subject to the
reporting requirements of the Exchange Act, then Optionee may, provided he/she
is not at the time an affiliate of the Company (nor was such an affiliate during
the preceding three (3) months), sell the Purchased Shares (without
Stock Purchase Agreement
Page 1
<PAGE>
registration) pursuant to paragraph (k) of Rule 144 after the Purchased Shares
have been held for a period of two (2) years following the payment of the
Exercise Price for such shares.
3. DISPOSITION OF SHARES. Optionee hereby agrees that Optionee
shall make no disposition of the Purchased Shares (other than a permitted
transfer under paragraph C.1) unless and until there is compliance with all of
the following requirements:
(i) Optionee shall have provided the Company with a
written summary of the terms and conditions of the proposed
disposition.
(ii) Optionee shall have complied with all
requirements of this Agreement applicable to the disposition of the
Purchased Shares.
(iii) Optionee shall have provided the Company with
written assurances, in form and substance satisfactory to the Company,
that (a) the proposed disposition does not require registration of the
Purchased Shares under the 1933 Act or (b) all appropriate action
necessary for compliance with the registration requirements of the 1933
Act or of any exemption from registration available under the 1933 Act
(including Rule 144) has been taken.
(iv) Optionee shall have provided the Company with
written assurances, in form and substance satisfactory to the Company,
that the proposed disposition will not result in the contravention of
any transfer restrictions applicable to the Purchased Shares.
The Company shall not be required (i) to transfer on its books
any Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
4. RESTRICTIVE LEGENDS. In order to reflect the restrictions
imposed by this Agreement upon the disposition of the Purchased Shares, the
stock certificates for the Purchased Shares shall be endorsed with restrictive
legends, including one or more of the following legends:
(i) "The shares represented by this certificate have
not been registered under the Securities Act of 1933. The shares may
not be sold or offered for sale in the absence of (a) an effective
registration statement for the shares under such Act, (b) a 'no action'
letter of the Securities and Exchange Commission with respect to such
sale or offer or (c) satisfactory assurances to the Company that
registration under such Act is not required with respect to such sale
or offer."
(ii) "The shares represented by this certificate are
subject to the terms of the certain Stock Purchase Agreement between
the Company and the registered holder of the shares (or the predecessor
in interest to the shares). Such agreement grants certain rights of
first refusal to the Company (or its assignees) upon the sale,
assignment, transfer, encumbrance or other disposition of the Company's
shares. A copy of such agreement is maintained at the Company's
principal corporate offices."
C. TRANSFER RESTRICTIONS
---------------------
1. RESTRICTION ON TRANSFER. Optionee shall not transfer,
assign, encumber or otherwise dispose of any of the Purchased Shares in
contravention of the First Refusal Right under Article D or the market stand-off
provisions of paragraph C.3. Such restrictions on transfer, however, shall not
be applicable to (i) a gratuitous transfer of the Purchased Shares, provided and
only if Optionee obtains the Company's prior written consent to such transfer,
(ii) a transfer of title to the Purchased Shares effected pursuant to Optionee's
will or the laws of intestate succession or (iii) a transfer to the Company in
pledge as security for any purchase money indebtedness incurred by Optionee in
connection with the acquisition of the Purchased Shares.
Stock Purchase Agreement
Page 2
<PAGE>
2. TRANSFEREE OBLIGATIONS. Each person (other than the
Company) to whom the Purchased Shares are transferred by means of one of the
permitted transfers specified in paragraph C.1 must, as a condition precedent to
the validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Agreement and that the transferred
shares are subject to (i) the First Refusal Right granted hereunder and (ii) the
market stand-off provisions of paragraph C.3, to the same extent such shares
would be so subject if retained by Optionee.
3. MARKET STAND-OFF.
(a) In connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the Company's initial
public offering, Owner shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to any Purchased Shares without the prior written
consent of the Company or its underwriters. Such limitations shall be in effect
for such period of time from and after the effective date of the final
prospectus for the offering as may be requested by the Company or such
underwriters; provided, however, that in no event shall such period exceed
twenty-four (24) months.
(b) In the event of any stock split, stock dividend,
recapitalization, combination of shares, exchange or conversion of shares or
other change affecting the Company's outstanding Common Stock effected as a
class without the Company's receipt of consideration, then any new, substituted
or additional securities distributed with respect to the Purchased Shares shall
be immediately subject to the provisions of this paragraph C.3, to the same
extent the Purchased Shares are at such time covered by such provisions.
(c) In order to enforce the limitations of this
paragraph C.3, the Company may impose stop-transfer instructions with respect to
the Purchased Shares until the end of the applicable stand-off period.
D. RIGHT OF FIRST REFUSAL
----------------------
1. GRANT. The Company is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares. For purposes of this Article D, the term
"transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition of the Purchased Shares intended to be made by Owner, but shall not
include any of the permitted transfers under paragraph C.l.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
the Purchased Shares desires to accept a bona fide third-party offer for the
transfer of any or all of such shares (the Purchased Shares subject to such
offer to be hereinafter called the "Target Shares"), Owner shall promptly (i)
deliver to the Corporate Secretary written notice (the "Disposition Notice") of
the terms and conditions of the offer, including the purchase price and the
identity of the third-party offeror, and (ii) provide satisfactory proof that
the disposition of the Target Shares to such third-party offeror would not be in
contravention of the provisions set forth in Articles B and C.
3. EXERCISE OF RIGHT. The Company (or its assignees) shall,
for a period of thirty (30) days following receipt of the Disposition Notice,
have the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms and conditions as those specified therein
or upon such other terms and conditions (not materially different from those
specified in the Disposition Notice) to which Owner consents. Such right shall
be exercisable by delivery of written notice (the "Exercise Notice") to Owner
prior to the expiration of the thirty (30) day exercise period. If such right is
exercised with respect to all the Target Shares, then the Company (or its
assignees) shall effect the repurchase of such shares, including payment of the
purchase price, not more than five (5) business days after delivery of the
Exercise Notice; at such time Owner shall deliver to the Company the
certificates representing the Target Shares to be repurchased, each certificate
to be properly endorsed for transfer.
Should the purchase price specified in the Disposition Notice
be payable in property other than cash or evidences of indebtedness, the Company
Stock Purchase Agreement
Page 3
<PAGE>
(or its assignees) shall have the right to pay the purchase price in the form of
cash equal in amount to the value of such property. If Owner and the Company (or
its assignees) cannot agree on such cash value within ten (10) days after the
Company's receipt of the Disposition Notice, the valuation shall be made by an
appraiser of recognized standing selected by Owner and the Company (or its
assignees) or, if they cannot agree on an appraiser within twenty (20) days
after the Company's receipt of the Disposition Notice, each shall select an
appraiser of recognized standing and the two (2) appraisers shall designate a
third appraiser of recognized standing, whose appraisal shall be determinative
of such value. The cost of such appraisal shall be shared equally by Owner and
the Company. The closing shall then be held on the later of (i) the fifth
business day following delivery of the Exercise Notice or (ii) the fifth
business day after such cash valuation shall have been made.
4. NON-EXERCISE OF RIGHT. In the event the Exercise Notice is
not given to Owner within thirty (30) days following the date of the Company's
receipt of the Disposition Notice, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms and
conditions (including the purchase price) no more favorable to such third-party
offeror than those specified in the Disposition Notice; provided, however, that
any such sale or disposition must not be effected in contravention of the
provisions of Article B. The third-party offeror shall acquire the Target Shares
free and clear of the First Refusal Right hereunder, but the acquired shares
shall remain subject to (i) the securities law restrictions of paragraph B.2,
and (ii) the market stand-off provisions of paragraph C.3. In the event Owner
does not effect such sale or disposition of the Target Shares within the
specified thirty (30) day period, the First Refusal Right shall continue to be
applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph D.6.
5. PARTIAL EXERCISE OF RIGHT. In the event the Company (or its
assignees) makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Company
delivered within five (5) days after Owner's receipt of the Exercise Notice, to
effect the sale of the Target Shares pursuant to either of the following
alternatives:
(i) sale or other disposition of all the Target
Shares to the third-party offeror identified in the Disposition Notice,
but in full compliance with the requirements of paragraph D.4, as if
the Company did not exercise the First Refusal Right hereunder; or
(ii) sale to the Company (or its assignees) of the
portion of the Target Shares which the Company (or its assignees) has
elected to purchase, such sale to be effected in substantial conformity
with the provisions of paragraph D.3.
Failure of Owner to deliver timely notification to the Company
under this paragraph D.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6. LAPSE. The First Refusal Right under this Article D shall
lapse and cease to have effect upon the earliest to occur of (i) the first date
on which shares of the Common Stock are held of record by more than five hundred
(500) persons, (ii) a determination is made by the Board that a public market
exists for the outstanding shares of Common Stock or (iii) a firm commitment
underwritten public offering, pursuant to an effective registration statement
under the 1933 Act. However, the market stand-off provisions of paragraph C.3
shall continue to remain in full force and effect following the lapse of the
First Refusal Right hereunder.
E. GENERAL PROVISIONS
------------------
1. ASSIGNMENT. The Company may assign its First
Refusal Right to any person or entity selected by the Board, including (without
limitation) one or more shareholders of the Company.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this
Agreement or in the Plan shall confer upon Optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any Parent or Subsidiary) or
Stock Purchase Agreement
Page 4
<PAGE>
Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's Service at any time for any reason whatsoever, with or without cause.
3. NOTICES. Any notice required in connection with (i) the
First Refusal Right, or (ii) the disposition of any Purchased Shares covered
thereby shall be given in writing and shall be deemed effective upon personal
delivery or upon deposit in the United States mail, registered or certified,
postage prepaid and addressed to the party entitled to such notice at the
address indicated below such party's signature line on this Agreement or at such
other address as such party may designate by ten (10) days advance written
notice under this paragraph E.3 to all other parties to this Agreement.
4. NO WAIVER. The failure of the Company (or its assignees) in
any instance to exercise the First Refusal Right shall not constitute a waiver
of any other rights of first refusal that may subsequently arise under the
provisions of this Agreement or any other agreement between the Company and
Optionee or Optionee's spouse. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
5. CANCELLATION OF SHARES. If the Company (or its assignees)
shall make available, at the time and place and in the amount and form provided
in this Agreement, the consideration for the Purchased Shares to be repurchased
in accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer
have any rights as a holder of such shares (other than the right to receive
payment of such consideration in accordance with this Agreement). Such shares
shall be deemed purchased in accordance with the applicable provisions hereof,
and the Company (or its assignees) shall be deemed the owner and holder of such
shares, whether or not the certificates therefor have been delivered as required
by this Agreement.
F. MISCELLANEOUS PROVISIONS
------------------------
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take
whatever additional action and execute whatever additional documents the Company
may deem necessary or advisable in order to carry out or effect one or more of
the obligations or restrictions imposed on either Optionee or the Purchased
Shares pursuant to the express provisions of this Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes
the entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
3. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Oregon without resort to
that State's conflict-of-laws rules. The parties hereto hereby irrevocably
submit to the jurisdiction of any state or federal court sitting in Multnomah
County, Oregon, in any action or proceeding brought to enforce or otherwise
arising out of or relating to this Agreement, and hereby waive any objection to
venue in any such court and any claim that such forum is an inconvenient forum.
4. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and Optionee and Optionee's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
6. POWER OF ATTORNEY. Optionee's spouse hereby appoints
Optionee his or her true and lawful attorney in fact, for him or her and in his
or her name, place and stead, and for his or her use and benefit, to agree to
any amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
Stock Purchase Agreement
Page 5
<PAGE>
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
[The remainder of this page intentionally left blank]
Stock Purchase Agreement
Page 6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first indicated above.
OREGON BAKING COMPANY,
DBA MARSEE BAKING
By:_____________________________________
Title:__________________________________
Address:________________________________
OPTIONEE
________________________________________
Address:________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Company's granting
Optionee the right to acquire the Purchased Shares in accordance with the terms
of such Agreement, the undersigned hereby agrees to be irrevocably bound by all
the terms and provisions of such Agreement, including (specifically) the right
of the Company (or its assignees) to purchase any and all interest or right the
undersigned may otherwise have in such shares.
________________________________________
OPTIONEE'S SPOUSE
Address:________________________________
Stock Purchase Agreement
Page 7
<PAGE>
APPENDIX
--------
DEFINITIONS
- -----------
BOARD shall mean the Company's Board of Directors.
CODE shall mean the Internal Revenue Code of 1986, as amended.
COMMON STOCk shall mean the Company's Common Stock.
CORPORATE TRANSACTION shall mean one or more of the following
shareholder-approved transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of
which is to change the state of the Company's incorporation;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company;
(iii) any reverse merger in which the Company is the surviving
entity but in which fifty percent (50%) or more of the Company's
outstanding voting stock is transferred to holders different from those
who held the stock immediately prior to such merger.
COMPANY shall mean Oregon Baking Company, dba Marsee Baking, an Oregon
corporation, and any of its successors.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as
amended.
FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of Common Stock, shall be determined by the
Plan Administrator after taking into account such factors as it shall deem
appropriate.
GRANT NOTICE shall mean the notice of grant of stock option pursuant to
which Optionee has been informed of the basic terms of the Option.
1933 ACT shall mean the Securities Act of 1933, as amended.
NON-STATUTORY OPTION shall mean an option not intended to meet the
requirements of Code Section 422.
OPTION AGREEMENT shall mean the agreement between the Company and
Optionee evidencing the Option.
OWNER shall mean Optionee and all subsequent holders of the Purchased
Shares who derive their chain of ownership through a permitted transfer from
Optionee in accordance with paragraph C.l.
PARENT shall mean any Company (other than the Company) in an unbroken
chain of Companies ending with the Company, provided each Company in the
unbroken chain (other than the Company) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other Companies in such chain.
SEC shall mean the Securities and Exchange Commission.
SERVICE shall mean the provision of services to the Company or any
Parent or Subsidiary by an individual in the capacity of an employee, subject to
the control and direction of the employer entity as to both the work to be
<PAGE>
performed and the manner and method of performance, a non-employee member of the
board of directors or a consultant or independent contractor.
SUBSIDIARY shall mean each Company (other than the Company) in an
unbroken chain of Companies beginning with the Company, provided each such
Company (other than the last Company) in the unbroken chain owns, at the time of
the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other Companies in
such chain.
<PAGE>
EXHIBIT C
1998 NONQUALIFIED STOCK OPTION PLAN
[See Exhibit 10.5]
MASTER DISTRIBUTION AGREEMENT
Master Distribution Agreement (this "Agreement"), dated April 13, 1998,
between SYSCO FOOD SERVICES, INC. ("SYSCO") AND MARSEE BAKING ("name of
customer").
BACKGROUND
----------
A. Sysco Corporation and its affiliates, including SYSCO, perform purchasing,
marketing, warehousing, quality control, product research and development,
transportation and distribution services for foodservice customers.
B. Marsee Baking operates the establishments listed in Exhibit A (the Marsee
Baking Locations).
C. Marsee Baking desires to contract with SYSCO as its primary distributor for
foodservice products (i.e., supplying 80% or more of such products) to all of
its Marsee Baking Locations and SYSCO desires to perform these services.
In consideration of the mutual obligations set forth below, the parties
agree as follows:
1. APPOINTMENT OF DISTRIBUTOR
--------------------------
Marsee Baking appoints SYSCO to serve as its primary distributor to the
Marsee Baking Locations of foodservice products within the product categories
described in Article 2 ("Products"). As "primary distributor", SYSCO will be
entitled to not less than 80% of Marsee Baking's purchase requirements for
Products. Marsee Baking's purchase requirements will be determined on an
aggregate dollar volume basis. This aggregate dollar value excludes purchases
from Marsee Baking's current direct suppliers. This list can be amended by
mutual agreement between Marsee Baking and SYSCO Food Services of Portland.
2. PRODUCTS COVERED BY THIS AGREEMENT
----------------------------------
Products covered by this Agreement will be in the following categories:
1. Canned & Dry 7. Seafood - Fresh & Frozen
2. Frozen Fruits, Vegetables, 8. Paper, Plastics and Disposables
Bakery Items, Etc. 9. Janitorial Supplies & Cleaning
3. Dairy Chemicals
4. Meat- Fresh & Frozen 10. Beverage, Coffee and Equipment
5. Fresh Fruit and Vegetables 11. Smallwares and Equipment
6. Poultry - CVP & Frozen
* Confidential Treatment Requested
-1-
<PAGE>
Products will include SYSCO -registered trademark- brand, national brand
and other products as specified by Marsee Baking and stocked by SYSCO. Unless
otherwise specified, SYSCO -registered trademark- brand products will be
utilized to insure consistency of quality and to minimize costs. A description
of SYSCO -registered trademark- brand quality levels is attached as Exhibit B.
All Products in any of the Product categories specified in this Section 2 will
be priced using the margin on sell set forth in Section 6.2 for that product
category, whether or not such Products are set forth in the order guides
described in Section 5. All Products not in any of the Product categories
specified in this Section 2 will be sold to Marsee Baking at competitive prices
established from time to time by SYSCO.
3. SERVICE OBLIGATIONS OF SYSCO
----------------------------
3.1 ACCOUNT EXECUTIVE - SYSCO will assign an Account Executive and/or a
Customer Service Representative to service Marsee Baking's account. The Account
Executive and/or Customer Service Representative will maintain contact with
Marsee Baking Locations, on a mutually agreed basis, to review service
requirements.
3.2 PURCHASING GUIDES; ORDERS - SYSCO, with assistance from Marsee Baking,
will prepare purchase order guides to be used by Marsee Baking when placing
orders. Orders will be placed directly by Marsee Baking Locations ordering by
line number as specified in the purchase order guide.
3.3 POLICIES AND PROCEDURES - A policies and procedures guide will be
provided by SYSCO to all Marsee Baking Locations. Reasonable notice will be
given to Marsee Baking Locations when policies and procedures are changed by
SYSCO. Credits, pickups and other requests for service will be initiated by
local Marsee Baking Location personnel according to the guide.
3.4 RESTOCKING - SYSCO reserves the right to collect a restocking fee of
20% for returns due to Marsee Baking error or the refusal to take delivery of
Products ordered by Marsee Baking and/or such Marsee Baking Locations.
4. DELIVERY OBLIGATIONS OF SYSCO
-----------------------------
SYSCO will establish a delivery schedule for each Marsee Baking Location
within its market area and will use reasonable, good faith efforts to make
on-time deliveries.
5. DATA PROCESSING OBLIGATIONS OF SYSCO
------------------------------------
SYSCO will provide order guides on a monthly basis and, if requested in
writing by Marsee Baking, product usage reports. If Marsee Baking requests
customized reports in addition to order guides and usage reports, SYSCO will use
reasonable efforts to provide such reports. In order to cover the additional
expenses of providing such reports, SYSCO will establish a reasonable charge for
doing so and, if such charge is acceptable to Marsee Baking, will prepare and
furnish such reports to Marsee Baking.
* Confidential Treatment Requested
-2-
<PAGE>
SYSCO will also provide, at its expense, a personal computer software
system for Marsee Baking Locations to place orders directly with the delivering
operating company through the SYSCO Customer Companion system. Marsee Baking
must supply whatever personal computer hardware is necessary to enable it to
utilize such order entry software systems.
6. PRICE
-----
6.1 CALCULATION OF SELL PRICE - [The information appearing in this Section 6.1
has been omitted pursuant to a request for confidential treatment filed with the
Securities and Exchange Commission. The full text of Section 6.1 has been filed
separately with the Commission.]
* Confidential Treatment Requested
-3-
<PAGE>
The Sell Price for each Product on an order guide described in Section
5 will be calculated at the time the order guide is prepared. Sell Prices for
all Products on the order guide will be maintained until the next order guide is
prepared and sent to the Marsee Baking except that (i) all produce will be
priced at the time of invoicing and (ii) the Sell Prices of all other Products
which are market commodity products (as determined by Sysco) will change weekly
to reflect declines and advances in the cost of those market commodities.
6.2 SUBSTITUTIONS - Should a substitution be necessary, SYSCO will ship a
comparable product at a Sell Price calculated using the same percentage of
margin as on the original Product.
6.3 MERCHANDISING SERVICES - SYSCO and Sysco Corporation perform
value-added services for suppliers of SYSCO -registered trademark- brand and
other products over and above procurement activities typically provided. These
value-added services include regional and national marketing, freight
management, consolidated warehousing, quality assurance and performance based
product marketing. SYSCO and Sysco Corporation may recover the costs of
providing these services and SYSCO and Sysco Corporation may also be compensated
for these services and consider this compensation to be earned income. Receipt
of such cost recovery or earned income does not affect Cost and does not
diminish SYSCO's commitment to provide competitive prices to its customers.
6.4 PROPRIETARY OR SPECIAL ORDER ITEMS - To offset the additional costs
associated with handling Products bearing Marsee Bakings' [sic] trademarks or
logos as well as other Products purchased exclusively for Marsee Baking, an
additional 5% will be added to the margin on sell for all such proprietary items
that exceed 30 items per operating company. SYSCO will have no obligation to
carry a proprietary item if Marsee Baking purchases less than five cases per
week of that item.
If SYSCO and Marsee Baking cease doing business for any reason, Marsee
Baking will purchase, or cause a third party to purchase, all remaining
proprietary/special order items in SYSCO's inventory at SYSCO's Cost plus a
reasonable transfer and ware house handling charge not to exceed 50% of the Cost
of such proprietary/special order items. In such an event, Marsee Baking will
purchase or cause to be purchased all perishables within seven (7) days of the
termination of this Agreement and all frozen and dry proprietary/special order
items within fifteen (15) days of the termination of this Agreement.
SYSCO's policy is that all suppliers provide indemnity agreements and
insurance coverage for products purchased by SYSCO. In order to protect SYSCO
when it stocks proprietary/special order items at Marsee Baking's request and
the vendor of such items will not provide an indemnity, Marsee Baking will
defend, indemnify and hold harmless SYSCO and its employees, officers and
directors from all actions, claims and proceedings, and any judgments, damages
and expenses resulting therefrom, brought by any person or entity for injury,
illness and/or death or for damage to property in either case arising out of the
* Confidential Treatment Requested
-4-
<PAGE>
delivery, sale, resale, use or consumption of any proprietary/special order item
except to the extent such claims are caused by the negligence of SYSCO, its
agents or employees.
6.5 INCREASE IN SELL PRICE FOR SPLIT CASES - Due to the added costs
associated with handling less than full cases, a special handling charge of 10%
will be added to the Sell Price of all Product sold in split cases.
6.6 NATIONAL AGREEMENTS - Marsee Baking has provided SYSCO with written
evidence of the existence of agreements with Product manufacturers in which the
manufactures and Marsee Baking have agreed on prices the manufacturer will
charge distributors for Products to be resold to Marsee Baking, which agreements
are identified in Exhibit D. Marsee Baking must notify SYSCO in writing of the
existence of any additional agreements of this sort. SYSCO will not be
responsible for the failure to purchase under such additional agreements in the
absence of written notice from Marsee Baking and the manufacturer of the
existence of such agreements.
6.7 PROGRAM REVIEW - The pricing specified in this Agreement is based on
Marsee Baking's representations concerning its service needs, including but not
limited to its anticipated purchase volumes, drop sizes, Product mix, location
of Marsee Baking Locations and number of deliveries, as well as Marsee Baking's
compliance with its payment and other obligations specified in this Agreement.
If SYSCO determines after ninety (90) days from the date of this Agreement that
Marsee Baking requires service which varies materially from the levels
contemplated in Marsee Baking's representations made to SYSCO in negotiating
this Agreement, SYSCO reserves the right to request an increase in the margin on
sell specified in Section 6.2. If the parties are unable to agree on such an
increase and Marsee Baking's service requirements and/or contract compliance
continue to vary from that contemplated or required by this Agreement, SYSCO may
terminate this Agreement on thirty (30) days written notice to Marsee Baking.
7. CREDIT TERMS
------------
7.1 PAYMENT OBLIGATION - Payment for all Product is due on the 25th day of
the month for all Product delivered during the previous month (delinquent on the
26th day of the month following the month in which Product was delivered).
SYSCO may also modify its payment terms specified in this Section 7.1 if
payments are not made when due and/or the financial condition of the Marsee
Baking materially deteriorates.
7.2 SERVICE CHARGE - If invoices are not paid when due, a Service Charge
will be assessed to Marsee Baking, up to the maximum amount permitted by law.
Unpaid invoice balances and finance charges due to SYSCO will be deducted from
any credits due to Marsee Baking.
* Confidential Treatment Requested
-5-
<PAGE>
7.3 GUARANTEES AND APPLICATIONS - Marsee Baking will complete, execute and
deliver a new account form to SYSCO before this Agreement becomes binding upon
SYSCO. If required by SYSCO, Marsee Baking will submit a guarantee of Marsee
Baking's obligations under this Agreement executed by a third party specified by
SYSCO.
7.4 FINANCIAL INFORMATION - The continuing creditworthiness of Marsee
Baking is of central importance to SYSCO. In order to enable SYSCO to monitor
Marsee Baking's financial condition, Marsee Baking will supply annual financial
statements to SYSCO consisting of an income statement, balance sheet and
statement of cash flow. SYSCO may request such further financial information
from Marsee Baking from time to time as will enable SYSCO to accurately assess
Marsee Baking's financial condition.
8. PRICE VERIFICATION
------------------
Marsee Baking will be allowed one annual price verification for purchases
made under this Agreement. SYSCO will furnish computer verification of Costs for
the Products to be price verified, subject to the following limitations:
1. Date, time and place of price verification must be mutually agreed;
2. Fifteen (15) working days notice to SYSCO;
3. Items to be price verified should not exceed fifteen (15) line items,
and will be taken from the price list or purchasing order guide;
4. The period for which pricing is to be verified not to begin more than
twelve (12) months prior to the date of the price verification.
It is understood that Marsee Baking's price verification will consist of
reviewing SYSCO's computer verification of Costs.
9. TERM
----
The term of this Agreement will begin on April 15, 1998, and will remain in
effect until terminated. This Agreement may be terminated:
(a) By SYSCO upon written notice to Marsee Baking if Marsee Baking's
financial position deteriorates materially, determined by SYSCO in its sole
judgment; and
(b) By either party upon sixty (60) days prior written notice to the other
party.
Upon such termination, Marsee Baking agrees (i) to fully comply with its
obligations under Section 6.5 of this Agreement and (ii) to pay all invoices at
the earlier of the time they are due under Section 7.1 above or two (2) weeks
from the date of the last shipment to Marsee Baking or a Marsee Baking Location.
* Confidential Treatment Requested
-6-
<PAGE>
10. MISCELLANEOUS
-------------
10.1 ASSIGNMENT - Neither party may assign this Agreement without the prior
written consent of the other provided that SYSCO may utilize its operating
companies to perform as indicated in this Agreement. Subject to this limitation,
this Agreement shall be binding upon and inure to the benefit of the successors
and assigns of each of the parties.
10.2 ENTIRE AGREEMENT - The parties expressly acknowledges that this
Agreement contains the entire agreement of the parties with respect to the
relationship specified in this Agreement and supersedes any prior arrangements
or understandings between the parties with respect to such relationship.
10.3 AMENDMENTS - This Agreement may only be amended by a written document
signed by each of the parties.
10.4 NOTICES - Any written notice called for in this Agreement may be given
by personal delivery, first class mail, overnight delivery service or facsimile
transmission. Notices given by personal delivery will be effective on delivery;
by overnight service on the next business day; by first class mail five business
days after mailing; and by facsimiles when an answer back is received. The
address of each party is set forth below.
* Confidential Treatment Requested
-7-
<PAGE>
Executed as of the date set forth at the beginning of this Agreement.
SYSCO FOOD SERVICES OF PORTLAND, INC.
Greg Wolfe By: /S/Greg Wolfe
Vice President Finance ----------------------------
Telephone: (503) 682-8700 Its: VP Finance
Facsimile: (503) 682-4854 ---------------------------
MARSEE BAKING
______________________________ By: /s/ Tim Gray
______________________________ ----------------------------
______________________________ Its: Chief Financial Officer
Attention:____________________ ---------------------------
Telephone:____________________
Facsimile:____________________
* Confidential Treatment Requested
-8-
<PAGE>
MASTER DISTRIBUTION AGREEMENT
EXHIBIT INDEX
Exhibit A Participating Marsee Baking Locations
Exhibit B Description of SYSCO -registered trademark- Brand
Quality LevelS
Exhibit C Direct Pricing Agreements
* Confidential Treatment Requested
<PAGE>
EXHIBIT A
TO
MASTER DISTRIBUTION AGREEMENT
PARTICIPATING MARSEE BAKING LOCATIONS
- --------------------------------------------------------------------------------
WASHINGTON LOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMISSARY BURIEN
15413 NE 95th 15842 1st Avenue, S. A-107
Redmond, WA 98052 Burine, WA 98148
Phone: (425) 556-0700 Phone: (206) 439-0400
Fax: (425) 556-0762 Fax: (206) 439-0945
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MAIN STREET BALLARD
100 108th Avenue, NE 2021 NW Market
Bellevue, WA 98004 Ballard, OR 98107
Phone: (425) 635-0400 Phone: (206) 784-1400
Fax: (425) 635-0470 Fax: (206) 706-3165
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10TH FACTORIA
10301 10th Avenue, NE 3900 128th Avenue, SE A-1
Bellevue, WA 98004 Bellevue, WA 98006
Phone: (425) 688-0400 Phone: (425) 643-0400
Fax: (425) 688-0490 Fax: (425) 643-0189
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ISSAQUAH
755 NW Gilman Blvd., #G
Issaquah, WA 98027
Phone: (425) 313-0400
Fax: (425) 313-0447
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CROSSROADS
15600 8th Street NE
Bellevue, WA 98007
Phone: (425) 641-5300
Fax: (425) 641-6300
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Confidential Treatment Requested
<PAGE>
EXHIBIT A
TO
MASTER DISTRIBUTION AGREEMENT - CONTINUED
PARTICIPATING MARSEE BAKING LOCATIONS (CONTINUED)
- --------------------------------------------------------------------------------
OREGON LOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NW 23RD 4TH AND TAYLOR
1323 NW 23rd Street 845 SW Fourth
Portland, OR 97210 Portland, OR 97024
Phone: (503) 295-5900 Phone: (503) 226-9000
(503) 295-2061 Fax: (503) 226-8188
Fax: (503) 295-0450
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BYBEE PORTLAND AIRPORT
1625 SE Bybee Blvd. 7000 NE Airport Way
Portland, OR 97202 Portland, OR 97218
Phone: (503) 232-0000 Phone: (503) 281-7000
(503) 232-3148 Fax: (503) 281-3373
Fax: (503) 232-5585
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LAKE OSWEGO 6TH AND TAYLOR
406 "A" Avenue 519 SW 6th Avenue
Lake Oswego, OR 97034 Portland, OR 97205
Phone: (503) 697-5600 Phone: (503) 973-5000
(503) 697-7958 Fax: (503) 973-5100
Fax: (503) 697-7889
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NE 10TH AND BROADWAY 4TH AND PINE
935 NE Broadway 210 SW 4th Avenue
Portland, OR 97232 Portland, OR 97204
Phone: (503) 280-8800 Phone: (503) 952-5000
(503) 493-1178 Fax: (503) 220-1167
Fax: (503) 493-1175
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SALEM TANASBORNE
285 Liberty NE, Suite 100 2711 NW Town Center Dr.
Salem, OR 97301 Beaverton, OR 97005
Phone: (503) 589-0400 Phone: (503) 533-9400
Fax: (503) 589-4485 Fax: (503) 533-9607
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Confidential Treatment Requested
<PAGE>
EXHIBIT A
TO
MASTER DISTRIBUTION AGREEMENT - CONTINUED
PARTICIPATING MARSEE BAKING LOCATIONS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHERWOOD
16064 SW Tualatin-Sherwood Rd.
Sherwood, OR 97140-8378
Phone: (503) 625-64-00
Fax: (503) 625-6194
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CITY HALL
1220 SW Fifth
Portland, OR 97204
Phone: (503) 294-6000
Fax: (503) N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RALEIGH HILLS
6850 SW Beaverton-Hillsdale Hwy.
Portland, OR 97225
Phone: (503) 296-6700
Fax: (503) N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SALEM
285 Liberty NE - Suite #100
Salem, OR 97301
Phone: (503)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Confidential Treatment Requested
<PAGE>
EXHIBIT B
TO
MASTER DISTRIBUTION AGREEMENT
SYSCO QUALITY LEVELS
IMPERIAL SYSCO's highest quality level, produced and packed to
specifications which exceed the industry's top grading standards
and typically come from prime growing regions.
SUPREME Similar in quality to SYSCO's IMPERIAL products but
differentiated in that they are products unique to the
foodservice industry.
CLASSIC SYSCO's lead quality level under which fine quality products are
marketed. CLASSIC products generally meet or exceed competitive
"first" labels.
RELIANCE RELIANCE products offer consistency and value with specifications
that meet or exceed competitive labels for like economy grades
and quality. RELIANCE products offer consistency and value.
* Confidential Treatment Requested
<PAGE>
EXHIBIT C
TO
MASTER DISTRIBUTION AGREEMENT
DIRECT PRICING AGREEMENTS
Marsee Baking has agreements in place with the following vendors for
the following products, SYSCO will apply in pricing Products under this
Agreement.
VENDOR COVERED PRODUCTS
- ------ ----------------
* Confidential Treatment Requested
AGREEMENT NOT TO EXECUTE
------------------------
This Agreement Not to Execute ("Agreement") is made this 19th day of
February, 1999, by and between SYSCO FOOD SERVICES OF PORTLAND, INC., a Delaware
corporation ("Sysco") and OREGON BAKING COMPANY dba MARSEE BAKING an Oregon
corporation ("Marsee").
RECITALS
--------
A) Sysco and Marsee entered into an initial application for credit ("Credit
Agreement") under which Covalt [sic], as Purchaser, and Sysco, as Seller, agreed
to the purchase and sale of certain goods and services. A copy of the Credit
Agreement is attached hereto as Exhibit "A".
B) Pursuant to the Credit Agreement, Marsee was to make regular payments
for the goods and services purchased from Sysco. Marsee has failed to make all
timely payments when due and is now indebted to Sysco.
C) Sysco has asserted a claim for the amount due under the Credit Agreement
and the parties to this Agreement wish to resolve Sysco's claim by entering this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein, the
parties agree as follows:
AGREEMENT
---------
1. Marsee shall pay to Sysco the principal amount of TWO HUNDRED FIFTY
THOUSAND FORTY FOUR AND 64/100 DOLLARS ($250,044.64), plus interest
from November 1, 1998, on the principal amount at the rate of ten
percent (10%) per annum. Payments shall be received by Sysco not later
than the first day of each calendar month. Monthly payments shall be
interest only from November through June, 1999. On June 30, 1999,
Marsee shall pay the entire remaining unpaid balance including all
principal and interest. If Marsee does not timely make any payment
described herein, the entire then current unpaid balance, including
all principal and interest, shall be immediately due and owing and
interest on the unpaid balance shall bear interest at fifteen percent
(15%) per annum until paid in full.
2. Marsee agrees to meet all of the terms and conditions of the attached
Exhibit A Credit Agreement on all future purchases.
3. Contemporaneously with execution of this Agreement, Marsee shall
execute the ORCP 73B Statement by Defendant in the form attached to
this Agreement as Exhibit "B".
4. In the event that Marsee fails to make any payment required herein
when due, Sysco may, after three days prior written notice of payment
default, immediately pursue any and all of its legal and equitable
remedies including but not limited to filing the Confession of
<PAGE>
Judgment attached hereto as Exhibit "C" and ORCP 73B Statement by
Defendant with the appropriate court without further notice if Marsee
has not completely cured the payment default within three days of
delivery of the default notice from Sysco. Upon the filing of the
Confession of Judgment, Sysco shall provide Marsee a partial
satisfaction of judgment in an amount equal to payments made by
Marsee, if any, pursuant to Section 1 of this Agreement. Payment is
effective upon receipt by Sysco at: Sysco Food Services of Portland,
Inc., P.O. Box 527, Wilsonville, Oregon 97070.
5. In the event of any or suit or action is brought to enforce or
interpret this Agreement or otherwise with respect to the subject
matter of this Agreement, including without limitation any proceeding
brought under the United States Bankruptcy Code, the prevailing party
shall be entitled to recover from the other party reasonable attorney
fees and other costs incurred by the prevailing party in such suit or
action as determined by the trial court or on any appeal therefrom as
affixed by the appellate court.
6. The undersigned declares and represents that Marsee fully understands
the terms of this Agreement and voluntarily accepts the consideration
recited above.
7. This document contains the entire agreement and understanding between
the parties. The terms of this Agreement are contractual and not a
mere recital.
8. If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, (1) such provision
shall be fully severable, (2) this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had
never comprised a part hereof, (3) the remaining provisions of this
Agreement shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (4) in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as a part
of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be
legally possible.
9. The undersigned states and warrants that he/she has carefully read
this Agreement, knows the contents thereof, and has signed the same as
his/her own free act.
<PAGE>
10. This Agreement shall be governed by and construed in accordance with
the laws of the State of Oregon and venue for any dispute shall be
Multnomah County, Oregon.
OREGON BAKING COMPANY dba
MARSEE BAKING, an Oregon corporation
By:/S/Howard Wasserteil
----------------------------
Its: Executive VP
----------------------------
SYSCO FOOD SERVICES OF PORTLAND,
INC., a Delaware corporation
By: /s/Greg Wolfe
----------------------------
Its: VP/CFO
----------------------------
<PAGE>
NEW ACCOUNT FORM
EXHIBIT A
S OREGON BAKING CO. B SAME
---------------------------- ---------------------------
H BUSINESS NAME I ADDRESS
I MARSEE BAKING L
---------------------------- ---------------------------
P (DBA) TRADE NAME L CITY, STATE, ZIP
1323 NW 23RD
---------------------------- ---------------------------
T ADDRESS T PHONE NO. (AREA CODE)
O PORTLAND, OR 97210 O
---------------------------- ---------------------------
CITY, STATE, ZIP ATTENTION OF
*BUSINESS FACTS
*/ /Proprietorship / /Partnership /X/Corporation OR / /Franchise of
---- ---------
Under State of
New Owner? / /Yes Purchase Date / /No Length of time in Business
------- ------
Yrs
Bldg/Facilities: / /Owned /X/Leased / /Rented
Mortgage/Holder (Name)
----------------------------------------------------------
Lessor/Rentor (Name)
------------------------------------------------------------
Equipment / /Owned / /Leased / /Lessor Name
*Complete the following information for all Corporate Officers, Partners, or an
Individual Proprietor/Spouse.
Robert Schneider, President Howard Wasserteil, V.P.
- --------------------------- ---------------------------
Name and Title Name and Title
2075 NW 131st 3125 SW 66th
- --------------------------- ---------------------------
HOME ADDRESS HOME ADDRESS
Portland 97229 Portland 97225
- --------------------------- ---------------------------
CITY, STATE, ZIP CITY, STATE, ZIP
503 645 4408 292 7980
- --------------------------- ---------------------------
HOME PHONE NO. HOME PHONE NO.
560 66 8627 563 70 4453
- --------------------------- ---------------------------
SOCIAL SECURITY NO. SOCIAL SECURITY NO.
<PAGE>
GENERAL INFORMATION:
Type of Business:
/ /Restaurant/Fine Dining / /Fast Foods / /Family / /Institutional
/ /Hotel/Motel Seating Capacity 13 / /Hospital / /Nursing Home
--
Number of Beds / /Other
-- --------------------------
Number of Employees 5
----------------
Estimated Monthly Sales Volume 30,000 - 50,000
---------------
ACCOUNTS RECEIVABLE INFORMATION:
Accounts Payable Contact Vivian Title Retail Mgr
----------- -----------------
Accounts Payable Phone Number 295 4000
-----------------------------
Is a statement required to be mailed to the customer each month? /X/Yes / /No
Purchase order number required? / /Yes /X/No
BANKING
1st Interstate Daidre Bilyev
- --------------------------- ---------------------------
Bank Name Officer
NW 22nd & Lovejoy 123 557 005990 0 15,000
- --------------------------- -------------------- ---------
ADDRESS (CHECKING) ACCOUNT NO. BALANCE
Portland 97210
- --------------------------- -------------------- ---------
CITY, STATE, ZIP (LOAN) ACCOUNT NO. BALANCE
TRADE REFERENCES: (Preferably other food distributors)
NAME ADDRESS PHONE NO.
118 Nevin
1. Bakery Equipment Service Richmond, CA 800-842-4005
--------------------------------- ------------------------ ------------
2. Mountanos Bros So S.F., CA
--------------------------------- ------------------------ ------------
3. Bob Breckenridge, gen. contractor 789-4551
--------------------------------- ------------------------ ------------
4. Lisa Fisher, Designer 294-7090
--------------------------------- ------------------------ ------------
<PAGE>
TERMS AGREEMENT
The undersigned ("Purchaser") agrees that all purchases made by Purchaser from
Sysco Corporation or any of its subsidiaries and affiliated entities ("Seller")
are subject to the following terms and conditions.
1. Payment Terms - All amounts due for goods and services purchased from
Seller are payable at the Seller's distribution facility from which the
goods and services are delivered. Purchaser acknowledges that such amounts
are not payable in installments, but are payable in full as stated herein.
2. Service Charges - All amounts due Seller are payable in accordance with the
payment terms granted by Seller's credit department from which the goods
and services are delivered. If any amount due Seller is not paid in
accordance with such payment terms, a delinquency charge shall be added to
the sum due, which charge shall equal the amount obtained by multiplying
the delinquent balance by the lesser of (a) one and one-half percent (1 1/2
%) per month or (b) the maximum lawful rate permitted to be charged under
the applicable state's law.
3. NSF Charges - Purchaser shall pay Seller a service charge in an amount
equal to the greater of $10.00 or %5 of the check balance for all checks
returned by Purchaser's bank; provided, however, that such service charge
shall not be due and payable in the event such payment would result in the
violation of the usuary laws of the applicable jurisdiction.
4. Attorney Fees - In the event the account is turned over to an attorney or
other agency for collection, or suit is brought on same, or the same is
collected through any judicial proceeding whatsoever, Purchaser shall pay
all reasonable attorneys' fees and court costs incurred by Seller.
5. Credit Investigation - Release - Purchaser warrants to Seller that all
financial information furnished for the purpose of obtaining credit is
true, correct and complete in all material respects. Purchaser authorizes
the release of information furnished for the purpose of obtaining credit;
Purchaser authorizes Seller to investigate all references furnished
pertaining to the credit and financial responsibility of Purchaser; and
Purchaser releases Seller and all credit references from any and all claims
of damage resulting or alleged to result from Seller's credit
investigation.
6. Control Change - Purchaser shall notify Seller by first class and certified
mail or any change of ownership of Purchaser, if Purchaser is incorporated,
the surviving corporation of a merger, share exchange, asset sale, or any
other control change shall have all of the liabilities of Purchaser.
Purchaser
12/25/92 /s/ Howard Wasserteil
- ------------------------------ ---------------------------------
Date (Type or Print Name of Purchaser)
/s/ Illegible By:
- ------------------------------ ------------------------------
Sales Representative of Seller Printed name:
--------------------
Title:
---------------------------
Date:
----------------------------
<PAGE>
INDIVIDUAL PERSONAL GUARANTY
I, VIVIAN WASSERTEIL, for an in consideration of your extending credit at
my request to MARSEE BAKING (the "Company"), personally guarantee prompt payment
of any obligation of the Company to Sysco Corporation and each of its
subsidiaries and affiliated entities ("Seller"), whether now existing or
hereinafter incurred, and I further agree to bind myself to pay on demand any
sum which is due by the Company to Seller whenever the Company fails to pay
same. It is understood that this guaranty shall be an absolute, continuing and
irrevocable guaranty for such indebtedness of the Company.
I expressly waive presentment, demand, protest, notice of protest,
dishonor, diligence, notice of default or nonpayment, notice of acceptance of
this guaranty, notice of the extending of any guarantied indebtedness already or
hereafter contracted for by the Company, notice of any modification or renewal
of any credit agreement evidencing the indebtedness hereby guarantied, notice of
any renewal or extension of such indebtedness, and I expressly consent to any
modification or renewal of any credit agreement evidencing the indebtedness
hereby guarantied and to all renewals or extension of such indebtedness. I
further waive any right to require Seller to proceed against, or make any effort
at collection of the guarantied indebtedness from, the Company or any other
party liable for such indebtedness.
If the guarantied indebtedness is not paid by me when due, and this
guaranty is placed in the hands of an attorney for collection, or suit is
brought hereon, or it is enforced through any judicial proceeding whatsoever, I
shall pay all reasonable attorneys' fees and court costs incurred by Seller.
In the event more than one party executes this Guaranty as a guarantor,
then each guarantor agrees to be jointly and severally liable for the guarantied
indebtedness, and, in all instances herein, the singular shall be construed to
include the plural.
X /s/ Vivian Wasserteil X
------------------------ ---------------------------
Guarantor Guarantor
Print: Vivian Wasserteil Print:
------------------ ---------------------
- -------------------- Address: 3125 SW 66th Address:
Witness ------------------- -------------------
Portland, OR 97225
-------------------
Dated: 12/16/97 Dated:
------------------- ---------------------
<PAGE>
EXHIBIT B
ORCP 73B STATEMENT BY DEFENDANT
-------------------------------
Oregon Baking Company dba Marsee Baking ("Marsee" or "defendant"), hereby
gives the following written statement pursuant to ORCP 73B:
1. Defendant hereby authorizes the entry of judgment in favor of
plaintiff Sysco Food Services of Portland, Inc. ("Sysco"), and against
defendant for the principal amount of TWO HUNDRED FIFTY THOUSAND FORTY
FOUR AND 64/100 DOLLARS ($250,044.64), plus interest on the principal
amount at the rate of 10% per annum, from November 1, 1998, until
paid, plus attorneys' fees in the amount of $2,500 and costs in the
amount of $167.00.
2. This judgment arises out of the obligation of Marsee pursuant to a
Credit Agreement, a copy of which is attached hereto and incorporated
herein as Exhibit 1 ("Credit Agreement"). The obligation of defendant
to Sysco under the Credit Agreement has not been paid in full and the
amount set forth herein is justly and presently due for the amounts
owed by defendant.
3. Defendant Marsee, signing below by and through its authorized
representative, understands that the Confession of Judgment to which
this Statement is attached authorizes entry of judgment without
further proceeding which would authorize execution to enforce payment
of the judgment.
<PAGE>
4. This Statement has been executed after the date when the sums set
forth herein were due.
DATED this 9th day of April, 1999.;
----- ------
OREGON BAKING COMPANY
dba MARSEE BAKING an Oregon corporation
By:/s/Howard Wasserteil
---------------------------------------------
Its: Exec. VP
---------------------------------------------
STATE OF OREGON )
) ss.
County of Multnomah )
This instrument was acknowledged before me this 9th day of
-----
April, 1999, by Howard Wasserteil, as the Exec VP of OREGON
- ------ ----------------- -------
BAKING COMPANY dba MARSEE BAKING, an Oregon corporation, on behalf of the
corporation.
/s/Connie K. Weeks
----------------------------------------------
NOTARY PUBLIC FOR OREGON
My Commission Expires:8/22/2000
------------------------
[Official Seal]
<PAGE>
EXHIBIT C
IN THE CIRCUIT COURT OF THE STATE OF OREGON
FOR THE COUNTY OF MULTNOMAH
SYSCO FOOD SERVICES OF )
PORTLAND, INC., a Delaware )
corporation, )
) No.
) ------------
Plaintiff, ) CONFESSION OF JUDGMENT
)
vs. )
)
OREGON BAKING COMPANY dba )
MARSEE BAKING an Oregon corporation )
)
Defendant. )
Pursuant to ORCP 73, and based upon the ORCP 73B Statement of defendant
Oregon Baking Company dba Marsee Baking, attached hereto as Exhibit A,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that plaintiff Sysco Food
Services of Portland, Inc., have judgment against defendant, in the principal
amount of TWO HUNDRED FIFTY THOUSAND FORTY FOUR AND 64/100 DOLLARS
($250,044.64), plus interest thereon at the rate of 10% per annum from November
1, 1998, until paid, plus attorneys' fees in the amount of $2,500, plus costs in
the amount of $167.00, less any payments made and that execution shall issue on
this judgment.
MONEY JUDGMENT
--------------
1. Judgment Creditor: Sysco Food Services of Portland, Inc., a Delaware
corporation, plaintiff.
2. Judgment Creditor's Attorney: Mitchell E. Hornecker, Schwabe,
Williamson & Wyatt, P.C.
Page 1 - CONFESSION OF JUDGEMENT SCHWABE, WILLIAMSON & WYATT, P.C.
Attorneys at Law
Pacwest Center, Suites 1600-1800
1211 S.W. Fifth Avenue
Portland, OR 97204-3795
Telephone (503) 222-9581
<PAGE>
3. Judgment Debtor: Oregon Baking Company dba Marsee Baking, an Oregon
corporation, defendant.
4. Principal Amount of Judgment: $250,044.64.
5. Pre-judgment simple interest at the rate of 10% per annum on the
principal amount of the judgment, from November 1, 1998, until the date of entry
of judgment.
6. Attorneys' Fees: $2,500.
7. Costs: $167.00
8. Post-judgment simple interest at the rate of 15% per annum on the
judgment which consists of item 4. Post-judgment simple interest at the rate of
9% per annum on the judgment which consists of items 5, 6 and 7.
DATED this ____ day of __________________________, _____.
----------------------------------------
CIRCUIT COURT JUDGE
SUBMITTED BY:
SCHWABE, WILLIAMSON & WYATT, P.C.
By:
-----------------------------------
Mitchell E. Hornecker, OSB #86370
Of Attorneys for Plaintiff
Page 2 - CONFESSION OF JUDGEMENT SCHWABE, WILLIAMSON & WYATT, P.C.
Attorneys at Law
Pacwest Center, Suites 1600-1800
1211 S.W. Fifth Avenue
Portland, OR 97204-3795
Telephone (503) 222-9581
SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
Borrower: Oregon Baking Company
Address: 2287 N.W. Pettygrove
Portland, OR 97210
Date: October 28, 1997
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date
between SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive,
Santa Clara, California 95054 and the borrower named above (the "Borrower"),
whose chief executive office is located at the above address ("Borrower's
Address").
1. LOANS.
1.1. LOANS. Silicon will make one or more loans to the Borrower (the
"Loans") up to the amounts (the "Credit Limits") shown on the Schedule to this
Agreement (the "Schedule") as the Credit Limit for such loans. The terms of the
Loans are stated in this Agreement and in the Schedule. The terms of the
Schedule are incorporated into this Agreement. The Borrower is responsible for
monitoring the total amount of Loans and other Obligations outstanding from time
to time, and the Borrower shall not permit the amount of any Loan to exceed at
any time the applicable Credit Limit for such Loan. The Borrower shall not
permit the total amount of Loans and all other obligations to exceed at any time
the aggregate Credit Limit for the Loans. If at any time the total of all
outstanding Loans and all other Obligations exceeds the aggregate Credit Limit,
the Borrower shall immediately pay the amount of the excess to Silicon, without
notice or demand.
1.2. INTEREST; DEBIT TO DEPOSIT ACCOUNTS. All Loans and all other
monetary Obligations shall bear interest at the applicable rates shown on the
Schedule. Interest shall be payable monthly, on the due date shown on the
monthly billing from Silicon to the Borrower. The Borrower shall regularly
deposit all funds received from its business activities in accounts maintained
by the Borrower at Silicon. The Borrower hereby requests and authorizes Silicon
to debit any of the Borrower's accounts with Silicon, including without
limitation account no. _________, for payments of interest and principal due on
the Loans and all other obligations owing by the Borrower to Silicon. Silicon
shall promptly notify the Borrower of all debits which Silicon makes against the
Borrower's accounts. Any such debit against the Borrower's accounts shall in no
way be deemed a setoff by Silicon.
1.3. FEES. The Borrower shall pay to Silicon at closing a commitment
fee and other fees in the amounts shown on the Schedule. These fees are in
addition to all interest and other sums payable to Silicon and are not
refundable.
Page 1 - LOAN AND SECURITY AGREEMENT
<PAGE>
1.4 ADDITIONAL COSTS. In case of any law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law) which:
(a) subjects Silicon to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by the Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Silicon imposed by the United States of America or
any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Silicon; or
(c) imposes upon Silicon any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Silicon,
reduce the income receivable by Silicon or impose any expense upon Silicon with
respect to any loans, Silicon shall notify the Borrower thereof. Borrower agrees
to pay to Silicon the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation by Silicon of a statement of the amount and
setting forth Silicon's calculation thereof, all in reasonable detail, which
statement shall be deemed true and correct absent manifest error.
2. GRANT OF SECURITY INTEREST.
2.1. OBLIGATIONS. The term "Obligations" as used in this Agreement
means the following: the obligation to pay all Loans and all interest on the
Loans when due, and to pay and perform when due all other present and future
indebtedness, liabilities, obligations, guarantees, covenants, agreements,
warranties and representations of the Borrower to Silicon, whether joint or
several, monetary or non-monetary, and whether created pursuant to this
Agreement or any other present or future agreement (such as future agreements
relating to letters of credit issued by Silicon) or otherwise. Silicon may, in
its discretion, require that the Borrower pay monetary Obligations in cash to
Silicon, or charge them to the Borrower's Loan account, in which event they
shall bear interest at the rates applicable to the Loan to which such amounts
are charged.
2.2. COLLATERAL. As security for all Obligations, the Borrower hereby
grants Silicon a continuing security interest in all of the Borrower's assets,
including but not limited to all of the Borrower's interest in the types of
property described below, whether now owned or hereafter acquired, and wherever
located (collectively, the "Collateral"): (a) all accounts, contract rights,
chattel paper, letters of credit, documents, securities, money, and instruments,
and all other obligations now or in the future owing to the Borrower; (b) all
inventory, goods, merchandise, materials, raw materials, work in process,
finished goods, farm products, advertising, packaging and shipping materials,
supplies, and all other tangible personal property which is held for sale or
lease or furnished under contracts of service or consumed in the Borrower's
business, and all warehouse receipts and other documents; (c) all equipment,
including without limitation all machinery, fixtures, trade fixtures, vehicles,
furnishings, furniture, materials, tools, machine tools, office equipment,
computers and peripheral devices, appliances, apparatus, parts, dies, and jigs;
Page 2 - LOAN AND SECURITY AGREEMENT
<PAGE>
(d) all general intangibles including, but not limited to, deposit accounts,
goodwill, names, trade names, trademarks and the goodwill of the business
symbolized thereby, trademark applications, trade secrets, drawings, blueprints,
customer lists, patents, patent applications, copyrights copyright applications,
security deposits, loan commitment fees, federal, state and local tax refunds
and claims, all rights in all litigation presently or hereafter pending for any
cause or claim (whether in contract, tort or otherwise), and all judgments now
or hereafter arising therefrom, all rights to purchase or sell real or personal
property, all rights as a licensor or licensee of any kind, all royalties,
licenses, processes, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance), and all other rights,
privileges and franchises of every kind; (e) all books and records, whether
stored on computers or otherwise maintained; (f) all of the Borrower's cash;
books and records, whether stored on computers or otherwise maintained; (g) all
substitutions, additions and accessions to any of the foregoing, and all
products, proceeds and insurance proceeds of the foregoing, and all guaranties
of and security for the foregoing; and all books and records relating to any of
the foregoing. Silicon's security interest in any present or future technology
(including patents, trade secrets, and other technology) shall be subject to any
licenses or rights now or in the future granted by the Borrower to any third
parties in the ordinary course of the Borrower's business; provided that if the
Borrower proposes to sell, license or grant any other rights with respect to any
technology in a transaction that, in substance, conveys a major part of the
economic value of that technology, Silicon shall first be requested to release
its security interest, and Silicon may withhold such release in its discretion.
The Borrower shall not, either directly or through any agent, employee, licensee
or designee, (a) file an application for the registration of any patent,
trademark, or copyright with the U.S. Patent and Trademark Office, the U.S.
Copyright Office, or any similar office or agency in any other country, state,
or any political subdivision (the "Offices"), or (b) file any assignment of any
patent, trademark, or copyright which the Borrower may acquire from a third
party with any one of the Offices unless the Borrower shall, on or prior to the
date of such filing, notify Silicon of such filing, and, upon request of
Silicon, execute and deliver any and all assignments, agreements, instruments,
documents and papers as Silicon may request to evidence Silicon's interest in
such patents, trademarks, or copyrights, as the case may be, including the
goodwill and general intangibles of the Borrower relating thereto or represented
thereby. The Borrower authorizes Silicon to amend any applicable notice of
security interest or assignment executed pursuant to SECTION 4.9 of this
Agreement without first obtaining the Borrower's approval of or signature to
such amendment and to record such assignment with one or more of the Offices.
2.3. COLLATERAL DEFINITIONS. Notwithstanding SECTION 2.2, for purposes
of this Agreement, the intellectual property comprising the Collateral may be
further defined to include the following:
(a) Any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held, including without limitation those set forth in EXHIBIT A
attached to the Intellectual Property Security Agreement (collectively, the
"Copyrights");
(b) All patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including without
limitation the patents and patent applications set forth on EXHIBIT B attached
to the Intellectual Property Security Agreement (collectively, the "Patents");
Page 3 - LOAN AND SECURITY AGREEMENT
<PAGE>
(c) Any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks, including without limitation those set forth
on EXHIBIT C attached to the Intellectual Property Security Agreement
(collectively, the "Trademarks"); and
(d) Any series of related images, however fixed or encoded (i)
having or representing the predetermined, three-dimensional pattern of metallic,
insulating or semiconductor material present or removed from the layers of a
semiconductor chip product; and (ii) in which series the relation of the images
to one another is that each image has the pattern of the surface of one form of
the semiconductor chip product, including without limitation those set forth on
EXHIBIT D attached to the Intellectual Property Security Agreement
(collectively, the "Mask Works").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
The Borrower represents and warrants to Silicon as follows, and the
Borrower covenants that the following representations shall continue to be true,
and that the Borrower shall comply with all of the following covenants:
3.1. CORPORATE EXISTENCE AND AUTHORITY. The Borrower is and shall
continue to be duly authorized, validly existing and in good standing under the
laws of the state of its incorporation, as identified on the copy of the
Borrower's Articles of Incorporation delivered to Silicon. The Borrower is and
shall continue to be qualified and licensed to do business in all jurisdictions
in which any failure to do so would have a material adverse effect on the
Borrower. The execution, delivery and performance by the Borrower of this
Agreement, and all other documents executed by the Borrower in connection with
the Loans have been duly and validly authorized, are enforceable against the
Borrower in accordance with their terms, and do not violate any law or any
provision of, and are not grounds for acceleration under, any agreement or
instrument that is binding upon the Borrower.
3.2. NAME, TRADE NAMES AND STYLES.. The name of the Borrower set forth
in the heading to this Agreement is its correct name. Listed on an Exhibit to
the Schedule are all prior names of the Borrower and all of the Borrower's
present and prior trade names. The Borrower shall give Silicon 15 days' prior
written notice before changing its name or doing business under any other name.
The Borrower has complied, and shall in the future comply, with all laws
relating to the conduct of business under a fictitious business name.
3.3. PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth
in the heading to this Agreement is the chief executive office for the Borrower.
In addition, the Borrower has places of Business only at, and Collateral of the
Borrower is located only at, the locations set forth on the Schedule. The
Borrower shall give Silicon at least 15 days' prior written notice before
changing its chief executive office or moving Collateral (other than inventory
sold in the ordinary course of business) to any location other than a location
listed on the Schedule.
3.4. TITLE TO COLLATERAL; PERMITTED LIENS. The Borrower is now, and
shall at all times in the future be, the sole owner of all the Collateral,
except for items of equipment that are leased by the Borrower and general
intangibles subject to nonexclusive licenses granted by Borrower to its
customers in the ordinary course of business. The Collateral now is and shall
Page 4 - LOAN AND SECURITY AGREEMENT
<PAGE>
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for the following ("Permitted Liens"):
(a) purchase money security interests in specific items of equipment, other than
equipment financed by the Loans; (b) leases of specific items of equipment; (c)
liens for taxes not yet payable; (d) additional security interests and liens
consented to in writing by Silicon in its sole discretion; and (e) security
interests being terminated substantially concurrently with this Agreement.
Silicon shall have the right to require, as a condition to its consent under
subparagraph (d) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on terms satisfactory to Silicon in its
sole discretion, acknowledge that the holder's security interest is subordinate
to Silicon's security interest. Silicon now has, and shall continue to have, a
second priority, perfected and enforceable security interest in all of the
Collateral. The Collateral shall not be subject to any other liens or security
interests of any type except for the Permitted Liens. The Borrower shall at all
times defend Silicon and the Collateral against all claims of others. None of
the Collateral now is or shall be affixed to any real property in such a manner,
or with such intent, as to become a fixture.
3.5. MAINTENANCE OF COLLATERAL. The Borrower shall maintain the
Collateral in good working condition. The Borrower shall not use the Collateral
for any unlawful purpose.
3.6. BOOKS AND RECORDS. The Borrower has maintained and shall maintain
at the Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7. FINANCIAL CONDITION AND STATEMENTS. All financial statements now
or in the future delivered to Silicon have been, and shall be, prepared in
conformity with generally accepted accounting principles and now and in the
future shall completely and accurately reflect the financial condition of the
Borrower, at the times and for the periods therein stated. Since the last date
covered by any such statement, there has been no material adverse change in the
financial condition or business of the Borrower. The Borrower is now and shall
continue to be solvent.
3.8. TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. The Borrower has
timely filed, and shall timely file, all tax returns and reports required by
foreign, federal, state and local law. The Borrower has timely paid, and shall
timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions now or in the future owed by the Borrower. The Borrower may,
however, defer payment of any contested taxes, provided that the Borrower (a) in
good faith contests the Borrower's obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (b) notifies
Silicon in writing of the commencement of, and any material development in, the
proceedings, and (c) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. The Borrower is
unaware of any claims or adjustments proposed for any of the Borrower's prior
tax years which could result in additional taxes becoming due and payable by the
Borrower. The Borrower has paid, and shall continue to pay all amounts necessary
to fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms. The Borrower has not and shall not
withdraw from participation in, permit partial or complete termination of, or
permit the occurrence of any other event with respect to, any such plan which
could result in any liability of the Borrower, including, without limitation,
any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.
Page 5 - LOAN AND SECURITY AGREEMENT
<PAGE>
3.9. COMPLIANCE WITH LAW. The Borrower has complied, and shall comply,
in all material respects, with all provisions of all foreign, federal, state and
local laws and regulations relating to the Borrower, including, but not limited
to, those relating to ownership of real or personal property, conduct and
licensing of the Borrower's business, and environmental matters.
3.10. LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of the
Borrower's knowledge) threatened by or against or affecting the Borrower in any
court or before any governmental agency (or any basis therefor known to the
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of the Borrower,
or in any material impairment in the ability of the Borrower to carry on its
business in substantially the same manner as it is now being conducted. The
Borrower shall promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or against
the Borrower involving amounts in excess of $100,000.
3.11. USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes.
3.13. HAZARDOUS SUBSTANCES. The terms "hazardous wastes," "hazardous
substance," "disposal," "release," and "threatened release," as used in this
Agreement, shall have the same meanings as set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., or other
applicable state of Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. The Borrower represents and warrants that: (a) the Borrower
has no knowledge of (i) any use, generation, manufacture, storage, treatment,
disposal, release, or threatened release of any hazardous waste or substance by
any prior owners or occupants of any of the real properties owned or operated by
the Borrower, of (ii) any actual or threatened litigation or claims of any kind
by any person relating to such matters; (b) neither the Borrower nor any
subtenant, contractor, agent, or other user authorized by Borrower of any of the
real properties shall use, generate, manufacture, store, treat, dispose of, or
release any hazardous waste or substance on, under, or about any of the real
properties owned or operated by the Borrower except in compliance with all
applicable federal, state, and local laws, regulations, and ordinances,
including without limitation those laws, regulations and ordinances described
above. The Borrower authorizes Silicon and its agents, upon 24 hours' prior
notice (which need not be in writing), to enter upon the real properties to make
such inspections and tests as Silicon may deem appropriate to determine
compliance of the real properties owned or operated by the Borrower with this
Section of the Agreement. Any inspections or tests made by Silicon shall be for
Silicon's purposes only and shall not be construed to create any responsibility
or liability on the part of Silicon to the Borrower or to any other person. The
Borrower hereby (a) releases and waives any future claims against Silicon for
indemnity or contribution in the event the Borrower becomes liable for cleanup
or other costs under any such laws, and (b) agrees to indemnify and hold
harmless Silicon against any and all claims, losses, liabilities, damages,
Page 6 - LOAN AND SECURITY AGREEMENT
<PAGE>
penalties, and expenses which Silicon may directly or indirectly sustain or
suffer resulting from a breach of this Section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal, release or
threatened release occurring prior to the Borrower's ownership or interest in
the real properties, whether or not the same was or should have been known to
the Borrower. The provisions of this Section of the Agreement, including the
obligation to indemnify, shall survive the payment of the obligations and the
termination or expiration of this Agreement and shall not be affected by
Silicon's acquisition of any interest in any of the real properties, whether by
foreclosure or otherwise.
3.14 NO CONFLICTS. Performance of this Agreement does not conflict with
or result in a breach of any agreement to which Borrower is a party or by which
Borrower is bound, except to the extent that certain intellectual property
agreements prohibit the assignment of the rights thereunder to a third party
without the licensor's or other party's consent and this Agreement constitutes
an assignment.
3.15. NO TRANSFERS OF ENCUMBRANCES. During the term of this Agreement,
Borrower will not transfer or otherwise encumber any interest in the Collateral,
except for non-exclusive licenses granted by Borrower in the ordinary course of
business or as set forth in this Agreement and the Permitted Liens.
3.16. [Intentionally Omitted.]
3.17. [Intentionally Omitted.]
3.18. [Intentionally Omitted.]
3.19. [Intentionally Omitted.]
3.20. [Intentionally Omitted.]
3.21. ACCURATE INFORMATION. All information heretofore, herein or
hereafter supplied to Silicon by or on behalf of Borrower with respect to the
Collateral is accurate and complete in all material respects.
3.22. NO CONFLICTING AGREEMENT. Borrower shall not enter into any
agreement that would materially impair or conflict with Borrower's obligations
hereunder without Silicon's prior written consent, which consent shall not be
unreasonably withheld. Borrower shall not permit the inclusion in any material
contract to which it becomes a party of any provisions that could or might in
any way prevent the creation of a security interest in Borrower's rights and
interests in any property included within the definition of the Collateral
acquired under such contracts, except that certain contracts may contain
anti-assignment provisions that could in effect prohibit the creation of a
security interest in such contracts.
3.23. NOTICE OF IMPAIRMENT OF VALUE. Upon any executive officer of
Borrower obtaining actual knowledge thereof, Borrower will promptly notify
Silicon in writing of any event that materially adversely affects the value of
any Collateral, the ability of Borrower to dispose of any Collateral or the
rights and remedies of Silicon in relation thereto, including the levy of any
legal process against any of the Collateral.
4. ADDITIONAL DUTIES OF THE BORROWER.
4.1. FINANCIAL AND OTHER COVENANTS. The Borrower shall at all times
comply with the covenants set forth in the Schedule.
Page 7 - LOAN AND SECURITY AGREEMENT
<PAGE>
4.2. OVERADVANCE; PROCEEDS OF ACCOUNTS. If for any reason the total of
all outstanding Loads and all other Obligations exceeds the total Credit Limit,
as stated in the Schedule, without limiting Silicon's other remedies, and
whether or not Silicon declares an Event of Default, the Borrower shall remit to
Silicon all checks and other proceeds of the Borrower's accounts and general
intangibles, in the same form as received by the Borrower, within one day after
the Borrower's receipt of the same, to be applied to the Obligations in such
order as Silicon shall determine in its discretion.
4.3. INSURANCE. The Borrower shall at all times insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to Silicon, in such form and amounts as
Silicon may reasonably require. All such insurance policies shall name Silicon
as an additional loss payee, and shall contain a lenders loss payee endorsement
in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any
such insurance, subject to the claims of any holders of prior Permitted Liens,
Silicon shall apply such proceeds in reduction of the Obligations as Silicon
shall determine in its sole and absolute discretion, except that, provided no
Event of Default has occurred, Silicon shall release to the Borrower insurance
proceeds with respect to equipment totaling less than $100,000, which shall be
utilized by the Borrower for the replacement of the equipment with respect to
which the insurance proceeds were paid. Silicon may require reasonable assurance
that the insurance proceeds so released shall be so used. If the Borrower fails
to provide or pay for any insurance, Silicon may, but is not obligated to,
obtain the same at the Borrower's expense. The Borrower shall promptly deliver
to Silicon copies of all reports made to insurance companies.
Statutory notice regarding insurance:
WARNING
Unless you provide us with evidence of the insurance coverage as
required by our contract or loan agreement, we may purchase insurance at your
expense to protect our interest. This insurance may, but need not, also protect
your interest. If the collateral becomes damaged, the coverage we purchase may
not pay any claim you make or any claim made against you. You may later cancel
this coverage by providing evidence that you have obtained property coverage
elsewhere.
You are responsible for the cost of any insurance purchased by us. The
cost of this insurance may be added to your contract or loan balance. If the
cost is added to your contract or loan balance, the interest rate on the
underlying contract or loan will apply to this added amount. The effective date
of coverage may be the date your prior coverage lapsed or the date you failed to
provide proof of coverage.
This coverage we purchase may be considerably more expensive than
insurance you can obtain on your own and may not satisfy any need for property
damage coverage or any mandatory liability insurance requirements imposed by
applicable law.
4.4. REPORT. The Borrower shall provide Silicon with such written
reports with respect to the Borrower as Silicon shall from time to time
reasonably specify, including but not limited to the financial reports required
as stated in the Schedule.
4.5. ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times,
and upon one business day notice, Silicon, or its agents, shall have the right
to inspect the Collateral, and the right to audit and copy the Borrower's
accounting books, records, ledgers, journals, or registers and the Borrower's
books and records relating to the Collateral, provided that no prior notice is
required upon the occurrence and continuation of an Event of Default. Silicon
shall take reasonable steps to keep confidential all information obtained in
Page 8 - LOAN AND SECURITY AGREEMENT
<PAGE>
such inspection or audit, but Silicon shall have the right to disclose any such
information to its auditors, regulatory agencies and attorneys, and pursuant to
any subpoena or other legal process. The Borrower shall reimburse Silicon for
Silicon's actual costs for conducting two such audits per year. Silicon may
debit the Borrower's deposit accounts with Silicon for the cost of such audits,
in which event Silicon shall send notification thereof to the Borrower.
4.6. NEGATIVE COVENANTS. Except as may be expressly permitted in the
Schedule, the Borrower shall not, without Silicon's prior written consent, do
any of the following: (a) merge or consolidate with another corporation, except
that the Borrower may merge or consolidate with another corporation if the
Borrower is the surviving corporation in the merger and the aggregate value of
the assets acquired in the merger does not exceed 25% of the Borrower's tangible
net worth (determined in accordance with generally accepted accounting
principles) as of the end of the month prior to the effective date of the
merger, and the assets of the corporation acquired in the merger as not subject
to any liens or encumbrances, except Permitted Liens; (b) acquire any assets,
including stock of any other entity, outside the ordinary course of the business
for an aggregate purchase price (whether paid in cash, in stock of the Borrower
or other consideration) exceeding 25% of the Borrower's tangible net worth
(determined in accordance with generally accepted accounting principles) as of
the end of the month prior to the effective date of the acquisition; (c) enter
into any other transaction outside the ordinary course of business (except as
permitted by the other provisions of this Section); (d) sell or transfer any
Collateral, except for the sale of finished inventory in the ordinary course of
the Borrower's business; (e) make any loans of any money or any other assets to
shareholders, employees or any other person except in the ordinary course of
business; (f) incur any debts that are outside the ordinary course of business
or that would have a material, adverse effect on the Borrower or on the prospect
of repayment of the Obligations; (g) guarantee or otherwise become liable with
respect to the obligations of another party or entity; (h) pay or declare any
dividends on the stock of the Borrower (except for dividends payable solely in
stock of the Borrower); (i) redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of the stock of the Borrower, except when exercising
any standard repurchase right Borrower may have in any existing or hereafter
adopted Company Stock Option/Stock Issuance Plan or related documents; (j) make
any change in the Borrower's capital structure which has a material adverse
effect on that Borrower or on the prospect of repayment of the Obligations; or
(k) dissolve or elect to dissolve. Transactions permitted by the foregoing
provisions of this Section are only permitted if no Event of Default and no
event which (with notice or passage of time or both) would constitute an Event
of Default would occur as a result of such transaction.
4.7. LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Silicon with respect to any Collateral or in any
manner relating to the Borrower, the Borrower shall, without expense to Silicon,
make available the Borrower and its officers, employees and agents and the
Borrower's books and records to the extent that Silicon may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
4.8 [Intentionally Omitted.]
4.9 EXECUTE ADDITIONAL DOCUMENTATION. The Borrower agrees, at its
expense, on request by Silicon, to execute from time to time all documents in
form satisfactory to Silicon, as Silicon may deem reasonably necessary or useful
in order to perfect and maintain Silicon's perfected security interest in the
Collateral, and in order to fully consummate all of the transactions
contemplated by this Agreement.
Page 9 - LOAN AND SECURITY AGREEMENT
<PAGE>
4.10 [Intentionally Omitted.]
5. TERM.
5.1 MATURITY DATE. This Agreement shall continue in effect until the
payment in full of the Obligations, provided, however, that the Borrower shall
repay in full each Loan described on the Schedule, with all accrued but unpaid
interest on that Loan, on or before the Maturity Date stated on the Schedule for
such Loan.
5.2 EARLY TERMINATION. Subject to SECTION 5.3, this Agreement may be
terminated, without penalty, prior to the Maturity Date as follows: (a) by the
Borrower, effective three business days after written notice of termination is
given to Silicon; or (b) by Silicon at any time after the occurrence of an Event
of Default, without notice, effective immediately.
5.3 PAYMENT OF OBLIGATIONS. On the due dates stated in the Schedule, or
on any earlier effective date of termination, the Borrower shall pay and perform
in full all Obligations, whether evidenced by installment notes or otherwise,
and whether or not all or any part of such Obligations are otherwise then due
and payable. Notwithstanding any termination of this Agreement, all of Silicon's
security interests in all of the Collateral and all of the terms and provisions
of this Agreement shall continue in full force and effect until all Obligations
have been paid and performed in full; provided that, without limiting the fact
that Loans are discretionary on the part of Silicon, Silicon may, in its sole
discretion, refuse to make any further Loans after termination. No termination
shall in any way affect or impair any right or remedy of Silicon, nor shall any
such termination relieve the Borrower of any Obligation to Silicon, until all of
the Obligations have been paid and performed in full. Upon payment and
performance in full of all the Obligations, Silicon shall promptly deliver to
the Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate any of Silicon's security
interests.
6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and the Borrower
shall give Silicon immediate written notice thereof: (a) any warranty,
representation, statement, report or certificate made or delivered to Silicon by
the Borrower or any of the Borrower's officers or employees, now or in the
future, shall be untrue or misleading in any material respect; (b) the Borrower
shall fail to pay when due any Loan or any interest thereon or any other
monetary Obligation; or (c) the total outstanding balance of any Loan exceeds
the applicable Credit Limit, or the total Loans and other Obligations
outstanding at any time exceed the aggregate Credit Limit for all Loans, or the
total Loans and other Obligations outstanding at any time exceed the aggregate
Credit Limit for all Loans; or (d) the Borrower shall fail to comply with any of
the covenants set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or (e) the Borrower
shall fail to pay or perform any other non-monetary Obligation, under this
Agreement or any other agreement or document relating to the Loans; or (f) any
levy, assessment, attachment, seizure, lien or encumbrances is made on all or
any part of the Collateral; or (g) dissolution, termination of existence,
insolvency or business failure of the Borrower, or appointment of a receiver,
trustee or custodian for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by the Borrower
under any reorganization, bankruptcy, insolvency, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, now or in
Page 10 - LOAN AND SECURITY AGREEMENT
<PAGE>
the future in effect; or (h) the commencement of any proceeding against the
Borrower or any guarantor of any of the Obligations under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect,
which is not cured by the dismissal thereof within 45 days after the date
commenced; or (i) revocation or termination of, or limitation of liability upon,
any guaranty of the Obligations; or (j) commencement of proceedings by any
guarantor of any of the Obligations under any bankruptcy or insolvency law; or
(k) the Borrower makes any payment on account of any indebtedness or obligation
which has been subordinated to the Obligations, unless such payment is permitted
in the applicable subordination agreement, or if any person who has subordinated
such indebtedness terminates or in any way limits his subordinate agreement; or
(l) the Borrower shall generally not pay its debts as they become due; or the
Borrower shall conceal, remove or transfer any part of its property, with intent
to hinder, delay or defraud its creditors, or make or suffer any transfer of any
of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or (m) either the Borrower or any other party thereto
shall breach any subordination agreement executed in connection with the Loans;
or (n) the current shareholders of he Borrower shall crease to own more than 50%
of the outstanding common stock of the Borrower. If any of the foregoing
defaults, other than a failure to pay money and breach of an financial covenants
set forth in the Schedule, is curable, it may be cured (and no Event of Default
shall have occurred) if the Borrower cures the default within 15 days (or within
45 days in the case of clause (h) of this SECTION 6.1). Silicon may cease making
any Loans hereunder during the above cure periods, and thereafter if an Event of
Default has occurred.
6.2 REMEDIES. Upon the occurrence of any Event of Default and the
expiration of any applicable cure period under SECTION 6.1, and at any time
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by the Borrower), may do any one or
more of the following, to the extent that such actions are consistent with the
priority of Silicon's interest in the Collateral: (a) cease making Loans or
otherwise extending credit to the Borrower under this Agreement or any other
document or agreement; (b) accelerate and declare all or any part of the
Obligations to be immediately due, payable, and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing or
relating to any Obligation; (c) take possession of any or all of the Collateral
wherever it may be found, and for that purpose the Borrower hereby authorizes
Silicon without judicial process to enter onto any of the Borrower's premises
without interference to search for, take possession of, keep, store, or remove
any of the Collateral, and remain on the premises or cause a custodian to remain
on the premises in exclusive control thereof without charge for so long as
Silicon deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however, that
should Silicon seek to take possession of any or all of the Collateral by Court
process, the Borrower hereby irrevocably waives: (i) any bond and any surety or
security relating thereto required by any statute, court rule or otherwise as an
incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of and not dispose of any such
Collateral until after trial or final judgment; (d) require the Borrower to
assemble any or all of the Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and the
Borrower, and to remove the Collateral to such locations as Silicon may deem
advisable; (e) require the Borrower to deliver to Silicon, in kind, all checks
and other payments received with respect to all accounts and general
intangibles, together with any necessary endorsements, within one day after the
date received by the Borrower; (f) complete the proceeding, manufacturing or
repair of any Collateral prior to a disposition thereof and, for such purpose
Page 11 - LOAN AND SECURITY AGREEMENT
<PAGE>
and for the purpose of removal, Silicon shall have the right to use the
Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all other
property without charge; (g) sell, lease or otherwise dispose of any of the
Collateral in its condition at the time Silicon obtains possession of it or
after further manufacturing, processing or repair, at any one or more public
and/or private sales, in lots or in bulk, for cash, exchange or other property,
or on credit, and to adjourn any such sale from time to time without notice
other than oral announcement at the time scheduled for sale; Silicon shall have
the right to conduct such disposition on the Borrower's premises without charge,
for such time or times as Silicon deems reasonable, or on Silicon's premises, or
elsewhere and the Collateral need not be located at the place of disposition;
Silicon may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under applicable
law, at any private disposition; any sale or other disposition of Collateral
shall not relieve the Borrower of any liability the Borrower may have if any
Collateral is defective as to title or physical condition or otherwise at the
time of sale; (h) demand payment of, and collect nay accounts and general
intangibles comprising Collateral an, in connection therewith, the Borrower
irrevocably authorizes Silicon to endorse or sign the Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to the Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Silicon's
sole discretion, to grant extensions of time to pay, compromise claims and
settle accounts and the like for less than face value; (i) offset against any
sums in any general, special or other deposit accounts maintained by the
Borrower with Silicon; and (j) demand and receive possession of any of the
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable fees of
professionals (including attorneys' fees), expenses, costs, liabilities and
obligations incurred by Silicon with respect to the foregoing shall be added to
and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence of any Event of Default, the interest rat applicable to the
Obligations shall be increased by an additional two percent per annum above the
rate otherwise applicable.
6.3. STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. The Borrower
and Silicon agree that a sale or other disposition (collectively, "Sale") of any
Collateral which complies with the following standards shall conclusively be
deemed to be commercially reasonable: (a) notice of the Sale is given to the
Borrower at least seven days prior to the Sale, and, in the case of a public
Sale, notice of the Sale is published at least seven days before the Sale in a
newspaper of general circulation in the county where the Sale is to be
conducted; (b) notice of the Sale describes the Collateral in general,
non-specific terms; (c) the Sale is conducted at a place designed by Silicon,
with or without the Collateral being present; (d) the Sale commences at any time
between 8:00 a.m. and 6:00 p.m.; (e) payment of the purchase price in cash or by
cashier's check or wire transfer is required; (f) with respect to any Sale of
any of the Collateral, Silicon may (but is not obligated to) direct any
prospective purchaser to ascertain directly from the Borrower any and all
information concerning the same. Silicon may employ other methods of noticing
and selling the Collateral, in its discretion, if they are commercially
reasonable.
6.4. POWER OF ATTORNEY. Effective only upon the occurrence and during
the continuance of an Event of Default, the Borrower hereby irrevocably appoints
Silicon (and any of Silicon's designated officers, or employees) as the
Borrower's true and lawful attorney to: (a) send requests for verification of
accounts or notify account debtors of Silicon's security interest in the
accounts; (b) endorse the Borrower's name on any checks or other forms of
payment or security that may come into Silicon's possession; (c) sign the
Borrower's name on any invoice or bill of lading relating to any account, drafts
against account debtors, schedules and assignments of accounts, verifications of
accounts, and notices to account debtors; (d) make, settle, and adjust all
Page 12 - LOAN AND SECURITY AGREEMENT
<PAGE>
claims under and decisions with respect to the Borrower's policies of insurance;
and (e) settle and adjust disputes and claims respecting the accounts directly
with account debtors, for amounts and upon terms which Silicon determines to be
reasonable; provided Silicon may exercise such power of attorney to sign the
name of the Borrower on any of the documents described in SECTION 4.9 regardless
of whether an Event of Default has occurred. The appointment of Silicon as the
Borrower's attorney in fact, and each and every one of Silicon's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Silicon's obligation to
provide advances hereunder is terminated.
6.5. APPLICATION OF PROCEEDS. All proceeds realized as the result of
any Sale of the Collateral shall be applied by Silicon first to the costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion. Any surplus shall be
paid to the Borrower or other persons legally entitled thereto; the Borrower
shall remain liable to Silicon for any deficiency. If Silicon, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any Sale or other disposition of
Collateral, Silicon shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by Silicon of the cash therefor.
6.6. REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the Uniform Commercial Code of Oregon and each
state in which any Collateral is located, and under all other applicable laws,
and under any other instrument or agreement now or in the future entered into
between Silicon and the Borrower, and all of such rights and remedies are
cumulative and none is exclusive. Exercise or partial exercise by Silicon of one
or more of its rights or remedies shall not be deemed an election, nor bar
Silicon from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of Silicon to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and performed.
7. GENERAL PROVISIONS.
7.1. NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by certified mail return receipt
requested, addressed to Silicon or the Borrower at the addresses shown in the
heading to this Agreement, or at any other address designed in writing by one
party to the other party. In addition, Borrower shall send a copy of any notice
to Silicon to the following address: 11000 S.W. Stratus, Suite 170, Beaverton,
OR 97008-7113, Attn: Art Hiemstra. All notices shall be deemed to have been
given upon delivery in the case of notices personally delivered to the Borrower
or to Silicon, or at the expiration of two business days following the deposit
thereof in the United States mail, with postage prepaid.
7.2. SEVERABILITY. Should any provision of this Agreement be held by
any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in full
force and effect.
Page 13 - LOAN AND SECURITY AGREEMENT
<PAGE>
7.3. INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between the Borrower and Silicon and
supersede all prior and contemporaneous negotiations and oral representations
and agreements, all of which are merged and integrated in this Agreement. ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. UNDER
OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY SILICON AFTER
OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY SILICON TO
BE ENFORCEABLE.
7.4. WAIVERS. The failure of Silicon at any time or times to require
the Borrower to strictly comply with any of the provisions of this Agreement or
any other present or future agreement between the Borrower and Silicon shall not
waive or diminish any right of Silicon later to demand And receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent thereto. None of the provisions of
this Agreement or any other agreement now or in the future executed by the
Borrower and delivered to Silicon shall be deemed to have been waived by any act
or knowledge of Silicon or its agents or employees, but only by a specific
written waiver signed by an officer of Silicon and delivered to the Borrower.
The Borrower waives demand, protest, notice of protest, and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, general
intangible, document or guaranty at any time held by Silicon on which the
Borrower is or may in any way be liable, and notice of any action taken by
Silicon, unless expressly required by this Agreement.
7.5. [Intentionally Omitted.]
7.6. AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by the Borrower and a duly
authorized officer of Silicon.
7.7. TIME OF ESSENCE. Time is of the essence in the performance by the
Borrower of each and every obligation under this Agreement.
7.8 ATTORNEYS' FEES AND COSTS. The Borrower shall reimburse Silicon for
all reasonable attorneys' fees and fees of other professionals, and all filing,
recording, search, title insurance, appraisal, audit, and other reasonable costs
incurred by Silicon, pursuant to, or in connection with, or relating to this
Agreement (whether or not a lawsuit is filed), including, but not limited to,
any reasonable attorneys' fees and costs Silicon incurs in order to do the
following: prepare and negotiate this Agreement and the documents relating to
this Agreement; obtain legal advice in connection with this Agreement; enforce,
or seek to enforce, any of its rights; prosecute actions against, or defend
actions by, account debtors; commence, intervene in, or defend any action or
proceeding (including any appeal or review); initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of the borrower's books and
records; or protect, obtain possession of, lease, dispose of, or otherwise
enforce Silicon's security interest in, the Collateral and otherwise represent
silicon in any litigation relating to the Borrower. If either Silicon or the
Page 14 - LOAN AND SECURITY AGREEMENT
<PAGE>
Borrower files any lawsuit against the other predicated on a breach of this
Agreement, the prevailing party in such action shall be entitled to recover its
reasonable costs and professionals' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment, and in any appeal or
review by an appellate court. All fees and costs to which Silicon may be
entitled pursuant to this Section shall immediately become part of the
Borrower's Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
7.9. BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of the parties hereto; provided,
however, that the Borrower may not assign or transfer any of its rights under
this Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
the Borrower from its liability for the Obligations. The borrower agrees and
consents to Silicon's sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers, whether related
or unrelated to Silicon. Silicon may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Silicon may have about the Borrower or about any other matter relating
to the Loans and the Borrower hereby waives any rights to privacy it may have
with respect to such matters. The Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of any
repurchase of such participation interests. The Borrower also agrees that the
purchasers of any such participation interests shall be considered as the
absolute owners of such interests in the Loans and shall have all the rights
granted under the participation agreement or agreements governing the sale of
such participation interests.
7.10. SECTION HEADINGS; CONSTRUCTION. Section headings are only used in
this Agreement for convenience. The Borrower acknowledges that the headings may
not describe completely the subject matter of the applicable section, and the
headings shall not be used in any manner to construe, limit, define or interpret
any term or provision of this Agreement. This Agreement has been fully reviewed
and negotiated between the parties and no uncertainty or ambiguity in any term
or provision of this Agreement shall be construed strictly against Silicon or
the Borrower under any rule of construction or otherwise.
7.11. MUTUAL WAIVER OF JURY TRIAL. The Borrower and Silicon each hereby
waive the right to trial by jury in any action or proceeding based upon, arising
out of, or in any way relating to, this Agreement or any other present or future
instrument or agreement between Silicon and the Borrower, or any conduct, acts
or missions of Silicon or the Borrower or any of their directors, officers,
employees, agents, attorneys or any other persons affiliated with Silicon or the
borrower, in all of the foregoing cases, whether sounding in contract or tort or
otherwise.
7.12. GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of Silicon and the
Borrower shall be governed by, and construed in accordance with, the laws of the
State of Oregon. Any undefined term used in this Agreement that is defined in
the Oregon Uniform Commercial Code shall have the meaning assigned to that term
in the Oregon Uniform Commercial Code. As a material part of the consideration
to Silicon to enter into this Agreement, the Borrower (i) agrees that all
actions and proceedings relating directly or indirectly hereto shall at
Silicon's option, be litigated in courts located within Oregon, and that the
exclusive venue therefor shall be, at Silicon's option, Washington County or
Multnomah County, Oregon; (ii) consents to the jurisdiction and venue of any
such court and consents to service of process in any such action or proceeding
Page 15 - LOAN AND SECURITY AGREEMENT
<PAGE>
by personal delivery or any other method permitted by law; and (iii) waives any
and all rights the Borrower may have to object to the jurisdiction of any such
court, or to transfer or change the venue of any such action or proceeding.
BORROWER:
OREGON BAKING COMPANY
By: /s/ Peter Mair
--------------------------------
Title: CFO
-----------------------------
SILICON:
SILICON VALLEY BANK
By: /s/ Illegible
--------------------------------
Title: V.P.
-----------------------------
Page 16 - LOAN AND SECURITY AGREEMENT
<PAGE>
SCHEDULE TO LOAN AND SECURITY AGREEMENT
BORROWER: Oregon Baking Company
SECURED OPERATING LINE OF CREDIT
CREDIT LIMIT: An amount not to exceed $250,000 at any one time outstanding.
The amount of this Loan may be borrowed, repaid and
reborrowed from time to time, subject to the terms of this
Agreement and Schedule.
INTEREST RATE: The interest rate applicable to this Loan shall be a rate
equal to the "Prime Rate" in effect from time to time, plus
1.00% per annum. Interest calculations shall be made on the
basis of a 360-day year and the actual number of days
elapsed. "Prime Rate" means the rate announced from time to
time by Silicon as its "prime rate"; it is a base rate upon
which other rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The interest
rate applicable to the Obligations shall change on each date
there is a change in the Prime Rate.
COMMITMENT FEE: $2,000, which is fully earned and payable at closing. (Any
Commitment Fee previously paid by the Borrower in connection
with this loan shall be credited against this Fee.)
MATURITY DATE: October 23, 1998, at which time all unpaid principal and
accrued but unpaid interest shall be due and payable.
PRIOR NAMES OF
BORROWER: See attached Exhibit A.
TRADE NAMES OF
BORROWER: See attached Exhibit A.
TRADEMARKS OF
BORROWER: See attached Exhibit A.
OTHER LOCATIONS
AND ADDRESSES: See attached Exhibit A.
MATERIAL ADVERSE
LITIGATION: See attached Exhibit A.
Page 17 - LOAN AND SECURITY AGREEMENT
<PAGE>
OTHER COVENANTS: Borrower shall at all times comply with all of the following
additional covenants:
BANKING RELATIONSHIP. Borrower and its subsidiaries
shall at all times maintain their primary banking
relationship with Silicon. Neither Borrower nor its
subsidiaries shall establish any deposit accounts of any type
with any bank or other financial institution other than
Silicon without Silicon's prior written consent.
FINANCIAL STATEMENTS AND REPORTS. The Borrower shall provide
Silicon: (a) within 30 days after the end of each month, a
monthly financial statement (consisting of a income statement
and a balance sheet) prepared by the Borrower in accordance
with generally accepted accounting principals; and (b) within
90 days following the end of the Borrower's fiscal year,
complete annual CPA-audited financial statements, such audit
being conducted by independent certificate public accountants
reasonably acceptable to Silicon, together with an
unqualified opinion of such accountants.
CONDITIONS
TO CLOSING: Without in any way limiting the discretionary nature of
advances under this Agreement, before requesting any such
advance, the Borrower shall satisfy each of the following
conditions:
1. LOAN DOCUMENTS:
Silicon shall have received this Agreement and the Schedule
executed by the Borrower, a Continuing guaranty in form and
substance satisfactory to Silicon, executed by Joe Tanous and
John Durbetaki, and such other loan documents as Silicon
shall require, each duly executed and delivered by the
parties thereto.
2. DOCUMENTS RELATING TO
AUTHORITY, ETC.:
Silicon shall have received each of the following in form and
substance satisfactory to it:
(a) Certificate Copies of the Articles of Incorporation and
Bylaws of the Borrower:
(b) A Certificate of Good Standing issued by the Secretary
of State of the borrower's state of incorporation and such
other states as Silicon may reasonably request with respect
to the Borrower;
(c) A certified copy of a Resolution adopted by the Board
of Directors of the Borrower authorizing the execution,
delivery and performance of this Agreement, and any other
documents or certificates to be executed by the Borrower in
connection with this transaction; and
Page 18 - LOAN AND SECURITY AGREEMENT
<PAGE>
(d) Incumbency Certificates describing the office and
identifying the specimen signatures of the individuals
signing all such loan documents behalf of the Borrower.
3. PERFECTION AND
PRIORITY OF SECURITY:
Silicon shall have received evidence satisfactory to it that
its security interest in the Collateral has been duly
perfected and that such security interest is prior to all
other liens, charges, security interests, encumbrances
and adverse claims in or to the Collateral other than
Permitted Liens, which evidence shall include, without
limitation, a certificate from the appropriate state agencies
showing the due filing and second priority of the UCC
Financing Statements to be signed by the Borrower covering
the Collateral.
4. INSURANCE: Silicon shall have received evidence satisfactory to it that
all insurance required by this Agreement is in full force and
effect, with loss payee designations and additional insured
designations as required by this Agreement.
5. OTHER INFORMATION:
Silicon shall have received such other statements, opinions,
certificates, documents and information with respect to
matter contemplated by this Agreement as it may reasonably
request, all of which must be acceptable to Silicon.
Silicon shall have conducted an examination of the Borrower's
books, records ledgers, journals, and registers, as Silicon
may deem necessary, and shall be satisfied with the results
of such examination in its sole discretion.
Silicon and the Borrower agree that the terms of this Schedule
supplement the Loan and Security Agreement between Silicon and the Borrower and
agree to be bound by the terms of this Schedule.
BORROWER:
OREGON BAKING COMPANY
By: /s/ Peter Mair
--------------------------------
Title: CFO
-----------------------------
SILICON:
SILICON VALLEY BANK
By: /s/ Illegible
--------------------------------
Title: V.P.
-----------------------------
Page 19 - LOAN AND SECURITY AGREEMENT
<PAGE>
EXHIBIT A
TRADENAMES
----------
PRIOR NAMES
-----------
TRADEMARKS
----------
OTHER LOCATIONS AND ADDRESSES
-----------------------------
MATERIAL ADVERSE LITIGATION
---------------------------
[OTHER DISCLOSURES]
Page 20 - LOAN AND SECURITY AGREEMENT
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of May 4, 1998, by
and between Oregon Baking Company ("Borrower") whose address is 2287 NW
Pettygrove, Portland, OR 97210 and Silicon Valley Bank ("Silicon") whose address
is 3003 Tasma Drive, Santa Clara, CA 95064 and with a loan production office
located at 11000 SW Stratus, Suite 170, Beaverton, OR 97008.
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among
other documents, a Loan and Security Agreement, dated October 28,1 997, together
with any and all Schedules attached thereto, as may be amended from time to time
(the "Loan Agreement"). The Loan Agreement provided for, among other things, a
Credit Limit in the original principal amount of Two Hundred Fifty Thousand
Dollars ($250,000) (the "Secured Operating Line of Credit"). Defined terms used
by not otherwise defined herein shall have the same meanings as in the Loan
Agreement.
Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to
as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement. Additionally,
repayment of the Indebtedness is guaranteed by Joe Tanous and John Durbetaki
(each, the "Guarantor"), pursuant to two (2) Continuing Guaranty agreements
(each, the "Guaranty"). Furthermore, repayment of the Letter of Credit (as
defined below) under the Indebtedness is guaranteed by each Guarantor pursuant
to two (2) Commercial Guaranty agreement (each, the "Commercial Guaranty"),
executed concurrently herewith.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO LOAN AGREEMENT
1. The following Section is hereby incorporated into the Loan Agreement.
LETTER OF CREDIT. Subject to the terms and conditions of this Loan
Agreement, Silicon agrees to issue or cause to be issued a Letter of
Credit ("Letter of Credit") for the account of Borrower to assist
Borrower in the acquisition of Bernie's Bagels, in a face amount not to
exceed Three Hundred Twenty Five Thousand Dollars ($325,000). Such
letter of Credit shall have an expire date no later than one year after
its issuance, and an annual option to renew at each renewal. Borrower's
Letter of Credit reimbursement obligation shall be secured by a
Certificate of Deposit number 8800023826, including any and all
renewals and proceeds, held at Silicon, in an amount not less than one
third (0.33) of the face amount of the Letter of Credit. The Letter of
Credit shall be, in form and substance, acceptable to Silicon in its
sole discretion and shall be subject to the terms and conditions of
Silicon's form of application and Letter of Credit agreement.
Borrower shall indemnify, defend and hold Silicon harmless from any
loss, cost, expense or liability, including, without limitation,
reasonable attorneys' fees, arising out of or in connection with the
Letter of Credit.
1
<PAGE>
B. MODIFICATION(S) TO GUARANTY.
1. The following paragraphs are hereby incorporated into the Guaranty:
FINANCIAL INFORMATION. Guarantor shall promptly deliver to Silicon
complete and current financial statements and tax returns within thirty
(30) days of filing, and such other information about Guarantor as
Silicon may reasonably request.
COMMERCIAL GUARANTY. Guarantor's obligation to Borrower's indebtedness
under the Letter of Credit is limited to the terms and conditions as
stated in that certain Commercial Guaranty, dated May 4, 1998, by and
between Guarantor and Silicon.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Silicon a fee in the amount of One
Thousand Six Hundred Twenty Five Dollars ($1,626) (the "Loan Fee") plus all
out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has not defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Indebtedness, Silicon is
relying upon Borrower's representations, warranties, and agreements, as set
froth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Silicon's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Silicon to make any future modifications to
the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Silicon and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Silicon in writing. No maker,
endorser, or guarantor will be released by virtue of this Loan Modification
Agreement. The terms of this paragraph apply not only to this Loan Modification
Agreement, but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee and Silicon's receipt of
Commercial Guaranty.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: SILICON:
OREGON BAKING COMPANY SILICON VALLEY BANK
By: /s/ Brad Barnett By: /s/ Derek Ridgley
------------------------ -------------------------
Name: Brad Barnett Name: Derek Ridgley
---------------------- -----------------------
Title: President/CEO Title: V.P.
--------------------- ----------------------
2
<PAGE>
The undersigned hereby consent to the modifications to the Indebtedness pursuant
to this Loan Modification Agreement hereby ratify all the provisions of the
Guaranty and confirm that all provisions of that document are in full force and
effect.
GUARANTOR:
/s/ Joe Tanous
- ------------------------
Joe Tanous
/s/ John Durbetaki
- ------------------------
John Durbetaki
3
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of October 23, 1998,
by and between Oregon Baking Company ("Borrower") and Silicon Valley Bank
("Silicon") a California chartered bank with a loan production office located in
Beaverton, OR.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among
other documents, a Loan and Security Agreement, dated October 28, 1997, together
with any and all Schedules attached thereto, as may be amended form time to time
(the "Loan Agreement"). The Loan Agreement provided for, among other things, a
Credit Limit in the original principal amount of Two Hundred Fifty Thousand
Dollars ($250,000) (the "Secured Operating Line of Credit"). Defined terms used
but not otherwise defined herein shall have the same meanings as in the Loan
Agreement.
Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to
as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement. Additionally,
repayment of the Indebtedness is guaranteed by Joe Tanous and John Durbetaki
(each, the "Guarantor"), pursuant to two (2) Continuing Guaranty agreements
(each, the "Guaranty"). Furthermore, repayment of the Letter of Credit (as
defined below) under the Indebtedness is guaranteed by each Guarantor pursuant
to two (2) Commercial Guaranty agreements (each, the "Commercial Guaranty").
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO SCHEDULE LOAN AGREEMENT.
1. The term "Maturity Date" is hereby amended to mean February 23, 1999,
at which time all unpaid principal and all accrued but unpaid interest shall be
due and payable.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Silicon a fee in the amount of
Five Hundred Dollars ($500) (the "Loan Fee") plus all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Indebtedness, Silicon is
relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Silicon's agreement to
1
<PAGE>
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Silicon to make any future modifications to
the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Silicon and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Silicon in writing. No maker,
endorser, or guarantor will be released by virtue of this Loan Modification
Agreement. The terms of this paragraph apply not only to this Loan Modification
Agreement, but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: SILICON:
OREGON BAKING COMPANY SILICON VALLEY BANK
By: /s/ Howard Wasserteil By: /s/ Derek Ridgley
------------------------ -------------------------
Name: Howard Wasserteil Name: Derek Ridgley
---------------------- -----------------------
Title: Exec. V.P. Title: Vice President
--------------------- ----------------------
2
<PAGE>
The undersigned hereby consent to the modifications to the Indebtedness pursuant
to this Loan Modification Agreement hereby ratify all the provisions of the
Guaranty and confirm that all provisions of that document are in full force and
effect.
GUARANTOR:
/s/ Joe Tanous
- ------------------------
Joe Tanous
/s/ John Durbetaki
- ------------------------
John Durbetaki
3
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of February 23, 1999 by
and between Oregon Baking Company ("Borrower") and Silicon Valley Bank
("Silicon") a California chartered bank with a loan production office located in
Beaverton, OR.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among
other documents, a Loan and Security Agreement, dated October 26, 1997, together
with any and all schedules attached thereto, as may be amended from time to
time, (the "Loan Agreement"). the Loan Agreement provided for, among other
things, a Credit Limit in the original principal amount of Two Hundred Fifty
Thousand Dollars ($250,000)(the "Secured Operating Line of Credit"). Defined
terms used but not otherwise defined herein shall have the same meanings as in
the Loan Agreement.
Hereinafter, all Indebtedness owing by Borrower to Silicon shall be referred to
as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement. Additionally,
repayment of the Indebtedness is guaranteed by Joe Tanous and John Durbetaki
(each, the "Guarantor"), pursuant to two (2) Continuing Guaranty agreements
(each, the "Guaranty"). Furthermore, repayment of the Letter of Credit (as
referenced below) is guaranteed by each Guarantor pursuant to two (2) Commercial
Guaranty Agreements (each, the "Commercial Guaranty").
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the indebtedness shall be
referred to as the "Security Documents." Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO SCHEDULE LOAN AGREEMENT
1. The term "Maturity Date" is hereby amended to mean February 23, 2000,
at which time all unpaid principal and all accrued but unpaid interest
shall be due and payable.
2. The paragraph entitled "Letter of Credit" is hereby amended to provide
that the Letter of Credit may have an expiry date of no later than
March 1, 2000, subject to the annual renewal option as provided herein.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
6. PAYMENT OF LOAN FEE. Borrower shall pay to Silicon a fee in the amount of Two
Thousand Five Hundred Dollars ($2,500)(the "Loan Fee"), plus all out of pocket
expenses.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Indebtedness, Silicon is
1
<PAGE>
relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Silicon's agreement to
modifications to the existing indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate silicon to make any future modifications to
the indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Silicon and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Silicon in writing. No maker,
endorser, or guarantor will be released by virtue of this Loan Modification
Agreement. the terms of this paragraph apply not only to this loan modification
agreement, but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: SILICON:
OREGON BAKING COMPANY SILICON VALLEY BANK
By: /s/ Howard Wasserteil By: /s/ Derek Ridgley
------------------------ -------------------------
Name: Howard Wasserteil Name: Derek Ridgley
---------------------- -----------------------
Title: Exec VP Title: Vice President
--------------------- ----------------------
The undersigned hereby consent to the modifications to the indebtedness pursuant
to this Loan Modification Agreement, hereby ratify all the provisions of the
Guaranty and confirm that all provisions of that document are in full force and
effect.
GUARANTOR:
/s/ Joe Tanous
- --------------------------
Joe Tanous
/s/ John Durbetaki
- --------------------------
John Durbetaki
2
CONTRIBUTION AND INDEMNITY AGREEMENT
This Agreement is entered into among Oregon Baking Company, dba Marsee
Baking, an Oregon corporation ("Marsee"), and Joseph F. Tanous ("Tanous") and
John Durbetaki ("Durbetaki") (sometimes collectively referred to herein as the
"Guarantors").
Marsee has applied for credit facilities from Silicon Valley Bank (the
"Bank"). The Bank is unwilling to lend money to Marsee without personal
guarantees from the Guarantors. With guarantees, the Bank is willing to
establish a line of credit for Marsee, represented by a $250,000 promissory note
(the "Bank Notes").
Guarantors are current shareholders of Marsee and members of the Board
of Directors. Guarantors are willing to guarantee Marsee's line of credit in
consideration of a warrant to purchase additional shares of Marsee's Common
Stock.
In order to assist Marsee in obtaining the credit facilities from Bank,
the Guarantors have on or about October 30, 1997, signed guarantees on the
Bank's standard forms jointly guaranteeing the aggregate of indebtedness owed to
the Bank by Marsee (each a "Guaranty" and collectively the "Guarantees"). The
purpose of this Agreement is to set forth the agreement between the Guarantors
regarding their individual liability with respect to contribution and payment
liabilities under any of the Guarantees.
Accordingly, the parties agree as follows:
1. SHARING OF GUARANTY LIABILITY. It is the express agreement of the
parties that each Guarantor shall be responsible, on a several basis, for fifty
percent (50%) of any Guaranty Liability, as defined below. This percentage is
referred to in this Agreement as the Applicable Percentage. For purposes of this
Agreement, the term "Guaranty Liability" includes any amount, whether principal
or interest, and any and all collection costs, including attorney fees, that may
be paid or become payable to the Bank under the Guarantees, including any and
all advances, debts, obligations and liabilities of Marsee heretofore, now, or
hereafter made, incurred or created, whether voluntary or involuntary and
however arising, whether direct or acquired by the Bank by assignment or
succession, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and all attorneys' fees, the allocated
costs of the Bank's in-house counsel, and all other costs and expenses which may
be incurred by the Bank in the enforcement of the Bank Notes in any legal action
(at trial, on appeal or on review). Upon any demand for payment under any of the
Guarantees, each of the Guarantors agrees to pay his Applicable Percentage of
any amount paid.
2. DEFINITION OF PRO RATA SHARE. The term "Pro Rata Share" means, with
respect to the Guarantors, the total amount, as the same may change from time to
time, that all of the Guarantors have paid under the Guarantees, multiplied by
the Applicable Percentage. In determining the total amount that all parties have
paid under the Guarantees, only amounts actually paid shall be counted. Amounts
reduced to a monetary judgment, but not yet paid, shall not be counted. If a
party delivers property to the Bank in partial or complete satisfaction of their
Guarantees, or if the Bank forecloses or otherwise seizes any property of a
party, the amount of Marsee indebtedness discharged as a result of such property
transferred shall be counted. Any amounts received by a Guarantor under Section
3 below shall be deducted in computing the amount the Guarantor has paid under
their Guarantees.
3. RIGHT OF CONTRIBUTION. If at any time and from time to time, either
of the Guarantors have paid the Bank following any demand for payment under the
Guarantees more than their Pro Rata Share (the "Paying Guarantor"), the Paying
Guarantor shall have the right to collect from the other Guarantor ("Non-Paying
Guarantor") the amount by which the amount paid is in excess of the Paying
Guarantor's Pro Rata Share. Any deficiency owed by the Non-Paying Guarantor to
the Paying Guarantor is payable upon demand. Any unpaid demand following a
disproportionate payment under the Guarantees shall bear interest commencing ten
(10) days following receipt of the demand at the Bank's prime rate of interest
plus two (2) percentage points.
Contribution and Indemnity Agreement
Page 1
<PAGE>
4. REMOVAL OF GUARANTEES. The Company agrees to use its best efforts to
remove the Guarantees by November 1, 2000.
5. INDEMNITY.
5.1. If at any time and from time to time, either of the Guarantors
have paid the Bank following any demand for payment under the Guarantees, upon
written notice from the Paying Guarantor, Marsee shall indemnify the Paying
Guarantor against any and all losses, liability and expense (including
reasonable attorneys' fees) arising out of or caused by such payment to the
Bank.
5.2. Each party will defend, hold harmless, and indemnify the other
party from and against all loss, damage, injury or expense (including reasonable
attorney fees) arising out of or caused by any breach of any of the provisions
of this Agreement by such party.
6. MISCELLANEOUS.
6.1 NO OTHER GUARANTEES. This Agreement among the parties concerning
the sharing of guarantee liability is limited to the specifically-referenced
Guarantees. It does not apply to any other guarantees given previously or in the
future. No Guarantor shall enter into an agreement to guarantee any future
indebtedness of Marsee's without first notifying the other Guarantor of his
intention to do so.
6.2 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified or
supplemented only by a written instrument executed by all parties hereto. The
waiver by any party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
6.3 NOTICES. All notices, requests, demands and other communications
which are required or permitted under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
first-class mail, postage prepaid:
If to Marsee: Brad K. Barnett, President and CEO
Oregon Baking Company
dba Marsee Baking
PO Box 25776
Portland, OR 97298
With a copy to: Brendan R. McDonnell
Tonkon Torp LLP
SW Fifth Avenue, Suite 1600
Portland, OR 97204
If to Tanous: Joseph F. Tanous
SW 72nd Avenue
Portland, OR 97224
If to Durbetaki: John Durbetaki
SW Laurelwood Road
Gaston, OR 97119
or such other address as any party shall have specified by notice in writing to
the other.
Contribution and Indemnity Agreement
Page 2
<PAGE>
6.1 NOTICES REGARDING DEMANDS. No party will make any payment under any
of the guarantees unless and until a written demand for payment has been
received from the Bank. If any party receives a demand for payment under any of
the Guarantees, notice of such demand will be promptly sent to the other parties
to this Agreement. Marsee shall promptly send to the Guarantors any notice of
default received from the Bank.
6.2 BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, legatees
or successors; nothing in this Agreement is intended to confer on any third
person any rights, remedies, obligations or a liability under or by reason of
this Agreement.
6.3 ATTORNEY FEES. If any action is brought with respect to this
agreement, or in any appeal therefrom, the prevailing party shall be entitled to
reasonable attorney fees as determined by the court or courts in which the
action or appeal is tried or heard.
6.4 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with Oregon law without regard to its choice of law provisions.
6.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
EXECUTED as of the 23rd day of October, 1997.
OREGON BAKING COMPANY
dba Marsee Baking
By: /s/ Brad Barnett
----------------------------------
Its: President/CEO
---------------------------------
GUARANTORS:
/s/ Joseph F. Tanous
--------------------------------------
Joseph F. Tanous
/s/ John Durbetaki
--------------------------------------
John Durbetaki
Contribution and Indemnity Agreement
Page 3
LINC CAPITAL, INC. LINC CAPITAL, INC.
MASTER LEASE AGREEMENT 303 East Wacker Drive, #1000
Chicago, Illinois 60601
(312) 946-1000
MASTER LEASE AGREEMENT NO.7217
Date: April 17, 1998
LESSEE: OREGON BAKING CORPORATION, DBA MARSEE BAKING
ADDRESS: 2287 NW PETTYGROVE, PORTLAND, OR 97210
LINC CAPITAL, INC. ("Lessor") hereby leases to Lessee and Lessee leases from
Lessor, in accordance with the terms and conditions hereinafter set forth, the
equipment and property purchased by Lessor for lease to the Lessee hereunder
together with all replacement parts, additions, accessories, alterations and
repairs incorporated therein or now or hereafter affixed thereto Add-on Items
(as defined herein) (herein collectively referred to as the "Equipment")
described in each Schedule which may be executed by Lessor and Lessee from time
to time (individually a "Schedule" and collectively, the "Schedules"), each of
which is made a part hereof. For all purposes of this Master Lease Agreement
("Lease"), each Schedule relating to one or more items of Equipment shall be
deemed a separate lease incorporating all of the terms and provisions of this
Lease. In the event of a conflict between the terms of this Lease and the terms
and conditions of an Schedule, the terms and conditions of the Schedule shall
govern and control that Schedule.
1. TERM AND RENTAL. The term of this Lease (the "Initial
Lease Term") for any item of Equipment shall be set forth in
the Schedule relating to such item of Equipment and shall
commence (the "Commencement Date") on the Acceptance Date.
The "Acceptance Date" with respect to each Schedule shall be
the applicable of either: (1) the date of delivery to Lessee
of all of the Equipment to be leased thereunder; (2) in the
case of Equipment which is the subject of a sale and
leaseback between Lessor and Lessee, the date upon which
Lessor purchases such Equipment from Lessee; or (3) in the
case of Equipment requiring installation, the date of
installation of the Equipment. If the Acceptance Date is
other than the first day of a calendar quarter, then the
Commencement Date of the Initial Lease Term set forth in any
Schedule shall be the first day of the calendar quarter
following the month which includes the Acceptance Date and
Lessee shall pay to Lessor, in addition to all other sums
due hereunder, an amount equal to one-thirtieth of the
amount of the average monthly rental payment due or to
become due hereunder multiplied by the number of days from
and including the Acceptance Date to the Commencement Date
of the Initial Lease Term set forth in the Schedule. During
the entire Initial Lease Term and any extension or renewal
of the term of this Lease, Lessee agrees to pay the total
rental due hereunder which shall be the total amount of all
rental payments set forth in the Schedule plus such
additional amounts as may become due hereunder or pursuant
to any written modification hereof or additional written
agreement hereto. Except as otherwise specified in the
Schedule, rental payments payable hereunder shall be due
monthly and shall be payable in advance on the first day of
each month during the term of this Lease beginning with the
Commencement Date of the Initial Lease Term. All rental
payments due hereunder shall be sent to the address of the
Lessor specified in this Lease or in the Schedule or as
otherwise directed by the Lessor in writing. Rental payments
or any other payments due hereunder not made by their
scheduled due date shall be overdue and shall be subject to
a service charge in an amount equal to two percent (2%) per
month or the maximum rate permitted by law whichever is less
(the "Service Charge Rate") applied to amount of the overdue
payments from the date due until paid. If Lessor shall at
any time accept a rental payment after it shall become due,
such acceptance shall not constitute or be construed as a
waiver of any or all of Lessor's rights hereunder, including
without limitation those rights of Lessor set forth in
Sections 12 and 13 hereof.
2. TITLE. This is an agreement of lease only. Except as
otherwise provided in any applicable Schedule. Lessee shall
have no right, title or interest in or to the Equipment
lease hereunder, except as to the lawful use thereof subject
to the terms and conditions of this Lease. All of the
Equipment shall remain personal property (whether or not the
Equipment may at any time become attached or affixed to real
property). The Equipment is and shall remain the sole and
exclusive property of Lessor or its assignees. All
replacement parts, modifications, repairs, alterations,
additions and accessories now or hereafter incorporated in
or affixed to the Equipment whether before or after the
Commencement Date (herein collectively called "Add-on
<PAGE>
Items") are hereby included in the definition of
"Equipment". All Add-on Items shall become the property of
Lessor upon being so incorporated or affixed to the
Equipment and shall be returned to Lessor as provided in
Section 3 (other than alterations, additions and accessions
that are attached or affixed by Lessee with notice to Lessor
after the Commencement Date for which the Lessor has not
given value or purchased and which are readily removable by
Lessee from the Equipment without any diminution of value or
functionality to the Equipment). Upon the request of Lessor,
Lessee will affix to the Equipment labels or other markings
supplied by Lessor indicating its ownership of the Equipment
and shall keep the same affixed for the entire term of this
Lease. Lessee agrees to promptly execute and deliver or
cause to be executed and delivered to Lessor and Lessor is
hereby authorized to record or file, any statement and/or
instrument reasonably requested by Lessor for the purpose of
showing Lessor's interest in the Equipment, including
without limitation, financing statements, security
agreements, and waivers with respect to rights in the
Equipment from any owners or mortgagees of any real estate
where the Equipment may be located. In the event that Lessee
fails or refuses to execute and/or file Uniform Commercial
Code financing statements or other instruments or recordings
which Lessor or its assignee reasonably deems necessary to
perfect or maintain perfection of Lessor's or its assignee's
interests hereunder, Lessee hereby appoints Lessor as
Lessee's limited attorney-in-fact to execute and record all
documents necessary to perfect or maintain the perfection of
Lessor's interests hereunder. Lessee shall pay Lessor for
any costs or fees relating to any filings hereunder
including, but not limited to actual out of pocket costs,
fees, searches, documentation preparation, documentary
stamps, privilege taxes and reasonably attorneys' fees. If
any item of Equipment includes computer software purchased
by Lessor or for which Lessor has given Lessee value, Lessee
shall upon request made by Lessor, execute and deliver and
shall cause Seller (as hereinafter defined) to deliver all
such documents as are necessary to effectuate assignment of
all software licenses to Lessor.
3. ACCEPTANCE AND RETURN OF EQUIPMENT. Lessor shall, at any
time prior to unconditional acceptance of all Equipment by
Lessee, have the right to cancel this Lease with respect to
such Equipment (and if the Equipment or any portion thereof
has not previously been delivered, Lessor may refuse to pay
for the Equipment or any portion thereof or refuse to cause
the same to be delivered) if: (a) the Acceptance Date with
respect to any item of Equipment to be leased pursuant to
any Schedule has not occurred within ninety (90) days of the
estimated Acceptance Date set forth in such Schedule or (b)
there shall be, in the reasonable judgment of Lessor, a
material adverse change in the financial condition or credit
standing of Lessee or of any guarantor of Lessee's
performance under this Lease since the date of the most
recent financial statements of Lessee or of such guarantor
submitted to Lessor. Upon any cancellation by Lessor
pursuant to this Section or the provisions of any Schedule,
Lessee shall forthwith reimburse to Lessor all sums paid by
Lessor with respect to such Equipment plus all costs and
expenses of Lessor incurred in connection with such
Equipment and any interest or rentals due hereunder in
connection with such Equipment and shall pay to Lessor all
other sums then due hereunder, whereupon if Lessee is not
then in default and has fully performed all of its
obligations hereunder, Lessor will, upon request of Lessee,
transfer to Lessee without warranty or recourse any rights
that Lessor may then have with respect to such Equipment.
Lessee agrees to promptly execute and deliver to Lessor (in
no event later than 15 days after the Acceptance Date) a
confirmation by Lessee of unconditional acceptance of the
Equipment in the form supplied by Lessor (the "Equipment
Acceptance"). Lessee agrees, before execution of the
aforesaid Equipment
1
<PAGE>
Acceptance, to inform Lessor in writing of any defects in
the Equipment, or in the installation thereof, which have
come to the attention of Lessee or its agents and which
might give rise to a claim by Lessee against the Seller or
any other person. If Lessee fails to give notice to Lessor
of any such defects or fails to deliver to Lessor the
Equipment Acceptance as provided herein, it shall be deemed
an acknowledgment by Lessee (for purposes of this Lease
only) that no such defects in the Equipment or its
installation exist and it shall be conclusively presumed,
solely as between Lessor and its assignees and Lessee, that
such Equipment has been unconditionally accepted by Lessee
for lease hereunder.
Except as otherwise provided in any Schedule, upon
expiration or the cancellation or termination of the Lease
with respect to any Equipment, Lessee shall return the
Equipment to Lessor as provided herein. Lessee shall provide
Lessor with not less than ninety (90) days prior written
notice of its intention to return the Equipment upon
expiration of the Initial Lease Term. Upon expiration or the
cancellation or termination of the Lease with respect to any
equipment, Lessee shall, at its own expense, assemble,
crate, insure and deliver all of the Equipment and all of
the service records and all software and software
documentation subject to this Lease and any Schedules hereto
to Lessor in the same good condition and repair as when
received, reasonable wear and tear resulting only from
proper use thereof excepted, to such reasonable destination
within the continental United States as Lessor shall
designate with all packing, drayage and freight charges to
the return destination designated by Lessor pre-paid by
Lessee with evidence of transit insurance on all items of
Equipment at their original Cost. Lessee shall, immediately
prior to such return of each item of Equipment or commercial
unit of Equipment, provide to Lessor a letter from the
manufacturer of the equipment or another service
organization reasonably acceptable to Lessor certifying that
said item is in good working order, with reasonable wear and
tear resulting only from proper use thereof excepted,
whether such item is eligible for a maintenance agreement by
such manufacturer, and all software and related attachments
are included thereon. If any computer software requires
relicensing when removed from Lessee's premises, Lessee
shall bear all costs of such relicensing. Except as
otherwise expressly provided in the Schedule, if Lessee
fails for any reason to provide the notice set forth above
or Lessee fails to redeliver the Equipment back to Lessor in
accordance with the terms set forth above, Lessee shall pay
to Lessor, at Lessor's election, an amount equal to the
highest monthly payment set forth in the Schedule for a
period of not less than three (3) months and at the end of
such period of time ("Holdover Period"). Except as otherwise
expressly provided in the Schedule, if Lessee fails or
refuses to return the Equipment as provided herein at the
end of any Holdover Period, Lessee shall pay to Lessor, at
Lessor's option, an amount equal to the highest monthly
rental payment set forth in the Schedule for each month or
portion thereof, until Lessee so returns the Equipment to
Lessor. Should Lessor permit use by Lessee of any Equipment
beyond the Initial Lease Term, or, if applicable, any
exercised extension or renewal term, the lease obligations
of Lessee shall continue and such permissive use shall not
be construed as a renewal of the term thereof, or as a
waiver of any right or continuation of any obligation of
Lessor hereunder, and Lessor may take possession of any such
Equipment at any time upon demand.
4. DISCLAIMER OF WARRANTIES. LESSEE HAS EXCLUSIVELY SELECTED
AND CHOSEN THE TYPE, DESIGN, CONFIGURATION, SPECIFICATION
AND QUALITY OF THE EQUIPMENT HEREIN LEASED AND THE VENDOR,
DEALER, SELLER, MANUFACTURER OR SUPPLIER THEREOF (HEREIN
COLLECTIVELY CALLED "SELLER"), AS SET FORTH IN THE
SCHEDULES. LESSOR MAKES NO REPRESENTATION OR WARRANTY,
EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER,
INCLUDING WITHOUT LIMITATION, THE CONDITION OF THE
EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS, ADAPTABILITY,
ANY IMPLIED WARRANTY OF QUIET ENJOYMENT OR NON-INTERFERENCE
OR SUITABILITY FOR ANY PARTICULAR PURPOSE, AND, LESSEE
LEASES, HIRES AND RENTS THE EQUIPMENT AS IS, WHERE IS."
Lessee understands and agrees that neither Seller, nor any
agent of Seller, is an agent of Lessor or is in any manner
authorized to waive or alter any term or condition of this
Lease. Lessor shall not be liable for any loss or damage
suffered by Lessee or by any other person or entity, direct
or indirect or consequential, including, but not limited to,
business interruption and injury to persons or property,
resulting from non-delivery or late delivery, installation,
failure or faulty operation, condition, suitability or use
of the Equipment leased by Lessee hereunder, or for any
<PAGE>
failure of any representations, warranties or covenants made
by the Seller. Any claims of Lessee, with respect to claims
discussed in the preceding sentences, shall not be made
against Lessor but shall be made, if at all, solely and
exclusively against Seller, or any persons other than the
Lessor. Lessor hereby authorizes Lessee to enforce during
the term of this Lease, in its name, but at Lessee's sole
effort and expense, all warranties, agreements or
representations, if any, which may have been made by Seller
to Lessor or to Lessee, and Lessor hereby assigns to Lessee
solely for the limited purpose of making and prosecuting any
such claim, all rights which Lessor may have against Seller
for breach of warranty or other representation respecting
the Equipment.
5. CARE, TRANSFER AND USE OF EQUIPMENT. Lessee, at its own
expense, shall maintain the Equipment in good operating
condition, repair and appearance in accordance with Seller's
specifications and in compliance with all laws and
regulations applicable to the Equipment, Lessee and its
business and shall protect the Equipment from deterioration
except for reasonable wear and tear resulting only from
proper use thereof. When generally offered with respect to
the Equipment Lessee shall, at its expense, keep a
maintenance contract in full force and effect, throughout
the term of this Lease and any Schedule hereto unless other
wise agreed on the Schedule. The disrepair or inoperability
of the Equipment regardless of the cause thereof shall not
relieve Lessee of the obligation to pay rental hereunder.
Lessee shall not make any modification, alteration or
addition to the Equipment (other than normal operating
accessories or controls). Lessee will not, and will not
permit anyone other than the authorized field engineering
representatives of Seller or other maintenance organization
reasonably acceptable to Lessor to effect any inspection,
adjustment, preventative or remedial maintenance or repair
to the Equipment. LESSEE MAY NOT (A) RELOCATE OR OPERATE THE
EQUIPMENT AT LOCATIONS OTHER THAN THE PREMISES OF LESSEE
SPECIFIED IN THE APPLICABLE SCHEDULE (THE "PREMISES"),
EXCEPT WITH LESSOR'S PRIOR WRITTEN CONSENT, WHICH SHALL NOT
BE UNREASONABLY WITHHELD IF SUCH OTHER LOCATION WITHIN THE
CONTINENTAL UNITED STATES, OR (B) SELL, CONVEY, TRANSFER,
ENCUMBER, PART WITH POSSESSION OF, OR ASSIGN ANY ITEM OF
EQUIPMENT OR ANY OF ITS RIGHTS HEREUNDER, AND ANY SUCH
PURPORTED TRANSACTION SHALL BE NULL AND VOID AND OF NO FORCE
OR EFFECT. In the event of a relocation of the Equipment or
any item thereof to which Lessor consents, all costs
(including any additional property taxes or other taxes and
any additional expense of insurance coverage) resulting from
any such relocation, shall be promptly paid by Lessee upon
presentation to Lessee of evidence supporting such cost.
Lessor shall have the right during normal hours upon
reasonable notice to Lessee, subject to applicable laws and
regulations, to enter Lessee's Premises in order to inspect,
observe, affix labels or other markings, or to exhibit the
Equipment to prospective purchasers or future Lessees
thereof, or otherwise protect Lessor's interest therein.
6. NET LEASE. THIS LEASE AND ANY SCHEDULE HERETO IS A NET
LEASE, AND ALL PAYMENTS HEREUNDER ARE NET TO LESSOR. All
taxes, assessments, licenses, and other charges (including,
without limitation personal property taxes and sales, use
and leasing taxes and penalties and interest on such taxes)
imposed, levied or assessed on the ownership, possession,
rental or use of the Equipment during the term of this Lease
and any Schedule hereto (except for Lessor's federal or
state net income taxes) shall be paid by Lessee when due and
before the same shall become delinquent, whether such taxes
are assessed or would ordinarily be assessed against Lessor
or Lessee. To the extent possible under applicable law, for
personal property or ad valorem tax return purposes only,
Lessee shall include the Equipment on such reports and
returns as may be required by local law, which returns shall
be timely filed by it. Lessee shall provide Lessor with
evidence that Lessee has complied with the foregoing
provisions. In any event, Lessee shall file all tax returns
required for itself or Lessor with respect to the Equipment
and this Lease and Lessor hereby appoints Lessee as its
attorney-in-fact for such purpose. In case of failure by
2
<PAGE>
Lessee to so pay said taxes, assessments, licenses or other
charges, Lessor may pay all or any part of such items, in
which event the amount so paid by Lessor including any
interest or penalties thereon and reasonable attorneys' fees
incurred by Lessor in pursuing its rights against Lessee or
defending against any claims or defense asserted by or
through Lessee shall be immediately paid by Lessee to Lessor
as additional rental hereunder. Lessee shall promptly pay
all costs, expenses and obligations of every kind and nature
incurred in connection with the use or operation of the
Equipment which may arise or become due during the term of
this Lease and any Schedule hereto, whether or not
specifically mentioned herein. In case of failure by Lessee
to comply with any provision of this Lease and any Schedule
hereto, Lessor shall have the right but not the obligation,
to effect such compliance on behalf of Lessee. In such
event, all costs and expenses incurred by Lessor in
effecting such compliance shall be immediately payable by
Lessee to Lessor as additional rental hereunder.
7. INDEMNITY. Lessee shall at its expense: (i) indemnify,
protect and defend Lessor's title to the Equipment from and
against all persons claiming against or through Lessee; (ii)
at all times keep the Equipment then subject to his Lease
free from any and all liens, encumbrances, attachments,
levies, executions, burdens, charges or legal process of any
and every type whatsoever; (iii) give Lessor immediate
written notice of any breach of this Lease described in
clause (ii); and (iv) indemnify, protect and save Lessor
harmless from any loss, cost or expense (including
reasonable attorneys' fees) caused by the Lessee's breach of
any of the provisions of this Lease, whether incurred by
Lessor in pursuing its rights against Lessee or defending
against any claims or defenses asserted by or through
Lessee. Lessee shall and does hereby agree to indemnify,
defend and hold Lessor and its assigns harmless from and
against any and all liability, loss, costs, injury, damage,
penalties, suits, judgments, demands, claims, expenses and
disbursements (including without limitation, reasonable
attorney's fees incurred by Lessor by pursuing its rights
against Lessee or defending against any claims or defenses
asserted by or through Lessee) of any kind whatsoever
arising out of, on account of, or in connection with this
Lease and the Equipment leased hereunder, including, without
limitation, its manufacture, selection, purchase, delivery,
rejection, installation, ownership, possession, leasing,
renting, operation, control, use, maintenance and the return
thereof except for any such claims or damages from Lessor's
gross negligence or willful misconduct. This indemnity shall
survive the Initial Lease Term or earlier cancellation or
termination of this Lease and any Schedule hereto.
8. INSURANCE. Commencing on the date that risk of loss or
damage passes to Lessor from the Seller of any Equipment
covered under this Lease and continuing until Lessee has
re-delivered possession of the Equipment to Lessor, Lessee
shall, at its own expense, keep the Equipment (including all
Add-on Items thereto) insured against all risks of loss or
damage from every and any cause whatsoever in such amounts
(but in no event less than the greater of the replacement
value thereof or the amount set forth in any applicable
Casualty Schedule, whichever is higher) with such
deductibles and exclusions as approved by Lessor and in such
form as is reasonably satisfactory to Lessor. All such
insurance policies shall protect Lessor and Lessor's
assignee(s) as loss payees as their interest may appear.
Lessee shall also, at its own expense, carry public
liability insurance, with Lessor and Lessor's assignee(s) as
an additional insured, in such amounts with such companies
and in such form as is reasonably satisfactory to Lessor,
with respect to injury to person or property resulting form
or based in any way upon or in any way connected with or
relating to the installation, use or alleged use, or
operation of any or all of the Equipment, or its location or
condition.
Not less than ten days prior to the Acceptance Date, Lessee
shall deliver to Lessor satisfactory evidence of such
insurance and shall further deliver evidence of renewal of
each such policy not less than thirty (30) days prior to
expiration thereof. Each such policy shall contain an
endorsemet providing that the issuer will give Lessor not
less than thirty (30) days prior written notice of the
effective date of any alteration, change, cancellation, or
modification of such policy or the failure by Lessee to
timely pay all required premiums, costs or charges with
respect thereto. Upon Lessor's request, Lessee shall cause
its insurance agent(s) to execute and deliver to Lessor Loss
Payable Clause Endorsement and Additional Insured
Endorsement (bodily injury and property damage liability
<PAGE>
insurance) forms provided to Lessee by Lessor. In case of
the failure to procure or maintain such insurance, Lessor
shall have the right, but not the obligation, to obtain such
insurance and any Premium paid by Lessor shall be
immediately due and payable by Lessee to Lessor as
additional rent hereunder. The maintenance of any policy or
policies of insurance pursuant to this Section shall not
limit any obligation or liability of Lessee pursuant to
Sections 7 or 9 or any other provision of this Lease and any
Schedule hereto.
9. RISK OF LOSS. Until such time as the Equipment is
returned and delivered to and accepted by Lessor at the
expiration of this Lease, pursuant to the terms of this
Lease and any Schedule hereto, Lessee hereby assumes and
shall bear the entire risk of loss, damage, theft and
destruction of the Equipment, or any portion thereof, from
any cause whatsoever ("Equipment Loss"). Without limitation
of the foregoing, no Equipment Loss shall relieve Lessee in
any way from its obligations hereunder. Lessee shall
promptly notify Lessor in writing of any Equipment Loss. In
the event of any such Equipment Loss, Lessee shall: (a) in
the event Lessor determines such Equipment to be repairable,
promptly place, at Lessee's expense, the Equipment in good
repair, condition and working order in accordance with
Seller's specifications and to the satisfaction of Lessor;
or (b) in the event of an actual or constructive total loss
of any item of Equipment at Lessor's option: (i) promptly
replace, at Lessee's expense, the Equipment with like
equipment of the same or a later model with the same Add-on
Items as the Equipment, and in good repair, condition and
working order in accordance with the Seller's specifications
and to the satisfaction of Lessor; or (ii) immediately pay
to Lessor the amount obtained by multiplying the actual
Equipment Cost as specified in the applicable Schedule by
the percentage contained in any applicable Casualty Schedule
for the date of such Equipment Loss plus, any unpaid rentals
or any amounts due hereunder.
If no Casualty Schedule has been made a part of any
applicable Schedule, an amount equal to the present value of
the total amount of unpaid rentals and all other amounts due
and to become due under any applicable Schedule during the
term thereof as of the date of any payment, discounted at a
rate equal to discount rate of the Federal Reserve Bank of
Chicago as of the Commencement Date of the Lease with
respect to each applicable Schedule, plus an additional
amount equal to the estimated fair market value of the
Equipment at the end of the Initial Lease Term applicable to
such Equipment (the "End of Term Value"). In no event shall
the amount of such End of Term Value for the Equipment be
less than twenty percent (20%) of the actual cost of the
Equipment unless a purchase option is granted (or other end
of term payment is required) under this Lease for other than
the fair market value of the Equipment then the actual
amount of such Purchase Option Price (or other end of term
payment) specified in the applicable Equipment Schedule
shall be due and payable to Lessor as the End of Term Value
under this section or such lesser or greater amount
specified in the applicable Schedule.
In the event Lessee is required to repair or replace any
such item of Equipment pursuant to Subsections (a) or (b)(i)
of the preceding sentence, the insurance proceeds received
by Lessor, if any, pursuant to Section 8, after the use of
such funds to pay any unpaid amounts then due hereunder,
shall be paid to Lessee or, if applicable, to a third party
repairing or replacing the Equipment upon Lessee's
furnishing proof reasonably satisfactory to Lessor that such
repair or replacement has been completed in a reasonably
satisfactory manner. In the event Lessor elects option
(b)(ii), Lessee shall be entitled to a credit against the
payment required by said subsection in an amount equal to
such insurance proceeds actually received by Lessor pursuant
to Section 8 on account of such Equipment, and, upon payment
by Lessee to Lessor of all of the sums required pursuant to
Subsection (b)(ii), the applicable Schedule shall terminate
with respect to such item of Equipment and Lessee shall be
entitled to whatever interest Lessor may have in such item
AS IS, WHERE IS and WITH ALL FAULTS in its then condition
and location without warranties of any type whatsoever,
express or implied.
10. COVENANTS OF LESSEE. LESSEE AGREES THAT ITS OBLIGATIONS
UNDER THIS LEASE AND ANY SCHEDULE HERETO, INCLUDING WITHOUT
LIMITATION, THE OBLIGATION TO PAY RENTAL,
3
<PAGE>
ARE IRREVOCABLE AND ABSOLUTE, SHALL NOT ABATE FOR ANY REASON
WHATSOEVER (INCLUDING ANY CLAIMS AGAINST LESSOR), AND SHALL
CONTINUE IN FULL FORCE AND EFFECT REGARDLESS OF ANY
INABILITY OF LESSEE TO USE THE EQUIPMENT OR ANY PART THEREOF
FOR ANY REASON WHATSOEVER INCLUDING, WITHOUT LIMITATION,
WAR, ACT OF GOD, STORMS, GOVERNMENTAL REGULATIONS, STRIKE OR
OTHER LABOR TROUBLES, LOSS, DAMAGE, DESTRUCTION, DISREPAIR,
OBSOLESCENCE, FAILURE OF OR DELAY IN DELIVERY OF THE
EQUIPMENT, OR FAILURE OF THE EQUIPMENT TO PROPERLY OPERATE
FOR ANY CAUSE. In the event of any alleged claim (including
a claim which would otherwise be in the nature of a set-off)
against Lessor, Lessee shall fully perform and pay its
obligations hereunder (including the payment of all rents,
without set-off or defense of any kind) and its only
exclusive recourse against Lessor shall be by a separate
action. Lessee agrees to furnish promptly to Lessor the
annual financial statements of Lessee (and of any guarantors
of Lessee's performance under this Lease and any Schedule
hereto), prepared in accordance with generally accepted
accounting principles and such interim financial statements
of Lessee as Lessor may reasonably require during the entire
term of this Lease and any Schedule hereto. Either
independent certified public accountants or the Lessee's
chief financial officer as requested by Lessor shall certify
all such annual financial statements. Lessee, if required by
Lessor prior to the initial purchase by Lessor of Equipment
for lease hereunder, shall provide at Lessee's expense an
opinion of its counsel acceptable to Lessor affirming the
covenants, representations and warranties of Lessee under
this Lease and any Schedule hereto. So long as there are
amounts due Lessor under this Lease, Lessee shall supply
Lessor with such other financial and operating performance
data as is provided to its outside investors or commercial
lenders and, if applicable, required to be provided to
shareholders by the Security and Exchange Commission, and
Lessee shall immediately notify Lessor of any material
adverse change in its financial condition or business
prospects.
11. REPRESENTATIONS AND WARRANTIES. In order to induce
Lessor to enter into this Lease and any Schedule hereto and
to lease the Equipment to Lessee hereunder, Lessee
represents and warrants that: (a) FINANCIAL STATEMENTS. (i)
applications, financial statements, and reports which have
been submitted by Lessee and any Obligors (as hereinafter
defined) to Lessor are, and all information hereafter
furnished by Lessee and Obligors to Lessor will be, true and
correct in all material respects as of the date submitted;
(ii) as of the date hereof, the date of any Schedule and any
Acceptance Date, there has been no material adverse change
in any matter stated in such applications, financial
statements and reports; and, (iii) none of the foregoing
omit or omitted to state any material fact which would make
any of the foregoing false or misleading. (b) OBLIGATION.
Lessee is an organizational entity described on the
signature page hereof and is duly organized, validly
existing and is duly qualified to do business and is in good
standing or subsisting or in other similar active status in
each State in which the Equipment will be located. (c)
AUTHORITY. Lessee has full power, authority and right to
execute, deliver and perform this Lease and any Schedule
hereto, and the execution delivery and performance hereof
has been authorized by all necessary action of Lessee. (d)
ENFORCEABILITY. This Lease and any Schedule or other
document executed in connection therewith has been duly
executed and delivered by Lessee and any Obligor and
constitutes a legal, valid and binding obligation of Lessee,
and any Obligor enforceable in accordance with its terms.
(e) CONSENTS. The execution, delivery and performance of
this Lease and any Schedule hereto does not require any
approval or consent of any stockholders, partners or
proprietors or of any trustee or holders of any indebtedness
or obligations of Lessee and will not contravene any law,
regulation, judgment or decree applicable to Lessee, or the
certificate or articles of incorporation, partnership
agreement, by-laws or other governing documents of Lessee,
or contravene the provisions of, or constitute a default
under, or result in the creation of any lien upon any
property of Lessee under any mortgage, instrument or other
agreement to which Lessee is a party or by which Lessee or
its assets may be bound or affected. Except as disclosed, no
authorization, approval, license, filing or registration
with any court or governmental agency or instrumentality is
necessary in connection with the execution, delivery,
performance, validity and enforceability of this Lease and
any Schedule hereto. (f) TITLE. On each Commencement Date,
Lessor shall have good and marketable title to the items of
Equipment which is subject to this Lease and any Schedule
hereto on such date, free and clear of all liens, except the
lien of Seller which will be released upon receipt of
payment. Lessee warrants that no party has a security
<PAGE>
interest in the Equipment which will not be released on or
before payment by Lessor to Seller of the Equipment and that
the Equipment is and shall at all times remain personal
property regardless of how it may be affixed to any real
property. (g) LITIGATION. There is no action, suit,
investigation or proceeding by or before any court,
arbitrator, agency or governmental authority pending or
threatened against or affecting Lessee: (i) which involves
the Equipment or the transactions contemplated by this Lease
and any Schedule hereto; or (ii) which, if adversely
determined, could have a material adverse effect on the
financial condition, business or operation of Lessee.
12. EVENTS OF DEFAULT. An event of default ("Event of
Default") shall occur hereunder if Lessee or any Obligor
("Obligor" shall include any guarantor or surety of any
obligation so Lessee to Lessor under this Lease and any
Schedule hereto): (i) fails to pay any installment of rent
or other payment required hereunder within five (5) days
after its due date; or (ii) attempts to or does remove from
the Premises (except a relocation with Lessor's consent as
provided in Section 5), sell, transfer, encumber, part with
possession of, or sublet any item of the Equipment; or (iii)
shall suffer or have suffered, in the reasonable judgment of
Lessor, a material adverse change in its financial condition
since the date of the last financial statements submitted to
Lessor, and as a result thereof Lessor in good faith deems
itself to be insecure; or (iv) breaches or shall have
breached any representation or warranty made or given by
Lessee or Obligor in this Lease or in any other document
furnished to Lessor in connection herewith, or any such
representation or warranty shall be untrue or, by reason of
failure to state a material fact or otherwise, shall be
misleading or any of the statements or other documents or
information submitted at any time heretofore or hereafter by
Lessee or Obligor to Lessor shall be untrue or, by reason of
failure to state a material fact or otherwise, shall be
misleading or (v) fails to perform or observe any other
covenant, condition or agreement to be performed or observed
by it hereunder, and such failure or breach shall continue
unremedied for a period of ten days after the date on which
notice thereof shall be given by Lessor to Lessee (unless
such remedial action cannot be completed within such ten day
period but Lessee has in good faith commenced to remedy such
breach or failure and such remedy is in fact achieved within
a time period agreed to by Lessor); or (vi) shall become
insolvent or bankrupt or make an assignment for the benefit
of creditors or consent to the appointment of a trustee or
receiver, or a trustee or receiver shall be appointed for a
substantial part of its property without its consent, or
bankruptcy or reorganization or insolvency proceeding shall
be instituted by or against Lessee or Obligor and Lessee
fails to continue to pay all rentals becoming due hereunder
during the pendency of such proceedings and fails to assume
this Lease within sixty (60) days after the commencement of
such proceedings; or (vii) conveys, sells, transfer or
assigns substantially all of Lessee's or Obligor's assets or
ceases doing business as a going concern, or, if a
corporation, ceases to be in good standing or files a
statement of intent to dissolve, or abandons any or all of
the Equipment; or (viii) shall be in breach of or default
under any lease or other agreement at any time executed with
Lessor or any other Lessor or with any lender to Lessee or
Obligor such that Lessee's obligations thereunder have been
or are being accelerated.
13. REMEDIES. Upon the occurrence and during any continuance
of an Event of Default (the "Default Date") set forth in
Section 12, Lessor may, in its sole and absolute discretion,
do any one or more of the following: (a) upon notice to
Lessee cancel all or any portion of this Lease or any
Schedules executed pursuant thereto; (b) enter Lessee's
Premises and without removal of the Equipment, render the
Equipment unusable or, require Lessee to assemble the
Equipment and make it available to Lessor at a place
designated by Lessor and/or dispose of the Equipment by sale
or otherwise (all of which determinations may be made by
Lessor in its sole and absolute discretion); (c) declare
immediately due and payable all sums due and to become due
hereunder for the full term of the Lease (including any
renewal or purchase obligations which Lessee has contracted
to pay); (d) with or without canceling this Lease, recover
from Lessee damages, in an amount equal to the sum of: (i)
all unpaid rent and other amounts that became due and
payable on, or prior to, the Default Date, (ii) the present
value of all future rentals and other amounts described in
the Lease and not included in (i) above discounted to the
Default Date at a rate equal to the discount rate of the
Federal Reserve Bank of Chicago as of the Commencement Date
4
<PAGE>
of the Lease with respect to each Schedule (which discount
rate, Lessee agrees is a commercially reasonable rate which
takes into account the facts and circumstances at the time
such Schedule commenced), (iii) all commercially reasonable
costs and expenses incurred by Lessor in enforcing Lessor's
rights under this Lease, or defending against any claims or
defenses asserted by or through Lessee, including but not
limited to, costs of repossession, recovery, storage,
repair, sale, re-lease and reasonable attorneys' fees, (iv)
the estimated residual value of the Equipment as of the
expiration of the Lease, (v) any indemnity amount payable to
Lessor hereunder; and (vi) interest on all of the foregoing
from the Default Date until the date payment is received by
Lessor at 2% per month or the highest rate permitted by law,
whichever is less; (e) exercise any other right or remedy
which may be available to it under the Uniform Commercial
Code or any other applicable law.
If Lessor elects to dispose of any Equipment recovered from
the possession of Lessee after an Event of Default, Lessor
shall dispose of such Equipment in a commercially reasonable
manner. Lessor reserves the right, in its sole and absolute
discretion, to control the timing and negotiate the terms of
any re-leasing or re-sale of any or all of the Equipment at
a public auction or in a private sale, at such time, on such
terms and with such notice as Lessor shall in its sole and
absolute discretion deem commercially reasonable. In such
event, without any duty on Lessor's part to effect any such
re-lease or sale of the Equipment, Lessor will credit the
present value of any proceeds from such sale or re-lease
actually received and retainable by it (net of any and all
costs or expenses) discounted from the date of Lessor's
receipt thereof to the Default Date at 2 1/2% in excess of
the Prime Rate (or its equivalent) per annum in effect at
the First National Bank of Chicago on the date of such
payment to the amounts due to Lessor from Lessee under the
provisions of (c), (d) and/or (e) above. A cancellation of
this Lease shall occur only upon notice by Lessor and only
as to such items of Equipment as Lessor specifically elects
to cancel and this Lease shall continue in full force and
effect as to the remaining items of Equipment, if any. If
this Lease and/or any Schedule is deemed at any time to be
one intended as security, Lessee agrees that the Equipment
shall secure, in addition to the indebtedness set forth
herein, any other indebtedness at any time owing by Lessee
to Lessor. No remedy referred to in this Section is intended
to be exclusive, but shall be cumulative and in addition to
any other remedy referred to above or otherwise available to
Lessor at law or in equity. No express or implied waiver by
Lessor of any default shall constitute a waiver of any other
default by Lessee or a waiver of any of Lessor's rights.
14. ASSIGNMENT BY LESSOR. LESSOR MAY (WITH OR WITHOUT NOTICE
TO LESSEE) SELL, TRANSFER, ASSIGN OR GRANT A SECURITY
INTEREST IN ALL OR ANY PART OF ITS INTEREST IN THIS LEASE,
ANY SCHEDULE, ANY ITEMS OF EQUIPMENT OR ANY AMOUNT PAYABLE
HEREUNDER. In such an event, Lessee shall, upon receipt of
written notice, acknowledge any such sale, transfer,
assignment or grant of a security interest and shall pay its
obligations hereunder or amounts equal thereto to the
respective transferee, assignee or secured party in the
manner specified in any instructions received from Lessor.
Notwithstanding any such sale, transfer, assignment or grant
of a security interest by Lessor and so long as no Event of
Default shall have occurred hereunder, neither Lessor nor
any transferee, assignee or secured party shall interfere
with Lessee's right of use or quiet enjoyment of the
Equipment. In the event of such sale, transfer, assignment
or grant of a security interest in all or any part of this
Lease and any Schedule hereto, or in the Equipment or in
sums payable hereunder, as aforesaid, Lessee agrees to
execute such documents as may be reasonably necessary to
evidence, secure and complete such sale, transfer,
assignment or grant of a security interest and to perfect
the transferee's, assignee's or secured party's interest
therein (with any filing fees at Lessor's expense) and
Lessee further agrees that the rights of any transferee,
assignee or secured party shall not be subject to any
defense, set-off or counterclaim that Lessee may have
against Lessor or any other party, including the Seller,
which defenses, set-offs and counterclaims shall be asserted
only against such party, and that any such transferee,
assignee or secured party shall have all of Lessor's rights
hereunder, but shall assume none of Lessor's obligations
hereunder. Lessee acknowledges that any assignment or
transfer by Lessor shall not materially change Lessee's
duties or obligations under this Lease and shall not
materially increase the burdens and risks imposed on Lessee.
<PAGE>
15. MISCELLANEOUS. All notices and demands relating hereto
shall be in writing and sent by either any nationally
recognized overnight air courier or by certified mail,
return receipt requested, to Lessor or Lessee at their
respective addresses above or shown in the Schedule, or at
any other address designed by notice served in accordance
herewith. Notice by overnight air courier shall be effective
one (1) business day after delivery. Notice by certified
mail shall become effective five (5) business days after
deposit in the United States mail, with proper postage
prepaid, addressed to the party intended to be served at the
address designated herein. All obligations of Lessee shall
survive the termination or expiration of this Lease and any
Schedule hereto. If more than one Lessee is named in this
Lease, the liability of each hereunder to Lessor shall be
joint and several. Any general partner executing this Lease
on behalf of the Lessee agrees that its liability to Lessor
hereunder shall be absolute, primary and direct, and that
Lessor shall not be required to pursue any right or remedy
it may have against the Lessee under the Lease (and shall
not be required to first commence any action or obtain any
judgment against Lessee) before enforcing this liability
against such general partner, and that such general partner
will, upon demand, pay Lessor the amount of all sums then
due under the Lease, the payment of which, by Lessee, is in
default under the Lease, and will, upon demand, perform all
other obligations of Lessee, the performance of which, by
Lessee, is in default under the Lease. Lessee shall, upon
request of Lessor from time to time, perform all acts and
execute and deliver to Lessor all documents which Lessor
deems reasonably necessary to implement this Lease and any
Schedule hereto, including, without limitation, certificates
addressed to such persons as Lessor may direct stating that
this Lease and the Schedule hereto is in full force and
effect, that there are no amendments or modifications
thereto, that Lessor is not in default hereof or breach
hereunder, setting forth the date to which rentals due
hereunder have been paid, ad stating such other matters as
Lessor may reasonably request. This Lease and any Schedule
hereto shall be binding upon the parties and their
successors, legal representatives and assigns. Lessee's
successors and assigns shall include, without limitation, a
receiver, debtor-in-possession, or trustee of or for Lessee.
If any person, firm, corporation or other entity shall
guarantee this Lease and the performance by Lessee of its
obligations hereunder, all of the terms and provisions
hereof shall be duly applicable to such Obligor.
16. CONDITIONS PRECEDENT TO LEASING. (i) Lessor shall have
not obligation to purchase any Equipment for lease to Lessee
under any Schedule hereunder unless or until acceptable
documentation, the form of which will be provided by Lessor
has been executed by Lessee and delivered to Lessor; (ii)
Lessor has confirmed with Lessee that no material adverse
change in Lessee's financial condition and business
prospects has occurred prior to each purchase of Equipment.
17. INVALIDITY. In the event that any provision of this
Lease and any Schedule hereto shall be unenforceable in
whole or in part, such provision shall be limited to the
extent necessary to render the same valid, or shall be
excised from this Lease or any Schedule hereto, as
circumstances may require, and this Lease and the applicable
Schedule shall be construed as if said provision had been
incorporated herein as so limited, or as if said provision
had not been included herein, as the case may be without
invalidating any of the remaining provisions hereof.
18. END OF TERM OPTIONS. Provided that the Lease has not
been terminated and that no Event of Default or event which,
with notice or lapse of time or both, would become an Event
of Default shall have occurred and shall be continuing.
Lessee shall at the end of the Initial Lease Term of the
first Schedule be entitled to elect and to exercise one of
the options, if any, indicated in the applicable Schedule
which election shall be binding on Lessee with respect to
all Schedules entered into between Lessor and Lessee under
this Lease. The foregoing options granted hereunder shall be
exercised by written notice delivered to Lessor by Lessee
not more than 180 days and not less than ninety (90) days
prior to the expiration of the Initial Lease Term of the
Equipment, subject to Schedule No. 001.
5
<PAGE>
19. PROGRESS PAYMENTS. If requested by Lessee, progress
payments will be made for any amount over the Minimum
Invoice Amount specified on each Progress Payment
Authorization per invoice to vendors in accordance with
Lessor's standard procedures. Unless otherwise agreed by
Lessor the minimum progress payment amount shall not be less
than the Minimum Progress Payment Amount specified on the
Progress Payment Authorization. Interim rent, on progress
payments, shall be payable from the date progress payments
are made by Lessor to the Commencement Date of the
corresponding Schedule. Interim rent shall be calculated at
the daily equivalent of the Monthly Lease Rate Factor.
Lessee shall deliver to Lessor a Progress Payment
Authorization, not less than 30 days prior to the due date
thereof and in a form acceptable to Lessor, to make a
progress payment and, provided on such due date no Events of
Default have occurred and be continuing hereunder or under
the Lease. Lessor shall make the progress payment set forth
to the manufacturer(s) or supplier(s) as set forth in such
authorization.
20. LAW. This Lease and any Schedule hereto shall be binding
only when accepted by Lessor at its corporate headquarters
in Illinois and shall in all respects be governed and
construed, and the rights and the liabilities of the parties
hereto determined, except for local filing requirements, in
accordance with the laws of the State of Illinois. LESSEE
WAIVES TRIAL BY JURY AND SUBMITS TO THE JURISDICTION OF THE
FEDERAL DISTRICT COURT OR ANY STATE COURT LOCATED WITHIN
COOK COUNTY IN THE STATE OF ILLINOIS AND WAIVES ANY RIGHT TO
ASSERT THAT ANY ACTION INSTITUTED BY LESSOR IN ANY SUCH
COURT IS IN THE IMPROPER VENUE OR SHOULD BE TRANSFERRED TO A
MORE CONVENIENT FORUM
LESSEE'S INITIALS /s/ HW
------
21. AMENDMENTS. This Lease and any Schedule hereto contain
the entire agreement between the parties with respect to the
Equipment, this Lease and any Schedule hereto and there is
no agreement or understanding oral or written, which is not
set forth herein. This Lease and any Schedule hereto may not
be altered, modified, terminated or discharged except by a
writing signed by the party against whom such alternation,
modification, termination or discharge is sought.
LESSEE'S INITIALS /s/ HW
------
22. LESSEE'S WAIVERS. To the extent permitted by applicable
law, Lessee hereby waives any and all rights and remedies
conferred upon a Lessee by Article 2A of the Uniform
Commercial Code as adopted in any jurisdiction, including
but not limited to Lessee's rights to: (i) cancel this
Lease; (ii) repudiate this Lease; (iii) reject the
Equipment; (iv) revoke acceptance of the Equipment; (v)
recover damages from Lessor for any breaches of warranty or
for any other reason related to the Equipment; (vi) claim a
security interest in the Equipment in Lessee's possession or
control for any reason; (vii) deduct all or any part of any
claimed damages resulting from Lessor's default, if any,
under this Lease; (viii) accept partial delivery of the
Equipment; (iv) "cover" by making any purchase or lease of
or contract to purchase or lease Equipment in substitution
for those due from Lessor; (x) recover any general, special,
incidental, or consequential damages for any reason
whatsoever; and (xi) specific performance, replevin,
detinue, sequestration, claim, and delivery of the like for
any Equipment identified to this Lease. To the extent
permitted by applicable law (unless expressly otherwise
agreed hereunder), Lessee also hereby waives any rights now
or hereafter conferred by statute or otherwise which may
require Lessor to sell, lease, or otherwise use any
Equipment in mitigation of Lessor's damages as set forth in
Paragraph 13 or which may otherwise limit or modify any of
Lessor's rights or remedies under Paragraph 13. Any action
by Lessee against Lessor for any default by Lessor under
this Lease, including breach of warranty or indemnity, shall
be commenced within one (1) year after any such cause of
action accrues.
LESSEE'S INITIALS /s/ HW
------
<PAGE>
23. COUNTERPARTS. This Lease may be executed in any number
of counterparts, each of which shall be deemed an original
Each Schedule shall be executed in three (3) serially
numbered counterparts each of which shall be deemed an
original but only counterpart number 1 shall constitute
"chattel paper" or "collateral" within the meaning of the
Uniform Commercial Code in any jurisdiction.
24. ADDENDUM. ("X" if applicable) [_] see Addendum(s)
attached hereto and made a part hereof.
The person executing this Lease for and on behalf of Lessee warrants and
represents, which warranty and representation shall survive the expiration or
termination of this Lease, that this Lease and the execution hereof has been
duly and validly authorized by Lessee, constitutes a valid and binding
obligation of Lessee and that he has authority to make such execution for and on
behalf of Lessee.
IN WITNESS WHEREOF, this Lease has been executed by Lessee this _____ day of
__________ 19__.
ACCEPTED AT CHICAGO, ILLINOIS
OREGON BAKING CORPORATION,
DAB MARSEE BAKING LINC CAPITAL, INC.
Lessee Lessor
By: /s/ HOWARD WASSERTEIL By: /s/ WILLIAM F. DEMANS
--------------------- ---------------------
Title: EXEC. V.P. Title: SENIOR V.P.
------------------ ------------------
Date: 4-29-98 Date: 5/7/98
------------------- -------------------
6
<PAGE>
LINC CAPITAL, INC. LINC Capital, Inc.
EQUIPMENT SCHEDULE 303 East Wacker Drive
SCHEDULE NO. 001 Chicago, Illinois 60601
(312) 946-1000
- --------------------------------------------------------------------------------
Equipment Location: See Attached Master Lease Agreement No.: 7217
--------------------------------
Acceptance Date: May 31, 1998
- --------------------------------------------------------------------------------
LINC CAPITAL, INC. (Lessor) hereby agrees to lease to the Lessee named below,
and Lessee hereby agrees to lease and rent from Lessor the Equipment identified
below, for the term and at the rental payments specified herein, all subject to
the terms and conditions set forth herein and on the reverse side hereof and in
the referenced Master Lease Agreement except as the same may be varied by the
terms of this Schedule.
================================================================================
- --------------------------------------------------------------------------------
EQUIPMENT DESCRIPTION: The Equipment will consist of Cost of Equipment:
FURNITURE, FIXTURES AND EQUIPMENT as $415,732.93
more fully described on Schedule "A" attached hereto
and made a part hereof.
- --------------------------------------------------------------------------------
================================================================================
TERM AND RENTAL:
- --------------------------------------------------------------------------------
Commencement Date: Initial Payment: $27,398.46 Initial Lease Term:
JUNE 1, 1998 (COVERING FIRST AND 36 months
LAST RENTAL PAYMENTS)
- --------------------------------------------------------------------------------
Rental Payments* (plus, if applicable all sales, use or other taxes imposed upon
rental payments) shall be made monthly in advance as follows: $ 13,699.23 per
rental payment beginning on the Commencement Date until THIRTY-SIX (36) rental
payments have been paid in full followed by either (i) a 37TH rental payment of
$ 41,573.29 or (ii) provided that no Event of Default has occurred and is
continuing under the Lease in lieu of making the foregoing 37TH rental payment,
Lessee may elect, by written notice issued to Lessor on or before the due date
of the 34TH rental payment , to pay a sum equal to $ 4,157.33 on the due date of
the 37TH rental payment and a like rental payment sum on the next 11 consecutive
rental payment dates respectively and upon such election the Initial Lease Term
shall be deemed to have been extended by 12 months.
*Rental Payments are based on the Lease Rate Factor and are subject to
adjustment as described in Paragraph A on the REVERSE SIDE HEREOF. If
applicable, all freight, sales and use taxes, insurance and maintenance expense
paid by Lessor shall be paid by Lessee in accordance with the terms of the Lease
and this Schedule.
================================================================================
PROPERTY TAXES: Lessor shall report all Equipment for personal property or
advalorem tax return purposes as may be required under applicable law, and all
resulting taxes shall be paid by Lessee.
================================================================================
<PAGE>
================================================================================
END OF TERM OPTIONS: At the end of the initial lease term the following options
are granted to Lessee in accordance with the terms described on the reverse side
hereof:
OPTION TO RENEW the Initial Lease Term at a Rental equal to the FAIR RENTAL
VALUE (not less than 1%) renewal each month for a Renewal Period of TWELVE (12)
months.
OPTION TO PURCHASE not less than all of the Equipment at the end of the Initial
Lease Term (as described above including any extension thereof) at a Purchase
Option Price equal to the then FAIR MARKET VALUE (not less than 10%) of the
Equipment.
================================================================================
ADDITIONAL TERMS AND CONDITIONS TO THIS EQUIPMENT SCHEDULE ARE ON THE REVERSE
SIDE HEREOF.
The person executing this Lease for and on behalf of Lessee warrants and
represents, which warranty and representation shall survive the expiration or
termination of this Lease, that this Lease and the execution hereof has been
duly and validly authorized by Lessee, constitutes a valid and binding
obligation of Lessee and that he has authority to make such execution for and on
behalf of Lessee.
- --------------------------------------------------------------------------------
Lessee: ACCEPTED AT CHICAGO, ILLINOIS BY LESSOR:
Oregon Baking Corporation, LINC CAPITAL, INC
dba Marsee Baking
By: /s/ Howard Wasserteil By: /s/ William F. DeMans
----------------------- -----------------------
Title: Exec VP Title: Senior V.P.
-------------------- --------------------
Date: 6/16/98 Date: 6/23/98
- --------------------------------------------------------------------------------
This Lease (and Equipment Schedule and Master Lease the terms of which
it incorporates) has been assigned, is subject to the security
interests of, and is held in trust for the benefit of Fleet Bank NA,
as Agent, pursuant to the terms and conditions of a security agreement
dated September 28, 1994 and related documents (as the same may be
amended).
<PAGE>
ADDITIONAL TERMS AND CONDITIONS TO EQUIPMENT SCHEDULE
A. ADJUSTMENTS TO RENTAL PAYMENTS. Rental Payments are based on a Lease Rate
Factor of 3.2952 % subject to adjustment as described below. The Monthly Lease
Rate Factor will be indexed to the yield for U.S. Treasury Notes maturing
closest to the date Thirthy-six months from the Commencement Date of this
Equipment Schedule (the "Index Instrument"). The yield of the Index Instrument
is currently 5.63 % for the 6 3/8 % Treasury Notes maturing March 2001 as
reported in the Wall Street Journal dated March 3, 1998. The Monthly Lease Rate
Factor shall be adjusted by Lessor to provide for any increase in the yield of
the Index Instrument on the Commencement Date of this Equipment Schedule. At the
Commencement Date of this Equipment Schedule, the Monthly Lease Rate Factor (as
adjusted) shall be fixed for the Initial Lease Term of this Equipment Schedule.
B. ESTIMATED COST OF EQUIPMENT, ESTIMATED ACCEPTANCE DATE, ESTIMATED
COMMENCEMENT DATE AND ADJUSTMENTS IN RENTAL. As used herein, "actual cost" means
the total cost to Lessor of purchasing and delivering the Equipment to Lessee
including, subject to Lessor's consent, taxes, transportation charges and other
charges, which may be applicable. The amount of each payment set forth in the
Schedule are based on an estimate of actual cost, which estimate may, but need
not, be set forth in the Schedule, and such amounts shall be adjusted
proportionately (increased or decreased) if the actual cost of the Equipment
differs from said estimate. Lessee hereby authorizes Lessor to adjust, if
necessary, the amounts set forth in the Schedule to reflect actual cost when the
actual cost is known and to add to the amount of each rental payment any sales,
use or leasing tax that may be imposed on or measured by the rental payments.
Lessor will inform Lessee of the adjustments in rent necessary to reflect actual
cost. If the Commencement Date and Acceptance Date are "estimated" Lessee agrees
to execute a replacement Equipment Schedule setting forth the actual
Commencement Date and Acceptance Date as soon as those dates become final.
C. INITIAL PAYMENT AND/OR SECURITY DEPOSIT. Lessee shall make a security deposit
and/or initial payment as indicated in this Schedule upon execution of this
Schedule and Lessor shall be authorized to apply funds held by Lessor and
otherwise payable to Lessee for such purposes. Any initial payments made by
Lessee shall be deemed to have been earned by Lessor immediately upon receipt
thereof and shall be deemed to have been applied immediately to satisfy Lessee's
obligations to make such payments hereunder. Initial Payments made by the Lessee
shall not be refundable under any circumstances. Any security deposit paid by
Lessee shall not be refundable to Lessee in the event that the term of this
Lease does not commence unless on account of Lessee's rightful refusal to accept
delivery of the Equipment and in that event such sums shall be deemed to have
been earned by Lessor immediately upon the receipt hereof. At Lessor's option
any security deposit made hereunder may be applied by Lessor to cure any default
of Lessee under the lease, in which event Lessee shall promptly restore the
security deposit to their full amounts as set forth in this Schedule. If all the
terms and conditions herein to be performed by Lessee are fully performed and
all of Lessee's obligations hereunder are fully complied with, that portion of
any security deposit not so applied shall be refunded to Lessee at the
termination or expiration of this Lease.
D. PURCHASE OPTION AND/OR OPTION FOR RENEWAL OF LEASE TERM. [This section
applies only if this schedule indicates that an option to purchase the Equipment
or an option to renew the Lease Term is applicable.] Provided that the Lease,
this Schedule, or any option granted hereunder has not been terminated by Lessor
and that no Event of Default shall have occurred and shall be continuing, Lessor
agrees to grant Lessee an option to purchase the Equipment and/or renew the
Lease Term. See Section 18 of the Master Lease Agreement for additional terms
and conditions applicable to End of Term Options.
<PAGE>
If an Event of Default has not occurred under the Lease, Lessee, by giving
Lessor not less than ninety (90) days written notice by registered or certified
mail prior to the expiration date of this Schedule, may, elect to (1) if
applicable, purchase not less than all of the Equipment then leased hereunder,
at the times and in the manner hereinafter specified, for an amount equal to the
Purchase Option Price stated on the face of this Schedule plus any accrued and
unpaid rental or other amounts due under the Lease and plus any applicable sales
tax with respect thereto or (2) if applicable, renew the lease term of not less
than all of the Equipment then leased hereunder for the period(s) and for the
renewal rental(s) (payable in advance) stated on the face of this Schedule. If
Lessee elects to exercise said purchase option, same shall be exercised on the
day immediately following the date of expiration of the minimum lease term, and
by the delivery at such time by Lessee to Lessor of payment, in cash or by
certified check, of the amount of the Purchase Price for the Equipment as
hereinbefore set forth.
Upon payment of said purchase price for the Equipment, Lessor shall, upon
request of Lessee, execute and deliver to Lessee a Bill of Sale for the
Equipment, on an "AS IS," "WHERE IS," "WITH ALL FAULTS" basis, without
representations or warranties of any kind whatsoever. If Lessee exercises its
purchase option and fails to make such payment, Lessee shall pay as additional
rent for each month or fraction thereof after the end of the Initial Lease Term,
an amount equal to the highest monthly payment set forth herein. If Lessee does
not elect to exercise either of said options; Lessee shall return each item of
equipment to Lessor, pursuant to and under the terms and conditions of Section 3
of the Lease. If Lessee fails to notify Lessor as provided herein or if Lessor
and Lessee cannot agree on the purchase or renewal terms, then the term of this
Lease shall be automatically extended at the highest rental provided in this
Schedule, for successive three month periods unless and until terminated by
either party giving to the other not less than three months prior written notice
by registered or certified mail of its intention to terminate at the end of the
next succeeding extension period, and upon termination of this Schedule, Lessee
shall return all of the Equipment as provided in the Lease.
-2-
This Lease (and Equipment Schedule and Master Lease the terms of which
it incorporates) has been assigned, is subject to the security
interests of, and is held in trust for the benefit of Fleet Bank NA,
as Agent, pursuant to the terms and conditions of a security agreement
dated September 28, 1994 and related documents (as the same may be
amended).
<PAGE>
BILL OF SALE Lease No 7217-001
(See Attached Schedule A)
KNOW ALL PEOPLE BY THESE PRESENTS, that OREGON BAKING CORPORATION, DBA MARSEE
BAKING, AN OREGON CORPORATION; having its principal office and place of business
at 2287 NW PETTYGROVE, PORTLAND, OR 97210 (herein, the "Seller"), for an in
consideration of the sum of Ten Dollars ($10.00) and other good and valuable
consideration received from LINC CAPITAL, INC. having its principal office and
place of business at 303 East Wacker Drive, Chicago, Illinois 60601 (herein, the
"Buyer"), the receipt and sufficiency of which is hereby acknowledged, has
bargained, sold, transferred, assigned, set over and conveyed, and by these
presents does bargain, sell, transfer, assign, set over and convey unto the
Buyer, its successors and assigns, the personal property described in Schedule A
attached hereto (the "Equipment"), TO HAVE AND TO HOLD the Equipment unto the
Buyer, its successors and assigns, to its and their own use and behalf forever.
Seller hereby represents and warrants to Buyer that Seller is the absolute owner
of the Equipment, that the Equipment is free and clear of all liens, charges and
encumbrances and that Seller has full right, power and authority to sell the
Equipment and to make this Bill of Sale. Seller hereby represents, warrants and
covenants to and with Buyer on the date hereof that:
(1) Seller has full power, authority and legal right to make and perform its
obligations under this Bill of Sale; and the execution, delivery and performance
thereof have been duly authorized by all necessary actions on the part of
Seller, and do not require any approval or consent of any equity interest
holders of Seller or any trustee or holder or any indebtedness or obligation of
Seller or such required approval and consents have heretofore been duly obtained
by Seller; (2) the execution, delivery and making of this Bill of Sale by Seller
does not contravene any law, governmental rule, regulation, order or ordinance
of any governmental entity having jurisdiction over this matter; (3) the
execution and delivery of this Bill of Sale does not contravene any provision of
any internal organizational instruments of Seller including any applicable
Certificate of Incorporation or Bylaws, Certificate of Limited Partnership, and
does not and will not result in any breach of or constitute a default under any
indenture, mortgage, contract, agreement or instrument to which Seller is a
party or by which it or its property is bound; (4) the obligations set forth in
this Bill of Sale are valid and binding obligations, enforceable in accordance
with their terms against Seller, except as such enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditor's rights or
general principles of equity; (5) ALL SALES, TRANSFER, FRANCHISE OR SIMILAR
TAXES IMPOSED UPON SELLER IN CONNECTION WITH THE ACQUISITION OF THE EQUIPMENT BY
SELLER FROM ITS SUPPLIERS WILL HAVE BEEN PAID ON THE DATE HEREOF AND ALL SUCH
TAXES DUE WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS BILL OF SALE WILL
BE PAID BY SELLER AND SELLER AGREES TO PROVIDE BUYER WITH EVIDENCE THAT ALL SUCH
SALES TAXES HAVE BEEN PAID (6) there are no pending or, to the knowledge of
Seller, threatened actions or proceedings before any court or administrative
agency which will materially adversely affect the condition, business or
operation of Seller or the ability of Seller to perform its obligations under
this Bill of Sale; and (7) Seller will make appropriate notations on its books
and records indicating the sale of Equipment to Buyer pursuant to this Bill of
Sale.
Seller hereby further covenants with Buyer that: (1) Seller shall pay or obtain,
as the case may be, when due, all sales, use, property or other taxes (other
than taxes based on the net income of Buyer), licenses, tolls, inspection or
other fees, bonds, permits or certificates now or hereafter imposed by or
required to be paid or obtained to or from any jurisdiction in connection with
the sale of the Equipment by Seller to Buyer; (2) Seller hereby assigns to Buyer
all warranties and representations of the manufacturer(s) of the Equipment or
suppliers of the Equipment to Seller, to the extent assignable and to the extent
such warranties and representations are not assignable, Seller agrees to enforce
such representations and warranties for the benefit of Buyer; (3) Seller hereby
covenants that with respect to any item of Equipment at the time of sale to
Buyer that is subject to the lien of any third party claiming through Seller,
Seller shall obtain the written agreement of such third parties to release all
such said liens; and (4) Seller hereby agrees to indemnify Buyer and protect,
defend and hold it harmless from and against any and all loss, cost, damage,
injury or expense, including without limitation, reasonable attorneys' fees
wheresoever and howsoever arising which Buyer may incur by reason of any
material breach by Seller of any of the representations by, or obligations of
Seller set forth herein.
<PAGE>
EXCEPT AS SPECIFICALLY SET FORTH IN A SEPARATE AGREEMENT OR IN THIS BILL OF SALE
THERE ARE NO WARRANTIES OR REPRESENTATIONS OF ANY KIND OR NATURE, EXPRESS OR
IMPLIED, CONCERNING THE EQUIPMENT, ITS CONDITION, ITS FITNESS FOR A PARTICULAR
PURPOSE, OR ITS MERCHANTABILITY.
Seller, for itself and its successors and assigns further covenants and agrees
to do, execute and deliver, or to cause to be done, executed and delivered, all
such further acts, transfers and assurances, for the better assuring, conveying
and confirming unto Buyer and its successors and assigns, all and singular, the
Equipment hereby bargained, sold, assigned, transferred, set over and conveyed,
as Buyer and its successors and assigns shall request.
This Bill of Sale and the representations, warranties, and covenants herein
contained shall inure to the benefit of Buyer and its successors and assigns,
shall be binding upon Seller and its successors, assigns and transferees, and
shall survive the execution and delivery hereof.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed as of May
31, 1998 by its duly authorized officers or representatives.
Accepted in Chicago, IL by:
SELLER: Oregon Baking Corporation, BUYER: LINC CAPITAL, INC.
dba Marsee Baking ------------------------------------
By: /s/ Howard Wasserteil By:
----------------------
Name: Howard Wasserteil Name: /s/ William F. DeMans
-------------------- ---------------------
Title: Exec VP Title: Senior V.P.
------------------- ---------------------
<PAGE>
Lease No. 7217-001
SCHEDULE A
to
BILL OF SALE
between
Oregon Baking Corporation, dba Marsee Baking, as Seller
and
LINC CAPITAL, INC as Buyer
Attached hereto is the Schedule of personal property constituting the Equipment
which is the subject matter of the Bill of Sale between Seller and Buyer.
SELLER: Oregon Baking Corporation, dba Marsee Baking
BY: /s/ Howard Wasserteil
NAME: Howard Wasserteil
TITLE: Exec VP
<PAGE>
EQUIPMENT ACCEPTANCE CERTIFICATE LINC CAPITAL, INC.
303 East Wacker Drive
Chicago, Illinois 60601
(312) 946-1000
Master Lease Agreement No 7217 between LINC Capital, Inc. ("Lessor") and
OREGON BAKING CORPORATION, DBA MARSEE BAKING ("Lessee")
Equipment Schedule No. 001
- --------------------------------------------------------------------------------
Equipment Description:
The "Equipment" consisting of FURNITURE, FIXTURES AND EQUIPMENT as more fully
described on Schedule "A" attached hereto and made a part hereof.
- --------------------------------------------------------------------------------
To Whom it May Concern:
The undersigned, being a duly authorized officer or agent of the Lessee, hereby
(i) certifies that all of the above-referenced equipment (the "Equipment") has
been delivered and inspected, is of an acceptable size, design, capacity and
manufacture, is in good working order, repair and condition, and has been
installed to the satisfaction of Lessee; and (ii) unconditionally accepts the
Equipment "AS IS," "WHERE IS," for all purposes of the Lease.
It is understood and agreed by Lessee that LINC Capital, Inc. and its successors
and assigns in no way or manner assumes any responsibility, either now or
hereafter, for the use, performance, functioning, maintenance or service of the
Equipment, or for its suitability or adaptability for any particular purpose.
Your identification decals will be attached indicating your ownership of the
above equipment upon written request made to us.
Acceptance Date as defined in Section 1 of the Lease shall be May 31, 1998.
-------------
Oregon Baking Corporation, dba Marsee Baking
Lessee
By: /s/ Howard Wasserteil
----------------------
Title: Exec VP
-------------------
Date: 6-16-98
-------------------
<PAGE>
SCHEDULE A
LIST OF RETAIL STORES
OREGON RETAIL STORES WASHINGTON RETAIL STORES
- -------------------- ------------------------
Tanasbourne Crossroads
2711 NW Town Center Dr 15600 NE 8th Street suite D2
Beaverton, OR 97005 Bellevue, WA 98003
Washington County King County
Sherwood 10th avenue
16064 SW Tualatin-Sherwood 10301 NE 10th Avenue
Sherwood, OR 97140-8378 Bellevue, WA 98004
Washington County King County
Salem Main Street
285 Liberty NE suite 100 100 108th Avenue NE
Salem, OR 97301 Bellevue, WA 98004
Marion County King County
Issaquah
755 NW Gilman Blvd bldg G
Issaquah, WA 98027
King County
Factoria
3900 128th Avenue SE #A-1
Bellevue, WA 98006
King County
Ballard
2021 NW Market
Seattle, WA 98107
King County
Burien
15842 First Avenue S #A-107
Burien, WA 98148
King County
<PAGE>
OREGON BAKING COMPANY DBA MARSEE BAKING
SCHEDULE A (SCHEDULE 001)
TO BE PAID
----------
<TABLE>
<CAPTION>
Date of Description of
Vendor Inv.# Invoice Items purchased Location-City, County
------ ----- ------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
1 Baumgart Construction contract 03/12/98 various FFE Main St, Bellevue, WA
2 Espresso Roma 16318 03/25/98 Espresso machine Main St, Bellevue, WA
3a Shelby Williams 21145 03/27/98 chairs Main St, Bellevue, WA
4a Tube Art 03/27/98 remove/dispose sign Main St, Bellevue, WA
4b Tube Art contract 03/27/98 signage Main St, Bellevue, WA
5 Kalberer's 62029 04/03/98 various FFE Main St., Bellevue, WA
6a Charis, Inc. 112707 04/14/98 chairs, tables, Main St., Bellevue, WA
umbrellas
15 Merchants Info. 337597 04/14/98 micros Main St., Bellevue, WA
Solutions
3b Shelby Williams 21145 03/27/98 chairs/stools 10th St. Bellevue, WA
7 Baumgart contract 04/16/98 various FFE 10th St. Bellevue, WA
6b Chairs, Inc. 112707 04/14/98 chairs, tables, 10th St. Bellevue, WA
umbrellas
3c Shelby Williams 21145 03/27/98 chairs/stools Issaquah, WA
6c Chairs, Inc. 112707 04/14/98 chairs, tables, Issaquah, WA
umbrellas
8a Baumgart Const. contract 02/28/98 various FFE Beaverton, OR
9 Kalberer's 61180 03/17/98 various FFE Beaverton, OR
10 Bakery Equipment 18798 03/17/98 abor for move of Beaverton, OR
Servic Baxter Ove
11 Shelby Williams 21144 03/27/98 chairs Beaverton, OR
6d Chairs, Inc. 112707 04/14/98 chairs, tables, Beaverton, OR
umbrellas
12 Baumgart contract 04/15/98 various FFE Sherwood, OR
12 Baumgart contract 04/15/98 various FFE Sherwood, OR
<CAPTION>
PAID
----
Date of Description of
Vendor Inv.# Invoice Items purchased Location
------ ----- ------- --------------- --------
<S> <C> <C> <C> <C> <C>
13 Espresso Roma 16160 02/24/98 Espresso machine Beaverton, OR
14 Shelby Williams 20187 03/10/98 chairs/stools Beaverton, OR
8b Baumgart contract 03/16/98 various FFE Beaverton, OR
4b Tube Art contract 03/25/98 signage Main, Bellevue, WA
LESEE /s/ HJW LESSOR
------- ------
<PAGE>
<CAPTION>
Amount Date Inv. Bal. Still
Vendor of Inv. Due Due Model Serial #
------ ------- --------- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
1 Baumgart Construction 42,658.13 39,282.00
2 Espresso Roma 4,600.00 4,600.00 3GRP Automatic Mode 116555
3a Shelby Williams 3,134..25 04/06/98 3,134.25 CE-90
4a Tube Art 594.04 547.00
4b Tube Art 14,632.74 7,316.36
5 Kalberer's 35,262.20 04/13/98 32,469.80 see attached invoice
6a Chairs, Inc. 3,171.45 upon receipt 3,171.45
15 Merchants Info. 16,373.20 upon receipt 15,362.00
Solutions
3b Shelby Williams 6,362.44 04/06/98 6,362.44 CE-90 & CE-93
7 Baumgart 46,787.00 46,787.00
6b Chairs, Inc. 953.04 upon receipt 953.04
3c Shelby Williams 3,910.06 04/06/98 3,910.06 CE-90 & CE-93
6c Chairs, Inc. 250.91 upon receipt 250.91
8a Baumgart Const. 1,764.94 03/19/98 1,764.94
9 Kalberer's 32,896.78 32,896.78 see attached invoice
10 Bakery Equipment 500.00 04/17/98 500.00
Servic
11 Shelby Williams 588.49 04/06/98 588.49 CE-90
6d Chairs, Inc. 1,910.31 upon receipt 1,910.31
12 Baumgart 51,870.00 51,870.00
12 Baumgart 2,851.00 2,851.00
------------ ------------
271,070.98
Total to be Paid: 256,527.83
<CAPTION>
Amount OBC Date of Amount Bal. Still
Vendor of Inv. ch# Check of check Due Model Serial #
------ ------- --- ----- -------- --- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
13 Espresso Roma 5,150.00 22472 04/01/98 5,150.00 0.00 P Automatic Model 85- 116556
14 Shelby Williams 3695.53 22493 04/02/98 3695.53 0.00 CE-90 & CE-93
8b Baumgart 35,393.00 22348 03/24/98 33,628.06 1,764.94
4b Tube Art 14,632.74 22468 03/27/98 7,316.38 7,316.36
------------
Paid Total: 49,789.97
Grand Total 306,317.80
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-001
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE June 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
Grand Total from Page 1
Removed & junked both sets of Bellevue, WA Tube Art 6-48611
channel letters
Installation Man/Eq 22.5 Hrs. Bellevue, WA Tube Art 6-48683
Shop labor 1.5 Hrs
Re-face sign Man/Eq 1.5 Hrs. Bellevue, WA Tube Art 6-48676
Single rack oven, digital, gas fired Sherwood, OR Bakery Equipment 000109247
Supervisor Services
Freight
21 4 Top Metal Slot Frame Tables Portland, OR Chairs, Inc. 112722
90 EMU Chairs Black
27 Umbrellas
27 Umbrella Stands
27 Umbrella Silk Screens
1 Freight for Umbrellas and Chairs
3 000184-012 Sherwood, OR Merchants Information 338891
Kit, 2400 FFS, S Solutions, Inc.
3 400344-001
Kit, Roll Printer, 2000
3 400350-001
Attached Display 1000/2000
1 400329-001
Kit, Com Interface Board 2700
1 400305-002
Kit, 2400 Crt Controller, FF
Lessee's Initials /s/ HJW Lessor's Initials
------- ----- Page 1 of 5
<PAGE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. INVOICE INVOICE DATE
AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
$306,317.80
Removed & junked both sets of channel letters 369.00
$369.00 06/04/98
Installation Man/Eq 22.5 Hrs. 167.50
Shop labor 1.5 Hrs 82.50
$250.00 06/04/98
Re-face sign Man/Eq 1.5 Hrs. 100.50
$100.50 06/04/98
Single rack oven, digital, gas fired 15,370.00
Supervisor Services 9801-00981 500.00
Freight 234.00
$16,104.00 06/04/98
21 4 Top Metal Slot Frame Tables 3,990.00
90 EMU Chairs Black 6,750.00
27 Umbrellas 2,025.00
27 Umbrella Stands 540.00
27 Umbrella Silk Screens 945.00
1 Freight for Umbrellas and Chairs 995.09
$15,245.09
3 000184-012 27680 5,686.00
Kit, 2400 FFS, S 27688
27691
3 400344-001 63678 1,500.00
Kit, Roll Printer, 2000 63685
63681
3 400350-001 750.00
Attached Display 1000/2000
1 400329-001 52118 450.00
Kit, Com Interface Board 2700
1 400305-002 3837 750.00
Kit, 2400 Crt Controller, FF
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-001
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE June 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 400316-001
Kit, 4000 VDU Keypad
1 400332-002
Assy, Monitor, Amber, 14, TTL
3 40018-013
Cash Dwr, 12V, Din, Small Profile
7 PRPR04
Connector Sets
1 Freight (P2)
Freight 2000 Series
15 PPROGO5
Programming/Setup/Database
1 000193-121
MWS +/PCISN Communicating SFTWR
1 Pentcomputer
Pentium 200, 32 MG, 2GIG HD
Win 95, Keyboard, Mouse
33.6 Modem
1 Tape Bkup T300
3.2 GIG Tape Drive
1 Monitor
14" SVGA Monitor
1 Trippliteups
Trippliteups UPS Power Backup
HP 6 Series
HP 6 Series Laser Printer
1 Procomm Sftware
Procomm Sftware
1 PPROGO5
Computer Configuration/Set-up
Discount (P2)
Micros 2000 Series
3 000184-012 Bellevue, WA Merchants Information 338573
Kit, 2400 FFS, S Solutions, Inc.
3 400344-001
Kit, Roll Printer, 2000
Lessee's Initials /s/ HJW Lessor's Initials
------- ----- Page 2 of 5
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
1 400316-001 250.00
Kit, 4000 VDU Keypad
1 400332-002 165.00
Assy, Monitor, Amber, 14, TTL
3 40018-013 630.00
Cash Dwr, 12V, Din, Small Profile
7 PRPR04 595.00
Connector Sets
1 Freight (P2) 254.50
Freight 2000 Series
15 PPROGO5 975.00
Programming/Setup/Database
1 000193-121 15872 1,800.00
MWS +/PCISN Communicating SFTWR
1 Pentcomputer OR13550 2,165.00
Pentium 200, 32 MG, 2GIG HD
Win 95, Keyboard, Mouse
33.6 Modem
1 Tape Bkup T300
3.2 GIG Tape Drive
1 Monitor PA881TC00630
14" SVGA Monitor
1 Trippliteups SJPHJ035332
Trippliteups UPS Power Backup
HP 6 Series
HP 6 Series Laser Printer
1 Procomm Sftware
Procomm Sftware
1 PPROGO5 500.00
Computer Configuration/Set-up
Discount (P2) (1,527.00)
Micros 2000 Series
$14,942.50
3 000184-012 24356 5,685.00
Kit, 2400 FFS, S 24877
24618
61794 1,500.00
3 400344-001 61850
Kit, Roll Printer, 2000 61801
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-001
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE June 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
3 400350-001
Attached Display 1000/2000
1 400329-001
kit, Com Interface Board 2700
1 400305-002
Kit, 2400 Crt Controller, FF
1 400316-001
Kit, 4000 VDU Key Pad
1 400332-003
Assy, Monitor, Amber, 14TTL
3 400018-013
cash Dwr, 12V, Din, Small Profile
7 PRPR04
Site Survey And Preparation
1 Freight (P2)
Freight 2000 Series
45 PPR0G05
Programming/Setup/Training and Live
Support
1 000193-121
MWS +/ PCISN Communications Sftware
1 Pentcomputer
Pentium 200MMX, 32 MG, 2 GIG HD
Win 95, Keyboard, Mouse
33.6 Modem
1 Tape Bkup T3000
HP Colorado T3000 Tape Drive
1 Monitor
14" SVGA Monitor
1 Trippliteups
Tripplite UPS Power Backup
1 HP 6 Series
HP 6 Series Laser Printer
1 Procomm Software
Procomm Software
1 PPR0G05
Computer configuration/Setup
1 Discount (P2)
Lessee's Initials /s/ HJW Lessor's Initials
------- ----- Page 3 of 5
<PAGE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. INVOICE INVOICE DATE
AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
3 400350-001 750.00
Attached Display 1000/2000
1 400329-001 23406 450.00
kit, Com Interface Board 2700
1 400305-002 3429 750.00
Kit, 2400 Crt Controller, FF
1 400316-001 250.00
Kit, 4000 VDU Key Pad
1 400332-003 165.00
Assy, Monitor, Amber, 14TTL
3 400018-013 630.00
cash Dwr, 12V, Din, Small Profile
7 PRPR04 595.00
Site Survey And Preparation
1 Freight (P2) 254.50
Freight 2000 Series
45 PPR0G05 2,925.00
Programming/Setup/Training and Live
Support
1 000193-121 72805 1,800.00
MWS +/ PCISN Communications Sftware
1 Pentcomputer OR13852 2,165.00
Pentium 200MMX, 32 MG, 2 GIG HD
Win 95, Keyboard, Mouse
33.6 Modem
1 Tape Bkup T3000
HP Colorado T3000 Tape Drive
1 Monitor CA87CIC00785
14" SVGA Monitor
1 Trippliteups
Tripplite UPS Power Backup
1 HP 6 Series SJPHJ036022
HP 6 Series Laser Printer
1 Procomm Software
Procomm Software
1 PPR0G05 500.00
Computer configuration/Setup
1 Discount (P2) (1,527.00)
$16,892.50
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-001
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE June 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 Material and Labor Bellevue, WA Baumgart Construction 841
1 Overhead/Profit
13 Black Crakle Table Base Bellevue, WA Kalberer 64192
1 Labor
1 Labor
1 5'0" Non Refrigerated Pastry case
2 Hotel Pan, Sixth SZ, 4" DP S/S
1 Slide Door Merchandiser Black
1 One Year Labor Warranty
1 Undercounter Dishwasher W/Booster
1 Plain White Sign
4 2Qt. Bain Marie
1 Freight Contract
1 Freezer One Door
1 Compressor Warranty
1 Labor Warranty, 1Year Service
3 Tray Rack Flange
1 Display case (cake deli etc.)
1 Display case Glass Curve Refrigerator
1 Breugers case, Refrigerated
1 Tomatoe King 3/16 Cut
1 Tomatoe King Blades
1 Focacia Toaster, Countertop
1 Scale
1 Bread slicer 1/2 Slice Chrome
1 Undercounter Refrigerator
1 Labor Warranty, 1Year Service
5 Bain marie 2QT
2 Cut Pan to 2in" QA
1 Knock Box for Espresso
3 Menu Lettering on Plastic Laminate Sherwood, OR Northwest Sign Center 11706
Panel Provided By Client
Logo in Dimensional PVC With Antique
White Detail On Plastic Laminate Panel
Provided by Client
6 7X15 D/F Black 6mm PVC Hanging
Sign For Area ID
Lessee's Initials /s/ HJW Lessor's Initials
------- ----- Page 4 of 5
<PAGE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. INVOICE INVOICE DATE
AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
1 Material and Labor 3,535.00
1 Overhead/Profit 354.00
$3,889.00
13 Black Crakle Table Base 898.56
1 Labor 400.00
1 Labor 500.00
1 5'0" Non Refrigerated Pastry case 3,771.00
2 Hotel Pan, Sixth SZ, 4" DP S/S 13.60
1 Slide Door Merchandiser Black 1,810.40
1 One Year Labor Warranty 87.48
1 Undercounter Dishwasher W/Booster 3,216.78
1 Plain White Sign
4 2Qt. Bain Marie 42.76
1 Freight Contract
1 Freezer One Door 1,659.00
1 Compressor Warranty 79.30
1 Labor Warranty, 1Year Service 128.75
3 Tray Rack Flange 183.99
1 Display case (cake deli etc.) 6,199.25
1 Display case Glass Curve Refrigerator 5,975.00
1 Breugers case, Refrigerated 4,201.00
1 Tomatoe King 3/16 Cut 152.50
1 Tomatoe King Blades 16.20
1 Focacia Toaster, Countertop 369.90
1 Scale 403.00
1 Bread slicer1/2slice Chrome 3,731.40
1 Undercounter Refrigerator 1,106.62
1 Labor Warranty, 1Year Service 102.60
5 Bain marie 2QT 53.45
2 Cut Pan to 2in" QA 28.80
1 Knock Box for Espresso 16.20
$35,147.54
3 Menu Lettering on Plastic Laminate 900.00
Panel Provided By Client
1 Logo in Dimensional PVC With Antique 250.00
White Detail On Plastic Laminate Panel
Provided by Client
6 7X15 D/F Black 6mm PVC Hanging
Sign For Area ID 200.00
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-001
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE June 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
2 Door Hours
2 Door Logos
2 Installation Of Door Graphics (per hr.)
2 Design/Layouts/Consultations (per hr.)
38 Bagel Arcylic Tag D/F Bellevue, WA Northwest Sign Center 11693
3 12 X 18 Acrylic Order Item Here Sign
4 8.5 X 11 Chalkboard with Log
1 Shipping by UPS
3 Menu Panels with revised coy and Bellevue, WA Northwest Sign Center 11692
Layout
3 Design/Layout/Consultation
1 Logo on Dimensional PVC with
Gold Detail On Plastic
7 7X15 D/F Black 6mm PVC Hanging
Sign for Area ID
2 Menu Lettering on Plastic Laminate Bellevue, WA Northwest Sign Center 11663
Panel Provided by Client
3 Design/Consultation/Layouts
3 Menu Lettering on Plastic Laminate
18 Bagel Acrylic Tag
1 12x12 Acrylic Order Item Here Sign
1 Price Changes For 1st Month
1 Shipping by UPS
1 Shipping by UPS
Lessee's Initials /s/ HJW Lessor's Initials
------- ----- Page 5 of 5
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
2 Door Hours 90.00
2 Door Logos 50.00
2 Installation Of Door Graphics (per hr.) 90.00
2 Design/Layouts/Consultations (per hr.) 150.00
$1,730.00
38 Bagel Arcylic Tag D/F 570.00
3 12 X 18 Acrylic Order Item Here Sign 135.00
4 8.5 X 11 Chalkboard with Log 180.00
1 Shipping by UPS 25.00
$910.00
3 Menu Panels with revised coy and 900.00
Layout
3 Design/Layout/Consultation 225.00
1 Logo on Dimensional PVC with 350.00
Gold Detail On Plastic
7 7X15 D/F Black 6mm PVC Hanging 210.00
Sign for Area ID
$1,685.00
2 Menu Lettering on Plastic Laminate 600.00
Panel Provided by Client
3 Design/Consultation/Layouts 225.00
3 Menu Lettering on Plastic Laminate 900.00
18 Bagel Acrylic Tag 270.00
1 12x12 Acrylic Order Item Here Sign 45.00
1 Price Changes For 1st Month 10.00
1 Shipping by UPS 70.00
1 Shipping by UPS 30.00
$2,150.00
-----------
Grand Total $415,732.93
</TABLE>
<PAGE>
LINC CAPITAL, INC. LINC Capital, Inc.
EQUIPMENT SCHEDULE 303 East Wacker Drive
SCHEDULE NO. 002 Chicago, Illinois 60601
(312) 946-1000
- --------------------------------------------------------------------------------
Equipment Location: 2287 N.W. PETTYGROVE Master Lease Agreement No.: 7217
PORTLAND, OR 97210 --------------------------------
(See Attached) Acceptance Date: July 31, 1998
- --------------------------------------------------------------------------------
LINC CAPITAL, INC. (Lessor) hereby agrees to lease to the Lessee named below,
and Lessee hereby agrees to lease and rent from Lessor the Equipment identified
below, for the term and at the rental payments specified herein, all subject to
the terms and conditions set forth herein and on the reverse side hereof and in
the referenced Master Lease Agreement except as the same may be varied by the
terms of this Schedule.
================================================================================
- --------------------------------------------------------------------------------
Equipment Description: The Equipment will Estimated Cost of Equipment:
consist of FURNITURE, FIXTURES AND EQUIPMENT $434,577.06
as more fully described on Schedule "A"
attached hereto and made a part hereof.
- --------------------------------------------------------------------------------
================================================================================
TERM AND RENTAL:
- --------------------------------------------------------------------------------
Commencement Date: Initial Payment: $28,640.37 Initial Lease Term:
August 1, 1998 (COVERING FIRST AND 36 months
LAST RENTAL PAYMENTS
- --------------------------------------------------------------------------------
Rental Payments*(plus, if applicable all sales, use or other taxes imposed upon
rental payments) shall be made monthly in advance as follows: $14,320.18 per
rental payment beginning on the Commencement Date until THIRTY-SIX (36) rental
payments have been paid in full followed by either (i) a 37th rental payment of
$43,457.71 or (ii) provided that no Event of Default has occurred and is
continuing under the Lease in lieu of making the foregoing 37th rental payment,
Lessee may elect, by written notice issued to Lessor on or before the due date
of the 34th rental payment, to pay a sum equal to $4,345.77 on the due date of
the 37th rental payment and a like rental payment sum on the next 11 consecutive
rental payment dates respectively and upon such election the Initial Lease Term
shall be deemed to have been extended by 12 months.
*Rental Payments are based on the Lease Rate Factor and are subject to
adjustment as described in Paragraph A on the REVERSE SIDE HEREOF. If
applicable, all freight, sale sand use taxes, insurance and maintenance expense
paid by Lessor shall be paid by Lessee in accordance with the terms of the Lease
and this Schedule.
================================================================================
PROPERTY TAXES: Lessor shall report all Equipment for personal property or
advalorem tax return purposes as may be required under applicable law, and all
resulting taxes shall be paid by Lessee.
================================================================================
<PAGE>
================================================================================
END OF TERM OPTIONS: At the end of the initial lease term the following options
are granted to Lessee in accordance with the terms described on the reverse side
hereof:
OPTION TO RENEW the Initial Lease Term at a Rental equal to the FAIR RENTAL
VALUE (not less than 1%) renewal each month for a Renewal Period of Twelve (12)
months.
OPTION TO PURCHASE not less than all of the Equipment at the end of the Initial
Lease Term (as described above including any extension thereof) at a Purchase
Option Price equal to the then FAIR MARKET VALUE (not less than 10%) of the
Equipment.
================================================================================
ADDITIONAL TERMS AND CONDITIONS TO THIS EQUIPMENT SCHEDULE ARE ON THE REVERSE
SIDE HEREOF.
The person executing this Lease for and on behalf of Lessee warrants and
represents, which warrant and representation shall survive the expiration or
termination of this Lease, that this Lease and the execution hereof has been
duly and validly authorized by Lessee, constitutes a valid and binding
obligation of Lessee and that he has authority to make such execution for and on
behalf of Lessee.
Lessee: ACCEPTED AT CHICAGO, ILLINOIS BY LESSOR:
Oregon Baking Corporation, LINC CAPITAL, INC
dba Marsee Baking
By: /s/ Howard Wasserteil By: /s/ William F. DeMans
---------------------- ----------------------
Title: Exec VP Title: Senior V.P.
------------------- -------------------
Date: 8/10/98 Date:
-------------------- -------------------
This Lease (and Equipment Schedule and Master Lease the terms of which
it incorporates) has been assigned, is subject to the security
interests of, and is held in trust for the benefit of Fleet Bank NA,
as Agent, pursuant to the terms and conditions of a security agreement
dated September 28, 1994 and related documents (as the same may be
amended).
<PAGE>
BILL OF SALE Lease No 7217-001
(See Attached Schedule A)
KNOW ALL PEOPLE BY THESE PRESENTS, that OREGON BAKING CORPORATION, DBA MARSEE
BAKING, AN OREGON corporation; having its principal office and place of business
at 2287 NW PETTYGROVE, PORTLAND, OR 97210 (herein, the "Seller"), for an in
consideration of the sum of Ten Dollars ($10.00) and other good and valuable
consideration received from LINC CAPITAL, INC. having its principal office and
place of business at 303 East Wacker Drive, Chicago, Illinois 60601 (herein, the
"Buyer"), the receipt and sufficiency of which is hereby acknowledged, has
bargained, sold, transferred, assigned, set over and conveyed, and by these
presents does bargain, sell, transfer, assign, set over and convey unto the
Buyer, its successors and assigns, the personal property described in Schedule A
attached hereto (the "Equipment"), TO HAVE AND TO HOLD the Equipment unto the
Buyer, its successors and assigns, to its and their own use and behalf forever.
Seller hereby represents and warrants to Buyer that Seller is the absolute owner
of the Equipment, that the Equipment is free and clear of all liens, charges and
encumbrances and that Seller has full right, power and authority to sell the
Equipment and to make this Bill of Sale. Seller hereby represents, warrants and
covenants to and with Buyer on the date hereof that:
(1) Seller has full power, authority and legal right to make and perform its
obligations under this Bill of Sale; and the execution, delivery and performance
thereof have been duly authorized by all necessary actions on the part of
Seller, and do not require any approval or consent of any equity interest
holders of Seller or any trustee or holder or any indebtedness or obligation of
Seller or such required approval and consents have heretofore been duly obtained
by Seller; (2) the execution, delivery and making of this Bill of Sale by Seller
does not contravene any law, governmental rule, regulation, order or ordinance
of any governmental entity having jurisdiction over this matter; (3) the
execution and delivery of this Bill of Sale does not contravene any provision of
any internal organizational instruments of Seller including any applicable
Certificate of Incorporation or Bylaws, Certificate of Limited Partnership, and
does not and will not result in any breach of or constitute a default under any
indenture, mortgage, contract, agreement or instrument to which Seller is a
party or by which it or its property is bound; (4) the obligations set forth in
this Bill of Sale are valid and binding obligations, enforceable in accordance
with their terms against Seller, except as such enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditor's rights or
general principles of equity; (5) ALL SALES, TRANSFER, FRANCHISE OR SIMILAR
TAXES IMPOSED UPON SELLER IN CONNECTION WITH THE ACQUISITION OF THE EQUIPMENT BY
SELLER FROM ITS SUPPLIERS WILL HAVE BEEN PAID ON THE DATE HEREOF AND ALL SUCH
TAXES DUE WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS BILL OF SALE WILL
BE PAID BY SELLER AND SELLER AGREES TO PROVIDE BUYER WITH EVIDENCE THAT ALL SUCH
SALES TAXES HAVE BEEN PAID (6) there are no pending or, to the knowledge of
Seller, threatened actions or proceedings before any court or administrative
agency which will materially adversely affect the condition, business or
operation of Seller or the ability of Seller to perform its obligations under
this Bill of Sale; and (7) Seller will make appropriate notations on its books
and records indicating the sale of Equipment to Buyer pursuant to this Bill of
Sale.
Seller hereby further covenants with Buyer that: (1) Seller shall pay or obtain,
as the case may be, when due, all sales, use, property or other taxes (other
than taxes based on the net income of Buyer), licenses, tolls, inspection or
other fees, bonds, permits or certificates now or hereafter imposed by or
required to be paid or obtained to or from any jurisdiction in connection with
the sale of the Equipment by Seller to Buyer; (2) Seller hereby assigns to Buyer
all warranties and representations of the manufacturer(s) of the Equipment or
suppliers of the Equipment to Seller, to the extent assignable and to the extent
such warranties and representations are not assignable, Seller agrees to enforce
such representations and warranties for the benefit of Buyer; (3) Seller hereby
covenants that with respect to any item of Equipment at the time of sale to
Buyer that is subject to the lien of any third party claiming through Seller,
Seller shall obtain the written agreement of such third parties to release all
such said liens; and (4) Seller hereby agrees to indemnify Buyer and protect,
defend and hold it harmless from and against any and all loss, cost, damage,
injury or expense, including without limitation, reasonable attorneys' fees
wheresoever and howsoever arising which Buyer may incur by reason of any
material breach by Seller of any of the representations by, or obligations of
Seller set forth herein.
<PAGE>
EXCEPT AS SPECIFICALLY SET FORTH IN A SEPARATE AGREEMENT OR IN THIS BILL OF SALE
THERE ARE NO WARRANTIES OR REPRESENTATIONS OF ANY KIND OR NATURE, EXPRESS OR
IMPLIED, CONCERNING THE EQUIPMENT, ITS CONDITION, ITS FITNESS FOR A PARTICULAR
PURPOSE, OR ITS MERCHANTABILITY.
Seller, for itself and its successors and assigns further covenants and agrees
to do, execute and deliver, or to cause to be done, executed and delivered, all
such further acts, transfers and assurances, for the better assuring, conveying
and confirming unto Buyer and its successors and assigns, all and singular, the
Equipment hereby bargained, sold, assigned, transferred, set over and conveyed,
as Buyer and its successors and assigns shall request.
This Bill of Sale and the representations, warranties, and covenants herein
contained shall inure to the benefit of Buyer and its successors and assigns,
shall be binding upon Seller and its successors, assigns and transferees, and
shall survive the execution and delivery hereof.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed as of
4/29/98 by its duly authorized officers or representatives.
- -------
Accepted in Chicago, IL by:
SELLER: Oregon Baking Corporation, BUYER: LINC CAPITAL, INC.
dba Marsee Baking William F. DeMans
--------------------------
By: /s/ Howard Wasserteil By:
-----------------------
Name: Howard Wasserteil Name: /s/ William F. DeMans
--------------------- ---------------------
Title: Exec. V.P. Title: Senior V.P.
-------------------- ---------------------
<PAGE>
Lease No 7217-002
SCHEDULE A
to
BILL OF SALE
between
Oregon Baking Corporation, dba Marsee Baking, as Seller
and
LINC CAPITAL, INC. as Buyer
Attached hereto is the Schedule of personal property constituting the Equipment
which is the subject matter of the Bill of Sale between Seller and Buyer.
SELLER: Oregon Baking Corporation, dba Marsee Baking
BY:
NAME:
TITLE:
<PAGE>
EQUIPMENT ACCEPTANCE CERTIFICATE LINC Capital, Inc.
303 East Wacker Drive
Chicago, Illinois 60601
(312) 946-1000
Master Lease Agreement No 7217 between LINC Capital, Inc. ("Lessor") and Oregon
Baking Corporation, dba Marsee Baking ("Lessee")
Equipment Schedule No. 002
- --------------------------------------------------------------------------------
Equipment Description:
The "Equipment" consisting of FURNITURE, FIXTURES AND EQUIPMENT as more fully
described on Schedule "A" attached hereto and made a part hereof.
- --------------------------------------------------------------------------------
To Whom it May Concern:
The undersigned, being a duly authorized officer or agent of the Lessee, hereby
(i) certifies that all of the above-referenced equipment (the "Equipment") has
been delivered and inspected, is of an acceptable size, design, capacity and
manufacture, is in good working order, repair and condition, and has been
installed to the satisfaction of Lessee; and (ii) unconditionally accepts the
Equipment "AS IS," "WHERE IS," for all purposes of the Lease.
It is understood and agreed by Lessee that LINC Capital, Inc. and its successors
and assigns in no way or manner assumes any responsibility, either now or
hereafter, for the use, performance, functioning, maintenance or service of the
Equipment, or for its suitability or adaptability for any particular purpose.
Your identification decals will be attached indicating your ownership of the
above equipment upon written request made to us.
Acceptance Date as defined in Section 1 of the Lease shall be July 31, 1998.
Oregon Baking Corporation, dba Marsee Baking
Lessee
By: /s/ Howard Wasserteil
----------------------
Title: Exec VP
-------------------
Date: 8/10/98
-------------------
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-002
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE August 1, 1998
<TABLE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR INVOICE NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 Mfg./Install signs, vinyly & logo Beaverton, OR Blaze Signs of Amer. 305.1616
1 Permits & Acquisition
1 Design Time
1 Permits & Acquisition Sherwood, OR Blaze Signs of Amer. 305.1655
1 Removals
1 Shop Time for letter pattern
80 Donegal 001 Sand Dunne Grade 8 Portland, Or Shelby Williams 23101
Industries
5 Donegal 001 Sand Dunne Grade 8
Transportation
172 Donegal 001 Sand Dunne Grade 8 Redmond, Wa Shelby Wsilliams 23096
Industries
18 Donegal 001 Sand Dunne Grade 8
Transportation
1 Freezer, One Door Bellevue, Wa Kalberer 64449
1 Compressor Warranty 5 Yr
1 One Year Labor Warranty
3 Tray Rack Flange Support
1 Undercounter Dishwasher w/Booster
1 Tomato King 3/16" Cut
1 Tomato King Blades
1 Focacia Toaster, Countertop
1 Scale
1 Bread Slicer 1/2" Slice Chrome
1 Undercounter Refrigerator
1 Warranty Labor, One Year
9 Bain marle 2Qt.
2 Cut pan to 2" QA
1 Knock Box For Espresso
1 Slide Door for Merchandizer Black
1 One Year Labor Warranty
1 Plain White Sign for GDM47
2 Hotel Pan, Sixth SZ, 4 DP S/S
1 Freight for Bread Slicer Shipped
1 Freight for true GDM47
Lessee's Initials /s/ HW Lessor's Initials Page 1 of 8
-------- -----
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C> <C>
1 Mfg./Install signs, vinyly & logo 6,141.00
1 Permits & Acquisition 152.00
1 Design Time --------- 130.00
$6,423.00
1 Permits & Acquisition 198.00
1 Removals 450.00
1 Shop Time for letter pattern --------- 250.00
$898.00
80 Donegal 001 Sand Dunne Grade 8 6,240.00
5 Donegal 001 Sand Dunne Grade 8 650.00
Transportation --------- 1,450.68
$8,340.68
172 Donegal 001 Sand Dunne Grade 8 13,416.00
18 Donegal 001 Sand Dunne Grade 8 2,340.00
Transportation --------- 2,866.06
$18,622.06
1 Freezer, One Door 1,659.00
1 Compressor Warranty 5 Yr 87.48
1 One Year Labor Warranty 194.40
3 Tray Rack Flange Support 203.61
1 Undercounter Dishwasher w/Booster 3,281.00
1 Tomato King 3/16" Cut 153.90
1 Tomato King Blades 16.20
1 Focacia Toaster, Countertop 369.90
1 Scale 403.00
1 Bread Slicer1/2" Slice Chrome 3,731.40
1 Undercounter Refrigerator 1,106.62
1 Warranty Labor, One Year 102.60
9 Bain marle 2Qt. 96.21
2 Cut pan to 2" QA 28.80
1 Knock Box For Espresso 16.20
1 Slide Door for Merchandizer Black 1,810.40
1 One Year Labor Warranty 87.48
1 Plain White Sign for GDM47 0.00
2 Hotel Pan, Sixth SZ, 4 DP S/S 13.60
1 Freight for Bread Slicer Shipped 65.00
1 Freight for true GDM47 ---------- 178.12
$13,604.92
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-002
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE August 1, 1998
<TABLE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR INVOICE NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 Slide Door Merchandizer Black Serial Sherwood, Or Kalberer 64445
1 Plain White Sign for GDM47
1 One Year Labor Warranty
1 Freight - Contract
1 Labor
1 Pastry Case Sherwood, Or Kalberer 64444
1 Deli Display Case
1 Breugers Case, Refrigerated
1 Display case Curved Glass
refrigerated
1 Focacia Toaster, Countertop
1 Bread Slicer,1/2" Slice Chrome
1 Scale
1 Knock Box For Espresso
1 Undercounter Refrigerator
1 Warranty Labor One Year
1 Labor
1 Labor
1 Tomato King 3/16" Cut
1 Toamto King Blades
4 Cut pan to 2" QA
1 Undercounter Dishwasher w/Booster
4 Hotel Pan, Sixth SZ 4" DP S/S
9 2Qt Bain Marie
1 Bain Marie 2Qt.
1 Freight-Contract
1 Undercounter Dishwasher w/Booster Salem, Or Kalberer 64448
1 Breugers Case, Refrigerated
1 5'0" Non refrigerated Pastry Case
2 Display case (Cake, Deli,Focacia)
1 Tomato King 3/16" Cut
1 Tomato King Blades
1 Focacia Toaster, Countertop
1 Scale
1 Bread Slicer 1/2" Bread Chrome
1 Undercounter Refrigerator
1 Warranty Labor, 1Year
9 bain marie 2Qt.
Lessee's Initials /s/ HW Lessor's Initials Page 2 of 8
-------- -----
<PAGE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION SERIAL INVOICE INVOICE DATE
NO. AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C> <C>
1 Slide Door Merchandizer Black Serial 1,810.40
1 Plain White Sign for GDM47 0.00
1 One Year Labor Warranty 87.48
1 Freight - Contract 201.43
1 Labor --------- 85.00
$2,184.31
1 Pastry Case 4,204.00
1 Deli Display Case 6,572.00
1 Breugers Case, Refrigerated 4,201.00
1 Display case Curved Glass 5,975.00
refrigerated
1 Focacia Toaster, Countertop 369.90
1 Bread Slicer,1/2" Slice Chrome 3,731.40
1 Scale 375.52
1 Knock Box For Espresso 16.20
1 Undercounter Refrigerator 1,106.62
1 Warranty Labor One Year 102.60
1 Labor 500.00
1 Labor 400.00
1 Tomato King 3/16" Cut 152.50
1 Toamto King Blades 16.20
4 Cut pan to 2" QA 57.60
1 Undercounter Dishwasher w/Booster 3,281.00
4 Hotel Pan, Sixth SZ 4" DP S/S 27.20
9 2Qt Bain Marie 108.90
1 Bain Marie 2Qt. 12.10
1 Freight-Contract --------- 0.00
31,209.74
1 Undercounter Dishwasher w/Booster 3,281.00
1 Breugers Case, Refrigerated 4,201.00
1 5'0" Non refrigerated Pastry Case 3,771.00
2 Display case (Cake, Deli,Focacia) 12,398.50
1 Tomato King 3/16" Cut 153.90
1 Tomato King Blades 16.20
1 Focacia Toaster, Countertop 369.90
1 Scale 403.00
1 Bread Slicer1/2" Bread Chrome 3,731.40
1 Undercounter Refrigerator 1,106.62
1 Warranty Labor, 1Year 102.60
9 bain marie 2Qt. 96.21
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-002
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE August 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
2 Cut Pan to 2" QA
1 Knock Box For Espresso
1 Labor
1 Labor
2 Hotel Pan Sixth SZ 4" DP S/S
1 Slide Door Merchandiser, Black
1 One Year Warranty
1 Plain white Sign for GDM47
1 Freight-Contract
1 Slide Door merchandiser Black Portland, Or Kalberer 64443
1 One Year Warranty
1 Freight-Contract
1 Labor
1 48" Sandwich Top Unit Bellevue, Wa Kalberer 64439
1 Freight-Contract
1 Warranty Compressor
1 Labor Warranty, 1 Year Service
13 bain marie 2Qt. Bellevue, Wa Kalberer 64441
2 Knock Box For Espresso
4 Hotel Pan, Sixth SZ, 4 DP S/S
4 Cut Pan To 2" QA
1 3GRP Auto Model 85-16M Sherwood, OR Coffee House 16518-IN
Freight
1 SM90 Grinder Bellevue, WA Coffee House 16548-IN
1 SM90 Grinder
Freight
1 SM90 Grinder Sherwood, OR Coffee House 16596-IN
1 SM90 Grinder
Freight
1 SM90 Grinder Bellevue, WA Coffee House 16636-IN
1 SM90 Grinder
Freight
Lessee's Initials /s/ HW Lessor's Initials Page 3 of 8
-------- -----
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C> <C>
2 Cut Pan to 2" QA 28.80
1 Knock Box For Espresso 16.20
1 Labor 500.00
1 Labor 400.00
2 Hotel Pan Sixth SZ 4" DP S/S 13.60
1 Slide Door Merchandiser, Black 1,810.40
1 One Year Warranty 87.48
1 Plain white Sign for GDM47 0.00
1 Freight-Contract ---------- 178.12
$32,665.93
1 Slide Door merchandiser Black 1,810.40
1 One Year Warranty 87.48
1 Freight-Contract 201.43
1 Labor ---------- 80.00
$2,179.31
1 48" Sandwich Top Unit 1,463.83
1 Freight-Contract 48.79
1 Warranty Compressor 69.00
1 Labor Warranty, 1 Year Service ---------- 135.00
$1,716.62
13 bain marie 2Qt. 138.97
2 Knock Box For Espresso 32.40
4 Hotel Pan, Sixth SZ, 4 DP S/S 27.20
4 Cut Pan To 2" QA ---------- 57.60
$256.17
1 3GRP Auto Model 85-16M 4,500.00
Freight ---------- 90.00
$4,590.00
1 SM90 Grinder 350.00
1 SM90 Grinder 350.00
Freight ---------- 76.00
$776.00
1 SM90 Grinder 350.00
1 SM90 Grinder 350.00
Freight ---------- 76.00
$776.00
1 SM90 Grinder 350.00
1 SM90 Grinder 350.00
Freight 74.00
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-002
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE August 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 3GRP Auto Model 85-16M Bellevue, WA Coffee House 116510-IN
Freight
1 3GRP AUTOMATIC MODEL 85-16M Bellevue, WA Coffee House 16970-IN
1 SM 90 Grinder
Freight
1 3GRP Automatic Model 85-16M Bellevue, WA Coffee House 16975-IN
1 SM 90 Grinder
Freight
1 3GRP Automatic Model 85-16M Bellevue, WA Coffee House 16974-IN
1 SM 90 Grinder
Freight
3 Menu Lettering On Plastic Laminate Sherwood, OR Northwest Sign Center 11749
Panel Provided by Client
1 Logo in Dimensional PVC with Vinyl
Detail on Plastic Laminate
Panel Provided by Client
7 7.75" x 15 D/F Black 6MM PVC Hanging
Sign For Area ID
3 Menu Lettering on Plastic Bellevue, WA Northwest Sign Center 11762
1 Logo
8 7.75 x 15 D/F Black MM
3 Menu Lettering on Plastic Bellevue, WA Northwest Sign Center 11763
1 Logo
8 7.75 x 15 D/F Black MM
1 One Single Face Sign, Routed Alumium Bellevue, WA Tube Art 15772
Lessee's Initials /s/ HW Lessor's Initials Page 4 of 8
-------- -----
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C>
---------
$774.00
1 3GRP Auto Model 85-16M 4,500.00
Freight --------- 100.00
$4,600.00
1 3GRP AUTOMATIC MODEL 85-16M 118256 4,500.00
1 SM 90 Grinder 9728 700.00
9725
Freight --------- 190.00
$5,390.00
1 3GRP Automatic Model 85-16M 118259 4,500.00
1 SM 90 Grinder 9738 700.00
9729
Freight --------- 190.00
$5,390.00
1 3GRP Automatic Model 85-16M 118258 4,500.00
1 SM 90 Grinder 9743 700.00
9742
Freight --------- 161.82
$5,361.82
3 Menu Lettering On Plastic Laminate 900.00
Panel Provided by Client
1 Logo in Dimensional PVC with Vinyl
Detail on Plastic Laminate 350.00
Panel Provided by Client
7 7.75" x 15 D/F Black 6MM PVC Hanging 245.00
Sign For Area ID ---------
$1,495.00
3 Menu Lettering on Plastic 900.00
1 Logo 350.00
8 7.75 x 15 D/F Black MM --------- 280.00
$1,530.00
3 Menu Lettering on Plastic 900.00
1 Logo 350.00
8 7.75 x 15 D/F Black MM --------- 280.00
$1,530.00
1 One Single Face Sign, Routed Alumium 10,450.00
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-002
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE August 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
Face With Push Thru Copy For North
Elevation.
One Single Face Sign, Routed Alumium
Face With Push Thru Copy For East
Elevation.
1 Permit To Install Signage Bellevue, WA Tube Art 9-15772
1 Manufactured Two Sets of Logos, Bellevue, WA Tube Art 6-48581
1st Surface Vinyl 12" H Logo
1 Manufactured And Installed One Set Sherwood, OR Tube Art 15799
14 to 41 Channel Letters With Clear
Faces and Yellow Vinyl Overlay.
One Double Face Hanging Window
Display.
1 Permits To Install Signage Bellevue, WA Tube Art 9-15754
2 13-3/8" x 5' Single Face Tenant Panel Bellevue, WA Tube Art 157721
For Existing Monument Sign.
1 Casework Bellevue, WA RBI Construction 90673
Light fixtures
Granite Counter Top
1 Casework Bellevue, WA RBI Construction 90674
Light Fixtures
Granite Counter Top
1 Deductive Change Order
1 Change Order #1 F F & E Bellevue, WA RBI Construction 90675
Casework Revision
1 Change Order #3 F F & E
Repair Existing Baking Oven
1 Single Sided Bread Rack Portland, OR Westwood Mfg. 353-R
1 Marsee Tables Sherwood, OR Westwood Mfg. 347-R
Lessee's Initials /s/ HW Lessor's Initials Page 5 of 8
-------- -----
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C> <C>
Face With Push Thru Copy For North
Elevation.
One Single Face Sign, Routed Alumium
Face With Push Thru Copy For East
Elevation. ----------
$10,450.00
1 Permit To Install Signage ---------- 140.00
$140.00
1 Manufactured Two Sets of Logos, 600.00
1st Surface Vinyl 12" H Logo ----------
$600.00
1 Manufactured And Installed One Set 8,091.00
14 to 41 Channel Letters With Clear
Faces and Yellow Vinyl Overlay.
One Double Face Hanging Window
Display. ----------
$8,091.00
1 Permits To Install Signage ---------- 140.00
$140.00
2 13-3/8" x 5' Single Face Tenant Panel 1,198.00
For Existing Monument Sign. ----------
$1,198.00
1 Casework 48,440.00
Light fixtures 3,875.00
Granite Counter Top ---------- 3,977.00
$56,252.00
1 Casework 50,010.00
Light Fixtures 5,390.00
Granite Counter Top 4,643.00
1 Deductive Change Order ---------- (9,442.00)
$50,601.00
1 Change Order #1 F F & E 4,662.90
Casework Revision
1 Change Order #3 F F & E 1,369.36
Repair Existing Baking Oven ----------
$6,032.26
1 Single Sided Bread Rack ---------- 2,275.00
$2,275.00
1 Marsee Tables 9,592.00
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-002
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE August 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 Deposit
10 Blac Crackle Table Base Sherwood, OR Kalberer 64641
16 Blac Crackle Table Base
1 Freight Contract
10 Black Crackle Table Base
1 Freight Contract
6 Black Crackle Table Base
1 Freight Contract
1 Freezer, One Door Issaquah, OR Kalberer 63870
1 Compressor Warranty
1 Labor Warranty
3 Tray Rack, Flange
1 Undercounter Dishwasher w Booster
1 48" Non refrigerated Pastry Case
1 Display Case
1 Display Case Cake refrigerated
1 Breugers Case Refrigerated
1 Tomatoe [sic] King 3/16" Cut
1 Tomatoe [sic] King Blades
1 Focacia Toaster Countertop
1 Scale
1 Bread Slicer 1/2" Slice Chrome
1 Undercounter Refrigerator
1 Warranty Labor 1 Year
5 Bain Marie 2 QT.
2 Cut pan to 2" OA
1 Knock Box For Espresso
9 Black Crackle Table base
2 Hotel Pan Sixth SZ
1 Slide Door Merchandiser Black
1 One Year labor Warranty
4 Plain White Sign For GDM47
1 2 QT Bain marie
1 Labor; Delivery, Install Federal cases
1 Labor: Delivery, Install, Equipment
1 Freight For True GDM47
Freight For Bread Slicer
Lessee's Initials /s/ HW Lessor's Initials Page 6 of 8
-------- -----
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C> <C>
1 Deposit --------- (2,398.00)
$7,194.00
10 Blac Crackle Table Base 830.70
16 Blac Crackle Table Base 1,820.00
1 Freight Contract 211.97
10 Black Crackle Table Base 691.20
1 Freight Contract 129.20
6 Black Crackle Table Base 598.74
1 Freight Contract --------- 75.20
$4,357.01
1 Freezer, One Door 1,659.00
1 Compressor Warranty 79.31
1 Labor Warranty 128.75
3 Tray Rack, Flange 183.99
1 Undercounter Dishwasher w Booster 3,281.00
1 48" Non refrigerated Pastry Case 3,604.49
1 Display Case 6,199.25
1 Display Case Cake refrigerated 5,975.00
1 Breugers Case Refrigerated 4,201.00
1 Tomatoe [sic] King 3/16" Cut 152.50
1 Tomatoe [sic] King Blades 16.20
1 Focacia Toaster Countertop 369.90
1 Scale 403.00
1 Bread Slicer1/2" Slice Chrome 3,731.40
1 Undercounter Refrigerator 1,106.62
1 Warranty Labor 1 Year 102.60
5 Bain Marie 2 QT. 53.45
2 Cut pan to 2" OA 28.80
1 Knock Box For Espresso 16.20
9 Black Crackle Table base 622.08
2 Hotel Pan Sixth SZ 13.60
1 Slide Door Merchandiser Black 1,810.40
1 One Year labor Warranty 87.48
4 Plain White Sign For GDM47 0.00
1 2 QT Bain marie 42.76
1 Labor; Delivery, Install Federal cases 500.00
1 Labor: Delivery, Install, Equipment 400.00
1 Freight For True GDM47 178.12
Freight For Bread Slicer 65.00
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-002
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE August 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 Freezer, One Door Bellevue, OR Kalberer 63873-A
1 Compressor warranty 5Year
1 One year labor Warranty
3 Tray rack, Flange Support
1 Under Counter Dishwasher w Booster
1 Breugers Case refrigerated
1 5'0" non Refrigerated pastry Case
2 Display Case (Cake, Deli, Focacia)
1 Tomatoe [sic] King 3/16" Cut
1 Tomato King Blades
1 Focacia Toaster Countertop
1 Scale
1 Bread Slicer,1/2" Slice Chrome
1 Undercounter Refrigerator
1 warranty Labor 1 Year
9 Bain Marie 2 QT.
2 Cut pan to 2" OA
1 knock box for Esspresso
1 Labor-Install Federal Cases
1 Labor-Install Equipment
2 Hotel Pan, Sixth SZ, 4 DP S/S
1 Freight-For Berkel Slicer Shipped
1 Baxter Single Oven Rack Sherwood, OR Bakery Equipment
Freight
Furniture & Elec. Fixtures Salem, OR Baumgart 864
Furniture Belleve, WA 842
Furniture Belleve, WA 863
Furniture Belleve, WA 841
Furniture Belleve, WA 865
Lessee's Initials /s/ HW Lessor's Initials Page 7 of 8
-------- -----
<PAGE>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C> <C>
$35,011.90
1 Freezer, One Door 1,659.00
1 Compressor warranty 5Year 87.48
1 One year labor Warranty 194.40
3 Tray rack, Flange Support 203.61
1 Under Counter Dishwasher w Booster 3,281.00
1 Breugers Case refrigerated 4,201.00
1 5'0" non Refrigerated pastry Case 3,771.00
2 Display Case (Cake, Deli, Focacia) 12,398.50
1 Tomatoe [sic] King 3/16" Cut 153.90
1 Tomato King Blades 16.20
1 Focacia Toaster Countertop 369.90
1 Scale 403.00
1 Bread Slicer,1/2" Slice Chrome 3,731.40
1 Undercounter Refrigerator 1,106.62
1 warranty Labor 1 Year 102.60
9 Bain Marie 2 QT. 96.21
2 Cut pan to 2" OA 28.80
1 knock box for Esspresso 16.20
1 Labor-Install Federal Cases 500.00
1 Labor-Install Equipment 400.00
2 Hotel Pan, Sixth SZ, 4 DP S/S 13.60
1 Freight-For Berkel Slicer Shipped 65.00
$32,799.42
1 Baxter Single Oven Rack 350.00
Freight 98.85
$448.85
Furniture & Elec. Fixtures 45,919.00
Furniture 16,907.00
Furniture 2,674.06
Furniture 2,730.00
Furniture 443.00
$68,673.06
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-002
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE August 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. INVOICE INVOICE DATE
AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C> <C>
-----------
GRAND TOTAL $434,577.06
Lessee's Initials /s/ HW Lessor's Initials Page 8 of 8
-------- -----
</TABLE>
<PAGE>
LINC CAPITAL, INC. LINC Capital, Inc.
EQUIPMENT SCHEDULE 303 East Wacker Drive
SCHEDULE NO. 003 Chicago, Illinois 60601
(312) 946-1000
- --------------------------------------------------------------------------------
Equipment Location: 2287 N.W. PETTYGROVE Master Lease Agreement No.: 7217
PORTLAND, OR 97210 ------------------------------------
(See Attached) Acceptance Date: September 30, 1998
- --------------------------------------------------------------------------------
LINC CAPITAL, INC. (Lessor) hereby agrees to lease to the Lessee named below,
and Lessee hereby agrees to lease and rent from Lessor the Equipment identified
below, for the term and at the rental payments specified herein, all subject to
the terms and conditions set forth herein and on the reverse side hereof and in
the referenced Master Lease Agreement except as the same may be varied by the
terms of this Schedule.
================================================================================
- --------------------------------------------------------------------------------
Equipment Description: The Equipment will Cost of Equipment:
consist of FURNITURE, FIXTURES AND EQUIPMENT $366,493.58
as more fully described on Schedule "A"
attached hereto and made a part hereof.
- --------------------------------------------------------------------------------
================================================================================
TERM AND RENTAL:
- ---------------------------------------- ---------------------------------------
Commencement Date: Initial Payment: $24,153.40 Initial Lease Term:
October 1, 199 (COVERING FIRST AND LAST 36 months
RENTAL PAYMENTS
- ---------------------------------------- ---------------------------------------
Rental Payments*(plus, if applicable all sales, use or other taxes imposed upon
rental payments) shall be made monthly in advance as follows: $12,076.70 per
rental payment beginning on the Commencement Date until THIRTY-SIX (36) rental
payments have been paid in full followed by either (i) a 37th rental payment of
$36,649.36 or (ii) provided that no Event of Default has occurred and is
continuing under the Lease in lieu of making the foregoing 37th rental payment,
Lessee may elect, by written notice issued to Lessor on or before the due date
of the 34th rental payment, to pay a sum equal to $3,664.94 on the due date of
the 37th rental payment and a like rental payment sum on the next 11 consecutive
rental payment dates respectively and upon such election the Initial Lease Term
shall be deemed to have been extended by 12 months.
*Rental Payments are based on the Lease Rate Factor and are subject to
adjustment as described in Paragraph A on the REVERSE SIDE HEREOF. If
applicable, all freight, sale sand use taxes, insurance and maintenance expense
paid by Lessor shall be paid by Lessee in accordance with the terms of the Lease
and this Schedule.
================================================================================
PROPERTY TAXES: Lessor shall report all Equipment for personal property or
advalorem tax return purposes as may be required under applicable law, and all
resulting taxes shall be paid by Lessee.
================================================================================
<PAGE>
================================================================================
END OF TERM OPTIONS: At the end of the initial lease term the following options
are granted to Lessee in accordance with the terms described on the reverse side
hereof:
OPTION TO RENEW the Initial Lease Term at a Rental equal to the FAIR RENTAL
VALUE (not less than 1%) renewal each month for a Renewal Period of Twelve (12)
months.
OPTION TO PURCHASE not less than all of the Equipment at the end of the Initial
Lease Term (as described above including any extension thereof) at a Purchase
Option Price equal to the then FAIR MARKET VALUE (not less than 10%) of the
Equipment.
================================================================================
ADDITIONAL TERMS AND CONDITIONS TO THIS EQUIPMENT SCHEDULE ARE ON THE REVERSE
SIDE HEREOF.
The person executing this Lease for and on behalf of Lessee warrants and
represents, which warrant and representation shall survive the expiration or
termination of this Lease, that this Lease and the execution hereof has been
duly and validly authorized by Lessee, constitutes a valid and binding
obligation of Lessee and that he has authority to make such execution for and on
behalf of Lessee.
Lessee: ACCEPTED AT CHICAGO, ILLINOIS BY LESSOR:
Oregon Baking Corporation, LINC CAPITAL, INC
dba Marsee Baking
By: /s/ Howard Wasserteil By: /s/ William F. DeMans
---------------------- ----------------------
Title: Exec VP Title: Senior V.P.
------------------- -------------------
Date: 9/30/98 Date:
-------------------- --------------------
This lease (and Equipment Schedule and Master Lease the terms of which
it incorporates) has been assigned, is subject to the security
interests of, and is held in trust for the benefit of Fleet Bank NA,
as Agent, pursuant to the terms and conditions of a security agreement
dated September 28, 1994 and related documents (as the same may be
amended).
<PAGE>
Lease No 7217-003
BILL OF SALE
(See Attached Schedule A)
KNOW ALL PEOPLE BY THESE PRESENTS, that Oregon Baking Corporation, dba Marsee
Baking, an Oregon corporation; having its principal office and place of business
at 2287 NW Pettygrove, Portland, OR 97210 (herein, the "Seller"), for and in
consideration of the sum of Ten Dollars ($10.00) and other good and valuable
consideration received from LINC CAPITAL, INC., having its principal office and
place of business at 303 East Wacker Drive, Chicago, Illinois 60601 (herein, the
"Buyer"), the receipt and sufficiency of which is hereby acknowledged, has
bargained, sold, transferred, assigned, set over and conveyed, and by these
presents does bargain, sell, transfer, assign, set over and convey unto the
Buyer, its successors and assigns, the personal property described in Schedule A
attached hereto (the "Equipment"), TO HAVE AND TO HOLD the Equipment unto the
Buyer, its successors and assigns, to its and their own use and behalf forever.
Seller hereby represents and warrants to Buyer that Seller is the absolute owner
of the Equipment, that the Equipment is free and clear of all liens, charges and
encumbrances and that Seller has full right, power and authority to sell the
Equipment and to make this Bill of Sale. Seller hereby represents, warrants and
covenants to and with Buyer on the date hereof that:
(1) Seller has full power, authority and legal right to make and perform its
obligations under this Bill of Sale; and the execution, delivery and performance
thereof have been duly authorized by all necessary actions on the part of
Seller, and do not require any approval or consent of any equity interest
holders of Seller or any trustee or holder of any indebtedness or obligation of
Seller or such required approval and consents have heretofore been duly obtained
by Seller; (2) the execution, delivery and making of this Bill of Sale by Seller
does not contravene any law, governmental rule, regulation, order or ordinance
of any internal governmental entity having jurisdiction over this matter; (3)
the execution and delivery of this Bill of Sales does not contravene any
provision of any internal organizational instruments of Seller including any
applicable Certificate of Incorporation by Bylaws, Certificate of Limited
Partnership, and does not and will not result in any breach of or constitute a
default under any indenture, mortgage, contract, agreement or instrument to
which Seller is a party or by which it or its property is bound; (4) the
obligations set forth in this Bill of Sale are valid and binding obligations,
enforceable in accordance with their terms against Seller, except as such
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditor's rights or general principles of equity; (5) ALL SALES,
TRANSFER, FRANCHISE OR SIMILAR TAXES IMPOSED UPON SELLER IN CONECTION WITH THE
ACQUISITION OF THE EQUIPMENT BY SELLER FROM ITS SUPPLEIRS WILL HAVE BEEN PAID ON
THE DATE HEREOF AND ALL SUCH TAXES DUE WITH RESPECT TO THE EXECUTION AND
DELIVERY OF THIS BILL OF SALE WILL BE PAID BY SELLER AND SELLER AGREES TO
PROVIDE BUYER WITH EVIDENCE THAT ALL SUCH SALES TAXES HAVE BEEN PAID; (6) there
are no pending, or to the knowledge of Seller, threatened actions or proceedings
before any court or administrative agency which will materially adversely affect
the condition, business or operation of Seller or the ability of Seller to
perform its obligations under this Bill of Sale; and (7) Seller will make
appropriate notations on its books and records indicating that the sale of
Equipment to Buyer pursuant to this Bill of Sale.
Seller hereby further covenants with Buyer that: (1) Seller shall pay or obtain,
as the case may be, when due, all sales, use, property or other taxes (other
than taxes based on the net income of Buyer), licenses, tolls, inspection or
other fees, bonds, permits or certificates now or hereafter imposed by or
required to be paid or obtained to or from any jurisdiction in connection with
the sale of the Equipment by Seller to Buyer; (2) Seller hereby assigns to Buyer
all warranties and representations of the manufacturer(s) of the Equipment or
suppliers of the Equipment to Seller, to the extent assignable and to the extent
such warranties and representations are not assignable, Seller agrees to enforce
such representations and warranties for the benefit of Buyer; (3) Seller hereby
covenants that with respect to any item of Equipment at the time of sale to
Buyer that is subject to the lien of any third party claiming through Seller,
Seller shall obtain the written agreement of such third parties to release all
such said liens; and (4) Seller hereby agrees to indemnify Buyer and protect,
defend and hold it harmless from and against any and all loss, cost, damage,
injury or expense, including without limitation, reasonable attorneys' fees
wheresoever and howsoever arising which Buyer may incur by reason of any
material breach by Seller or any of the representations by, or obligations of
Seller set forth herein.
<PAGE>
EXCEPT AS SPECIFICALLY SET FORTH IN A SEPARATE AGREEMENT OR IN THIS BILL OF SALE
THERE ARE NO WARRANTIES OR REPRESENTATIONS OF ANY KIND OR NATURE, EXPRESS OR
IMPLIED, CONCERNING THE EQUIPMENT, ITS CONDITION, ITS FITNESS FOR A PARTICULAR
PURPOSE, OR ITS MERCHANTABILITY.
Seller, for itself and its successors and assigns further covenants and agrees
to do, execute and deliver, or to cause to be done, executed and delivered, all
such further acts, transfers and assurances, for the better assuring, conveying
and confirming unto Buyer and its successors and assigns, all and singular, the
Equipment hereby bargained, sold, assigned, transferred, set over and conveyed,
as Buyer and its successors and assigns shall request.
This Bill of Sale and the representations, warranties, and covenants herein
contained shall inure to the benefit of Buyer and its successors and assigns,
shall be binding upon Seller and its successors, assigns and transferees, and
shall survive the execution and delivery hereof.
IN WITNESS HEREOF, Seller has caused this Bill of Sale to be executed as of
September 30, 1998 by its duly authorized officers or representatives.
Accepted in Chicago, IL by:
SELLER: Oregon Baking Corporation, BUYER: LINC CAPITAL, INC.
dba Marsee Baking /s/ William F. DeMans
--------------------------
By: /s/ Howard Wasserteil By:
-----------------------
Name: Howard Wasserteil Name: William F. DeMans
--------------------- ---------------------
Title: Exec VP Title: Senior VP.
-------------------- ---------------------
<PAGE>
Lease No 7217-003
SCHEDULE A
to
BILL OF SALE
between
Oregon Baking Corporation, dba Marsee Baking, as Seller
and
LINC CAPITAL, INC. as Buyer
Attached hereto is the Schedule of personal property constituting the Equipment
which is the subject matter of the Bill of Sale between Seller and Buyer.
SELLER: Oregon Baking Corporation, dba Marsee Baking
BY: /s/ Howard Wasserteil
NAME: Howard Wasserteil
TITLE: Exec VP
<PAGE>
EQUIPMENT ACCEPTANCE CERTIFICATE LINC CAPITAL, INC.
303 East Wacker Drive
Chicago, Illinois 60601
(312) 946-1000
Master Lease Agreement No 7217 between LINC Capital, Inc. ("Lessor") and Oregon
Baking Corporation, dba Marsee Baking ("Lessee")
Equipment Schedule No. 003
- --------------------------------------------------------------------------------
Equipment Description:
The "Equipment" consisting of FURNITURE, FIXTURES AND EQUIPMENT as more fully
described on Schedule "A" attached hereto and made part hereof.
- --------------------------------------------------------------------------------
To Whom it May Concern:
The undersigned, being a duly authorized officer or agent of the Lessee, hereby
(i) certifies that all of the above-referenced equipment (the "Equipment") has
been delivered and inspected, is of an acceptable size, design, capacity and
manufacture, is in good working order, repair and condition, and has been
installed to the satisfaction of Lessee; and (ii) unconditionally accepts the
Equipment "AS IS," "WHERE IS," for all purposes of the Lease.
It is understood and agreed by Lessee that LINC Capital, Inc. and its successors
and assigns in no way or manner assumes any responsibility, either now or
hereafter, for the use, performance, functioning, maintenance or service of the
Equipment, or for its suitability or adaptability for any particular purpose.
Your identification decals will be attached indicating your ownership of the
above equipment upon written request made to us.
Acceptance Date as defined in Section 1 of the Lease shall be September 30,
1998.
Oregon Baking Corporation, dba Marsee Baking
Lessee
By: /s/ Howard Wasserteil
----------------------
Title: Exec VP
-------------------
Date: 10/1/98
--------------------
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-003
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE October 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 *BG Marsee Install 1 Ballard, WA Kalberer 3132589
Installation Marsee Bakery
1 *BG Marsee Install 1
Installation Marsee Bakery
1 Labor-Install Federal Cases Bellevue, WA Kalberer 17000510
1 Labor-Install Equipment
1 Freezer Burien, WA Kalberer 64450
1 Compressor Warranty 5 YR
1 1 YR Labor Warranty
3 Tray Rack, Flange Support
1 Undercounter Dishwasher
1 Tomato King
1 Tomato King Blades
1 Focacia Toaster
1 Scales
1 Bread Slicer
1 Undercounter Refrigerator
1 Warranty
9 Bain Marie
2 Cut Pan
1 Knock Box for Espresso
2 Hotel Pan
1 Slide kDoor Merchandiser
1 Plain White Sign
1 1YR Warranty
1 Freight True
1 Freight for Berkel Slicer
1 Freezer Ballard, WA Kalberer 64451
1 Compressor Warranty 5 YR
1 1 YR Labor Warranty
3 Tray Rack, Flange Support
Lessee's Initials /s/ HW Lessor's Initials 1
-------- -----
<PAGE>
<CAPTION>
INVOICE INVOICE DAT
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
1 *BG Marsee Install 1 500.00
Installation Marsee Bakery
1 *BG Marsee Install 1 400.00
-------------
Installation Marsee Bakery $900.00
1 Labor-Install Federal Cases 500.00
1 Labor-Install Equipment 400.00
-------------
$900.00
1 Freezer 1,659.00
1 Compressor Warranty 5 YR 87.48
1 1 YR Labor Warranty 194.40
3 Tray Rack, Flange Support 203.61
1 Undercounter Dishwasher 3,281.00
1 Tomato King 153.90
1 Tomato King Blades 16.20
1 Focacia Toaster 369.90
1 Scales 403.00
1 Bread Slicer 3,731.40
1 Undercounter Refrigerator 1,106.62
1 Warranty 102.60
9 Bain Marie 96.21
2 Cut Pan 28.80
1 Knock Box for Espresso 16.20
2 Hotel Pan 13.60
1 Slide kDoor Merchandiser 1,810.40
1 Plain White Sign 0.00
1 1YR Warranty 87.48
1 Freight True 178.12
1 Freight for Berkel Slicer 65.00
-------------
$13,604.92
1 Freezer 1,659.00
1 Compressor Warranty 5 YR 87.48
1 1 YR Labor Warranty 194.40
3 Tray Rack, Flange Support 203.61
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-003
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE October 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 Undercounter Dishwasher
1 Tomato King
1 Tomato King Blades
1 Focacia Toaster
1 Scales
1 Bread Slicer
1 Undercounter Refrigerator
1 Warranty
9 Bain Marie
2 Cut Pan
1 Knock Box for Espresso
2 Hotel Pan
1 Slide kDoor Merchandiser
1 Plain White Sign
1 1YR Warranty
1 Freight True
1 Freight for Berkel Slicer
1 Breugers Case Refrigerated Burien, WA Kalberer 65383
1 5'0" Non Refrigerated Pastry Case
2 Display Cases
1 Breugers Case Refrigerated Ballard, WA Kalberer 65384
1 5'0" Non Refrigerated Pastry Case
2 Display Cases
1 Breugers Case Refrigerated Bellevue, WA Kalberer 65385
1 5'0" Non Refrigerated Pastry Case
2 Display Cases
Lessee's Initials /s/ HW Lessor's Initials 2
-------- -----
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
1 Undercounter Dishwasher 3,281.00
1 Tomato King 153.90
1 Tomato King Blades 16.20
1 Focacia Toaster 369.90
1 Scales 403.00
1 Bread Slicer 3,731.40
1 Undercounter Refrigerator 1,106.62
1 Warranty 102.60
9 Bain Marie 96.21
2 Cut Pan 28.80
1 Knock Box for Espresso 16.20
2 Hotel Pan 13.60
1 Slide kDoor Merchandiser 1,810.40
1 Plain White Sign 0.00
1 1YR Warranty 87.48
1 Freight True 178.12
1 Freight for Berkel Slicer 65.00
------------
$13,604.92
1 Breugers Case Refrigerated 4,201.00
1 5'0" Non Refrigerated Pastry Case 3,771.00
2 Display Cases 6,199.25
6,199.25
------------
$20,370.50
1 Breugers Case Refrigerated 4,201.00
1 5'0" Non Refrigerated Pastry Case 3,771.00
2 Display Cases 6.199.25
6.199.25
------------
$20,370.50
1 Breugers Case Refrigerated 4,201.00
1 5'0" Non Refrigerated Pastry Case 3,771.00
2 Display Cases 6.199.25
------------
$20,370.50
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-003
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE October 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
5 4 Top Frunc Tables Chairs, Inc. 112751
20 Euro Chairs Black
6 Euro Lower Poles
4 burgandy/Forest green Sun US
Umbrella
4 Umbrella Stands
4 Silk Screen Umbrellas
20 Paint Chairs from Natural Black
1 Shipping of Umbrellas
1 Automatic Model 85-16M Issaquah, WA Coffee House Supply 0017232-IN
Freight
1 3GRP Automatic Model 85-16M Burien, WA Coffee House Supply 00017265-IN
Freight
Casework Burien, WA RBI Construction 90693
Light Fixtures
Granite Counter Tops
Manufactured and Installed: Bellevue, WA Tube Art 0-15816
1 One Single Face Oval Logo Wall
Sign
1 One Double Face Window Sign
Two Single Face Product Signs
1 One Standard Set Of Door Vinyl
Quote
Credit Of Overpayment Of Tax From
Invoice #0-15754 Revised-108th
1 One Single Face Logo Salem, OR Tube Art 0-15824
2 Single Face Product
2 Double Face Window
Lessee's Initials /s/ HW Lessor's Initials 3
-------- -----
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
5 4 Top Frunc Tables 950.00
20 Euro Chairs Black 1,500.00
6 Euro Lower Poles 58.80
4 burgandy/Forest green Sun US 431.20
Umbrella
4 Umbrella Stands 100.00
4 Silk Screen Umbrellas 140.00
20 Paint Chairs from Natural Black 300.00
1 Shipping of Umbrellas 14.00
-------------
$3,494.00
1 Automatic Model 85-16M 4,500.00
Freight 150.00
-------------
$4,650.00
1 3GRP Automatic Model 85-16M 4,500.00
Freight 150.00
-------------
$4,650.00
Casework 45,752.00
Light Fixtures 5,127.00
Granite Counter Tops 3,572.00
-------------
$54,451.00
Manufactured and Installed:
1 One Single Face Oval Logo Wall
Sign
1 One Double Face Window Sign
Two Single Face Product Signs
1 One Standard Set Of Door Vinyl
Quote 8,903.00
Credit Of Overpayment Of Tax From (1,158.76)
-------------
Invoice #0-15754 Revised-108th $7,744.24
1 One Single Face Logo 2,193.00
2 Single Face Product 2,868.00
2 Double Face Window 3,618.00
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-003
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE October 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
2 Vinyl Window Logos
2 Vinyl Door Logos and one set of
Store Hours
1 Set of 10-14"/2'6' Sintra Bellevue, WA Tube Art 0-15825
non-Illuminated Letters
1 Double Face
Window Sign, Flat Faces, Vinyl Copy
3 Vinyl Logos and 2 sets of Store Hours
1 Set Channelume Letter Issaquah, WA Tube Art 0-15852
1 Product signs
1 Double Face Window Sign
2 Door Vinyl logos and One Set of Store
Hours
1 Set of Reverse Pan Channel Letters Bellevue, WA Tube Art 0-15816
1 Set of reverse pan Channel Letters Burien, WA Tube Art 0-15854
1 Set of product Signs
1 Door Vinyl Logo and One set of
Store Hours
1 Set of Sintra Letters
1 Set of Reverse Pan Channel Letters Burien, WA Tube Art 0-15853
3 Window Logos and 2 Sets of
Store Hours
Added Vinyl "Marsee Baking"
Clock Face
Refaced Existing Circular Clock sign
2 Single Face wall Logo Oval signs
2 Sets Product Copy EA Panel
Lessee's Initials /s/ HW Lessor's Initials 4
-- ----- -----
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
2 Vinyl Window Logos 250.00
2 Vinyl Door Logos and one set of 300.00
Store Hours
------------
$9,229.00
1 Set of 10-14"/2'6' Sintra 1,698.00
non-Illuminated Letters
1 Double Face 1,269.00
Window Sign, Flat Faces, Vinyl Copy
3 Vinyl Logos and 2 sets of Store Hours 500.00
------------
$3,467.00
1 Set Channelume Letter 7,669.00
1 Product signs 3,050.00
1 Double Face Window Sign 1,859.00
2 Door Vinyl logos and One Set of Store 300.00
------------
Hours $12,878.00
1 Set of Reverse Pan Channel Letters 8,338.00
------------
8,338.00
1 Set of reverse pan Channel Letters 7,936.00
1 Set of product Signs 3,050.00
1 Door Vinyl Logo and One set of 200.00
Store Hours
1 Set of Sintra Letters 1,857.00
------------
$13,043.00
1 Set of Reverse Pan Channel Letters 8,552.00
3 Window Logos and 2 Sets of 575.00
Store Hours
Added Vinyl "Marsee Baking" 125.00
Clock Face
Refaced Existing Circular Clock sign 973.00
2 Single Face wall Logo Oval signs 4,622.00
2 Sets Product Copy EA Panel 5,814.00
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-003
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE October 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 Set Reverse Pan Letters @ 10024.00 Bellevue, WA Tube Art 158251
Removed and Painted Non-Illuminated
Letters @ 382.00
2 Single Face Product Signs @ 3050.00
Front Servery, Uppers w/Display Issaquah, WA Baumgart Construction 843
Shelves w/Working Cabinets
Espresso Screen, Federal case
Baskets
Back Servery, Menu Cabinet, Board
and Frame, Condiment and Trash
Tables and Steel Bread Rack
Tile Counter Tops
Light Fixtures
Order Charge
Front Servery, Uppers w/ Display Burien, WA Baumgart Construction 847
Shelves w/ Working Cabinets,
Espresso Screen, Federal case
Baskets
Back Servery, Menu Cabinet, Board
and Frame, Condiment and Trash
Tables and Steel Bread Rack
Title Counter Tops
Light Fixtures
Order Charge
3 Menu lettering on Plasic [sic] Laminate Issaquah, WA Northwest Sign Center 11793
Panel provided by Client
1 Logo In Dimensional PVC with Gold
Detail on Plastic Laminate Panel
Provided by Client
Lessee's Initials /s/ HW Lessor's Initials 5
-------- -----
<PAGE>
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
1 Set Reverse Pan Letters @ 10024.00 13,456.00
Removed and Painted Non-Illuminated
Letters @ 382.00
2 Single Face Product Signs @ 3050.00
--------------
$13,456.00
Front Servery, Uppers w/Display 28,470.00
Shelves w/Working Cabinets
Espresso Screen, Federal case
Baskets
Back Servery, Menu Cabinet, Board 17,696.00
and Frame, Condiment and Trash
Tables and Steel Bread Rack 5,184.00
Tile Counter Tops 3,919.00
Light Fixtures 4,192.00
Order Charge (1,799.00)
--------------
$57,662.00
Front Servery, Uppers w/ Display 25,092.00
Shelves w/ Working Cabinets,
Espresso Screen, Federal case
Baskets
Back Servery, Menu Cabinet, Board 12,271.00
and Frame, Condiment and Trash
Tables and Steel Bread Rack 6,633.00
Title Counter Tops 4,469.00
Light Fixtures 4,192.00
Order Charge 4,727.00
--------------
$57,384.00
3 Menu lettering on Plasic [sic] Laminate 900.00
Panel provided by Client
1 Logo In Dimensional PVC with Gold 350.00
Detail on Plastic Laminate Panel
Provided by Client
</TABLE>
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7217-003
Oregon Baking Corp. dba Marsee Baking
COMMENCEMENT DATE October 1, 1998
<TABLE>
<CAPTION>
INVOICE
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR NO. PO NO.
<S> <C> <C> <C> <C> <C>
8 D/F Black 6mm PVC Hanging Sign
for Area ID
1 Acrylic Panel for Drink Case
3 Menu lettering on Plasic [sic] Laminate Issaquah, WA Northwest Sign Center 11795
Panel provided by Client
1 Logo in Dimensional PVC with Gold
Detail on Plastic Laminate Panel
Provided by Client
8 D/F Black 6mm PVC Hanging Sign
for Area ID
1 Acrylic Panel for Drink Case
3 Menu Lettering on Plastic Laminate Ballard, WA Northwest Sign Center 11794
Panel Provided by Client
Logo in Dimensional PVC with Gold
Detail on Plastic Laminate
8 D/F Black 6mm PVC Hanging Sign
for Area ID
1 Acrylic Panel For Drink Case
1 Black Sandwich Board
Lessee's Initials /s/ HW Lessor's Initials 6
-------- -----
<PAGE>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. AMOUNT BREAKDOWN PAID AMOUNT PAID
<S> <C> <C> <C> <C> <C> <C>
8 D/F Black 6mm PVC Hanging Sign 280.00
for Area ID
1 Acrylic Panel for Drink Case 75.00
---------------
$1,605.00
3 Menu lettering on Plasic [sic] Laminate 900.00
Panel provided by Client
1 Logo in Dimensional PVC with Gold 350.00
Detail on Plastic Laminate Panel
Provided by Client
8 D/F Black 6mm PVC Hanging Sign 280.00
for Area ID
1 Acrylic Panel for Drink Case 75.00
---------------
$1,605.00
3 Menu Lettering on Plastic Laminate 900.00
Panel Provided by Client
Logo in Dimensional PVC with Gold 350.00
Detail on Plastic Laminate
8 D/F Black 6mm PVC Hanging Sign 280.00
for Area ID
1 Acrylic Panel For Drink Case 75.00
1 Black Sandwich Board 450.00
---------------
$2,055.00
---------------
Grand Total $366,493.58
</TABLE>
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NO
SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR (ii)
AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED, EXCEPT THAT NO SUCH OPINION SHALL BE
REQUIRED IF SUCH SALE IS PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT.
WARRANT TO PURCHASE
SHARES OF SERIES C CONVERTIBLE PREFERRED STOCK
----------------------------------------------
THIS CERTIFIES THAT, for value received LINC CAPITAL, INC., is entitled
to subscribe for and purchase 1,500 shares (as adjusted pursuant to provisions
hereof, the "SHARES") of the fully paid and nonassessable SERIES C CONVERTIBLE
PREFERRED STOCK of OREGON BAKING CORPORATION, DBA MARSEE BAKING, an Oregon
corporation (the "Company"), at a price per share of 40.00 (such price and such
other price as shall result from time to time, from adjustments specified herein
is herein referred to as the "WARRANT PRICE") subject to the provisions and upon
the terms and conditions hereinafter set forth. As used herein, the "PREFERRED
STOCK" shall mean the Company's presently authorized SERIES C CONVERTIBLE
PREFERRED STOCK, and any stock into or for which such SERIES C CONVERTIBLE
PREFERRED STOCK may hereafter be converted or exchanged pursuant to the
Certificate of Incorporation of the Company as from time to time amended as
provided by law and in such Certificate, and the term "GRANT DATE" shall mean
APRIL 17, 1998. THE COMPANY ACKNOWLEDGES THAT THE CASH CONSIDERATION PAID BY
HOLDER FOR THIS WARRANT IS $50.00 FOR INCOME TAX PURPOSES.
In the event that all of the Preferred Stock is converted into Common
Stock, this Warrant shall be exercisable solely for such Common Stock, and any
reference throughout this Warrant to shares of Preferred Stock shall be deemed
to refer to the shares of Common Stock into which the Preferred Stock may be
converted.
1. TERM. The purchase rights represented by this Warrant are exercisable, in
whole or in part, at any time and from time to time and after the Grant Date and
on or prior to the tenth anniversary of the Grant Date.
2. METHOD OF EXERCISE; NET ISSUE EXERCISE
2.1 METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. The purchase
rights represented by this Warrant may be exercised by the holder of this
Warrant, in whole or in part and from time to time, by the surrender of this
Warrant (with the notice of exercise from attached hereto as ANNEX A duly
executed) at the principal office of the Company and by the payment to the
Company, by check, of an amount equal to the then applicable Warrant Price per
share multiplied by the number of Shares then being purchased. The holder of
this Warrant may make any exercise of this Warrant contingent upon the
consummation of a public offering of the Company's Common Stock under the
Securities Act of 1933, as amended (the "Act"). The person or persons in whose
name(s) any certificate(s) representing shares of Preferred Stock shall be
issuable upon exercise of this Warrant, shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the Shares represented thereby (and such Shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificate for the Shares so purchased
shall be delivered to the holder hereof as soon as possible (and in any event
within five days of receipt of such notice) and,
1
<PAGE>
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
hereof as soon as possible (and in any event within such five-day period).
2.2 NON-CASH EXERCISE.
(a) In lieu of payment in cash, the rights represented by this
Warrant may also be exercised by a written notice of exercise in the form of
ANNEX A attached hereto specifying that the holder of this Warrant wishes to
convert all or any portion of this Warrant (the "CONVERSION RIGHT") into a
number of Shares equal to the quotient obtained by dividing (x) the value of the
Shares subject to the portion of this Warrant being exercised (determined by
subtracting the aggregate Warrant Price for such Shares in effect immediately
prior to the exercise of the Conversion Right from the aggregate Fair Market
Value of the Shares issuable upon exercise of such portion of this Warrant
immediately prior to the exercise of the Conversion Right) by (y) the Fair
Market Value of one share of Preferred Stock immediately prior to the exercise
of the Conversion Right.
(b) For purposes of this Section 2.2, the "FAIR MARKET VALUE" of the
Company's Preferred Stock shall be equal to the number of shares of Common Stock
into which each such share of Preferred Stock is convertible at the time of such
determination multiplied by the average of the closing bid and asked prices of
the Company's Common Stock quoted in the Over-The-Counter Market Summary on the
Nasdaq National Market or the closing price quoted on any exchange on which the
Common Stock is listed whichever is applicable, as published in THE WALL STREET
JOURNAL for the ten trading days prior to the date of determination of Fair
Market Value. If the Common Stock is not traded Over-The-Counter or on an
exchange, the Fair Market Value shall be determined jointly and in good faith by
the Company and the holder hereof upon a review of all factors relevant to the
value of the Company as a going concern without applying any minority or
illiquidity discounts. If the Company and the holder hereof are unable to agree
upon Fair Market Value as provided above, the Fair Market Value shall be
determined based on the factors described above by an investment banker of
national reputation selected by the Company and reasonably acceptable to the
holder of this Warrant. The fees and expenses of such investment banker shall be
paid by the Company unless the Fair Market Value determined by such investment
banker is less than 100% of the Fair Market Value determined by the Company then
the fees and expenses of such investment banker shall be shared equally between
the Company and the holder hereof.
2.3 EXERCISE INTO COMMON STOCK. Upon any exercise of this warrant, at the
election of the holder, this Warrant may be exercised into the number of shares
of Common Stock into which the Shares issuable upon such exercise are then
convertible.
2.4 AUTOMATIC EXERCISE. To the extent this Warrant is not previously
exercised, and if the fair market value of the Company's Common Stock subject to
this warrant is greater than the Warrant price then in effect, this Warrant
shall be deemed automatically exercised pursuant to Section 2.2 above (even if
not surrendered) immediately before its expiration. For purposes of such
automatic exercise, the fair market value of the Company's Common Stock upon
such expiration shall be determined pursuant to Section 2.2(b) above. To the
extent this Warrant or any portion thereof is deemed automatically exercised
pursuant to this Section, the Company agrees to promptly notify the holder
hereof of the number of Shares, if any, the holder hereof is to receive by
reason of such automatic exercise.
2
<PAGE>
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be issued
upon the exercise of the rights represented by this Warrant and Common Stock
issuable upon conversion of the Preferred Stock will, upon issuance, be validly
issued, fully paid and nonassessable, issued in compliance with all applicable
federal and state securities laws, and free from all taxes, liens and charges
with respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized and reserved for the purpose of issuance upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Preferred Stock (and Common Stock issuable upon conversion thereof) to provide
for the exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number of Shares
purchasable upon the exercise of this Warrant and the Warrant Price shall be
subject to adjustment from time to time upon the occurrence of certain events,
as follows:
(a) RECLASSIFICATION OR MERGER, ETC. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any consolidation or merger of the Company with or into another
corporation or entity (other than a merger with another corporation or entity in
which the Company is the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new Warrant (in form and substance satisfactory to
the holder of this Warrant) providing that the holder of this Warrant shall have
the right to exercise such new Warrant and upon such exercise to receive, in
lieu of each share of Preferred Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, change, consolidation, sale of
all or substantially all of the Company's assets or merger by a holder of one
share of Preferred Stock. Such new Warrant shall provide for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 4. The provisions of this section (a) shall similarly apply
to successive reclassifications, changes, consolidations, mergers, sales of
assets and transfers.
(b) SUBDIVISIONS OR COMBINATION OF SHARES; STOCK DIVIDENDS. In the
event that the Company shall at any time subdivide the outstanding shares of
Preferred Stock, or shall issue a stock dividend on its outstanding shares of
Preferred Stock, the number of Shares issuable upon exercise of this Warrant
immediately prior to the issuance of such stock dividend shall be
proportionately increased, and the Warrant Price shall be proportionately
decreased, and in the event that the Company shall at any time combine the
outstanding shares of Preferred stock, the number of Shares issuable upon
exercise of this Warrant immediately prior to such combination shall be
proportionately decreased, and the Warrant Price shall be proportionately
increased, effective at the close of business on the date of such subdivision,
stock dividend or combination, as the case may be.
(c) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Section 4 and in the taking of all such action as may be
3
<PAGE>
necessary or appropriate in order to protect the right of the holder of this
Warrant against impairment.
(d) NOTICE OF RECORD DATE. In case at any time:
(i) the Company shall declare any dividend upon its Preferred
Stock or Common Stock payable in cash or stock or make any other distribution to
the holders of its Preferred Stock or its Common Stock;
(ii) the Company shall offer for subscription PRO RATA to the
holders of its Preferred Stock or Common Stock any additional shares of stock of
any class, or other rights;
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or a consolidation or
merger of the Company with or into, or a sale of all or substantially all its
assets to another entity or entities; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in any one or more of said
cases, the Company shall give, by first class mail, postage prepaid, or by telex
or telecopier, addressed to the holder of this Warrant at the address of such
holder as shown on the books of the Corporation (A) at least 30 days' prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (B) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price shall be adjusted
pursuant to the provisions hereof, the Company shall within ten (10) days of
such adjustment deliver a certificate signed by its chief financial office to
the holder of this Warrant setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Warrant Price then in effect.
6. FRACTIONAL SHARES. No fractional shares of Preferred Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Warrant
Price then in effect.
7. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR SHARES OF
PREFERRED STOCK.
(a) COMPLIANCE WITH SECURITIES ACT. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, the shares of Preferred Stock to be
issued upon exercise hereof and the Common Stock to be issued upon conversion of
such Preferred Stock are being acquired for investment and that such holder will
4
<PAGE>
not offer, sell or otherwise dispose of this Warrant or any shares of Preferred
Stock to be issued upon exercise hereof (or Common Stock issued upon conversion
of the Preferred Stock) except under circumstances which will not result in a
violation of the Act. This Warrant and all shares of Preferred Stock issued upon
exercise of this Warrant (unless registered under the Act) shall be stamped or
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED WITH OUT
(I) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR (II) AN
OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, EXCEPT THAT NO SUCH
OPINION SHALL BE REQUIRED IF SUCH SALE IS PURSUANT TO RULE 144
PROMULGATED UNDER THE ACT.
(b) DISPOSITION OF WARRANT AND SHARES. With respect to any offer,
sale or other disposition of this warrant or any shares of Preferred Stock
acquired pursuant to the exercise of this Warrant (or Common Stock issued upon
conversion of such Preferred Stock) prior to registration of such shares, the
holder hereof and each subsequent holder of this Warrant agrees to give written
notice to the Company prior thereto, describing briefly the manner thereof,
together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect) of this Warrant or such shares of Preferred stock or Common
Stock and indicating whether or not under the Act certificates for this Warrant
or such shares of Preferred Stock or Common Stock to be sold or otherwise
disposed of require any restrictive legend as to applicable restrictions on
transferability in order to insure compliance with the Act. Each certificate
representing this Warrant or the shares of Preferred Stock or Common Stock thus
transferred (except a transfer pursuant to Rule 144) shall bear a legend as to
the applicable restrictions on transferability in order to insure compliance
with the Act, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to insure compliance with the Act. Nothing
herein shall restrict the transfer of this Warrant or any portion hereof by the
initial holder hereof or any partner of any affiliate of such holder, to any
partnership affiliated with such holder, or to any partner of any such
partnership, provided such transfer may be made in compliance with applicable
federal and state securities laws. The Company may issue stop transfer
instructions to its transfer agent in connection with the foregoing
restrictions.
8. RIGHTS AS SHAREHOLDERS. No holder of this Warrant, as such, shall be
entitled to vote or receive dividends or be deemed the holder of Preferred Stock
or any other securities of the Company which may at any time be issuable on the
exercise thereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof or
to receive dividends or subscription rights or otherwise until this Warrant
shall have been exercised and the Shares purchasable upon the exercise hereof
shall have become deliverable, as provided herein; PROVIDED THAT the Company
shall deliver to the holder hereof prior written notice of any of the foregoing
in accordance with the provisions of Section 4(d) above.
9. ISSUANCE TAX. The issuance of certificates for shares of Preferred Stock
upon exercise of this Warrant shall be made without charge to the holder hereof
for any issuance tax in respect hereof, provided that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
5
<PAGE>
holder of this Warrant.
10. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. NOTICES. Any notice, request or other document required or permitted to
be given or delivered to the holder or the Company shall be delivered, or shall
be sent by certified or registered mail, postage prepaid, to such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefore on the signature page of this Warrant.
12. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant and all of
the covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at the time of
the exercise of this Warrant, in whole or in part, upon request of the holder
hereof but at the Companys expense, acknowledge in writing its continuing
obligation to the holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Registrable Shares) to
which the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; PROVIDED THAT the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
13. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to the holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant or any stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
14. DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs
of this Warrant are inserted for convenience only and do not constitute a part
of this Warrant.
15. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF ILLINOIS.
OREGON BAKING CORPORATION, DBA MARSEE BAKING
(the "Company")
By: /s/ Howard Wasserteil
---------------------------
Its: Exec. V.P.
--------------------------
Date:
--------------------------
<PAGE>
ANNEX A
NOTICE OF EXERCISE
------------------
To:
[1. The undersigned hereby elects to purchase 1,500 shares of Series C
Convertible Preferred Stock of OREGON BAKING CORPORATION, DBA MARSEE BAKING
pursuant to the terms of the attached Warrants, and tenders herewith payment of
the purchase price of such shares in full.]
[1. The undersigned hereby elects to purchase 1,500] shares of Series C
Convertible Preferred Stock of OREGON BAKING CORPORATION, DBA MARSEE BAKING
pursuant to an non-cash conversion of the Warrant as provided in Section 2.2 of
the Warrant.*]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing such shares.
--------------------------
(Signature)
- ---------------------
(Date)
- -------------------------------
* Alternative for non-cash exercise pursuant to Section 2.2
7
<PAGE>
WARRANT PURCHASE AGREEMENT
--------------------------
(FOR SHARES OF SERIES C CONVERTIBLE PREFERRED STOCK)
THIS WARRANT PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of APRIL 17, 1998 by and between OREGON BAKING CORPORATION, DBA MARSEE
BAKING, AN OREGON] corporation (the "COMPANY"), and LINC CAPITAL INC., a
Delaware corporation (the "PURCHASER").
The Company desires to sell, and the Purchaser desires to purchase, a
warrant to purchase 1,500 shares of the Company's SERIES C CONVERTIBLE PREFERRED
STOCK, par value $40.00 per share (the "PREFERRED STOCK"), at a price per share
of $40.00 in the form attached hereto as EXHIBIT A and on the terms and
conditions set forth herein (the "WARRANT") for an aggregate purchase price of
$50.00 (the "PURCHASE PRICE").
This agreement is being entered into by the Company and the Purchaser
in connection with that certain EQUIPMENT NOTE LOAN AND SECURITY AGREEMENT OR
MASTER LEASE AGREEMENT between OREGON BAKING CORPORATION, DBA MARSEE BAKING (the
"Obligor") and Purchaser, (the "FINANCING ARRANGEMENT".
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto agree as follows:
1. PURCHASE OF THE WARRANT.
(a) Subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase the Warrant from the Company and the Company agrees
to sell and issue the Warrant to the Purchaser for the Purchase Price for the
Warrant.
(b) The purchase and sale of the Warrant shall take place at the
offices of the Purchaser, at 303 E. Wacker Drive, Suite 1000, Chicago, Illinois
60601, or at such other place as the Company and the Purchaser shall agree, in
conjunction with the closing (the "CLOSING") of the Financing Arrangement with
the Obligor. The Company acknowledges that the Purchaser shall have no
obligation to extend any financial accommodations to the Obligor in accordance
with the terms of the Financing Arrangement unless and until the Company has
executed and delivered this Agreement and the Warrant to the Purchaser. Upon
execution by the Company and delivery of this Agreement to the Purchaser, the
Company shall deliver the Warrant to the Purchaser, against delivery to the
Company of a check in the amount of the Purchase Price.
2. ACCESS TO INFORMATION. The Purchaser acknowledges that it has had
access to all material information concerning the Company which it has
requested. The Purchaser also acknowledges that it has had the opportunity to,
and has to its satisfaction, questioned the officers of the Company with respect
to its investment hereunder.
3. REPRESENTATIONS OF THE PURCHASER. The Purchaser represents that it
understands that the Warrant, the shares of Preferred Stock issuable upon
exercise thereof (the "WARRANT SHARES") and the shares of Common Stock issuable
upon conversion of the Warrant Shares are speculative investments that it is
aware of the Company's business affairs and financial condition and that it has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire sufficient information about the Company to
8
<PAGE>
reach an informed and knowledgeable decision to acquire the Warrant. The
Purchaser is purchasing the Warrant and any Warrant Shares issued upon exercise
thereof for investment for its own account only and not with a view to, or for
resale in connection with, any "distribution" thereof in violation of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), or any applicable
state securities laws. The Purchaser further represents that is understands that
the Warrant and Warrant Shares have not been registered under the Securities Act
or applicable state securities laws b reason of specific exemptions therefrom,
which exemptions depend upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. The Purchaser understands
that the Warrant and any Warrant Shares purchased upon exercise thereof must be
held indefinitely unless such securities are subsequently registered under the
Securities Act and all applicable state securities laws and regulations or an
exemption from such registration or qualification is available, and that the
Company is under no obligation to register or qualify such securities except as
set forth in the any Registration Agreement described on Schedule A, if
applicable. The Purchaser is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act. The Purchaser's corporate headquarters and
principal place of business is located in the State of Illinois.
4. LEGENDS. The Purchaser acknowledges and understands that the
instrument evidencing the Warrant and any certificates evidencing the Warrant
Shares (and any Common Stock issuable upon conversion thereof) shall bear the
legends as specified in the Warrant (and any other legends required under state
or federal securities laws in the opinion of legal counsel for the Company).
5. CONDITIONS OF THE PURCHASER'S OBLIGATION AT THE CLOSING. The
obligation of the Purchaser to purchase and pay for the Warrant at the Closing
is subject to the satisfaction as of the Closing of the following conditions
unless any such conditions have been waived by the Purchaser:
(a) FINANCING. The Financing shall have been committed to by
Purchaser or consummated simultaneously with the purchase and sale of the
Warrant on terms and conditions satisfactory to the Purchaser.
(b) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations
and warranties contained in Section 6 hereof shall be true and correct in all
respects at and as of the Closing as though then made, except to the extent of
changes caused by the transactions expressly contemplated herein, and the
Company shall have performed in all respects all of the covenants required to be
performed by it hereunder prior to the Closing.
(c) SECURITIES LAW COMPLIANCE. The Company shall have made all
filings under all filings under all applicable federal and state securities laws
necessary to consummate the issuance of the Warrant pursuant to this Agreement
in compliance with such laws.
(d) OPINION OF THE COMPANY'S COUNSEL. The Purchaser shall have
received from legal counsel for the Company (which counsel shall be reasonably
acceptable to the Purchaser), an opinion in connection with the issuance of the
Warrant and the consummation of the transactions contemplated thereby, which
shall be addressed to the Purchaser, dated the date of the Closing and in form
and substance reasonably satisfactory to the Purchaser.
(e) CLOSING DOCUMENTS. The Company shall have delivered to the
Purchaser all of the following documents:
9
<PAGE>
(i) an Officer's Certificate, dated the date of the Closing, stating
that the conditions specified in this Section 5 have been fully satisfied;
(ii) certified copies of the resolution duly adopted by the Company's
board of directors authorizing the execution, delivery and performance of this
Agreement and each of the other agreements contemplated hereby, the issuance and
sale of the Warrant, the reservation of the Warrant Shares for issuance upon
exercise of the Warrant, the reservation of shares of Common Stock for issuance
upon conversion of the Warrant Shares and the consummation of all other
transactions contemplated by this Agreement;
(iii) certified copies of the Company's Certificate of Incorporation
and bylaws (and fully-executed copies of any amendments to any Stock Purchase
Agreements, if applicable, and amendments to any Stockholders Agreement, if
applicable) each as in effect at the Closing;
(iv) copies of all third party and governmental consents, approvals
and filings required in connection with the consummation of the transactions
hereunder (including, without limitation, all blue sky law filings and waivers
of all preemptive rights and rights of first refusal); and
(v) such other documents relating to the transactions contemplated by
this Agreement as the Purchaser or its special counsel may reasonably request.
(f) PROCEEDINGS. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to the consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser and its special counsel.
(g) AMENDMENTS TO STOCK PURCHASE AGREEMENTS. If applicable, the
Company, the Purchaser and any original investors in the Company who are parties
to any Stock Purchase Agreements (whose consent or approval is required prior to
the execution and delivery of this Agreement or the issuance of the Warrant
contemplated hereunder) shall have entered into an amendment to each such Stock
Purchase Agreement in form and substance acceptable to the Purchaser, and such
Amendment shall be in full force and effect as of the Closing.
(h) AMENDMENTS TO STOCKHOLDERS AGREEMENT. If applicable, the
Company, the Purchaser and any original holders of Shares in the Company who are
parties to any Stockholder Agreements (whose consent or approval is required
prior to the execution and delivery of this Agreement or the issuance of the
Warrant contemplated hereunder) shall have entered into an amendment to each
such Stockholder Agreement in form and substance acceptable to the Purchaser,
and such Amendment shall be in full force and effect as of the Closing.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material
inducement to the Purchaser to enter into this Agreement and purchase the
Warrants hereunder, the Company hereby represents and warrants that:
(a) ORGANIZATION, CORPORATE POWER AND LICENSES. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Oregon] and is qualified to do business in every jurisdiction in
which the failure to do qualify has had or would be reasonably be expected to
10
<PAGE>
have a material adverse effect on the financial condition, operating results,
assets, operations or business prospects of the Company and its subsidiaries
taken as a whole. The Company possesses all requisite corporate power and
authority and all material licenses, permits and authorizations necessary to own
and operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the [Stock Purchase Agreement and
the Stockholders Agreement] and the Company's charter documents and bylaws which
have been furnished to the Purchaser's special counsel reflect all amendments
made thereto at any time prior to the date of this Agreement and are correct and
complete.
(b) CAPITAL STOCK AND RELATED MATTERS.
(i) As of the Closing and immediately thereafter, the
authorized capital stock of the Company shall consist of (a) the number and
series of all shares of preferred stock of the Company as described on the
Capitalization Table set forth on Schedule A attached hereto indicating the
number of shares which are authorized and shall be issued and outstanding
immediately prior to the Closing, and the number of shares shall be designated
as reserved for issuance upon exercise of the Warrant) and (b) the number of
shares of Common Stock as described on the Capitalization Table set forth on
Schedule A attached hereto indicating the number of such shares which are
authorized and shall be issued and outstanding immediately prior to the Closing
as well as the number of shares shall be reserved for issuance upon conversion
of each outstanding Series of preferred stock of the Company, which have been
reserved for issuance upon conversion of all Series of preferred stock of the
Company and the number of shares which shall be reserved for issuance upon
conversion of the Warrant Shares issuable upon exercise of the Warrant, and the
number of shares which shall be reserved for issuance upon exercise of
outstanding employee stock options. As of the Closing, the Company shall not
have outstanding any stock or securities convertible or exchangeable for any
shares of its capital stock or containing any profit participation features, nor
shall it have outstanding any rights, warrants or options to subscribe for or to
purchase its capital stock or any stock or securities convertible into or
exchangeable for its capital stock or any stock appreciation rights or phantom
stock plans, except for the Warrant and the preferred stock, as set forth on the
attached Capitalization Table. The Capitalization Table accurately sets forth
the foregoing information as well as the following information with respect to
all outstanding options and rights to acquire the Company's capital stock: the
holder, the number of shares covered, the exercise price and the expiration
date. As of the Closing, the Company shall not be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock or any warrants, options or other rights to acquire
its capital stock, except as set forth on the Capitalization Table. As of the
Closing, all of the outstanding shares of the Company's capital stock shall be
validly issued, fully paid and nonassessable.
(ii) Except for those preemptive rights or rights of refusal
with respect to the issuance of the Warrant contained in the Stock Purchase
Agreement described on the Capitalization Table (which rights have been waived)
and those preemptive rights or rights of refusal with respect to the issuance of
the Warrant contained in the Stockholders Agreement described on the
Capitalization Table, there are no statutory or, to the best of the Company's
knowledge, contractual stockholders preemptive rights or rights of refusal with
respect to the Warrant hereunder of the issuance of the Warrant Shares upon
exercise of the Warrant or the issuance of shares of Common Stock upon
conversion of the Warrant Shares. The Company has not violated any applicable
federal or state securities laws in connection with the offer, sale or issuance
of any of its capital stock, and the offer, sale and issuance of the Warrant
hereunder does not require registration under the Securities Act or any
applicable state securities laws. To the best of the Company's knowledge, there
11
<PAGE>
are no agreements between the Company's stockholders with respect to the voting
or transfer of the Companys [sic] capital stock or with respect to any other
aspect of the Company's affairs, except for the Stockholders Agreement(s)
described on the Capitalization Table.
(c) AUTHORIZATION: NO BREACH. The execution, delivery and
performance of this Agreement, the Warrant and all other agreements contemplated
hereby to which the Company is a party have been duly authorized by the Company.
This Agreement, the Warrant and all other agreements contemplated hereby to
which the Company is a party each constitutes a valid and binding obligation of
the Company, enforceable in accordance with their respective terms. The
execution and delivery by the Company of this Agreement, the Warrant and all
other agreements contemplated hereby to which the Company is a party, the
offering, sale and issuance of the Warrant hereunder, the issuance of the
Warrant Shares upon exercise of the Warrant, the issuance of shares of Common
Stock upon conversion of the Warrant Shares, and the fulfillment of and
compliance with the respective terms hereof and thereof by the Company, do not
and shall not (i) conflict with or result in a breach of the terms, conditions
or provisions of, (ii) constitute a default under, (iii) result in the creation
of any lien, security interest, charge or encumbrance upon the Company's capital
stock or assets pursuant to, (iv) give any third party the right to modify,
terminate or accelerate any obligation under, (v) result in a violation of, or
(vi) require any authorization, consent, approval, exemption or other action by
or notice or declaration to, or filing with, any court or administrative or
governmental body or agency pursuant to, the charter or bylaws of the Company or
any subsidiary, or any law, statute, rule or regulation to which the Company or
any subsidiary is subject, or any agreement instrument, order, judgment or
decree to which the Company or any subsidiary is subject, except for any such
filings required under applicable "blue sky" or state securities laws or
required under Regulation D promulgated under the Securities Act.
7. COVENANTS.
(a) Until such time as the Company shall have consummated a Public
Offering (as defined in any Stock Purchase Agreement identified on the
Capitalization Table, as the same may be amended in accordance with its terms),
the Company shall deliver to the Purchaser (so long as the Purchaser holds all
or any portion of the Warrant or any Warrant Shares and each other holder of all
or any portion of the Warrant or any Warrant Shares all of the financial and
other information delivered or required to be delivered to the investors,
together with any other information or data generally provided by the Company to
its stockholders. All such financial and other information shall be delivered
pursuant to this Section 7(a) on a timely basis no less frequently than on a
calendar quarterly basis.
(b) The Company shall use the proceeds from the Financing and from
the issuance and sale of the Warrant hereunder (collectively, the "PROCEEDS") to
finance business expansion and for the working capital purposes of the Company.
8. GENERAL PROVISIONS.
(a) This Agreement, the Warrant and the other agreements referred to
herein represent the entire agreement between the Company and the Purchaser
regarding the subject matter hereof, supersede all prior agreements and
understandings and may only be amended in writing signed by the Company and the
Purchaser.
(b) This Agreement shall bind and inure to the benefit if the
parties hereto and their respective successors and assigns.
12
<PAGE>
(c) This Agreement shall be governed in all respects by the laws of
the State of Oregon.
(d) This Agreement may be executed in counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
9. REGISTRATION AGREEMENT
The parties hereto agree that the Purchaser and any holder of the
Warrant shall have the registration rights as described on Exhibit B attached
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first set forth above.
OREGON BAKING CORPORATION, DBA MARSEE BAKING
(the "Company")
By /s/ Howard Wasserteil
------------------------------------
Its Exec. V.P.
-----------------------------------
LINC CAPITAL INC.
(the "Purchaser")
By
------------------------------------
Its
-----------------------------------
13
<PAGE>
SCHEDULE A
CAPITALIZATION SCHEDULE TABLE FOR
Oregon Baking Corporation, dba Marsee Baking
<TABLE>
<CAPTION>
======================================================================================================================
Number of Shares Reserved
Number of Shares for Issuance Upon
Number of Issued -------------------------------------------
Classes of Capital Stock Shares Authorized and Outstanding Exercise of Conversion of
Options, Warrants Convertible
Other Rights Securities
Agreements
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Common Stock
- ----------------------------------------------------------------------------------------------------------------------
Series [ ] Preferred Stock
- ----------------------------------------------------------------------------------------------------------------------
Series [ ] Preferred Stock
- ----------------------------------------------------------------------------------------------------------------------
Series [ ] Preferred Stock
- ----------------------------------------------------------------------------------------------------------------------
Series [ ] Preferred Stock
- ----------------------------------------------------------------------------------------------------------------------
Total Preferred Stock
======================================================================================================================
</TABLE>
Total Fully Diluted Outstanding Common Stock: [ ]
As of the Closing and immediately thereafter, the authorized capital stock of
the Company shall consist of (A [ ] shares of preferred stock, of which [ }
shares will be designated as Series A Convertible Preferred Stock of which [ ]
shares shall be issued and outstanding, and [ ] of which shall be reserved for
issuance upon exercise of the Warrant) and (b) [ ] shares of Common Stock, of
which [ ] shares shall be issued and outstanding, [ ] shares shall be reserved
for issuance upon conversion of the Series A Convertible Preferred Stock, [ ]
shares shall be reserved for issuance upon conversion of the class B Convertible
Preferred Stock, [ ] shares shall be reserved for issuance upon conversion of
the Series B Convertible Preferred Stock issuable upon exercise of the Warrant,
and [ ] shares shall be reserved for issuance upon exercise of outstanding
employee stock options.
Pre-emptive Rights and Rights of First Refusal With Respect to Company
Securities under:
Stock Purchase Agreement(s):
Stockholder Agreement(s):
14
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS GRANTED TO HOLDER
The Purchaser and any holder of the Warrant shall have the registration rights
as described on Exhibit B attached hereto as follows:
1. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register any
of its securities under the Securities Act and the registration form to be used
may be used for the registration of Registrable Securities (a "Piggyback
Registration"), the Company shall give prompt written notice to all holders of
Registrable Securities of its intention to effect such a registration and shall
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion herein with 20 days
after the receipt of the Company's notice.
(b) "REGISTRABLE SECURITIES" means (i) any Common Stock issued upon
exercise of the Warrant and (ii) Common Stock issued or issuable with respect to
the securities referred to in clause (i) above by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular Registrable
Securities, such securities shall cease to be Registrable when they have been
distributed to the public pursuant to a offering registered under the Securities
Act (or an similar rule then in force.) For purposes of this Agreement, a Person
shall be deemed to be a holder of Registrable Securities, and the Registrable
Securities shall be deemed to be in existence, whenever such Person has the
right to acquire directly or indirectly such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether to not such acquisition has actually be effected, and such
Person shall be entitled to exercise the rights of a holder of Registrable
Securities hereunder.
(c) PIGGYBACK EXPENSES. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(d) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company shall include in such registration (i) first, the
securities the Company proposes to sell, (ii) second, the Registrable Securities
requested to be included in such registration, pro rata among the holders of
such Registrable Securities on the basis of the number of shares owed by each
such holder, and (iii) third, other securities requested to be included in such
registration.
(e) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is
an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such registration (i) first, the securities requested to be included therein
by the holders requesting such registration and the Registrable Securities
requested to be included in such registration, pro rata among the holders of
such securities on the basis of the number of securities so requested to be
included therein, and (ii) second, other securities requested to be included in
such registration.
(f) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to registrable Securities pursuant to this
paragraph 1, than if such previous registration has not been withdrawn or
abandoned, the Company shall not file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8 or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a period of at
least 90 days has elapsed from the effective date of such previous registration.
2. REGISTRATION PROCEDURES. Whenever the holders of Registrable Securities
have requested that any Registrable Securities be registered pursuant to this
2
<PAGE>
Agreement, the Company shall use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof, and pursuant thereto the Company shall as expeditiously
as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registration Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to the counsel selected by the
holders of a majority of the Registrable Securities covered by such registration
statement copies of all documents proposed to be filed);
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 90 days and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of dispositions by
the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus and such other documents as such seller may reasonably
request in order to facilitate the disposition of the registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of jurisdiction as any
seller reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the company shall not be required to (i) qualify generally
to do business in any other jurisdiction where it would not otherwise be
required to qualify but for his subparagraph, (ii) subject itself to taxation in
any such jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company shall prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities convert by such
registration statement as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(f)[sic] provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the deposition of such
Registrable Securities (including effecting a stock split or combination of
shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
3
<PAGE>
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day the
Company's first full calendar quarter after the effective date of registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included; and
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order.
3. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, fees and disbursements of custodians,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discount and commissions)
and other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), shall be borne as provided in this Agreement, except
that the Company shall, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of liability insurance and the expenses and fees
for listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed or on the NASD
automated quotation system.
(b) In connection with each Piggyback Registration, the Company shall
reimburse the holders of Registrable Securities included in such registration
for the reasonable fees (not exceeding $2,500 for each registration) and
disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities included in such registration.
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
4. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses cause by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for the
use therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriter (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
4
<PAGE>
fact contained in the registration statement, prospectus or preliminary
prospectus or amendment thereof or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by such holder; provided that the obligation to indemnify shall be
individual, not joint and several, for each holder and shall be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
5. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution") or to undertake any
indemnification obligations to the Company of the underwriters with respect
thereto, except as otherwise provided in paragraph 4 hereof.
5
This warrant and the shares issuable upon exercise hereof have not been
registered under the securities act of 1933, as amended (the "Act"), or under
any state securities laws. The warrant and the shares may not be sold, pledged,
hypothecated, or offered for sale or otherwise distributed in the absence of (a)
an effective registration statement for the warrant and the shares under the act
and under applicable state securities law or (b) an opinion of counsel
satisfactory to the company that registration under the act and state securities
law is not required.
WARRANT NO. __ WARRANT EXPIRATION DATE: ________________
WARRANT TO PURCHASE ____SHARES OF
COMMON STOCK OF
OREGON BAKING COMPANY, DBA MARSEE BAKING
This certifies that ________________(the "Holder") and the Holder's
registered successors and assigns are entitled, subject to the terms and
conditions set forth below, to purchase from OREGON BAKING COMPANY, DBA MARSEE
BAKING, an Oregon corporation (the "Company"), ___ (__) shares of the Company's
Common Stock (the "Warrant Shares") at the greater of (i) Three Dollars and
Twenty-Five Cents ($3.25) per share, or (ii) the Fair Market Value (as defined
below) of a share of the Company's Common Stock on the date of exercise (the
"Warrant Price").
1. EXERCISE AND EXPIRATION.
(a) This Warrant may be exercised in whole or in part at any time or
times during the term commencing on the date of issuance and ending November 30,
2003, or upon the consummation of a plan of merger, the consummation of a plan
of share exchange to which the Company is a party or the corporation whose
shares will be acquired, the consummation of a sale or exchange of all or
substantially all of the property of the Company other than in the usual and
regular course of business, whichever is sooner, at which time the Warrant shall
automatically expire. This Warrant may be exercised by surrender hereof to the
Company, together with delivery of a signed Warrant Exercise Form in the form
attached hereto as ANNEX I specifying the number of shares to be purchased.
(b) Payment of the aggregate Warrant Price may be made by (i) cash
or check, or (ii) if, at the time of exercise, the Company's Common Stock is
either listed or admitted to trading on any stock exchange or is traded on the
NASDAQ National Market System, by converting this Warrant into shares of Common
Stock as provided herein. Under clause (ii) of the preceding sentence, Holder
may from time to time convert this Warrant, in whole or in part, into a number
of shares of Common stock determined by dividing (x) the aggregate Fair Market
Value (determined on the date of exercise) of the Warrant Shares minus the
aggregate Warrant Price of such Warrant Shares by (y) the Fair Market Value
(determined on the date of exercise) of one share of the Company's Common Stock.
(c) For purposes of this Warrant, "Fair Market Value" shall be the
value determined in accordance with the following provisions:
Warrant
Page 1
<PAGE>
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the NASDAQ National Market
System, the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question, as such price is reported by the National
Association of Securities dealers through the NASDAQ National Market System or
any successor system. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the stock
exchange determined by the Board of Directors of the Company to be the primary
market for the Common Stock, as such price is officially quoted in the composite
tape of transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such quotation
exists.
(iii) If the Common Stock is at the time neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, then the Fair market Value shall be determined by the Board of
Directors.
2. ADJUSTMENT OF SHARES.
(a) If all or a portion of this Warrant shall be exercised
subsequent to any stock dividend, stock split, combination of shares or similar
recapitalization event, occurring after the date of issuance, as a result of
which shares of any class shall be issued in respect of outstanding Common Stock
of the Company or such Common Stock shall be changed into the same or a
different number of shares of the same or another class or classes, the Holder
exercising this Warrant shall receive, for the aggregate Warrant price paid upon
such exercise, in lieu of the Common Stock otherwise issuable upon exercise of
this Warrant, the aggregate number and class of shares which such Holder would
have received in such stock dividend, stock split, recaptialization, combination
of shares, or similar recapitalization event as if this Warrant had been
exercised immediately prior to such event.
(b) In the event of any adjustment in the number of Shares covered
by this Warrant pursuant to Section 2(a), any fractional shares resulting from
such adjustment shall be disregarded and this Warrant shall cover only the
number of full shares resulting from such adjustment. The foregoing adjustments
shall be made by the Board of Directors of the Company, or by the applicable
terms of any assumption or substitution documents, and any adjustments so made
shall be final, binding and conclusive.
3. COMPLIANCE WITH SECURITIES LAWS. The Holder, by acceptance of this
Warrant, agrees that this Warrant and the Warrant Shares to be issued upon
exercise hereof are being acquired for investment and that the Holder will not
offer, sell, or otherwise dispose of this Warrant or any Warrant Shares to be
issued upon exercise hereof except under circumstances which will not result in
a violation of the Securities Act of 1933, as amended (the "Act"), or under
Warrant
Page 2
<PAGE>
applicable state law. This Warrant and all Warrant Shares issued upon exercise
of this Warrant (unless registered under the Act and under applicable state law)
shall include a legend in substantially the form set forth at the beginning of
this Warrant relating to such securities laws.
4. TRANSFER OF WARRANT. Subject to Section 3 above, this Warrant shall
be registered on the books of the Company and shall be transferable in whole or
in part on such books by the registered Holder hereof in person or by duly
authorized attorney by delivery to the Company of a duly completed Assignment in
the form attached hereto as ANNEX II.
5. NO SHAREHOLDER RIGHTS UNTIL EXERCISE. This Warrant shall not entitle
the Holder hereof to any voting rights or any other rights as a shareholder of
the Company, or to any other rights whatsoever except the rights state herein;
and no dividend or interest shall be payable or shall accrue in respect of this
Warrant or the Warrant Shares purchasable hereunder unless, and until, and
except to the extent that, this Warrant shall be exercised.
6. RESERVATION OF SHARES. The Company hereby agrees that it shall at
all times reserve and keep authorized and available for issuance a sufficient
number of Warrant Shares for the purpose of issuance upon exercise of this
Warrant to permit the exercise of this Warrant in whole.
The Company has caused this Warrant to be duly executed and
delivered as of the ____ day of _______________, 199_.
OREGON BAKING COMPANY
DBA MARSEE BAKING
BY ______________________________________
Warrant
Page 3
<PAGE>
ANNEX I
-------
WARRANT EXERCISE FORM
---------------------
(To be signed only on exercise of Warrant)
TO: OREGON BAKING COMPANY
DBA MARSEE BAKING
The undersigned Holder of the Warrant hereby irrevocably elects to
exercise the purchase right represented by such Warrant for, and to purchase
thereunder, _____________[*] shares of Common Stock of the Company and herewith
makes payment for the shares of $___________________. The undersigned hereby
requests that the certificates for the Warrant Shares be issued in the name of,
and delivered to:
________________________________________
________________________________________
________________________________________
Date:_________________
______________________________________________
(Signature must conform in all respect to name
of the Holder as specified on the face of the
Warrant)
- ----------------
* Insert here the number of shares (all or part of the number of shares
called for on the face of the Warrant) as to which the Warrant is being
exercised without making any adjustment for additional Common Stock or any other
shares or other securities or property or cash, which, pursuant to the
adjustment provisions of the Warrant, may be deliverable upon exercise.
<PAGE>
ANNEX II
--------
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfer
unto ___________________________, whose address is __________________, the right
represented by the attached Warrant to purchase ________________ shares of
Common Stock of OREGON BAKING COMPANY, dba MARSEE BAKING, to which the attached
Warrant relates, and appoints _____________________________________ attorney to
transfer such right on the books of such corporation with full power of
substitution in the premises.
DATED:_________ ______________________________________________________
(Signature must conform in all respects to name of the
Holder as specified on the face of the Warrant)
______________________________________________________
______________________________________________________
(Address of the Holder)
Signed in the presence of:
______________________________________
OMB Approval No. 3245-0201
U.S. Small Business Administration
NOTE
SBA LOAN NUMBER
-------------------------
GP CLP 124 615 40 10 PTD
-------------------------
HFCC# 5638 - 75% GTD
-----------------------------
(City and State)
900,000 (Date) JUNE 20, 1996 [sic]
- ------------------ ------------------------
For value received, the undersigned promises to pay to the order of
HELLER FIRST CAPITAL CORP., a Delaware corporation,
- --------------------------------------------------------------------------------
at its office in the city of PORTLAND , State of OREGON
---------------------- --------------------
or at holder's option, at such other place as may be designated from time to
time by the holder
-----------------------------------------------------------
- --------------------- NINE HUNDRED THOUSAND AND 00/100-------------dollars,
- -------------------------------------------------------------------
with interest on unpaid principal computed from the date of each advance to the
undersigned at the rate of PRIME + 2.75 percent per annum, payment to be made
--------------
in installments as follows:
Installments, including principal and interest, each in the amount of
FIFTEEN THOUSAND FIVE HUNDRED TWENTY-NINE dollars ($15,529.00),
commencing SEVEN months from the first day of the month following first
disbursement and continuing due and payable monthly thereafter until
SEVEN years and SIX months from date of Note when the full unpaid
balance of principal and interest shall become due and payable. Each
installment shall be applied to interest accrued as of date of receipt
and the balance, if any, to principal.
In addition to the foregoing payments, monthly payments of interest
only shall be made, beginning one month from date of Note, and
continuing for six months.
THIS IS A VARIABLE INTEREST RATE NOTE. Interest on unpaid principal
shall accrue at the initial rate of ELEVEN AND ONE-QUARTER percent
(11.25%) per annum. Commencing on the first calendar day of the
calendar month following first disbursement, and monthly thereafter,
the interest rate shall increase or decrease to TWO AND THREE-QUARTERS
percent (2.75%) above the Prime Rate in effect on the first business
day of the moth, as published in the Money Rates Section of THE WALL
STREET JOURNAL.
NOTE: The amount of the monthly payment shown above is based upon the
prime interest rate as of the date of the receipt of the loan
application of SBA of EIGHT AND ONE-HALF percent (8.50%) plus a spread
of TWO AND THREE-QUARTERS percent (2.75%).
<PAGE>
Holder should given written notice to the Borrower of each increase or
decrease in the interest rate and the reamortized installment payment
amount within thirty (30) days after the effective date of each rate
adjustment; however, the fluctuation of the interest rate is not
contingent on whether the notice is given.
If the Borrower shall be in default in payment due on the indebtedness
at the time the Small Business Administration (SBA) purchases its
guaranteed portion of said indebtedness, the rate of interest on both
the guaranteed and unguaranteed portions herein shall become fixed at
the rate in effect as of the date of default. If the Borrower shall not
be in default in payment when SBA purchases its guaranteed portion, the
rate of interest on both the guaranteed and unguaranteed portion herein
shall be fixed at the rate in effect as of the date of purchase by SBA.
If the collateral securing the Note is sold or transferred voluntarily,
involuntarily or by operation of law without the prior written consent
of the holder, the holder may at its option declare the entire unpaid
principal and interest of the note secured hereby immediately due and
payable. Acceptance by the holder of any payments after any sale or
transfer shall not constitute a waiver of the provisions of this
paragraph and the provisions hereof shall apply to each sale and
transfer.
Borrower further agrees to pay a late charge not to exceed 5% of the
payment amount due if such payment is not received within 15 days of
the due date. Funds paid by the borrower will be applied first to bring
the loan current, including accrued interest, and then to the late fee.
If this Note contains a fluctuating interest rate, the notice provision
is not a pre-condition for fluctuation (which shall take place regardless of
notice). Payment of any installment of principal or interest owing on this Note
may be made prior to the maturity date hereof without penalty. Borrower shall
provide lender with written notice of intent to prepay part or all of this loan
at least three (3) weeks prior to the anticipated prepayment date. A prepayment
is any payment made ahead of schedule that exceeds twenty (20) percent of the
then outstanding principal balance. If borrower makes a prepayment and fails to
give at least three weeks advance notice of intent to prepay, then,
notwithstanding any other provision to the contrary in this note or other
document, borrower shall be required to pay lender three weeks interest on the
unpaid principal as of the date preceding such prepayment.
SBA Form 147 (5-87) Previous editions obsolete Page 1
<PAGE>
The term "Indebtedness" as used herein shall mean the indebtedness
evidenced by this Note, including principal, interest, and expenses, whether
contingent, now due or hereafter to become due and whether heretofore or
contemporaneously herewith or hereafter contracted. The term "Collateral" as
used in this Note shall mean any funds, guaranties, or other property or rights
therein of any nature whatsoever or the proceeds thereof which may have been,
are, or hereafter may be, hypothecated, directly or indirectly by the
undersigned or others, in connection with, or as security for, the Indebtedness
or any part thereof. The Collateral, and each part hereof, shall secure the
Indebtedness and each part thereof. The covenants and conditions set forth or
referred to in any and all instruments of hypothecation constituting the
Collateral are hereby incorporated in this Note as covenants and conditions of
the undersigned with the same force and effect as through such covenants and
conditions were fully set forth herein.
The Indebtedness shall immediately become due and payable, without
notice or demand, upon the appointment of a receiver or liquidator, whether
voluntary or involuntary, for the undersigned or for any of its property, or
upon the filing of a petition by or against the undersigned under the provisions
of any State insolvency law or under the provisions of the Bankruptcy Reform Act
of 1978, as amended, or upon the making by the undersigned or an assignment for
the benefit of its creditors. Holder is authorized to declare all or any part of
the Indebtedness immediately due and payable upon the happening of any of the
following events: (1) Failure to pay any part of the Indebtedness when due; (2)
nonperformance by the undersigned of any agreement with, or any condition
imposed by, Holder or Small Business Administration (hereinafter called "SBA"),
with respect to the Indebtedness; (3) Holder's discovery of the undersigned's
failure in any application of the undersigned to Holder or SBA to disclose any
fact deemed by Holder to be material or of the making therein or in any of the
said agreements, or in any affidavit or other documents submitted in connection
with said application or the indebtedness, of any misrepresentation by, on
behalf of, or for the benefit of the undersigned; (4) the reorganization other
than a reorganization pursuant to any of the provisions of the Bankruptcy Reform
Act of 1978, as amended) or merger or consolidation of the undersigned (or the
making of any agreement therefor) without the prior written consent of Holder;
(5) the undersigned's failure duly to account, to Holder's satisfaction, at such
time or times as Holder may require, for any of the Collateral, or proceeds
thereof, coming into the control of the undersigned; or (6) the institution of
any suit affecting the undersigned deemed by Holder to affect adversely its
interest hereunder in the Collateral or otherwise. Holder's failure to exercise
its rights under this paragraph shall not constitute a waiver thereof.
<PAGE>
Upon the nonpayment of the Indebtedness, or any part thereof, when due,
whether by acceleration or otherwise, Holder is empowered to sell, assign, and
deliver the whole or any part of the Collateral at public or private sale,
without demand, advertisement or notice of the time or place of sale or of any
adjournment thereof, which are hereby expressly waived. After deducting all
expenses incidental to or arising from such sale or sales, Holder may apply the
residue of the proceeds thereof to the payment of the Indebtedness, as it shall
deem proper, returning the excess, if any, to the undersigned. The undersigned
hereby waives all right of redemption or appraisement whether before or after
sale.
Holder is further empowered to collect or cause to be collected or
otherwise to be converted into money all or any part of the Collateral, by suit
or otherwise, and to surrender, compromise, release, renew, extend, exchange, or
substitute any item of the Collateral in transactions with the undersigned or
any third party, irrespective of any assignment thereof by the undersigned, and
without prior notice to or consent of the undersigned or any assignee. Whenever
any item of the Collateral shall not be paid when due, or otherwise shall be in
default, whether or not the indebtedness, or any part thereof, has become due,
Holder shall have the same rights and powers with respect to such item of the
Collateral as are granted in this paragraph in case of nonpayment of the
Indebtedness, or any part thereof, when due. None of the rights, remedies,
privileges, or powers of Holder expressly provided for herein shall be
exclusive, but each of them shall be cumulative with and in addition to every
other right, remedy, privilege, and power now or hereafter existing in favor of
Holder, whether at law or equity, by statute or otherwise.
The undersigned agrees to take all necessary steps to administer,
supervise, preserve, and protect the Collateral; and regardless of any action
taken by Holder, there shall be no duty upon Holder in this respect. The
undersigned shall pay all expenses of any nature, whether incurred in or out of
court, an whether incurred before or after this Note shall become due at its
maturity date or otherwise, including but not limited to reasonable attorney's
fees and costs, which Holder may deem necessary or proper in connection with the
satisfaction of the Indebtedness or the administration, supervision,
preservation, protection of (including, but not limited to, the maintenance of
adequate insurance) or the realization upon the Collateral. Holder is authorized
to pay at any time and from time to time any or all of such expenses, add the
amount of such payment to the amount of Indebtedness, and charge interest
thereon at the rate specified herein with respect to the principal amount of
this Note.
SBA Form 147 (5-87) Page 2
<PAGE>
The security rights of Holder and its assigns hereunder shall not be
impaired by Holder's sale, hypothecation or rehypothecation of any note of the
undersigned or any item of the Collateral, or by any indulgence, including but
not limited to (a) any renewal, extension, or modification which Holder may
grant with respect to the Indebtedness or any part thereof, or (b) any
surrender, compromise, release, renewal, extension, exchange, or substitution
which Holder may grant in respect of the collateral, or (c) any indulgence
granted in respect of any endorser, guarantor, or surety. The purchaser,
assignee, transferee, or pledgee of this Note, the Collateral, and guaranty, and
any other document (or any of them), sold, assigned, transferred, pledged, or
repledged, shall forthwith become vested with and entitled to exercise all the
powers and rights given by this Note and all applications of the undersigned to
Holder or SBA, as if said purchaser, assignee, transferee, or pledgee were
originally named as Payee in this Note and in said application or applications.
<PAGE>
This promissory note is given to secure a loan which SBA is making or
in which it is participating and, pursuant to Part 101 of the Rules and
Regulations of SBA (13 C.F.R. 101.1(d)), this instrument is to be construed and
(when SBA is the Holder or a party in interest) enforced in accordance with
applicable Federal law.
Oregon Baking Company, an Oregon corporation
BY: /s/ HOWARD J. WASSERTEIL
------------------------------
Howard J. Wasserteil, President
BY: /s/ ROBERT E. SCHNEIDER
------------------------------
Robert E. Schneider, CEO
________________________________________________________________________________
Note.--Corporate applicants must execute Note, in corporate name, by
duly authorized officer, and seal must be affixed and duly attested: partnership
applicants must execute Note in firm name, together with signature of a general
partner.
Page 3
U.S. SMALL BUSINESS ADMINISTRATION
PORTLAND DISTRICT OFFICE
1515 S.W. FIFTH AVENUE, SUITE 1050
PORTLAND, OREGON 97201-5494
AUTHORIZATION AND LOAN AGREEMENT
(GUARANTY LOANS)
Heller First Capital Corp.
10260 SW Greenburg Road, Suite 400
Portland, OR 97223
Your request received May 1, 1997 for SBA to guarantee 75.00% of a loan in the
----------- ------
amount of $900,000.00 to be made by Lender to:
----------
The Oregon Baking Company, Inc.
dba Marsee Baking
P.O. Box 25776
Portland, OR 97225
is hereby approved pursuant to Section 7(a) of the Small Business Act as
amended.
1. The following forms are herewith enclosed:
(a) One blank SBA Note for your completion and execution by the Borrower.
The original copy of this authorization shall be executed prior to
first disbursement and retained in loan file by the Lender. (A copy of
the Note and all other documents should be given to the borrower.)
(b) Copies of the SBA Settlement Sheet (Form 1050) are to be completed and
executed by Lender and Borrower to reflect each disbursement. Lender
to keep yellow and pink copy in its Lender's loan file, and blue copy
should be provided to Borrower.
(c) Compensation Agreements (Form 159) shall be executed by Borrower,
Borrower's representative(s) if Borrower has employed an attorney,
accountant or other representative(s), or if Borrower is charged fees
for services by Lender or an associate of Lender. If no such fees have
been charged, please write "None" prior to execution by Borrower and
Lender. The form shall be returned to SBA only if the total amount of
all such fees exceed $1,000.00.
(d) A guaranty fee shall be paid by Lender to SBA within 90 days of the
date of this Authorization and may be charged to Borrower only after
Lender has paid fee to SBA, and initial disbursement made to Borrower.
The guaranty fee due Lender from the Borrower is as follows:
(ii) If the loan amount exceeds $100,000.00 the following rate
schedule applies:
(1) Three percent (3%) on the first $250,000.00 GUARANTEED
portion
PLUS
<PAGE>
Borrower Name: The Oregon Baking Company, Inc.
Page 2
(2) Three & one-half (3.5%) of the next $250,000.00 GUARANTEED
portion, up to $500,000.00
PLUS
(3) Three & seven-eights (3.875%) of the GUARANTEED portion
greater than $500,000.00 up to the maximum guaranty of
$750,000.00.
This guarantee fee must be sent to "SBA, Attn: Collection Activities
Branch; Denver, CO 8025911 (with SBA loan number on payment).
(e) The original copy of this Authorization shall be executed prior to
first disbursement and retained in loan file by the Lender. (A copy of
the Authorization and any amendments should be given to Borrower.)
2. This Authorization is subject to:
(a) Provisions of the Guaranty Agreement between Lender and SBA, dated
February 20, 1992.
(b) First disbursement of the Loan being made not later than six (6)
months, and no disbursement being made later than twelve (12) months,
from the date of this Authorization, unless such time is extended
pursuant to prior written consent by SBA.
(c) Receipt by Lender of evidence satisfactory to it in its sole
discretion, that there has been no unremedied adverse change since the
date of the Application, or since any of the preceding disbursements,
in the financial or any other condition of Borrower, which would
warrant withholding or not making any such disbursement or any further
disbursement. This shall include receipt and review of current (within
90 days of closing) business and personal financial statements.
(d) The representations made by Borrower in its loan application, the
requirements or conditions set froth in Lender's application form,
including the supporting documents thereto, the conditions set forth
in Lender's application form, including the supporting documents
thereto, the conditions set forth herein and any future conditions
imposed by Lender (with prior SBA approval).
(e) Prior to first disbursement, Lender shall obtain verification from
Internal Revenue Service (IRS) that tax returns submitted by Borrower
with the application for this loan conform to the returns filed with
IRS and/or business financial statements. Any discrepancy shall be
considered to be an adverse change, no disbursements will be made, and
SBA shall be promptly notified.
(f) Lender is permitted to use computer-generated replications of mandated
SBA Forms, as long as they are exact reproductions of these SBA Forms.
Lender will be held responsible for any errors or omissions.
<PAGE>
Borrower Name: The Oregon Baking Company, Inc.
Page 3
(g) Lender agrees to pay an ongoing guaranty fee equal to one-half of one
percent (0.5%) per annum on the guaranteed portion of the outstanding
balance. This fee shall be paid by the lender following the receipt of
a payment from borrower. The fee may not be charged to the borrower
and shall be received by the SBA-designated fiscal and transfer agent
by the third day of the month (or the next business day thereafter, if
the third is not a business day), following receipt of a scheduled
payment. There is a two business day grace period after the due date.
Lender agrees to report the status of all of its SBA guaranteed loans
on a monthly basis using SBA Form 1502 or an acceptable electronic
format.
3. Terms of Loan:
(a) Repayment term, interest(s), and maturity.
(1) Installments, including principal and interest, each in the amount of
FIFTEEN THOUSAND FIVE HUNDRED TWENTY NINE dollars ($15,529.00),
commencing SEVEN months from the first day of the month following
first disbursement and continuing due and payable monthly thereafter
until SEVEN years and SIX months from date of Note when the full
unpaid balance of principal and interest shall become due and payable.
Each installment shall be applied to interest accrued as of date of
receipt and the balance, if any, to principal.
In addition to the foregoing payments, monthly payments of interest
only shall be made, beginning one month from date of Note, and
continuing for SIX months.
(2) THIS IS A VARIABLE INTEREST RATE NOTE. Interest on unpaid principal
shall accrue at the initial rate of ELEVEN AND ONE-QUARTER percent
(11.25%) per annum. Commencing on the first calendar day of the
calendar month following first disbursement, and monthly thereafter,
the interest rate shall increase or decrease to TWO AND THREE-QUARTERS
percent (2.75%) above the Prime Rate in effect on the first business
day of the month, as published in the Money Rates Section of THE WALL
STREET JOURNAL.
(3) NOTE: The amount of the monthly payment shown above is based upon the
prime interest rate as of the date of the receipt of the loan
application by SBA of EIGHT AND ONE-HALF percent (8.50%) plus a spread
of TWO AND THREE-QUARTERS percent (2.75%).
(4) Holder should give written notice to the Borrower of each increase or
decrease in the interest rate and the reamortized installment payment
amount within thirty (30) days after the effective date of each rate
adjustment; however, the fluctuation of the interest rate is not
contingent on whether the notice is given.
(5) If the Borrower shall be in default in payment due on the indebtedness
at the time the Small Business Administration (SBA) purchases its
guaranteed portion of said indebtedness, the rate of interest on both
the guaranteed and unguaranteed portions herein shall become fixed at
the rate in effect as of the date of default. If the Borrower shall
not be in default in payment when SBA purchases its guaranteed
portion, the rate of interest on both the guaranteed and unguaranteed
portion herein shall be fixed at the rate I effect as of the date of
purchase by SBA.
<PAGE>
Borrower Name: The Oregon Baking Company, Inc.
Page 4
(6) Borrower shall provide Lender with written notice of intent to prepay
part or all the loan at least three (3) weeks prior to the anticipated
prepayment date. A prepayment is any payment made ahead of schedule
that exceeds twenty (20) percent of the then outstanding principal
balance. If Borrower makes a prepayment and fails to give at least
three weeks advance notice of intent to prepay, then, notwithstanding
any other provision to the contrary in this Authorization, Borrower
shall be required to pay Lender three weeks interest on the unpaid
principal as of the date of such prepayment.
(7) If the collateral securing the Note is sold or transferred
voluntarily, involuntarily or by operation of law without the prior
written consent of the holder, the holder may at its option declare
the entire unpaid principal and interest of the note secured hereby
immediately due and payable. Acceptance by the holder of any payments
after any sale or transfer shall not constitute a waiver of the
provisions of this paragraph and the provisions hereof shall apply to
each sale and transfer.
(8) Borrower further agrees to pay a late charge not to exceed 5% of the
payment amount due if such payment is not received within 15 days of
the due date for an Oregon based loan or within 10 days of the due
date for a Washington based loan. Funds paid by the borrower will be
applied first to bring the loan current, including accrued interest,
and then to the late fee.
(b) Use of proceeds of loan as follows (specific uses for which loan is
authorized):
(1) Approximately $455,000.00 for payment in full for purchase of
machinery and equipment.
(2) Approximately $270,000.00 for refinance SBA debt, Loan Numbers
GP825643002PTD, GP 5171973005PTD and GP 5595063007PTD
(3) Approximately $150,000.00 for working capital.
(4) Approximately $25,000.00 for closing costs.
(5) Balance, if any, to be used solely for operating expenses of
Borrower. If any funds are to be used for payment of payroll,
Lender is to be assured of timely deposit of all withheld taxes.
(6) Disbursement pursuant to paragraph 3(B)(1) to be made against
paid receipts or by joint payee checks against invoices.
(7) The borrower agrees, to the extent feasible, to purchase only
American-made equipment and products with the proceeds of this
loan.
<PAGE>
Borrower Name: The Oregon Baking Company, Inc.
Page 5
(c) Collateral:
(1) Perfected first security interest in all machinery and equipment
(EXCLUDING titled motor vehicles), furniture, and proceeds
thereof, now owned by Borrower, and hereafter acquired, located
at all business locations including but not limited to those
items described in listing attached to Loan Application. UCC
search required from Secretary of State, after recording of
Lender financing statement.
(2) Perfected security interest covering all inventory, general
intangibles, accounts, and proceeds thereof, now owned by
Borrower and hereafter acquired, located at all business
locations. Such security interest may be subject only to the
prior lien of TO BE DETERMINED as security for a debt not in
excess of $TO BE DETERMINED secured by accounts and inventory.
UCC search required from Secretary of State, after recording of
Lender financing statement.
(3) Purchase money security interest to be taken by Financing
Statement and Security Agreement in all personal property
acquired with loan proceeds. Lender shall file a Financing
Statement prior to disbursing loan proceeds, notify all senior
creditors if inventory is being acquired, and clearly identify
each item of personal property acquired with loan proceeds.
(4) Recorded Assignment with right of reassignment of all Borrower's
rights and interest in and to a certain lease between Borrower,
as Lessee and LESSOR covering premises for ALL BUSINESS LOCATIONS
which lease shall have an unexpired term, including options to
renew, of approximately SEVEN YEARS AND SIX MONTHS and contain
such other provisions and conditions as are satisfactory to
Lender.
Consent by Lessor to assignment and to right of reassignment by
Lender/SBA. Written agreement that so long as Lender/SBA has not
entered into possession of the premises covered by said lease for
the purpose of operating a business it shall not be liable for
rent or any other obligations of Lessee; in the event of default
under subject lease, Lessor will not take any action to terminate
the lease without giving 60 days prior written notice to
Lender/SBA and will grant Lender/SBA the right to cure such
default within said period; and, the Lessor disclaims all right,
title and interest in and to all leasehold improvements,
buildings, fixtures, personal property, and appurtenance placed
by Lessee on the premises during the aforementioned lease period
and waives any rights of landlord's distraint.
(5) Guaranty on SBA Form executed by Robert E. Schneider and Virginia
C. Wulf, securing the Note with second Deed of Trust or Mortgage
to be executed by Guarantor on real estate located at 2075 NW
131st Avenue, Portland, OR 97229. Such Deed of Trust or Mortgage
may be subject only to the interest of Great Western Bank as
security for a debt not in excess of $327,658. Affidavit of
Title, Lot Book Report or similar report satisfactory to Lender,
is required.
<PAGE>
Borrower Name: The Oregon Baking Company, Inc.
Page 6
(6) Guaranty on SBA Form 148 executed by Virginia C. Wulf, modified
to provide that the liability under the Guaranty of said
Guarantor(s) shall be limited to HER legal or equitable interest
in the real property security located at 2075 NW 131st Avenue,
Portland, OR 97229.
(7) Guaranty on SBA Form executed by Howard Wassertail & Vivian S.
Wasserteil, security the Note with second Deed of Trust or
Mortgage to be executed by Guarantor on real estate located at
3125 SW 66th Avenue, Portland, OR 97225. Such Deed of Trust or
Mortgage may be subject only to the interest of Great Western
Bank as security for a debt not in excess of $164,470.00.
Affidavit of Title, Lot Book Report or similar report
satisfactory to Lender, is required.
(8) Guaranty on SBA Form 148 executed by Vivian S. Wasstereil,
modified to provide that the liability under the Guaranty of said
Guarantor(s) shall be limited to HER legal or equitable interest
in the real property security located at 3125 SW 66th Avenue,
Portland, OR 97225.
(9) Tax realty service (annual tax status reporting service) will be
provided Lender for the term of the Loan covering all pledged
real property.
4. To further induce Lender to make and SBA to guarantee this Loan, Lender and
SBA impose the following conditions:
(a) Execution of all documents required in Item 1 above.
(b) Reimbursable Expenses. Borrower will, on demand, reimburse Lender for
any and all expenses incurred, or which may be hereafter incurred, by
Lender from time to time in connection with or by reason of Borrower's
application for, and the making and administration of the Loan.
(c) Books, Records, and Reports. Borrower will at all times keep proper
books of account in a manner satisfactory to Lender and/or SBA.
Borrower hereby authorizes Lender or SBA to make or cause to be made,
at Borrower Is expense and in such manner and at such times as Lender
or SBA may require, (a) inspections and audits of any books, records
and papers in the custody of control of Borrower or others, relating
to Borrower's financial or business conditions, including the making
of copies thereof and extracts therefrom, and (b) inspections and
appraisals of any of Borrower's assets. Borrower will furnish to
Lender and SBA for the TWELVE (12) month period ending 12/31/97, and
ANNUALLY thereafter (no later than 90 days following the expiration of
any such period) and at such other times and in such form as Lender
may prescribe, Borrower's financial and operating statements. Borrower
hereby authorizes all Federal, State and municipal authorities to
furnish reports of examinations, records, and other information
relating to the conditions and affairs of Borrower and any desired
information from reports, returns, files, and records of such
authorities upon request therefor by Lender or SBA.
(d) Borrower shall not execute any contracts for management consulting
services without prior approval of Lender and SBA.
<PAGE>
Borrower Name: The Oregon Baking Company, Inc.
Page 7
(e) Distributions and Compensation. Borrower will not, without the prior
written consent of Lender or SBA (a) if borrower is a corporation,
declare or pay any dividend or make any distribution upon its capital
stock, or purchase or retire any of its capital stock, or consolidate,
or merge with any other company, or give any preferential treatment,
make any advance, directly or indirectly, by way of loan, gift, bonus,
or otherwise, to any company directly or indirectly controlling or
affiliated with or controlled by Borrower, or any other company, or to
any officer, director or employee of Borrower, or of any such company,
(b) if Borrower is a partnership or individual, make any distribution
of assets of the business of Borrower, other than reasonable
compensation for services, or give any preferential treatment, make
any advance, directly or indirectly, by way of loan, gift, bonus, or
otherwise, to any partner or any of its employees, or to any company
directly or indirectly controlling or affiliated with or controlled by
Borrower, or any other company.
(f) Other provisions:
(1) Borrower shall provide and maintain hazard insurance (fire and
extended coverage) for the full replacement value on ALL PLEDGED
ASSETS. Fire and extended coverage insurance must contain a mortgagee
clause for Lender similar in character to New York Standard Mortgagee
Clause and a clause naming Lender as loss payee. General Public
Liability Insurance in an amount satisfactory to Lender is required.
Lender shall be named a loss payee, except for public liability.
(2) Prior to first disbursement, the Lender must be in receipt of evidence
of the kind described below from an independent authoritative source
which is sufficient to indicate to the Lender that the property is not
in a special flood hazard area (SFHA). Property is defined as the
asset(s) financed as a part of the SBA financial assistance and/or
other collateral deemed necessary by the field office. If such
evidence is not provided to the Lender, the Borrower must obtain, and
maintain, a Standard Flood Insurance Policy (SFIP) or other
appropriate special flood hazard insurance in amounts and coverages
equal to the lesser of (1) the insurable value of the property or (2)
the maximum amount of coverage available Borrower can show that
special flood hazard insurance has been acquired by submitting a copy
of the policy or providing evidence of premium payment for the
appropriate coverage to a licensed insurance agent. Borrower will not
be eligible for either any future disaster assistance or SBA business
loan assistance if the special flood hazard insurance is not
maintained as stipulated herein throughout the entire term of this
loan.
As evidence that property is not located within a special flood hazard
area subject to flooding, mudslides or erosions, the Lender may rely
on a determination of special flood hazard area status by the
Borrower's property and casualty insurance company, real estate
appraiser, title insurance company, a local government agency or other
authoritative source acceptable to SBA which would ordinarily have
knowledge of the special flood hazard area status for the property.
(3) Resolution of Board of Directors, of Borrower corporation, authorizing
the corporation to obtain the loan and given collateral to secure it.
<PAGE>
Borrower Name: The Oregon Baking Company, Inc.
Page 8
(4) Prior to any disbursement, Lender must be in receipt of evidence
satisfactory to it that Borrower and/or corporate guarantor is a
registered corporation listed in good standing with the Corporate
Commissioner of the State of Oregon. Loan documentation must reflect
correct spelling of corporate name.
BORROWER COVENANTS AND WARRANTS THAT:
(1) Borrower is in compliance with all applicable Federal and State
environmental laws and regulations, and that they will continue to
comply with all such laws and regulations in the future; no
proceedings alleging violations of environmental laws are pending, on
property owned or property to be purchased, leased or rented by
Borrower; Borrower has no knowledge of hazardous waste contamination
on property owned or property to be purchased, leased or rented by
Borrower; and Borrower assumes all responsibility and all liability
for toxic substance cleanup resulting from any violations, past,
present or future, and agrees to indemnify the Lender and SBA for any
and all resulting liabilities or costs.
(2) Prior to any disbursement, Lender must be in receipt of evidence
satisfactory to it that the registration of Borrower's assumed
business name is active on the records of the Corporation Division of
the Oregon Secretary of State.
(3) Borrower certifies that no principal who owns at least 50% of the
voting interest of the company is delinquent more than 60 days under
the terms of any (a) administrative order, (b) court order, or (c)
repayment agreement that requires payment of child support.
(4) Prior to first disbursement, Borrower must furnish to Lender a copy of
a lease for all business locations, with terms satisfactory to Lender.
(5) Prior to any further expansion, Borrower shall obtain written approval
of Lender. Lender shall insure the profitability of the operations
before granting approval for further expansion.
5. Parties Affected. This Agreement shall be binding upon Borrower and
Borrower's successors and assigns. No provision stated herein shall be
waived without the prior written consent of SBA. The Loan shall be
administered as provided in the Guaranty Agreement.
AIDA ALVAREZ
ADMINISTRATOR
By: /s/Wayne E. Carter May 16, 1997
-----------------------------------------------------------------------------
Wayne E. Carter, Acting Deputy District Director Date
CERTIFICATION
- -------------
Borrower has read and understands the action SBA can take in the event of
failure to meet scheduled payments in accordance with the terms and conditions
of the agreements.
<PAGE>
Borrower Name: The Oregon Baking Company, Inc.
Page 9
Borrower hereby agrees to the conditions imposed herein and further acknowledges
that this Authorization and Loan Agreement (Guaranty Loans) does not create a
commitment by Lender to disburse any funds pursuant hereto. Borrower further
agrees that the terms and conditions herein are for the benefit of, and may be
enforced by, Lender as well as SBA and this Authorization and all amendments
constitute the Loan Agreement between Lender and Borrower.
LENDER
Name: Heller First Capital Corp.
By: /s/ Donna L. Jordan
------------------------------------
Donna L. Jordan, Senior Vice President
By: /s/ Kathryn J. Sennott
------------------------------------
Kathryn J. Sennott, Credit Manager
Date: 6/20/97
----------------------------------
BORROWER
Name: The Oregon Baking Company, Inc.
By: /s/ Howard J. Wasserteil
------------------------------------
Howard J. Wasserteil, President
By: /s/ Robert E. Schneider
------------------------------------
Robert E. Schneider, CEO
Date: 6/20/97
----------------------------------
GUARANTORS (INDIVIDUAL)
/s/ Robert E. Schneider
- ---------------------------------------
Robert E. Schneider
/s/ Virginia C. Wulf
- ---------------------------------------
Virginia C. Wulf
/s/ Howard J. Wasserteil
- ---------------------------------------
Howard J. Wasserteil
/s/ Vivian S. Wasserteil
- ---------------------------------------
Vivian S. Wasserteil
Date: 6/30/97
----------------------------------
COMMERCIAL SECURITY AGREEMENT
================================================================================
Borrower: Oregon Baking Company, Lender: Heller First Capital Corp.
an Oregon corporation Portland Office
2277 NW Quimby 10250 SW Greenburg Road
Portland, OR 97296 Suite 400
Portland, OR 97223
================================================================================
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN OREGON BAKING
COMPANY, AN OREGON CORPORATION DBA MARSEE BAKING (REFERRED TO BELOW AS
"GRANTOR"); AND HELLER FIRST CAPITAL CORP. (REFERRED TO BELOW AS "LENDER"). FOR
VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER A SECURITY INTEREST IN THE
COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT LENDER SHALL HAVE THE
RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE COLLATERAL, IN ADDITION TO
ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from
time to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
ALL MACHINERY, EQUIPMENT, FURNITURE, INVENTORY, GENERAL INTANGIBLES
AND ACCOUNTS WHEREVER LOCATED AND MORE THROUGHLY DESCRIBED IN EXHIBIT
"A" ATTACHED HERETO AND MADE A PART HEREOF.
THIS SECURITY AGREEMENT INCLUDES PURCHASE MONEY SECURITY INTEREST IN
ALL MACHINERY AND EQUIPMENT ACQUIRED WITH LOAN PROCEEDS.
In addition, the work "Collateral" includes all the following, whether
now owned or hereafter acquired, whether now existing or hereafter
arising and wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions
for any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies,
payments, and other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral
section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing,
photograph, microfilm, microfiche, or electronic media, together with
all of Grantor's right, title, and interest in and to all computer
software required to utilize, create, maintain, and process any such
records or data on electronic media.
<PAGE>
Some or all of the Collateral may be located on the following described
real estate:
LOTS 17 & 18, COUCH'S ADDITION, CITY OF PORTLAND, COUNTY OF
MULTNOMAH, STATE OF OREGON. THE RECORD OWNER OF THE REAL PROPERTY IS
QUIMBY STREET PARTNERS.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
"Events of Default."
GRANTOR: The word "Grantor" means Oregon Banking [sic] Company, an Oregon
corporation dba Marsee Baking, its successors and assigns.
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation partners in
connection with the indebtedness.
INDEBTEDNESS. The work "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any other Related Documents.
LENDER. The word "Lender" means Heller First Capital Corp., its successors
and assigns.
NOTE. The work "Note" means the note or credit agreement dated June 20,
1997, in the principal amount of $900,000.00 from Oregon Baking Company, an
Oregon corporation to Lender, together with all renewals of, extensions of,
modifications of, refinancing of, consolidations of and substitutions for
the note or credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
lender's interest upon any and all chattel paper if not delivered TO Lender
for possession by Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement.
Lender may at any time and without further authorization from Grantor, file
a carbon, photographic or other reproduction of any financing statement or
of this Agreement for use as a financing statement. Grantor will reimburse
Lender for all expenses for the perfection and the continuation of the
perfection of Lender's security interest in the Collateral. Grantor
promptly will notify Lender before any change in Grantor's name including
any change to the assumed business names of Grantor.
NO VIOLATION. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
<PAGE>
COMMERCIAL SECURITY AGREEMENT Page 2
Loan No 5638 (continued)
================================================================================
ENFORCEABILITY OF COLLATERAL. To the extent Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contact and are in fact obligated as they appear
to be on the Collateral.
LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, will deliver
to Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor, and (d)
all other properties where Collateral is or may be located. Except in the
ordinary course of its business, Grantor shall not remove the Collateral
from its existing locations without the prior written consent of Lender.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent
the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at
such other locations as are acceptable to Lender. Some or all of the
Collateral may be located at the real property described above. Except in
the ordinary course of its business, including the sales of inventory,
Grantor shall not remove the Collateral from its existing locations without
the prior written consent of Lender. To the extent that the Collateral
consists of vehicles, or other titled property, Grantor shall not take or
permit any action which would require application for certificates of title
for the vehicles outside the State of Oregon, without the prior written
consent of Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A sale in
the ordinary course of Grantor's business does not include a transfer in
partial or total satisfaction of a debt or any bulk sale. Grantor shall not
pledge, mortgage, encumber or otherwise permit the Collateral to be subject
to any lien, security interest, encumbrance, or charge, other than the
security interest provided for in this Agreement, without the prior written
consent of Lender. This include security interests even if junior in right
to the security interests granted under this Agreement. Unless waived by
Lender, all proceeds from any disposition of the Collateral (for whatever
reason) shall be held in trust for Lender and shall not be commingled with
any other funds; provided however, this requirement shall not constitute
consent by Lender to any sale or other disposition. Upon receipt, Grantor
shall immediately deliver any such proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's
rights in the Collateral against the claims and demands of all other
persons.
COLLATERAL SCHEDULES AND LOCATIONS. Insofar as the Collateral consists of
inventory, Grantor shall deliver to Lender, as often as Lender shall
require, such lists, descriptions, and designations of such Collateral as
Lender may require to identify the nature, extent, and location of such
Collateral. Such information shall be submitted for Grantor and each of its
subsidiaries or related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not commit
or permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall have
the right at all reasonable times to examine, inspect, and audit the
Collateral whenever located. Grantor shall immediately notify Lender of all
cases involving the return, rejection, repossession, loss or damage of or
to any Collateral; of any request for credit or adjustment or of any other
dispute arising with respect to the Collateral; and generally of all
happenings and events affecting the Collateral or the value or amount of
the Collateral.
<PAGE>
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness,
or upon any of the other Related Documents. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and
so long as Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien which is
not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the lein plus
any interest, costs, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest
proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, including without limitation all environmental laws,
ordinances, rules and regulations, now or hereafter in effect, applicable
to the ownership, production, disposition, or use of the Collateral.
Grantor may contest in good faith any such law, ordinance or regulation and
withhold compliance during any proceeding, including appropriate appeals,
so long as Lender's interest in the Collateral, in Lender's opinion, is not
jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos.
The representations and warranties contained herein are based on Grantor's
due diligence in investigating the Collateral for hazardous wastes and
substances. Grantor hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any Environmental Laws, and (b)
agrees to indemnify and hold harmless Lender against any and all claims and
losses resulting from a breach of this provision of this Agreement, or as a
result of a violation of any Environmental Laws. This obligation to
indemnify shall survive the payment of the indebtedness and the
satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to
Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulation that coverages will not be
cancelled or diminished without at least thirty (30) days ' prior written
notice to Lender and not including any disclaimer of the insurer's
liability for failure to give such a notice. Each insurance policy also
shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor
or any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require.
If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be obligated to)
obtain such insurance as Lender deems appropriate, including if it so
chooses "single interest insurance" which will cover only Lender's interest
in the Collateral.
<PAGE>
COMMERCIAL SECURITY AGREEMENT Page 3
Loan No 5638 (continued)
================================================================================
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which have
not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the payment
of premiums shall remain Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as
Lender may reasonably request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
property insured (e) the then current value on the basis of which insurance
has been obtained and the manner of determining that value; and (f) the
expiration date of the policy. In addition, Grantor shall upon request by
Lender (however not more often than annually) have an independent appraiser
satisfactory to Lender determine, as applicable, the cash value or
replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of the
tangible personal property and beneficial use of all the Collateral and may use
it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security interest in such Collateral. If
Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Grantor shall request or as Lender, in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request
by Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
either (i) the term of any applicable insurance policy or (ii) the remaining
term of the Note, or (c) be treated as a balloon payment which will be due and
payable at the Note's maturity. This Agreement also will secure payment of these
amounts. Such right shall be in addition to all other rights and remedies to
which Lender may be entitled upon the occurrence of an Event of Default.
<PAGE>
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due on
the Indebtedness.
ENVIRONMENTAL DEFAULT. Failure of any party to comply with or perform when
due any term, obligation, covenant or condition contained in any
environmental agreement executed in connection with any Loan.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any
time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the Indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor of
forfeiture proceeding and if Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or such Guarantor dies or
becomes incompetent, Lender, at its option, may, but shall not be required
to, permit the Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender, and, in
doing so, cure the Event of Default.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Grantor has not been given a prior notice of a breach of the
same provision of this Agreement, it may be cured (and no Event of Default
will have occurred) if Grantor, after Lender sends written notice demanding
cure of such default, (a) cures the default within ten (10) days; or (b) if
the cure requires more than ten (10) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Oregon Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
<PAGE>
COMMERCIAL SECURITY AGREEMENT Page 4
Loan No 5638 (continued)
================================================================================
ACCELERATE INDEBTEDNESS. Lender may declare the entire indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time
of repossession, Grantor agrees Lender may take such other goods, provided
that Lender makes reasonable efforts to return them to Grantor after
repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in its own name
or that of Grantor. Lender may sell the Collateral at public auction or
private sale. Unless the Collateral threatens to decline speedily in value
or is a type customarily sold on a recognized market, Lender will give
Grantor reasonable notice of the time after which any private sale or any
other intended disposition of the Collateral is to be made unless Grantor
has signed, after an Event of Default occurs, a statement renouncing or
modifying Grantor's right to notification of sale. The requirements of
reasonable notice shall be met if such notice is given at least ten (10)
days before the time of the sale or disposition. All expenses relating to
the disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right,
(b) the receiver may be an employee of Lender and may serve without bond,
and (c) all fees of the receiver and his or her attorney shall become part
of the indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure until
repaid.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the indebtedness or apply it to payment of the indebtedness in
such order of preference as Lender may determine. Insofar as the Collateral
consists of accounts, general intangibles, insurance policies, instruments,
chattel paper, choses in action, or similar property, Lender may demand,
collect, receipt for, settle, compromise, adjust, sue for, foreclose, or
realize on the Collateral as Lender may determine, whether or not
indebtedness or Collateral is then due. For these purposes, Lender may, on
behalf of and in the name of Grantor, receive, open and dispose of mail
addressed to Grantor; change any address to which mail and payments are to
be sent; and endorse notes, checks, drafts, money orders, documents of
title, instruments and items pertaining to payment, shipment, or storage of
any Collateral. To facilitate collection, Lender may notify account debtors
and obligors on any Collateral to make payments directly to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining
on the indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Grantor shall
be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
<PAGE>
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies of
a secured creditor under the provisions of the Uniform Commercial Code, as
may be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced
by this Agreement or the Related Documents or by any other writing, shall
be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a default and to
exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Oregon. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of MULTNOMAH
County, the State of Oregon. Lender and Grantor hereby waive the right to
any jury trial in any action, proceeding, or counterclaim brought by either
Lender or Grantor against the other. This Agreement shall be governed by
and construed in accordance with the laws of the State of Oregon.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor
shall pay the costs and expenses of such enforcement. Costs and expenses
include Lender's attorneys' fees and legal expenses whether or not there is
a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Grantor also shall pay all court costs and such additional fees
as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each of the persons
signing below is responsible for all obligations in this Agreement.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile, and shall be effective when
actually delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class, postage
prepaid, addressed to the party to whom the notice is to be given at the
address shown above. Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's address.
To the extent permitted by applicable law, if there is more than one
Grantor, notice to any Grantor will constitute notice to all Grantors. For
notice purposes, Grantor will keep Lender informed at all times of
Grantor's current address(es).
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover
all sums of money or other property which may now or hereafter become due,
owing or payable from the Collateral; (b) to execute, sign and endorse any
and all claims, instruments, receipts, checks, drafts or warrants issued in
payment for the Collateral; (c) to settle or compromise any and all claims
arising under the Collateral, and, in the place and stead of Grantor, to
execute and deliver its release and settlement for the claim; and (d) to
file any claim or claims or to take any action or institute or take part in
any proceedings, either in its own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable. This power is given as security for the indebtedness, and the
authority hereby conferred is and shall be irrevocable and shall remain in
full force and effect until renounced by Lender.
<PAGE>
COMMERCIAL SECURITY AGREEMENT Page 5
Loan No 5638 (continued)
================================================================================
PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the
indebtedness and, at Lender's option, shall be payable by Borrower as
provided in the "EXPENDITURES BY LENDER" paragraph.
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on transfer
of the Collateral, this Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of
any of Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
WAIVER OF CO-OBLIGOR'S RIGHTS. If more than one person is obligated for the
indebtedness, Borrower irrevocably waives, disclaims and relinquishes all
claims against such other person which Borrower has or would otherwise have
by virtue of payment of the indebtedness or any part thereof, specifically
including but not limited to all rights of indemnity, contribution or
exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 20,
1997.
GRANTOR:
OREGON BAKING COMPANY, AN OREGON CORPORATION
BY: /s/ Howard J. Wasserteil BY: /s/ Robert E. Schneider
------------------------------- -------------------------
HOWARD J. WASSERTEIL, PRESIDENT ROBERT E. SCHNEIDER, CEO
================================================================================
LASER PRO, Reg.U.S. Pat. & T.M. Off., Ver. 3.23 -copyright- 1997 CFI
ProServices, Inc. All rights reserved. [OR-E40 OREGON1.LN C1.OVL]
<PAGE>
EXHIBIT "A"
All present and future accounts, contract rights, chattel paper, security
agreements and debts secured thereby, documents, notes, drafts, instruments,
general intangibles (including, but not limited to tax refunds, insurance
refunds, intellectual property and franchises) and returned goods. All present
and hereafter acquired equipment, furniture, furnishings and wherever located,
including but not limited to machinery and machine tools with motors, controls,
attachments, parts, tools and accessories incidental thereto. All present and
future fixtures. All present and future tools, dies, drawing, blueprints,
catalogs and computer programs. All present and hereafter acquired inventory
wherever located, including but not limited to raw materials, work in progress
and finished goods. All proceeds and products of the foregoing, including but
not limited to money, deposit accounts, goods, insurance proceeds, and other
tangible or intangible property received upon the sale or disposition of the
foregoing. All present and future patents, trademarks and tradenames. All
present and future books and records pertaining to the foregoing and the
equipment containing said books and records.
Except as to inventory held for sale, the debtor has no right to sell or
otherwise dispose of any of the collateral.
PROMISSORY NOTE
$268,286.58 L/N: 3230086-001
Chicago, Illinois
April 28, 1998
FOR VALUE RECEIVED, the undersigned, OREGON BAKING COMPANY DBA MARSEE BAKING
("Maker") promises to pay to the order of HELLER FINANCIAL LEASING, INC.
(together with any holder of this Note, "Payee"), at its office at 500 West
Monroe Street, Chicago, Illinois 60661 or at such other place as Payee may
appoint, the principal sum of Two Hundred Sixty-eight Thousand Two Hundred
Eighty-six Dollars and Fifty-eight Centers ($268,286.58) together with interest
thereon from the date disbursement is made hereunder on the whole amount of said
principal sum remaining unpaid from time to time at the rate of 11.24% per annum
(meaning 360 days for the actual number of days elapsed) payable monthly on the
whole amount of said sum remaining from time to time unpaid, together with
collection expenses and reasonable attorneys' fees if placed with an attorney
for collection. This Note shall be due and payable in monthly installments of
principal and interest as follows:
Sixty (60) consecutive monthly installments of Five Thousand Eight
Hundred Sixty-six and 71/100 Dollars ($5,866.71);
each payable on the 20TH day of the month commencing with the month of JUNE,
1998. The entire then outstanding principal balance hereunder, plus all accrued
and unpaid interest, charges and other amounts owing hereunder or under the
Security Agreement (defined below) is due and payable on MAY 20, 2003. All
payments shall be applied first to interest and then to principal.
If any installment of principal or interest due hereunder shall not be paid
within ten (10) days after such installment is due, Maker shall pay to Payee a
"late charge" of five percent (5%) of such delinquent amount (or the maximum
amount permitted by law, whichever is less). Maker hereby waives demand,
presentment for payment, protest, and notice of non-payment.
Notwithstanding the foregoing, if at any time implementation of any provision
hereof shall cause the interest contracted for or charged herein or collectable
hereunder to exceed the applicable lawful maximum rate, then the interest shall
be limited to such applicable lawful maximum.
Maker hereby authorizes Payee to insert the date of the first installment due
hereunder, a date not sooner than fifteen (15) days nor later than forty-six
(46) days after the date of disbursement. Payee's books and records shall be
dispositive of the date disbursement is made hereunder.
This Note is secured by and entitled to (I) the benefits of a certain Security
Agreement dated as of April 28, 1998, and (ii) any other agreements under which
Payee has been granted a lien and security interest in property to secure the
payment and performance by Maker of this Note (all of the foregoing hereinafter
sometimes collectively referred to as the "Security Agreement") to which
reference is made for a statement of the nature and extent of the protection and
security afforded, the rights of Payee, and the rights and obligations of Maker.
If a default shall occur under the Security Agreement, this Note may become or
be declared due in the manner and with the effect provided for therein.
Upon payment of all accrued late charges and interest then due or to become due,
Maker may prepay the entire balance evidenced hereby (less a rebate of unearned
interest, if any, calculated in accordance with the Simple Interest Method) upon
payment of a premium equal to 4% of the principal amount so prepaid; provided,
however, if said prepayment is made during any loan year after the second loan
year, said premium shall be reduced by 1% in each loan year thereafter until
said premium shall be reduced to a minimum premium of 1% and said premium shall
remain at such minimum until final maturity.
<PAGE>
Maker and all endorsers, guarantors or any others who may at any time become
liable for the payment hereof hereby consent to any and all extensions of time,
renewals, waivers and modifications of, and substitutions or release of security
or of any party primarily or secondarily liable on, or with respect to, this
Note or the Security Agreement or any of the terms and provisions thereof that
may be made, granted or consented to by Payee and agree that Payee shall not be
required to look to any collateral for the payment of this Note, but may proceed
against the undersigned or any one of the undersigned, if more than one, or any
guarantor hereof in such manner as it deems desirable. None of the rights or
remedies of Payee hereunder or under the Security Agreement are to be deemed
waived or affected by any failure to exercise same. All remedies conferred upon
Payee, the holder of the Security Agreement or any other instrument or agreement
to which the undersigned or any guarantor hereof is a party or under which any
or all of them is bound, shall be cumulative and not exclusive, and such
remedies may be exercised concurrently or consecutively at Payee's option.
This Note shall be governed by and construed in accordance with the laws and
decisions of the State of Illinois, without regard to principles of conflicts of
law, including all matters of construction, validity, enforceability and
performance. AT PAYEE'S ELECTION AND WITHOUT LIMITING PAYEE'S RIGHT TO COMMENCE
AN ACTION IN ANY OTHER JURISDICTION, MAKER (I) CONSENT(S) TO THE EXCLUSIVE
JURISDICTION AND VENUE OF ANY COURT (FEDERAL, STATE OR LOCAL) SITUATED IN THE
COUNTY OF COOK, STATE OF ILLINOIS, (II) WAIVE(S) ANY OBJECTION BASED UPON
IMPROPER VENUE AND/OR FORUM NON CONVENIENS, AND (III) CONSENT(S) TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, TO THE LAST KNOWN
ADDRESS OF MAKER, WHICH SERVICE SHALL BE DEEMED COMPLETED WITHIN TEN (10) DAYS
AFTER THE DATE OF MAILING THEREOF.
WAIVER OF JURY TRIAL: PAYEE AND MAKER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
NOTE OR THE SECURITY AGREEMENT. PAYEE AND MAKER ACKNOWLEDGE THAT THIS WAIVER IS
A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE, AND THE SECURITY
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS. PAYEE AND MAKER WARRANT AND REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS RESPECTIVE JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed on
the date first above written.
ATTEST: (Witness if not a corporation) OREGON BAKING COMPANY DBA MARSEE BAKING
/s/ D Mombell
- ----------------------------- By: /s/ Howard Wassterteil
-----------------------------
Name: Howard Wassterteil
Title: Secretary
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (hereinafter referred to as "Agreement" or "Security
Agreement"), made this 28th day of April, 1998, by and between OREGON BAKING
COMPANY DBA MARSEE BAKING, an Oregon corporation whose business address is 2277
NW Quimby, Portland, Oregon 97296 ("Debtor") and HELLER FINANCIAL LEASING, INC.,
a Delaware corporation, whose address is 500 West Monroe Street, Chicago,
Illinois 60661 ("Secured Party").
1. SECURE PAYMENT. To secure payment of indebtedness as evidenced by a note or
notes (the "Notes"), which Debtor has executed and delivered or will execute and
deliver to Secured Party and also to secure any other indebtedness or liability
of Debtor to Secured Party, direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising and no matter how acquired by
Secured Party, including all future advances or loans which may be made at the
option of Secured Party (all the foregoing hereinafter called the
"Indebtedness"), Debtor hereby grants and conveys to Secured Party a first
superior continuing lien and security interest in the property described below
and/or on the Schedule(s) attached hereto (the "Schedules"), all products and
proceeds (including insurance proceeds) thereof, if any, and all increases,
substitutions, replacements, attachments, additions, and accessions thereto, all
or any of the foregoing hereinafter called the "Collateral".
(DESCRIPTION OF COLLATERAL ON ATTACHED SCHEDULES. THE SCHEDULES MAY BE
SUPPLEMENTAL FROM TIME TO TIME TO EVIDENCE THE COLLATERAL, SUBJECT TO THIS
AGREEMENT.)
2. WARRANTIES, REPRESENTATIONS AND COVENANTS. Debtor warrants, represents,
covenants and agrees as follows:
(a) PERFORM OBLIGATIONS. Debtor shall pay all of the Indebtedness secured by
this Agreement and perform all of the obligations contained in this Agreement
according to its terms. Debtor shall use the loan proceeds primarily for
business uses and not for personal, family, household, or agricultural uses.
(b) DEFEND THE COLLATERAL. Debtor shall defend the title to the Collateral
against all persons and against all claims and demands whatsoever, which
Collateral, except for the security interest granted hereby, is lawfully owned
by Debtor and is now free and clear of any and all liens, security interests,
claims, charges, encumbrances, taxes, and assessments of any kind, except as may
be set forth on the Schedules. At the request of Secured Party, Debtor shall
furnish further assurance of title, execute any written agreement or do any
other acts necessary to effectuate the purposes and provisions of this
Agreement, execute any instrument or statement required by law or otherwise in
order to perfect, continue, or terminate the security interest of Secured Party
in the Collateral and pay all costs of filing in connection therewith.
(c) KEEP POSSESSION OF THE COLLATERAL. Debtor shall retain possession of the
Collateral until the Indebtedness is fully paid and performed (subject to
Secured Party's rights and remedies upon the occurrence of an Event of Default
[defined below]) and shall not sell, exchange, assign, loan, deliver, lease,
mortgage, or otherwise dispose of the Collateral or any part thereof without the
prior written consent of Secured Party. Debtor shall keep the Collateral at the
location[s] specified on the Schedules and shall not remove same (except in the
usual course of business for temporary periods) without the prior written
consent of Secured Party.
<PAGE>
(d) COLLATERAL FREE AND CLEAR. Debtor shall keep the Collateral free and
clear of all liens, charges, encumbrances, assessments, and other security
interest of any kind (other than the security interest granted hereby) and shall
pay, when due, all taxes, assessments, and license fees relating to the
Collateral.
(e) COLLATERAL IN GOOD OPERATING ORDER. All of the Collateral is in good
operating order, condition and repair and is used or useful in the business of
Debtor. Debtor shall keep the Collateral, at Debtor's sole cost and expense, in
good repair and condition and not misuse, abuse, waste, or allow it to
deteriorate except for normal wear and tear. Debtor shall make the Collateral
available for inspection by Secured Party at all reasonable times, and Debtor
will use and maintain the Collateral in a lawful manner in accordance with all
applicable laws, regulations, ordinances, and codes.
(f) INSURANCE. Debtor shall insure the Collateral against loss by fire
(including extended coverage), theft and other hazards, for its full insurable
value including replacement costs. The insurance policy shall name Secured Party
as loss payee and shall contain such other terms as Secured Party may require.
In addition, Debtor shall obtain liability insurance respecting the Collateral
covering liability for bodily injury, including death and property damage, in
amounts as Secured Party may require. Policies shall be in such form, amounts,
and with such companies as Secured Party may approve; shall provide for at lest
thirty (30) days prior written notice to Security Party prior to any
modification or cancellation thereof; shall be payable to Debtor and Secured
Party as their interests may appear; shall waive any claim for premium against
Secured Party; and shall provide that no breach of warranty or representation or
act or omission of Debtor shall terminate, limit or affect the insurers'
liability to Secured Party. Certificates of insurance or policies evidencing the
insurance required hereby along with satisfactory proof of the payment of the
premiums therefor shall be delivered to Secured Party who is authorized, but
under no duty, to obtain such insurance upon failure of Debtor to do so. Debtor
shall give immediate written notice to Secured Party and to insurers of loss or
damage to the Collateral and shall promptly file proofs of loss with insurers.
Debtor hereby irrevocably appoints Secured Party as Debtor's attorney-in-fact,
coupled with an interest, for the purpose of obtaining, adjusting and canceling
any such insurance and endorsing settlement drafts. Debtor hereby assigns to
Secured Party, as additional security for the Indebtedness, all sums which may
become payable under such insurance, including return premiums ad dividends.
(g) COMPLETE INFORMATION. No representation or warranty made by Debtor in
this Agreement and no other document or statement furnished to Secured Party by
or on behalf of Debtor contains any material misstatement of a material fact or
omits to state any material fact necessary in order to make the statements
contained herein or therein not misleading. Except as expressly set froth in the
Schedules, there is no fact known to Debtor that will or could have a materially
adverse affect on the business, operation, condition (financial or otherwise),
performance, propitiates or prospects of Debtor or Debtor's ability to timely
pay all of the Indebtedness and perform all of its other obligations contained
in or secured by this Agreement.
(h) IF COLLATERAL ATTACHES TO REAL ESTATE. If the Collateral or any part
thereof has been attached to or is to be attached to real estate, a description
of the real estate and the name and address of the record owner is set forth on
the Schedules. If said collateral is attached to real estate prior to the
perfection of the security interest granted hereby, Debtor will, on demand of
Secured Party, furnish Secured Party with a disclaimer or waiver of any interest
in the Collateral satisfactory to Secured Party and signed by all persons having
an interest in the real estate. Notwithstanding the foregoing, the Collateral
shall remain personal property and shall not be affixed to realty without the
prior written consent of Secured Party.
1
<PAGE>
(i) FINANCIAL STATEMENTS. Debtor shall deliver to Secured Party Debtor's
outside audited annual financial statements within ninety (90) days after the
end of Debtor's and guarantors' fiscal years and shall furnish, within sixty
(60) days after the end of each quarter, quarterly uncertified financial
statements of Debtor and compliance certificates if requested by Secured Party.
Each of Debtor and guarantor shall certify that all financial information and
statements provided to Secured Party fairly present the financial condition of
Debtor or guarantor at the date thereof.
(j) PERFECTION. This Agreement creates a valid and first priority security
interest in the Collateral, securing the payment and performance of the
Indebtedness and all actions necessary to perfect and protect such security
interest have been duly taken.
(k) AUTHORIZATION. Debtor is now, and will at all times remain, duly
licensed, qualified to do business and in good standing in every jurisdiction
where failure to be so licensed or qualified and in good standing would have a
material adverse effect on its business, properties or assets. Debtor has the
power to authorize, execute and deliver this Security Agreement, the Notes and
the other documents relating thereto (the Security Agreement, Notes and other
documents, all as amended from time to time, are hereafter collectively referred
to as the "Loan Documents"), to incur and perform obligations hereunder and
thereunder, and to grant he security interest created hereby. The Loan Documents
have been duly authorized, executed, and delivered by or on behalf of Debtor,
and constitute the legal, valid, and binding obligations of Debtor and are
enforceable against Debtor in accordance with their respective terms. Debtor
will preserve and maintain its existence and will not wind up its affairs or
otherwise dissolve. Debtor will not, without thirty (30) days prior written
notice to Secured Party, (1) change its name or so change it structure such that
any financing statement or other record notice becomes misleading or (2) change
its principal place of business or chief executive or accounting offices form
the address stated herein.
<PAGE>
(l) LITIGATION. There are no actions, suits, proceedings, or investigations
("Litigation") pending or, to the knowledge of Debtor. Debtor is not in
violation of any material term or provision of its by-laws, or of any material
agreement or instrument, or of any judgment, decree, order, or any state, rule,
or governmental regulation applicable to it. The execution, delivery, and
performance of the Loan Documents do not and will not violate, constitute a
default under, or otherwise conflict with any such term or provision or result
in the creation of any security interest, lien, charge, or encumbrance upon any
of the properties or assets of Debtor, except for the security interest herein
created. Debtor will promptly notify Secured Party in writing of Litigation
against it if: (1) the outcome of such Litigation may materially or adversely
affect the finances or operations of Debtor (for purposes of this provision, Ten
Thousand Dollars ($10,000) shall be deemed material) or (2) such Litigation
questions the validity of any Loan Document or any action taken or to be taken
pursuant thereto. Debtor shall furnish to Secured Party such information
regarding any such Litigation as Secured Party shall reasonably request.
(m) COMPLIANCE WITH LAWS. Debtor shall comply in all material respects with
all applicable laws, rules, and regulations and duly observe all valid
requirements of all governmental authorities, and all statutes, rules and
regulations relating to its business, including, without limitation, those
concerning public and employee health, safety, and social security and
withholding taxes and those concerning employee benefit plans and as such may be
required by the Internal Revenue Code, as amended from time to time (the "Code")
and the Employees Retirement Income Security Act of 1974, as amended from time
to time ("ERISA").
(n) TAXES. Debtor has timely filed all tax returns (federal, state, local,
and foreign) required to be filed by it and has paid or established reserves for
all taxes, assessments, fees, and other governmental charges upon its
properties, assets, income and franchises. Debtor does not know of any actual or
proposed additional tax assessments for any fiscal period against it which would
have a material adverse effect on it. Debtor will promptly pay and discharge all
taxes, assessments, and other governmental charges prior to the date on which
penalties are attached thereto, establish adequate reserves for the payments of
such taxes, assessments, and other governmental charges (including cash
reserves, if any, required by generally accepted accounting principles ("GAAP")
for any taxes, assessments, or other charges being contested), make all required
withholding and other tax deposits, and, upon request, provide Secured Party
with receipts or other proof that any or all of such taxes, assessments, or
governmental charges have been paid in a timely fashion; provided, however, that
nothing contained herein shall require the payment of any tax, assessment, or
other governmental charge so long as its validity is being contested in good
faith and by appropriate proceedings diligently conducted. Should any stamp,
excise, or other tax, including mortgage, conveyance, deed, intangible, or
recording taxes become payable in respect of this Security Agreement, the Notes,
or any other Loan Documents, Debtor shall pay the same (including interest and
penalties, if any) and shall hold Secured Party harmless with respect thereto.
(o) ENVIRONMENTAL LAWS. Debtor has complied and will comply in all material
respects with all Environmental Laws applicable to the transfer, construction
on, and operations of its property and business. Debtor has (1) not received any
summons, complaint, order, or similar notice that it is not in compliance with,
or that any public authority is investigating its compliance with, any
Environmental Laws and (2) no knowledge of any material violation of any
Environmental Laws on or about its assets or property. Debtor will comply, in
all material respects with all Environmental Laws and provide Secured Party,
promptly following receipt, copies of any correspondence, notice, complaint,
order, or other document that it receives asserting or alleging a circumstance
or condition which requires or may require a cleanup, removal, remedial action
or other response by or on the part of Debtor under Environmental Laws, or which
seeks damages or civil, criminal or punitive penalties from Debtor for an
alleged violation of any Environmental Laws. Debtor will advise Secured Party in
writing as soon as Debtor becomes aware of any condition or circumstance that
makes the environmental representations or warranties contained in this
Agreement inaccurate in any material respect. For purposes of this Security
Agreement, "Environmental Laws" means all federal, state, and local laws, rules,
regulations, orders, and decrees relating to health, safety, hazardous
substances, and environmental matters, including, without limitation, the
Resource Recovery and Reclamation Act of 1976, the comprehensive Environmental
Response, Compensation, and Liability Act of 1980, the Toxic Substances control
Act, the Clean Water At of 1977, and the Clean Air Act, all as amended from time
to time.
(p) NO LIABILITY. Debtor acknowledges and agrees that Secured Party shall
not be liable for any acts or omissions nor for any error of judgment or mistake
of fact or law other than as a result of Secured Party's gross negligence or
willful misconduct.
(q) SETOFF. Without limiting any other right of Secured Party, whenever
Secured Party has the right to declare any Indebtedness to be immediately due
and payable )(whether or not it has so declared), Secured Party is hereby
authorized at any time and from time to time to the fullest extent permitted by
law, to set off and apply against any and all of the Indebtedness, any and all
monies then or thereafter owed to Debtor by Secured Party in any capacity,
whether or not the obligation to pay such monies owed by Secured Party is then
due. Secured Party shall be deemed to have exercised such right of set-off
immediately at the time of such election even though any charge therefor is made
or entered on Secured Party's records subsequent thereto.
(r) BOOKS AND RECORDS. Debtor shall maintain, at all times, true and
complete books, records and accounts in which true and correct entries are made
of its transactions in accordance with GAAP and consistent with those applied in
the preparation of Debtor's financial statements. At all reasonable times, upon
reasonable notice, and during normal business hours, Debtor will permit Secured
Party or its agents to audit, examine and make extracts from or copies of any of
its books, ledgers, reports, correspondence, and other records. Secured Party
may verify any Collateral in any reasonable manner which Secured Party may
consider appropriate, and Debtor shall furnish all reasonable assistance and
information and perform any acts which Secured Party may reasonably request in
connection therewith.
2
<PAGE>
(s) WRITTEN NOTICE. Debtor agrees to give Secured Party written notice of
any action or inaction by Secured Party or any agent or attorney of Secured
Party or that may give rise to a claim against Secured Party or any agent or
attorney of Secured Party or that may be a defense to payment of the obligations
for any reason, including, but not limited to, commission of a tort or violation
of any contractual duty or duty implied by law. Debtor agrees that unless such
notice is fully given as promptly as possible (and in any event within thirty
(30) days) after Debtor has knowledge, or with the exercise of reasonable
diligence should have had knowledge, of any such action or inaction, Debtor
shall not assert, and Debtor shall be deemed to have waived, any claim or
defense arising therefrom.
(t) INDEMNITY. Debtor shall indemnify, protect, save, defend and hold
Secured Party, its parent, officers, directors, agents, employees, and attorneys
harmless from and against any loss, expense (including reasonable attorneys'
fees and costs), damage or liability arising directly or indirectly out of (i)
any breach of any representation, warranty or covenant contained herein and in
the other Loan Documents, (ii) any claim or cause of action that would deny
Secured Party the full benefit or protection of any provision herein and in the
Loan Documents, and (iii) the ownership, possession, lease, operation, use,
condition, sale, return, or other disposition of the Collateral. If after
receipt of any payment of all or any part of the Indebtedness, Secured Party is
for any reason compelled to surrender such payment to any person or entity,
because such payment is determined to be void or voidable as a preference,
impermissible set-off, or a diversion of trust funds, or for any other reason,
this Security Agreement and the Loan Documents shall continue in full force and
effect and Debtor shall be liable to Secured Party for the amount of such
payment surrendered. The provisions of the preceding sentence shall be and
remain effective notwithstanding any contrary action which may have been taken
by Secured Party in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to Secured Party's rights under this Security
Agreement and shall be deemed to have been conditioned upon such payment having
become final and irrevocable. Additionally, Debtor will pay or reimburse Secured
Party for any and all reasonable costs and expenses incurred in connection
herewith, including, but not limited to, attorneys' fees, filing fees, search
fees, and lien recordation. The provisions of this paragraph shall survive the
termination of this Security Agreement and the Loan Documents.
(u) COLLATERAL DOCUMENTATION. Debtor shall deliver to Secured Party prior to
any advance or loan, satisfactory documentation regarding the Collateral to be
financed, including, but not limited to, such invoices, canceled checks
evidencing payments, or other documentation as may be reasonably requested by
Secured Party. Additionally, Debtor must satisfy Secured Party that Debtor's
business and financial information is as has been represented and there has been
no material change in Debtor's business, financial condition, or operations.
3. PREPAYMENT. Debtor may NOT prepay the Indebtedness, whether in whole or in
part, at any time during the term of this Agreement without the prior written
consent of Secured Party in its sole discretion (per Promissory Note, paragraph
7).
4. EVENTS OF DEFAULT. If any one of the following events (each of which is
herein called an "Event of Default") shall occur: (a) Debtor defaults in the
payment, when due, of any Indebtedness, or (b) any warranty or material
representation of Debtor is untrue or inaccurate or Debtor breaches any warranty
or representation hereunder, or (c) Debtor breaches or defaults I the
performance of any other agreement or covenant hereunder, or (d) Debtor shall
default in the payment or performance of any secured debt, including, but not
limited to, Secured Party, or (e) Debtor becomes insolvent, makes an assignment
for the benefit of creditors or ceases to continue as a going business, or (f) a
receiver, trustee, conservator, or liquidator is appointed for Debtor or for all
or a substantial portion of Debtor's property, with or without the approval or
consent of Debtor, or (g) a petition is filed by or against Debtor under the
Bankruptcy Code or any amendment thereto or under any other insolvency law or
laws providing for the relief of debtors, or (h) in the reasonable opinion of
Secured Party the value of the Collateral is substantially reduced and
satisfaction by Debtor of the Indebtedness is imperiled; or (i) if there is a
material adverse change in the business or financial condition of Debtor then,
and in any such event, Secured Party shall have the right to exercise any one or
more of the remedies hereinafter provided.
<PAGE>
5. REMEDIES. In an Event of Default shall occur, in addition to all rights and
remedies of a secured party under the Uniform Commercial Code, Secured Party
may, at its option, at any time (a) declare the entire unpaid Indebtedness to be
immediately due and payable; (b) without demand or legal process, enter into the
premises where the Collateral may be found and take possession of and remove the
Collateral, all without charge to or liability on the part of Secured Party; and
(c) require Debtor to assemble the Collateral, render it unusable, and crate,
pack, ship, and deliver the Collateral to Secured Party in such manner and at
such place as Secured Party may require, all at Debtor's sole cost and expense.
DEBTOR HEREBY EXPRESSLY WAIVES ITS RIGHTS IF ANY TO (1) PRIOR NOTICE OF
REPOSSESSION AND (2) A JUDICIAL OR ADMINISTRATIVE HEARING PRIOR TO SUCH
REPOSSESSION. Secured Party may, at its option, ship, store and repair the
Collateral so removed and sell any or all of it at a public or private sale or
sales. Unless the Collateral is perishable or threatened to decline speedily in
value or is of a type customarily sold on a recognized market, Secured Party
will give Debtor reasonable notice of the time and place of any public sale
thereof or of the time after which any private sale or any other intended
disposition thereof is to be made, it being understood and agreed that Secured
Party may be a buyer at any such sale and Debtor may not, either directly or
indirectly, be a buyer at any such sale. The requirements, if any, or reasonable
notice will be met if such notice is mailed postage prepaid to Debtor at its
address shown above, at least five (5) days before the time of sale or
disposition. Debtor shall also be liable for and shall upon demand pay to
Secured Party all expenses incurred by Secured Party in connection with the
undertaking or enforcement by Secured Party of any of its rights or remedies
hereunder or at law, including, but to limited to, all expenses of repossessing,
storing, shipping, repairing, selling or otherwise disposing of the Collateral
and legal expenses, including reasonable attorneys' fees and court costs
(through any and all appeals and judgment and enforcement actions, it being
acknowledged and agreed by Debtor that this provision shall survive and not
merge with any such judgment), all of which costs and expenses shall be
additional Indebtedness hereby secured. After any such sale or disposition,
Debtor shall be liable for any deficiency of the Indebtedness remaining unpaid,
with interest thereon at the rate set forth in the related Note.
6. CUMULATIVE REMEDIES. All remedies of Secured Party hereunder are cumulative,
are in addition to any other remedies provided for by law or in equity and may,
to the extent permitted by law, be exercised concurrently or separately, and the
exercise of any one remedy shall not be deemed an election of such remedy or to
preclude the exercise of any other remedy. No failure on the part of Secured
party to exercise, and no delay in exercising any right or remedy, shall operate
as waiver thereof or in any way modify or be deemed to modify the terms of this
Security Agreement and the other Loan Documents or the Indebtedness, nor shall
any single or partial exercise by Secured Party of any right or remedy preclude
any other or further exercise of the same or any other right or remedy.
7. ASSIGNMENT. Secured Party may transfer or assign this Security Agreement, the
Note, or the Indebtedness and the other Loan Documents either together or
separately without releasing Debtor or the collateral, and upon such transfer or
assignment the assignee or holder shall be entitled to all the rights, powers,
privileges and remedies of Secured Party to the extent assigned or transferred.
The obligation so debtor shall not be subject, as against any such assignee or
transferee, to any defense, set-off, or counter-claim available to Debtor
against Secured Party and any such defense, set-off, or counter-claim may be
asserted only against Secured Party.
8. TIME IS OF THE ESSENCE. Time and manner of performance by Debtor of its
duties and obligations under this Security Agreement, the Notes, and the other
Loan Documents is of the essence. If Debtor shall fail to comply with any
provision of this Security Agreement and the other Loan Documents, Secured Party
shall have the right, but shall not be obligated, to take action to address such
non-compliance, in whole or in part, and all moneys spent and expenses and
obligations incurred or assumed by Secured Party shall be paid by Debtor upon
demand and shall be added to the Indebtedness. Any such action by Secured Party
shall not constitute a waiver of Debtor's default.
3
<PAGE>
9. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL E GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
10. CONSENT TO JURISDICTION. DEBTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK STATE OF ILLINOIS AND
IRREVOCABLY AGREES THAT, SUBJECT TO SECURED PARTY'S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE OTHER
LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. DEBTOR EXPRESSLY SUBMITS AND
CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS. DEBTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS AND AGREES THAT ALL SUCH SERVICE OR PROCESS MAY BE MADE UPON DEBTOR BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO DEBTOR, AT
THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE
TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
11. FURTHER ASSURANCE; NOTICE. Debtor shall, at its expense, do execute and
deliver such further acts and documents as Secured Party may from time to time
reasonably require to assure and confirm the rights created or intended to be
created hereunder to carry out the intention or facilitate the performance of
the terms of this Security Agreement and the Loan Documents or to assure the
validity, perfection, priority or enforceability of any security interest
created hereunder. Debtor agrees t execute any instrument or instruments
necessary or expedient for filing, recording, perfecting, notifying,
foreclosing, and/or liquidating of Secured Party's interest in the Collateral
upon request of, and as determined by, Secured Party, and Debtor hereby
specifically authorizes Secured Party to prepare and file Uniform Commercial
Code financing statements and other documents and to execute same for and on
behalf of Debtor as Debtor's attorney-in-fact, irrevocably and coupled with an
interest, for such purposes. All notices required or otherwise given by either
party shall be deemed adequately and properly given if sent by registered or
certified mail or by overnight courier with a copy by facsimile to the other
party at the addresses stated herein or at such other address as the other party
may from time to time designate in writing.
12. WAIVER OF JURY TRIAL. DEBTOR AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS. DEBTOR AND SECURED
PARTY ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. DEBTOR AND SECURED PARTY WARRANT
AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER
WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS.
13. ENTIRE AGREEMENT. THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS
EMBODY THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL RELATING TO HE SUBJECT MATTER HEREOF, AND MAY NOT BE CONTRADICTED OR VARIED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO.
<PAGE>
14. COMPLETE AGREEMENT. This Security Agreement and the other related Loan
Documents are intended by Debtor and Secured Party to be the final, complete,
and exclusive expression of the agreement between them. This Security Agreement
and the other related Loan Documents may not be altered, modified or terminated
in any manner except by a writing duly signed by the parties hereto. Debtor and
Secured Party intend this Security Agreement and the other related Loan
Documents to be valid and binding and no provisions hereof and thereof which may
be deemed unenforceable shall in any way invalidate any other provisions of this
Security Agreement and the other related Loan Documents, all of which shall
remain in full force and effect. This Security Agreement and the other related
Loan Documents shall be binding upon the respective successors, legal
representatives, and assigns of the parties. The singular shall include the
plural, the plural shall include the singular, and the use of any gender shall
be applicable to all genders. If there be more than one Debtor, the warranties,
representations and agreements herein are joint and several. The Schedules on
the following page[s] are a part hereof. Sections and subsections headings are
included for convenience of reference only and shall not be given any
substantive effect.
IN WITNESS WHEREOF, Secured Party and Debtor have each signed this Security
Agreement as of the day and year first above written.
SECURED PARTY: DEBTOR:
HELLER FINANCIAL LEASING, INC. OREGON BAKING COMPANY DBA MARSEE BAKING
BY: /S/ DAVID A. STERNWEIS BY: /S/ HOWARD WASSERTEIL
------------------------ ----------------------------
NAME: DAVID A. STERNWEIS NAME: HOWARD WASSERTEIL
TITLE: VICE PRESIDENT TITLE: SECRETARY
4
May 5, 1998
Oregon Baking Company dba Marsee Baking
2277 NW Quimby
Portland, OR 97296
Attn: Howard Wasserteil
RE: Letter of Credit Number SVB98IS0928
---------------
Dear Mr. Wasserteil:
Reference is made to that certain Security Agreement (the "Security Agreement")
dated April 28, 1998 between Oregon Baking Company dba Marsee Baking ("Marsee")
and Heller Financial Leasing, Inc. ("Heller") and the related Promissory Notes
(the "Notes") executed by Marsee" pursuant to which Heller agreed to provide
certain financing for Marsee. Reference is further made to that certain Letter
of Credit dated MAY 11 , 1998 in favor of Heller in the amount of $325,000. Said
Letter of Credit serves as additional collateral to secure the financing
provided by Heller.
Marsee has requested that Heller agree to a reduction of the principal amount of
the Letter of Credit and Heller has agreed to certain reductions as specified
below upon the following terms and conditions being met by Marsee.
1. Provided Marsee remits each of the first twelve monthly installments due
under the Notes on a timely basis, and provided that no default has occurred
during such time period under the Agreement or Notes, Heller will reduce the
Letter of Credit to $250,000.00.
2. Provided Marsee remits each of the first twenty-four monthly installments due
under the Notes on a timely basis, and provided that no default has occurred
during such time period, under the agreement or Notes, Heller will reduce the
Letter of Credit to $75,000.00.
3. Provided Marsee remits each of the first thirty-six monthly installments due
under the notes on a timely basis, and provided that no default has occurred
during such time period, under the Agreement or Notes, Heller will reduce the
Letter of Credit to $75,000.00.
4. Provided Marsee remits each of the first forty-eight monthly installments due
under the Notes on a timely basis, and provided that no default has occurred
during such time period under the Agreement or Notes, Heller will return the
Letter of Credit.
5. Each Installment shall be deemed timely paid if received by Heller within
fifteen (15) days of the due date therefor. Any installment paid via check or
other instrument shall not be deemed timely paid, regardless of the date of
receipt of such check or other instrument, if the same shall not be timely
honored.
<PAGE>
Notwithstanding the foregoing, nothing herein shall serve as a release of or an
agreement to release any other Collateral by Heller nor shall Heller be required
to look to the Letter of Credit before pursuing any other persons or any other
property that serves as Collateral for the financing provided by Heller.
If the foregoing is consistent with your understanding of our agreement, please
indicate your agreement in the place and manner provided below.
Sincerely
HELLER FINANCIAL LEASING, INC.
By: /s/ David A. Sternweis
----------------------------------------
David A. Sternweis, Vice President
ACCEPTED AND AGREED:
OREGON BAKING COMPANY DBA MARSEE BAKING
By /s/ Howard Wasserteil
----------------------------------------
Howard Wasserteil, Secretary
PROMISSORY NOTE
$105,190.30 L/N: 3230086-002
Chicago, Illinois
May 19, 1998
FOR VALUE RECEIVED, the undersigned, OREGON BAKING COMPANY DBA MARSEE BAKING
("Maker") promises to pay to the order of HELLER FINANCIAL LEASING, INC.
(together with any holder of this Note, "Payee"), at its office at 500 West
Monroe Street, Chicago, Illinois 60661 or at such other place as Payee may
appoint, the principal sum of One Hundred Five Thousand One Hundred Ninety
Dollars and Thirty Cents ($105,190.30). This Note shall be due and payable in
consecutive monthly installments of principal and interest as follows:
Sixty(60) consecutive monthly installments of Two Thousand
Three Hundred One and 49/100 Dollars ($2,301.49);
with the first such installment due on the 2nd day of July, 1998, continuing on
the same date of each month thereafter. The final monthly payment shall include
all accrued and unpaid charges and other amounts owing hereunder or under the
Security Agreement (defined below).
Interest, precomputed for the period ending when such installments are due, is
included in the foregoing installments. If any installment due hereunder shall
not be paid within ten (10) days after such installment is due, Maker shall pay
to Payee (i) a "late charge" of five percent (5%) of such delinquent amount (or
the maximum amount permitted by law, whichever is less), plus (ii) interest on
any installment past due, computed from the due date thereof, and upon the
entire unpaid balance if declared due, at the rate of one and one-half (1.5%)
per month (or the maximum amount permitted by law, whichever is less). Maker
hereby waives demand, presentment for payment, protest, and notice of
non-payment.
Notwithstanding the foregoing, if at any time implementation of any provision
hereof shall cause the interest contracted for or charged herein or collectable
hereunder to exceed the applicable lawful maximum rate, then the interest shall
be limited to such applicable lawful maximum.
Maker hereby authorizes Payee to insert the date of the first installment due
hereunder, a date not sooner than fifteen (15) days nor later than forty-six
(46) days after the date of disbursement. Payee's books and records shall be
dispositive of the date disbursement is made hereunder.
This Note is secured by and entitled to (i) the benefits of a certain Security
Agreement dated as of April 28, 1998, and (ii) any other agreements under which
Payee has been granted a lien and security interest in property to secure the
payment and performance by Maker of this Note (all of the foregoing hereinafter
sometimes collectively referred to as the "Security Agreement") to which
reference is made for a statement of the nature and extent of the protection and
security afforded, the rights of Payee, and the rights and obligations of Maker.
If a default shall occur under the Security Agreement, this Note may become or
be declared due in the manner and with the effect provided for therein.
Upon payment of all accrued late charges and interest then due or to become due,
Maker may prepay the entire balance evidenced hereby (less a rebate of unearned
interest, if any, calculated in accordance with the Simple interest Method) upon
payment of a premium equal to 4% of the principal amount so prepaid; provided,
however, if said prepayment is made during any loan year after the second loan
year, said premium shall be reduced by 1% in each loan year thereafter until
said premium shall be reduced to a minimum premium of 1% and said premium shall
remain at such minimum until final maturity.
Maker and all endorsers, guarantors or any others who may at any time become
liable for the payment hereof hereby consent to any and all extensions of time,
renewals, waivers and modifications of, and substitutions or release of security
or of any party primarily or secondarily liable on, or with respect to, this
Note or the Security Agreement or any of the terms and provisions thereof that
<PAGE>
may be made, granted or consented to by Payee and agree that Payee shall not be
required to look to any collateral for the payment of this Note, but may proceed
against the undersigned or any one of the undersigned, if more than one, or any
guarantor hereof in such manner as it deems desirable. None of the rights or
remedies of Payee hereunder or under the Security Agreement are to be deemed
waived or affected by any failure to exercise same. All remedies conferred upon
Payee, the holder of the Security Agreement or any other instrument or agreement
to which the undersigned or any guarantor hereof is a party or under which any
or all of them is bound, shall be cumulative and not exclusive, and such
remedies may be exercised concurrently or consecutively at Payee's option.
This Note shall be governed by and construed in accordance with the laws and
decisions of the State of Illinois, without regard to principles of conflicts of
law, including all matters of construction, validity, enforceability and
performance. AT PAYEE'S ELECTION AND WITHOUT LIMITING PAYEE'S RIGHT TO COMMENCE
AN ACTION IN ANY OTHER JURISDICTION, MAKER (I) CONSENT(S) TO THE EXCLUSIVE
JURISDICTION AND VENUE OF ANY COURT (FEDERAL, STATE OR LOCAL) SITUATED IN THE
COUNTY OF COOK, STATE OF ILLINOIS, (II) WAIVE(S) ANY OBJECTION BASED UPON
IMPROPER VENUE AND/OR FORUM NON CONVENIENS, AND (III) CONSENT(S) TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, TO THE LAST KNOWN
ADDRESS OF MAKER, WHICH SERVICE SHALL BE DEEMED COMPLETED WITHIN TEN (10) DAYS
AFTER THE DATE OF MAILING THEREOF.
WAIVER OF JURY TRIAL: PAYEE AND MAKER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
NOTE OR THE SECURITY AGREEMENT. PAYEE AND MAKER ACKNOWLEDGE THAT THIS WAIVER IS
A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE, AND THE SECURITY
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS. PAYEE AND MAKER WARRANT AND REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS RESPECTIVE JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
THE TOTAL AMOUNT TO BE REPAID HEREUNDER INCLUDES INTEREST COMPUTED ON THE BASIS
OF 11.27% SIMPLE INTEREST PER ANNUM ON THE ASSUMPTION THAT ALL PAYMENTS WILL BE
MADE ON THEIR RESPECTIVE DUE DATES.
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed on
the date first above written.
ATTEST (Witness if not a corporation) OREGON BAKING COMPANY
DBA MARSEE BAKING
By: /S/ HOWARD WASSERTEIL
- ------------------------------------- ------------------------
Name: Howard Wasserteil
Title: Secretary
<PAGE>
SCHEDULE A TO THE SECURITY AGREEMENT
Dated April 28, 1998
Between
HELLER FINANCIAL LEASING, INC. and
OREGON BAKING COMPANY DBA MARSEE BAKING
<TABLE>
<CAPTION>
Description Model No. Serial No.
======================================================================================================
<S> <C> <C>
Ten (10) Standard Rack Cover End Load
- ----------------------------------------------------------------------------- ------------------------
One (1) Hobar 140 quart Mixer with Bowl Guard, 140 V140
quart and 80 quart Bow Scrapers, Adapter, Stainless
Steel Bowls, beaters, Whp and Bowl Dolly
- ------------------------------------------------------------------------------------------------------
One (1) Mono Bread Gravity Feed Slicer, 1/2" slice
- ------------------------------------------------------------------------------------------------------
Nine (9) Tabco 36"x72" Work Tables with Casters
- ------------------------------------------------------------------------------------------------------
One Hundred (100) Orbis Bread Trays with (12) Solid
Attached Lid Containers and (4) 3" Caster Dollies
- ------------------------------------------------------------------------------------------------------
One (1) ATW 14"x20" L Bar Sealer and Shrink Tunnel
System
- ------------------------------------------------------------------------------------------------------
Three (3) Kubota Bench Scale with 14"x20" Platform KA-10HB-70L-A 66FS8V0013
- ------------------------------------------------------------------------------------------------------
One (1) Doran Stainless Steel Bench Scale, 150 pound 87701
capacity and 12"x16" Platform
- ------------------------------------------------------------------------------------------------------
One (1) Tibiletti Deck Oven with 233 square feet baking 230-4-240
area, 5 Pan Deep, 139Dx117Wx87H, 4 Decks, 12
Doors and 5 Pan Deep
- ------------------------------------------------------------------------------------------------------
One (1) U.R.M. Loader for Tibiletti Deck Oven with 80M
Spring Assisted Preset Elevator
- ------------------------------------------------------------------------------------------------------
One (1) Hobart 140 quart Mixer with Bowl Guard, 140 V1401
quart and 80 quart Bowl Scrapers, Adapter, 140 quart,
80 quart and 30 quart Stainless Steel Bowls, 80 quart
and 30 quart Aluminum Beaters, 80 quart D Whip, Bowl
Dollys/Trucks, Hobar 8181 Buffalo Chopper and 30 quart
D300 Mixer
- ------------------------------------------------------------------------------------------------------
Two (2) Hard Maple Tables with Stainless Steel Bases
and Drawers, 48"x144"x2 1/4"
- ------------------------------------------------------------------------------------------------------
Four (4) Hard Maple Tables with Stainless Steel Bases
and Drawers, 36"x72"x2 1/4"
- ------------------------------------------------------------------------------------------------------
One (1) Point-Of-Sale System with Pentium 200, 24624
- ------------------------------------------------------------------------------------------------------
32M RAM, 2 GIG Hard Drive 76745
- ------------------------------------------------------------------------------------------------------
T3000 3.2 GIG Tape Drive,
- ------------------------------------------------------------------------------------------------------
14" SVGA Monitor, OR13851
- ------------------------------------------------------------------------------------------------------
Trippliteups UPS Power Backup PA881C00548
- ------------------------------------------------------------------------------------------------------
and HP 6 Series Laser Printer SJPHJ035967
- ------------------------------------------------------------------------------------------------------
One (1) Bongard Oven with Steam Vents for all (4) 750.8.22
Decks and Kit to utilize existing loader
- ------------------------------------------------------------------------------------------------------
Twenty-eight (28) Gold Bon Shelves with 74" Posts,
(9) 24"x72", (14) 24"x48" and (5) 24"x60"
- ------------------------------------------------------------------------------------------------------
Five Hundred Four (504) 18x26.28 gauge Perforated
Sheet Pans
- ------------------------------------------------------------------------------------------------------
Seven (7) New Age 1290 Enclosed Pan Racks
- ------------------------------------------------------------------------------------------------------
One (1) Enclosed Transport Cabinet, 40 Pan capacity,
Aluminum
- ------------------------------------------------------------------------------------------------------
One Hundred (100) 18x26 Proofing Boards
- ------------------------------------------------------------------------------------------------------
Eight (8) Bun Pack Racks
- ------------------------------------------------------------------------------------------------------
Two (2) Baxter Rack Ovens with Standard Hoods, OV210
Controls and Manuals
- ------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------
Fourteen (14) Stainless Steel Double Racks with Steel
Wheels
- ------------------------------------------------------------------------------------------------------
Four Hundred Fifty (450) Perforated and Non-Stick
Finished Bake Sheets
- ------------------------------------------------------------------------------------------------------
Twenty-five (25) Aluminum Bagel Boards with Straps,
Tig weld baking part and Retrofit Aluminum Cart
</TABLE>
Together with all parts, accessories, attachments, substitutions, repairs,
improvements and replacements, and any and all rights thereunder and proceeds
thereof, including without limitation, insurance proceeds.
Place where Collateral is to be kept:
2277 NW Quimby
Portland, Oregon 97210
Redmond, WA
DEBTOR:
OREGON BAKING COMPANY DBA MARSEE BAKING
By: /s/ Howard Wasserteil
------------------------------------
Name: Howard Wasserteil
Its: Secretary
PROMISSORY NOTE
$38,576.90 L/N: 3230086-003
Chicago, Illinois
August 26,1998
FOR VALUE RECEIVED, the undersigned, OREGON BAKING COMPANY DBA MARSEE BAKING
("Maker") promises to pay to the order of HELLER FINANCIAL LEASING, INC.
(together with any holder of this Note, "Payee"), at its office at 500 West
Monroe Street, Chicago, Illinois 60661 or at such other place as Payee may
appoint, the principal sum of Thirty-Eight Thousand Five Hundred Seventy-Six
Dollars and Ninety Cents ($38,576.90). This Note shall be due and payable in
consecutive monthly installments of principal and interest as follows:
Sixty (60) consecutive monthly installments of Eight Hundred
Forty-Three and 96/100 Dollars ($843.96);
with the first such installment due on the 28th day of OCTOBER, 1998, continuing
on the same date of each month thereafter. The final monthly payment shall
include all accrued and unpaid charges and other amounts owing hereunder or
under the Security Agreement (defined below).
Interest, precomputed for the period ending when such installments are due, is
included in the foregoing installments. If any installment due hereunder shall
not be paid within ten (10) days after such installment is due, Maker shall pay
to Payee (i) a "late charge" of five percent (5%) of such delinquent amount (or
the maximum amount permitted by law, whichever is less), plus (ii) interest on
any installment past due, computed from the due date thereof, and upon the
entire unpaid balance if declared due, at the rate of one and one-half (1.5%)
per month (or the maximum amount permitted by law, whichever is less). Maker
hereby waives demand, presentment for payment, protest, and notice of
non-payment.
Notwithstanding the foregoing, if at any time implementation of any provision
hereof shall cause the interest contracted for or charged herein or collectable
hereunder to exceed the applicable lawful maximum rate, then the interest shall
be limited to such applicable lawful maximum.
Maker hereby authorizes Payee to insert the date of the first installment due
hereunder, a date not sooner than fifteen (15) days nor later than forty-six
(46) days after the date of disbursement. Payee's books and records shall be
dispositive of the date disbursement is made hereunder.
This Note is secured by and entitled to (i) the benefits of a certain Security
Agreement dated as of April 28, 1998, and (ii) any other agreements under which
Payee has been granted a lien and security interest in property to secure the
payment and performance by Maker of this Note (all of the foregoing hereinafter
sometimes collectively referred to as the "Security Agreement") to which
reference is made for a statement of the nature and extent of the protection and
security afforded, the rights of Payee, and the rights and obligations of Maker.
If a default shall occur under the Security Agreement, this Note may become or
be declared due in the manner and with the effect provided for therein.
Upon payment of all accrued late charges and interest then due or to become due,
Maker may prepay the entire balance evidenced hereby (less a rebate of unearned
interest, if any, calculated in accordance with the Simple Interest Method) upon
payment of a premium equal to 4% of the principal amount so prepaid; provided,
however, if said prepayment is made during any loan year after the second loan
year, said premium shall be reduced by 1% in each loan year thereafter until
said premium shall be reduced to a minimum premium of 1% and said premium shall
remain at such minimum until final maturity.
Maker and all endorsers, guarantors or any others who may at any time become
liable for the payment hereof hereby consent to any and all extensions of time,
renewals, waivers and modifications of, and substitutions or release of security
or of any party primarily or secondarily liable on, or with respect to, this
Note or the Security Agreement or any of the terms and provisions thereof that
may be made, granted or consented to by Payee and agree that Payee shall not be
<PAGE>
required to look to any collateral for the payment of this Note, but may proceed
and agree that Payee shall not be required to look to any collateral for the
payment of this Note, but may proceed against the undersigned or any one of the
undersigned, if more than one, or any guarantor hereof in such manner as it
deems desirable. None of the rights or remedies of Payee hereunder or under the
Security Agreement are to be deemed waived or affected by any failure to
exercise same. All remedies conferred upon Payee, the holder of the Security
Agreement or any other instrument or agreement to which the undersigned or any
guarantor hereof is a party or under which any or all of them is bound, shall be
cumulative and not exclusive, and such remedies may be exercised concurrently or
consecutively at Payee's option.
This Note shall be governed by and construed in accordance with the laws and
decisions of the State of Illinois, without regard to principles of conflicts of
law, including all matters of construction, validity, enforceability and
performance. AT PAYEE'S ELECTION AND WITHOUT LIMITING PAYEE'S RIGHT TO COMMENCE
AN ACTION IN ANY OTHER JURISDICTION, MAKER (I) CONSENT(S) TO THE EXCLUSIVE
JURISDICTION AND VENUE OF ANY COURT (FEDERAL, STATE OR LOCAL) SITUATED IN THE
COUNTY OF COOK, STATE OF ILLINOIS, (II) WAIVE(S) ANY OBJECTION BASED UPON
IMPROPER VENUE AND/OR FORUM NON CONVENIENS, AND (III) CONSENT(S) TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, TO THE LAST KNOWN
ADDRESS OF MAKER, WHICH SERVICE SHALL BE DEEMED COMPLETED WITHIN TEN(10) DAYS
AFTER THE DATE OF MAILING THEREOF.
WAIVER OF JURY TRIAL: PAYEE AND MAKER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
NOTE OR THE SECURITY AGREEMENT. PAYEE AND MAKER ACKNOWLEDGE THAT THIS WAIVER IS
A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE, AND THE SECURITY
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS. PAYEE AND MAKER WARRANT AND REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS RESPECTIVE JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
THE TOTAL AMOUNT TO BE REPAID HEREUNDER INCLUDES INTEREST COMPUTED ON THE BASIS
OF 11.27% SIMPLE INTEREST PER ANNUM ON THE ASSUMPTION THAT ALL PAYMENTS WILL BE
MADE ON THEIR RESPECTIVE DUE DATES.
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed on
the date first above written.
ATTEST (Witness if not a corporation) OREGON BAKING COMPANY
DBA MARSEE BAKING
/S/ MELODY JARMAN By: /S/ HOWARD WASSERTEIL
- ----------------------- -----------------------
Name: Howard Wasserteil
[NOTARY SEAL] Title: Secretary
<PAGE>
SCHEDULE A TO SECURITY AGREEMENT
Dated April 28, 1998
Between
HELLER FINANCIAL LEASING, INC. and
OREGON BAKING COMPANY DBA MARSEE BAKING
Loan No. 3230086-003
<TABLE>
<CAPTION>
Description Model No. Serial No.
========================================================================================================
<S> <C> <C>
Three (3) Mobile All Purpose Racks with 10 Shelves, 28"X
66"
- --------------------------------------------------------------------------------------------------------
One (1) Mobile All Purpose Rack with 10 Shelves, 28"X66"
- --------------------------------------------------------------------------------------------------------
Twenty (20) Bun Pan Racks, 20 Capacity 3"
- --------------------------------------------------------------------------------------------------------
Twelve (12) 24 Capacity Muffin Pans with SB&G
- --------------------------------------------------------------------------------------------------------
Twenty (20) Bun Pan Racks, 20 Capacity 3"
- --------------------------------------------------------------------------------------------------------
Five Hundred Four (504) 18"X26", 18 Gauge Perforated
Sheet Pans
- --------------------------------------------------------------------------------------------------------
Ten (10) 30 Space Racks
- --------------------------------------------------------------------------------------------------------
One (1) Reversible Sheeter, 200V, 60HZ, 3PH with 640MM SM630 D-10394
Conveyor
- --------------------------------------------------------------------------------------------------------
Two (2) Freycon Croissant Cutters A
- --------------------------------------------------------------------------------------------------------
Three (3) Thorpe Rollin Pins 3 1/2" X 18"
- --------------------------------------------------------------------------------------------------------
Two (2) Expandable Pastry Cutters, 7 Smooth Blades
- --------------------------------------------------------------------------------------------------------
Twenty (20) 18 Gauge Sheet Pans, 18"X13" Half Pan Size
- --------------------------------------------------------------------------------------------------------
Four (4) Pizza Cutters
- --------------------------------------------------------------------------------------------------------
Eight (8) 4 Quart Measures
- --------------------------------------------------------------------------------------------------------
Eight (8) 2 Quart Aluminum Measures
- --------------------------------------------------------------------------------------------------------
Two (2) Bakers Scales with Weight Set and Scoop
- --------------------------------------------------------------------------------------------------------
Four (4) 1 Quart Measures
- --------------------------------------------------------------------------------------------------------
Two (2) Sets of Mixing Bowls 3/4, 1 1/2, 3, 4, 5, 8, 13, 16, 20
- --------------------------------------------------------------------------------------------------------
One (1) Lincoln Flour Sifter, 18 Gauge Mesh
- --------------------------------------------------------------------------------------------------------
Ten (10) Standard Rack Covers
- --------------------------------------------------------------------------------------------------------
Fifty (50) 6 3/8" X 2 3/8" Inox Rings
- --------------------------------------------------------------------------------------------------------
<PAGE>
Eighty (80) 7 7/8" X 2 3/8" Inox Rings
- --------------------------------------------------------------------------------------------------------
Fifty (50) 6" X 3" Cake Pans, Aluminum
- --------------------------------------------------------------------------------------------------------
Eighty (80) 8" X 3" Cake Pans
- --------------------------------------------------------------------------------------------------------
Two Hundred (200) 3 1/4" X 1 3/4" Flan Rings
- --------------------------------------------------------------------------------------------------------
One Hundred (100) 8" X 3/4" Large Flan Rings
- --------------------------------------------------------------------------------------------------------
Twelve (12) Full Sheet Pans, Inox
- --------------------------------------------------------------------------------------------------------
Four (4) Half Sheet Pans, Ext. Inox
- --------------------------------------------------------------------------------------------------------
Ten (10) 9" X 13" X 2" POB-9132
- --------------------------------------------------------------------------------------------------------
Eight (8) 12" X 18" X 2" POB 12182
- --------------------------------------------------------------------------------------------------------
Four (4) 16" X 24" X 2" POB 16242
- --------------------------------------------------------------------------------------------------------
Five (5) Augt Metal Revolving Cake Stands
- --------------------------------------------------------------------------------------------------------
One (1) Welles Hot Plate, 208/240 Volt Ceramic Counter Top
- --------------------------------------------------------------------------------------------------------
One (1) Bench Model Dough Divider with 18 Part Head B1H 10802
Assembly
- --------------------------------------------------------------------------------------------------------
</TABLE>
Together with all parts, accessories, attachments, substitutions, repairs,
improvements and replacements, and any and all rights thereunder and proceeds
thereof, including without limitation, insurance proceeds.
DEBTOR:
OREGON BAKING COMPANY DBA MARSEE BAKING
By: /s/ Howard Wasserteil
------------------------------------
Name: Howard Wasserteil
Its: Secretary
CROSS-COLLATERAL AND CROSS-DEFAULT AGREEMENT
HELLER FINANCIAL LEASING, INC. (hereinafter referred to as "Heller") has
purchased one or more conditional sales contracts, lease agreements, chattel
mortgages, security agreements, notes and other choses in action arising from
the bona fide sale, lease or loan to the undersigned Debtor by various vendors,
lenders or lessors, of or on personal property (hereinafter referred to as
"Paper"), and/or Heller has made direct loans to or otherwise extended credit to
Debtor evidenced by items of security agreements and notes and/or Heller has
leased equipment to the Debtor on various leases and/or schedules thereto.
In consideration for Heller having done so and in order to induce Heller to make
an additional loan(s) to, or to enter into a lease(s) with, Debtor and/or to
purchase an additional item(s) of Paper (hereinafter collectively referred to as
the "Agreements") and in consideration of Heller so doing, and for other good
and valuable consideration, the receipt of which Debtor hereby acknowledges,
Debtor agrees, as follows:
All presently existing and hereafter acquired personal property of Debtor in
which Heller has or shall have a security interest, or retained title thereto,
shall secure the payment and performance of all Debtor's liabilities and
obligations to Heller of every kind and character, whether joint or several,
direct or indirect, absolute or contingent, due or to become due, and whether
under presently existing or hereafter created Agreements, or otherwise.
Debtor further agrees that Heller's security interest in or title to the
Collateral covered by any Agreement now held or hereafter acquired by Heller
shall not be terminated in whole or in part until and unless all indebtedness of
every kind, due or to become due, owed by Debtor to Heller is fully paid and
satisfied and the terms of every Agreement have been fully performed by Debtor.
It is further agreed that Heller is to retain Heller's security interest in or
title to all of the Collateral covered by all of the Agreements held or acquired
by Heller, as security for the payment and performance under each such Agreement
notwithstanding the fact that one or more of such Agreements may become fully
paid.
This instrument is intended to create cross-default and cross-security in favor
of Heller between and among all the within described Agreements and all
Collateral securing same.
A default under any Agreement shall be deemed to be a default under all other
Agreements. A default shall result if Debtor fails to pay any sum when due on
any Agreement, or if Debtor breaches any of the other terms and conditions
thereof, or if Debtor becomes insolvent, ceases to do business as a going
concern, makes an assignment for the benefit of creditors, or if a petition for
a receiver or in bankruptcy is filed by or against Debtor, or if any of Debtor's
property is seized, attached or levied upon. Upon Debtor's default, any or all
of the Agreements shall, at Heller's option, become immediately due and payable
without notice or demand to Debtor of any other party obligated thereon, and
Heller shall have and may exercise any and all rights and remedies of a secured
party under the Uniform Commercial Code or any other law, statue or regulation
as enacted in the applicable jurisdiction and as otherwise granted to Heller
under any term or provision of any Agreement. Debtor hereby waives, to the
maximum extent permitted by law, notices of default, notices of repossession and
sale or other deposition of Collateral, and all other notices, and in the event
any such notice cannot be waived, Debtor agrees that if such notice is mailed to
Debtor postage prepaid at the address shown below at least ten (10) days prior
to the exercise by Heller of any of Heller's rights or remedies, such notice
shall be deemed to be reasonable and shall fully satisfy any requirement for
giving notice.
All rights granted to Heller hereunder shall be cumulative and not alternative,
shall be in addition to and shall in no manner impair or affect Heller's rights
and remedies under any existing Agreement, law, statute or regulation.
This Agreement may not be varied or altered nor its provisions waived except by
Heller's duly executed written agreement and it shall be governed and construed
by and under the laws of the state of Illinois. This Agreement shall inure to
the benefit of Heller's successors and assigns and shall be binding upon
Debtor's heirs, administrators, executors, legal representatives, successors and
assigns.
IN WITNESS WHEREOF, this Agreement has been executed this 26th day of August,
1998.
DEBTOR:
OREGON BAKING COMPANY DBA MARSEE BAKING
By: /s/ Howard Wasserteil
---------------------
Name: Howard Wasserteil
Title: Secretary
PROMISSORY NOTE
L/N: 3230086-004
$85,939.78 Chicago, Illinois
November 6, 1998
FOR VALUE RECEIVED, the undersigned, OREGON BAKING COMPANY DBA MARSEE BAKING
("Maker") promises to pay to the order of HELLER FINANCIAL LEASING, INC.
(together with any holder of this Note, "Payee"), at its office at 500 West
Monroe Street, Chicago, Illinois 60661 or at such other place as Payee may
appoint, the principal sum of Eighty-Five Thousand Nine Hundred Thirty-Nine
Dollars and Seventy-Eight Cents ($85,939.78). This Note shall be due and payable
in consecutive monthly installments of principal and interest as follows:
Sixty (60) consecutive monthly installments of One Thousand Eight
Hundred Eighty and 13/100 Dollars ($1,880.13);
with the first such installment due on the 10th day of December, 1998,
continuing on the same date of each month thereafter. The final monthly payment
shall include all accrued and unpaid charges and other amounts owing hereunder
or under the Security Agreement (defined below).
Interest, precomputed for the period ending when such installments are due, is
included in the foregoing installments. If any installment due hereunder shall
not be paid within ten (10) days after such installment is due, Maker shall pay
to Payee (i) a "late charge" of five percent (5%) of such delinquent amount (or
the maximum amount permitted by law, whichever is less), plus (ii) interest on
any installment past due, computed from the due date thereof, and upon the
entire unpaid balance if declared due, at the rate of one and one-half (1.5%)
per month (or the maximum amount permitted by law, whichever is less). Maker
hereby waives demand, presentment for payment, protest, and notice of
non-payment.
Notwithstanding the foregoing, if at any time implementation of any provision
hereof shall cause the interest contracted for or charged herein or collectable
hereunder to exceed the applicable lawful maximum rate, then the interest shall
be limited to such applicable lawful maximum.
Maker hereby authorizes Payee to insert the date of the first installment due
hereunder, a date not sooner than fifteen (15) days nor later than forty-six
(46) days after the date of disbursement. Payee's books and records shall be
dispositive of the date disbursement is made hereunder.
This Note is secured by and entitled to (i) the benefits of a certain Security
Agreement dated as of April 28, 1998, and (ii) any other agreements under which
Payee has been granted a lien and security interest in property to secure the
payment and performance by Maker of this Note (all of the foregoing hereinafter
sometimes collectively referred to as the "Security Agreement") to which
reference is made for a statement of the nature and extent of the protection and
security afforded, the rights of Payee, and the rights and obligations of Maker.
If a default shall occur under the Security Agreement, this Note may become or
be declared due in the manner and with the effect provided for therein.
Upon payment of all accrued late charges and interest then due or to become due,
Maker may prepay the entire balance evidenced hereby (less a rebate of unearned
interest, if any, calculated in accordance with the Simple Interest Method) upon
payment of a premium equal to 4% of the principal amount so prepaid; provided,
however, if said prepayment is made during any loan year after the second loan
year, said premium shall be reduced by 1% in each loan year thereafter until
said premium shall be reduced to a minimum premium of 1% and said premium shall
remain at such minimum until final maturity.
Maker and all endorsers, guarantors or any others who may at any time become
liable for the payment hereof hereby consent to any and all extensions of time,
renewals, waivers and modifications of, and substitutions or release of security
or of any party primarily or secondarily liable on, or with respect to, this
Note or the Security Agreement or any of the terms and provisions thereof that
may be made, granted or consented to by Payee and agree that Payee shall not be
<PAGE>
required to look to any collateral for the payment of this Note, but may proceed
against the undersigned or any one of the undersigned, if more than one, or any
guarantor hereof in such manner as it deems desirable. None of the rights or
remedies of Payee hereunder or under the Security Agreement are to be deemed
waived or affected by any failure to exercise same. All remedies conferred upon
Payee, the holder of the Security Agreement or any other instrument or agreement
to which the undersigned or any guarantor hereof is a party or under which any
or all of them is bound, shall be cumulative and not exclusive, and such
remedies may be exercised concurrently or consecutively at Payee's option.
This Note shall be governed by and construed in accordance with the laws and
decisions of the State of Illinois, without regard to principles of conflicts of
law, including all matters of construction, validity, enforceability and
performance. AT PAYEE'S ELECTION AND WITHOUT LIMITING PAYEE'S RIGHT TO COMMENCE
AN ACTION IN ANY OTHER JURISDICTION, MAKER (I) CONSENT(S) TO THE EXCLUSIVE
JURISDICTION AND VENUE OF ANY COURT (FEDERAL, STATE OR LOCAL) SITUATED IN THE
COUNTY OF COOK, STATE OF ILLINOIS, (II) WAIVE(S) ANY OBJECTION BASED UPON
IMPROPER VENUE AND/OR FORUM NON CONVENIENS, AND (III) CONSENT(S) TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, TO THE LAST KNOWN
ADDRESS OF MAKER, WHICH SERVICE SHALL BE DEEMED COMPLETED WITHIN TEN (10) DAYS
AFTER THE DATE OF MAILING THEREOF.
WAIVER OF JURY TRIAL: PAYEE AND MAKER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
NOTE OR THE SECURITY AGREEMENT. PAYEE AND MAKER ACKNOWLEDGE THAT THIS WAIVER IS
A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE, AND THE SECURITY
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS. PAYEE AND MAKER WARRANT AND REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS RESPECTIVE JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
THE TOTAL AMOUNT TO BE REPAID HEREUNDER INCLUDES INTEREST COMPUTED ON THE BASIS
OF 11.27% SIMPLE INTEREST PER ANNUM ON THE ASSUMPTION THAT ALL PAYMENTS WILL BE
MADE ON THEIR RESPECTIVE DUE DATES.
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed on
the date first above written.
ATTEST (Witness if not a corporation) OREGON BAKING COMPANY
DBA MARSEE BAKING
By: /S/ HOWARD WASSERTEIL
- ------------------------------------- ----------------------------
Name: Howard Wasserteil
Title: Secretary
SUBSCRIBED AND SWORN TO ME BEFORE ME THIS
9TH DAY OF NOVEMBER 1998
/S/ E. DIETZ
- ------------------------------------- [NOTARY SEAL]
NOTARY PUBLIC IN AND FOR THE
COUNTY OF MULTNOMAH, STATE OF OREGON
<PAGE>
SCHEDULE A TO THE SECURITY AGREEMENT
Dated April 28, 1998
Between
HELLER FINANCIAL LEASING, INC. and
OREGON BAKING COMPANY DBA MARSEE BAKING
Loan No. 3230086-004
<TABLE>
<CAPTION>
Description Model No. Serial No.
=======================================================================================================
<S> <C> <C>
One (1) Tevira Silo System with one 70,000 lb. Storage
transport system to convey flour to two spiral mixers,
weigh station to dump flour, WP 120 computer and all
required piping and values
- -------------------------------------------------------------------------------------------------------
One (1) used Savage Bowl Lift C 392
- -------------------------------------------------------------------------------------------------------
One (1) used Hinds Bock Depositor 2545
- -------------------------------------------------------------------------------------------------------
One (1) used 80 Quart Bowl Strap
- -------------------------------------------------------------------------------------------------------
One (1) used 40 Quart Bowl Strap
- -------------------------------------------------------------------------------------------------------
One (1) BES (Bakery Equipment Service) Retail
Forming Machine w/o form BESRF-1200 drum, 220V/1PH, with
optional gooseneck hopper, double forming drum
- -------------------------------------------------------------------------------------------------------
One (1) used reconditioned 24 Part Box Divider 3793
- -------------------------------------------------------------------------------------------------------
Ten (10) New Age Enclosed Pan Racks 1290
- -------------------------------------------------------------------------------------------------------
</TABLE>
Together with all parts, accessories, attachments, substitutions,
repairs, improvements and replacements, and any and all rights
thereunder and proceeds thereof, including without limitation,
insurance proceeds.
Place where Collateral is to be kept:
2277 NW Quimby
Portland, Oregon 97210
15413 NE 95th St.
Redmond, WA 98052
DEBTOR:
OREGON BAKING COMPANY DBA
MARSEE BAKING
By: /s/ Howard Wasserteil
--------------------------------
Name: Howard Wasserteil
Its: Secretary
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into effective as of January 1, 1999, by and between Oregon Baking
Company, an Oregon corporation dba Marsee Baking (the "Company"), and Ray
Lindstom ("Executive"). The Company and Executive are hereinafter referred to as
the "Parties," and may individually be referred to as a "Party."
RECITALS
A. The Executive is presently employed by the Company as Chief
Executive Officer and has agreed to assume the position of President of the
Company effective as of the date of this Agreement.
B. The Board of Directors (the "Board") of the Company desires
to provide for the continued employment of the Executive and to reinforce and
encourage the continued attention and dedication to the Company of the Executive
as a member of the Company's management.
C. The Executive desires to continue his employment with the
Company, and is willing to accept such continued employment on the terms and
conditions set forth in this Agreement.
AGREEMENT
In consideration of the foregoing premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
Parties, intending to be legally bound, agree as follows:
1. EMPLOYMENT.
1.1 The Company hereby agrees to continue to employ Executive, and
Executive hereby accepts continued employment by the Company, upon the terms and
conditions set forth in this Agreement, effective as of the date first set forth
above ("Effective Date").
1.2 Executive shall serve as President and Chief Executive Officer of the
Company, its subsidiaries and successors (if any) and their subsidiaries.
Executive shall also serve in such other capacity or capacities, with the
consent of the Executive, as the Board may from time to time prescribe.
Employment Agreement
Page 1
<PAGE>
1.3 Executive shall do and perform all services, acts or things necessary
or advisable to manage and conduct the business of the Company and which are
normally associated with the position of President and Chief Executive Officer.
However, at all times during his employment, Executive shall be subject to the
direction and policies from time to time established by the Board.
Notwithstanding the foregoing, Executive shall have such corporate power and
authority as shall be reasonably required to enable the Executive to discharge
the Executive's duties in any office that Executive may hold.
1.4 Unless the Parties otherwise agree in writing, prior to Executive's
termination in accordance with this Agreement, Executive shall perform the
services he is required to perform pursuant to this Agreement at the Company's
offices located at2287 NW Pettygrove, Portland, Oregon, at the various
production and retail outlets, or at any other place at which the Company
conducts business; provided, however, that the Company may from time to time
reasonably require Executive to travel temporarily to other locations in
connection with the Company's business.
2. LOYAL AND CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.
2.1 During his employment by the Company, Executive shall devote his full
business energies, interest, abilities and productive time to the proper and
efficient performance of his duties under this Agreement. The foregoing shall
not preclude Executive from engaging in civic, charitable or religious
activities, or from serving on boards of directors of companies or organizations
which will not present any direct conflict of interest with the Company or
affect the performance of Executive's duties hereunder.
2.2 During the term of this Agreement, Executive shall not engage in
competition with the Company, either directly or indirectly, in any manner or
capacity, as adviser, principal, agent, partner, officer, director, employee,
member of any association or otherwise, in any phase of the business of
developing, producing and marketing of food and beverage which are in the same
field or which otherwise directly compete with the business or proposed business
of the Company; provided, however, nothing in this Section 2.2 shall in any way
prohibit ownership by Executive, as a passive investment, of less than one
percent (1%) of the outstanding shares of capital stock of any corporation with
one or more classes of its capital stock listed on a national securities
exchange or publicly traded in the over-the-counter market.
3. COMPENSATION OF EXECUTIVE.
3.1 The Company shall pay Executive a base salary of $150,000 per year,
payable in regular periodic payments in accordance with Company policy but in no
event less frequent than semi-monthly; provided, however, that at Executive's
sole discretion payment of up to fifty percent (50%) of Executive's base salary
may be deferred until the sooner of (i) the date on which the Company obtains
equity financing of one million dollars ($1,000,000) or more; or (ii) October 1,
1999.
Employment Agreement
Page 2
<PAGE>
3.2 Executive's base salary shall increase to $200,000 per year on the
sooner of (i) the first of the month following the second consecutive month
during which the Company achieved EBITDA of ten percent (10%) of gross revenues
or more; or (ii) October 1, 1999.
3.3 As further compensation, and so long as Executive is employed by
Company as provided in this Agreement and Executive is not otherwise in default
of any of the provisions herein, Executive shall be granted by the Company an
incentive stock option ("ISO") under the Company's 1997 Stock Option/Stock
Issuance Plan (the "Plan") so that Executive shall be entitled to purchase up to
140,000 shares of Company's Common Stock ("ISO Grant"). The exercise price shall
be the fair market value of the Company's Common Stock as of the grant date, as
determined by the Board at its discretion. Executive shall be permitted, at
Executive's discretion, to exercise the ISO Grant by executing and delivering a
three-year promissory note secured by a pledge of the purchased shares, which
note shall be on such terms and conditions as are approved by the Plan
administrator. Further, so long as Executive is employed by Company as provided
in this Agreement and Executive is not otherwise in default of any of the
provisions herein, Executive shall be granted by the Company nonqualified stock
options ("NQSOs") under the Company's 1998 Nonqualified Stock Option Plan so
that the Executive shall be entitled to purchase (i) up to 200,000 shares of
Company's Common Stock at an exercise price of seven dollars ($7.00) per share
("NQSO Grant I"); (ii) up to 200,000 shares of Company's Common Stock at an
exercise price of eleven dollars ($11.00) per share ("NQSO Grant II"); and (iii)
up to 100,000 shares of Company's Common Stock at an exercise price equal to
fair market value at the time the option is earned ("NQSO Grant III"). NQSO
Grant III shall be earned as of the date that Company achieves EBITDA of ten
percent (10%) of gross revenues or more for three consecutive months by December
31, 2000. If NQSO Grant III is not earned by December 31, 2000, it shall be
deemed canceled. The shares granted pursuant to this Section 3.3 are referred
to hereafter as the "Option Shares."
The shares granted to Executive under the ISO Grant, NQSO Grant I and NQSO
Grant II shall vest as follows: Twelve and one-half percent (12.5%) of the
shares vest six months from the date the options are granted and the balance of
shares equally in successive monthly installments over 42 months of service
thereafter.
The shares granted to Executive under NQSO Grant III shall vest fully as of
the date NQSO Grant III is earned.
3.4 Executive is eligible for a cash incentive bonus equal to forty percent
(40%) of base salary for the period May 1, 1999 through December 31, 1999,
payable on a pro rata basis, if Company achieves performance goals to be
determined by the Board in its discretion.
3.5 Executive shall be entitled to at least four (4) weeks of paid vacation
each twelve-month period during Executive's employment hereunder, in addition to
all national holidays. Any accrued vacation time shall be forfeited if not taken
by the end of the calendar year following the year in which it accrued.
Employment Agreement
Page 3
<PAGE>
3.6 Executive shall, in the discretion of the Board and in accordance with
Company policy, be entitled to participate in benefits under any employee
benefit plan or arrangement made available by the Company now or in the future
to its executives and key management employees. Notwithstanding the foregoing,
during Executive's employment hereunder, the Company shall continuously provide
Executive, at the Company's sole cost and expense, with medical, dental and
vision care/insurance for Executive, and shall pay the premiums due and owing on
Executive's one million dollar ($1,000,000) life insurance policy currently in
effect.
3.7 Executive shall be entitled to receive prompt reimbursement of all
reasonable expenses incurred by Executive in performing Company services,
including reimbursement of lodging expenses of up to $125 per night when
Executive stays overnight in Portland in connection with Company business, and
reimbursement of up to $300 per month for automobile expenses and mileage.
4. TERMS OF EMPLOYMENT.
4.1 The term of this Agreement shall be effective as of the date first
written above and shall terminate two (2) years from such date, unless earlier
terminated as hereinafter provided.
4.2 This Agreement may be renewed only by written consent of both parties.
4.3 The continued employment after the expiration shall not constitute an
extension of the term of this Agreement or any of its provisions for any period
of time.
5. TERMINATION BY COMPANY.
Executive's term of employment with the Company may be earlier terminated
by the Company under the following conditions:
5.1 DEATH. Upon Executive's death, in which case termination shall be
effective on the last day of the month in which Executive's death occurs.
5.2 DISABILITY. If Executive becomes, for six (6) consecutive months,
completely disabled due to physical or mental illness as defined under Section
5.2.1, or if Executive shall be absent from duties as required under the terms
of this Agreement on a full-time basis due to illness for six (6) consecutive
months, and shall not have returned to the performance of duties within thirty
(30) days after receiving written notice of termination following such six-month
period.
5.2.1 The term "completely disabled" as used in this Agreement shall
mean the inability of Executive to perform the essential functions of his
position under this Agreement by reason of any physical or mental impairment
which the Board, based upon medical advice or an opinion provided by a licensed
physician acceptable to the Board and approved by Executive, which approval
Employment Agreement
Page 4
<PAGE>
shall not be unreasonably withheld, determines to have incapacitated Executive
from satisfactorily performing any or all essential functions of his position
for the Company during the foreseeable future. Based upon such medical advice or
opinion, the determination of the Board shall be final and binding and the date
such determination is made shall be the date of such complete disability for
purposes of this Agreement.
5.3 FOR CAUSE. The Company may terminate Executive's employment under this
Agreement and may terminate this Agreement For Cause, as that term is defined in
Sections 5.3.1 through 5.3.5, by (i) delivery of written notice to Executive
specifying the cause or causes relied upon for such termination; and (ii) giving
Executive, together with his counsel, an opportunity to be heard before the
Board. Any notice of termination given pursuant to this Section 5.3 shall effect
termination as of the date specified in such notice or, in the event no such
date is specified, on the last day of the month in which such notice is
delivered or deemed delivered as provided in Section 10 below.
If Executive's employment under this Agreement is terminated by the Company
For Cause under this Section, Executive shall be entitled to receive only
accrued base salary and other accrued benefits required by law, prorated to the
date of termination. Grounds for the Company to terminate this Agreement For
Cause shall be limited to the occurrence of any of the following events without
Board consent:
5.3.1 Executive is in material breach of any provision of this Agreement
and, except as otherwise provided in this Section 5.3, such breach continues for
a period of thirty (30) days after notice of such breach is given to Executive
by the Company;
5.3.2 Executive's engaging or in any manner participating in any
activity which is directly competitive with or intentionally injurious to the
Company or which violates any provision of Section 8 of this Agreement and such
violation continues for a period of ten days after notice of such violation is
given to Executive by the Company;
5.3.3 Executive's commission of any fraud against the Company;
5.3.4 Executive's intentional improper use or appropriation for his
personal use or benefit of any funds or properties of the Company not authorized
by the Board to be so used or appropriated and the same has not been remedied
within thirty (30) days after notice of such violation is given to Executive by
the Company; or
5.3.5 Executive's conviction of any crime involving dishonesty or moral
turpitude.
5.4 WITHOUT CAUSE. The Company may terminate the Executive's employment
without cause upon delivery of written notice to the Executive at any time. Any
notice of termination given pursuant to this Section 5.4 shall effect
termination not less than sixty (60) days after the date of such notice.
Employment Agreement
Page 5
<PAGE>
6. TERMINATION BY EXECUTIVE. Executive may terminate his employment with the
Company for any reason or for no reason upon delivery of written notice not less
than sixty (60) days in advance of the effective date of such termination.
7. COMPENSATION UPON TERMINATION.
7.1 BASE SALARY. If Executive employment is terminated by the Company for
Cause or without Cause, or by reason of Executive's death or disability, the
Company shall pay Executive his base salary through the date of Executive's
termination date at the rate in effect at the time of the notice of termination,
and the Company shall thereafter have no further obligations to Executive under
this Agreement other than as required by law or by Section 7.3 below (if
applicable).
7.2 BONUSES. If Executive's employment is terminated by the Company or by
Executive during the term of this Agreement, Executive shall be eligible to
receive the bonus provided for in section 3.4 of this Agreement, or any other
bonus as may be awarded by the Board from time to time, only if Executive was
employed by the Company through the end of the applicable bonus period.
7.3 ACCELERATED VESTING OPTIONS UPON TERMINATION WITHOUT CAUSE OR UPON
DEATH. If the Company terminates Executive's employment without Cause during the
term of this Agreement, then upon Executive's furnishing to the Company an
executed waiver and release of claims in a form acceptable to the Company,
vesting on Executive's ISO and NQSO Grants I and II, shall be accelerated as if
Executive had been employed with the Company through the end of the term of this
Agreement as provided in Section 4.1. In the event of Executive's death during
the term of this Agreement, vesting of such number of options, granted pursuant
to Executive's ISO and NQSO Grants I and II, as would have vested during the
twelve month period following the date of Executive's death shall accelerate and
become vested effective as of the date of Executive's death.
8. CONFIDENTIAL INFORMATION; NONSOLICITATION.
8.1 Executive recognizes that his employment with the Company will involve
contact with information of substantial value to the Company, which is not old
and generally known in the trade, and which gives the Company an advantage over
its competitors who do not know or use such information, including but not
limited to, recipes, techniques, processes, sales and customer information, and
business and financial information relating to the business, products, practices
and techniques of the Company (hereinafter referred to as "Confidential
Information"). Executive will at all times regard and preserve as confidential
such Confidential Information obtained by Executive from whatever source and
will not, either during his employment with the Company or thereafter, publish
or disclose any part of such Confidential Information in any manner at any time,
or use the same except on behalf of the Company, without the prior written
consent of the Company. Notwithstanding the foregoing sentence, disclosure of
Confidential Information shall not be precluded if such information (i) is now,
Employment Agreement
Page 6
<PAGE>
or hereafter becomes, through no act or failure to act on the part of the
Executive, generally known or available, or (ii) is required to be disclosed by
law.
8.2 While employed by the Company and for one (1) year thereafter,
Executive agrees that, in order to protect the Company's confidential and
proprietary information from unauthorized use, Executive will not, either
directly or through others, solicit or attempt to solicit (i) any employee,
consultant or independent contractor of the Company to terminate his or her
relationship with the Company in order to become an employee, consultant or
independent contractor to or for any other person or business entity; or (ii)
the business of any customer, vendor or distributor of the Company which, at the
time of termination or one (1) year immediately prior thereto, was listed on the
Company's customer, vendor or distributor list.
9. SUCCESSORS. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
10. ASSIGNMENT AND BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of Executive and Executive's heirs, executors, personal
representatives, assigns, administrators and legal representatives. Because of
the unique and personal nature of Executive's duties under this Agreement,
neither this Agreement nor any rights or obligations under this Agreement shall
be assignable by Executive. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors, assigns and legal
representatives.
11. NOTICES. All notices or demands of any kind required or permitted to be
given by the Company or Executive under this Agreement shall be given in writing
and shall be personally delivered (and receipted for) or mailed by certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: Oregon Baking Company
dba Marsee Baking
2287 NW Pettygrove Street
Portland, Oregon 97296
With a copy to: Brendan R. McDonnell, Esq.
Tonkon Torp LLP
1600 Pioneer Tower
888 SW Fifth Avenue
Portland, Oregon 97204
Employment Agreement
Page 7
<PAGE>
If to Executive: Ray Lindstrom
9544 NE 30th Street
Bellevue, Washington 98004
Any such written notice shall be deemed received when personally delivered or
three (3) days after its deposit in the United States mail as specified above.
Either party may change its address for notices by giving notice to the other
Party in the manner specified in this Section.
12. CHOICE OF LAW; VENUE. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Oregon without regard to the conflict
of laws provisions thereof. If any suit or action is filed by any party to
enforce this Agreement or otherwise with respect to the subject matter of this
Agreement, jurisdiction and venue shall be in the federal or state courts
located in Multnomah County, Oregon.
13. INTEGRATION. This Agreement contains the complete, final and exclusive
agreement of the Parties relating to the subject matter of this Agreement, and
supersedes all prior oral and written employment agreements or arrangements
between the Parties.
14. AMENDMENT. This Agreement cannot be amended or modified except by a written
agreement signed by Executive and the Company.
15. WAIVER. No term, covenant or condition of this Agreement or any breach
thereof shall be deemed waived, except with the written consent of the Party
against whom the waiver is claimed, and any waiver of any such terms, covenant,
condition or breach shall not be deemed to be a waiver of any preceding or
succeeding breach of the same or any other term, covenant, condition or breach.
16. SEVERABILITY. The finding by a court of competent jurisdiction of the
unenforceability, invalidity or illegality of any provision of this Agreement
shall not render any other provision of this Agreement unenforceable, invalid or
illegal. Such court shall have the authority to modify or replace the invalid or
unenforceable term or provision with a valid and enforceable term or provision
which most accurately represents the Parties' intention with respect to the
invalid or unenforceable term or provision.
17. HEADINGS; CONSTRUCTION. The headings set forth in this Agreement are for
convenience of reference only and shall not be used in interpreting this
Agreement. The Parties acknowledge that each Party and its counsel has reviewed
and revised, or had an opportunity to review and revise, this Agreement, and the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.
18. REPRESENTATIONS AND WARRANTIES. Executive represents and warrants that, to
the best of Executive's knowledge, he is not restricted or prohibited,
contractually or otherwise, from entering into and performing each of the terms
and covenants contained in this Agreement, and that his execution and
Employment Agreement
Page 8
<PAGE>
performance of this Agreement will not violate or breach any other agreements
between Executive and any other person or entity.
19. ATTORNEY FEES. If any suit or action is filed by any Party to enforce this
Agreement or otherwise with respect to the subject matter of this Agreement, the
prevailing party shall be entitled to recover reasonable attorney fees incurred
in preparation or in prosecution or defense of such suit or action as fixed by
the trial court, and if any appeal is taken from the decision of the trial
court, reasonable attorney fees as fixed by the appellate court.
20. COUNTERPARTS. This Agreement may be executed in two counterparts, each of
which shall be deemed an original, all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
THE COMPANY: EXECUTIVE:
OREGON BAKING COMPANY
dba MARSEE BAKING
/s/ Howard Wasserteil /s/ Ray Lindstrom
- ------------------------------------- -----------------------------------
By: Howard Wasserteil Ray Lindstrom
Title: Executive Vice President
Employment Agreement
Page 9
EMPLOYMENT AGREEMENT
BY AND BETWEEN
OREGON BAKING COMPANY
(dba Marsee Baking)
AND
HOWARD WASSERTEIL
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
effective as of July 12, 1996, by and between Oregon Baking Company, an Oregon
corporation dba Marsee Baking (the "Company"), and Howard Wasserteil
("Executive"). The Company and Executive are hereinafter collectively referred
to as the "Parties," and may individually be referred to as a "Party."
RECITALS
A. The Executive is presently employed by the Company as the President.
B. As the Executive's contribution to the growth and success of the
Company since its inception has been substantial, the Board of Directors (the
"Board") of the Company desires to provide for the continued employment of the
Executive and to make certain changes in the Executive's employment arrangements
with the Company which the Board has determined will reinforce and encourage the
continued attention and dedication to the Company of the Executive as a member
of the Company's management.
C. The Executive desires to continue his employment with the Company,
and is willing to accept such continued employment on the terms and conditions
set forth in this Agreement.
AGREEMENT
In consideration of the foregoing premises and the mutual covenants
herein contained, and for other good and valuable consideration, the Parties,
intending to be legally bound, agree as follows:
SECTION 1 EMPLOYMENT.
1.1 The Company hereby agrees to continue to employ Executive, and
Executive hereby accepts continued employment by the Company, upon the terms and
conditions set forth in this Agreement, effective as of the date first set forth
above ("Effective Date").
1.2 Executive shall remain as the President of the Company, its
subsidiaries, and its successors (if any) and their subsidiaries (collectively,
the "Company Affiliates"); however, once the Company identifies and hires a new
president/chief executive officer ("New Executive"), Executive shall no longer
be President of the Company but shall be its Director of New Store Development.
Executive shall also serve in such other capacity or capacities, with the
consent of the Executive, as the Board may from time to time prescribe.
1
<PAGE>
1.3 Executive shall do and perform all services, acts or things
necessary or advisable to manage and conduct the business of the Company and
which are normally associated with the position of President, or, once a New
Executive is hired by the Company, the position of Director of New Store
Development, and which are not inconsistent with the provisions of the charter
documents of the Company Affiliates. However, at all times during his
employment, Executive shall be subject to the direction and policies from time
to time established by the Board. Notwithstanding the foregoing, Executive shall
have such corporate power and authority as shall be reasonably required to
enable the Executive to discharge the Executive's duties in any office that
Executive may hold.
1.4 So long as Executive is employed by the Company in accordance with
this Agreement, he shall be a member of the Company's Strategic Planning
Committee. Further, during such employment, the Company shall use its best
efforts to ensure that Executive remains a member of the Board of Directors and
a member of the Board's Executive and Audit Committees.
1.5 Unless the Parties otherwise agree in writing, prior to Executive's
termination in accordance with this Agreement, Executive shall perform the
services he is required to perform pursuant to this Agreement at the Company's
offices located at 2277 N.W. Quimby Street, Portland, Oregon, at the various
production and retail outlets, or at any other place at which the Company
conducts business; provided, however, that the Company may from time to time
reasonably require Executive to travel temporarily to other locations in
connection with the Company's business.
SECTION 2 LOYAL AND CONSCIENTIOUS PERFORMANCE; NONCOMPETITION.
2.1 During his employment by the Company, Executive shall devote his
full business energies, interest, abilities and productive time to the proper
and efficient performance of his duties under this Agreement. The foregoing
shall not preclude Executive from engaging in civic, charitable or religious
activities, or from serving on boards of directors of companies or organizations
which will not present any direct conflict of interest with the Company or
affect the performance of Executive's duties hereunder.
2.2 Prior to the Executive's termination in accordance with this
Agreement, Executive shall not engage in competition with the Company, either
directly or indirectly, in any manner or capacity, as adviser, principal, agent,
partner, officer, director, employee, member of any association or otherwise, in
any phase of the business of developing, producing and marketing of food and
beverage which are in the same field or which otherwise directly compete with
the business or proposed business of the Company; provided, however, nothing in
this Section 2.2 shall in any way prohibit ownership by Executive, as a passive
investment, of less than one percent (1%) of the outstanding shares of capital
stock of any corporation with one or more classes of its capital stock listed on
a national securities exchange or publicly traded in the over-the-counter
market.
2
<PAGE>
SECTION 3 COMPENSATION OF EXECUTIVE.
3.1 The Company shall pay Executive a base salary of not less than
$86,400.00 per year, payable in regular periodic payments in accordance with
Company policy but in no event less frequent than semi-monthly.
3.2 Executive's compensation may be changed from time to time by mutual
agreement of Executive and the Board.
3.3 All of Executive's compensation shall be subject to customary
withholding taxes and any other employment taxes as are commonly required to be
collected or withheld by the Company.
3.4 Executive shall be entitled to at least four (4) weeks of paid
vacation each twelve-month period during Executive's employment hereunder, which
shall continue to accrue during Executive's employment hereunder, in addition to
all national holidays.
3.5 As further compensation, and so long as Executive is employed by
Company as provided in this Agreement on such dates and Executive is not
otherwise in default of any of the provisions herein, Executive shall be granted
by the Company a nonqualified stock option ("Stock Option") under the Company's
existing 1993 Non-Qualified Stock Option Plan ("Plan") as amended so that
Executive shall be entitled to purchase up to 10,000 shares of Company's Common
Stock ("Grant I") on or after December 31, 1996, which date shall be the date of
granting for Grant I, and another 10,000 shares of Company's Common Stock
("Grant II") on or after December 31, 1997, which date shall be the date of
granting for Grant II. The exercise price for each share shall be the fair
market value of the Company's Common Stock as of the respective grant date, as
determined by the Board at its discretion. The shares of Common Stock granted to
Executive in this Section 3.5 ("Option Shares") shall vest immediately upon
grant according to the following schedule:
DATE OF VESTING SHARES VESTED
--------------- -------------
December 31, 1996 10,000
December 31, 1997 10,000
Executives shall have the right to exercise the vested Option Shares pursuant to
and in accordance with the terms and conditions of the Plan and the Company's
standard non-qualified option agreement adopted under the Plan.
3.6 Executive shall, in the discretion of the Board and in accordance
with Company policy, be entitled to participate in benefits under any employee
benefit plan or arrangement made available by the Company now or in the future
to its executives and key management employees. Notwithstanding the foregoing,
during Executive's employment hereunder, the Company shall continuously provide
3
<PAGE>
Executive, at the Company's sole cost and expense, with (i) disability insurance
in addition to any such policies required under Section 7.6 in this Agreement;
and (ii) medical, dental and vision care/insurance for Executive, Executive's
spouse and Executive's children.
3.7 As additional compensation, the Company may, but is not required
to, pay Executive cash bonuses, grant additional stock options, and increase
Executive's base salary, at such times and in such amounts as the Board may
determine in its sole discretion, based on Executive's performance and the
Company's achievement of the goals and objectives established jointly by the
Board and Executive from time to time.
3.8 Executive shall be entitled to receive prompt reimbursement of all
reasonable expenses incurred by Executive in performing Company services,
including expenses related to relocation, travel, entertainment, parking,
business meetings and professional dues. Such expenses shall be accounted for in
accordance with the policies and procedures established by the Company.
SECTION 4 TERM OF EMPLOYMENT.
4.1 The term of this Agreement shall be effective as of the date first
above written and shall terminate three (3) years from such date, unless earlier
terminated as hereinafter provided.
4.2 This Agreement may be renewed only by written consent of both
parties.
4.3 The continued employment after the expiration shall not constitute
an extension of the term of this Agreement or any of its provisions for any
period of time; except
4.3.1 In the event Executive's employment is terminated by the
Company "without cause," as those terms are defined in Section 5.4, and such
termination occurs after the three-year term provided in this Section 4,
Executive shall be entitled to no less than six months of Executive's annual
base salary in effect at the time of such termination as severance pay.
4.3.2 The rights and obligations contained in this Section
4.3.1 shall survive the termination of this Agreement and continue to be in
effect unless waived or modified in writing by both parties.
SECTION 5 TERMINATION BY COMPANY. Executive's term of employment with the
Company may be earlier terminated by the Company under the following conditions:
5.1 DEATH. Upon Executive's death, in which case termination shall be
effective on the last day of the month in which Executive's death occurs.
4
<PAGE>
5.2 DISABILITY. If Executive becomes, for six consecutive months,
completely disabled due to physical or mental illness as defined under Section
5.2.1, or if Executive shall be absent from duties as required under the terms
of this Agreement on a full-time basis due to illness for six consecutive
months, and shall not have returned to the performance of duties within thirty
(30) days after receiving written notice of termination following such six-month
period.
5.2.1 The term "completely disabled" as used in this Agreement
shall mean the inability of Executive to perform the essential functions of his
position under this Agreement by reason of any incapacity, physical or mental,
which the Board, based upon medical advice or an opinion provided by a licensed
physician acceptable to the Board and approved by the Executive, which approval
shall not be unreasonably withheld, determines to have incapacitated Executive
from satisfactorily performing any or all essential functions of his position
for the Company during the foreseeable future. Based upon such medical advice or
opinion, the determination of the Board shall be final and binding and the date
such determination is made shall be the date of such complete disability for
purposes of this Agreement.
5.3 FOR CAUSE. The Company may terminate Executive's employment under
this Agreement and this Agreement itself "for cause" ("For Cause") by (i)
delivery of written notice to Executive specifying the cause or causes relied
upon for such termination; and (ii) giving Executive, together with his counsel,
an opportunity to be heard before the Board. Any notice of termination given
pursuant to this Section 5.3 shall effect termination as of the date specified
in such notice or, in the event no such date is specified, on the last day of
the month in which such notice is delivered or deemed delivered as provided in
Section 11 below.
If Executive's employment under this Agreement is terminated by the
Company For Cause under this Section, Executive shall be entitled to receive
only accrued base salary and other accrued benefits required by law, prorated to
the date of termination. Executive will not be entitled to severance pay, pay in
lieu of notice or any other such compensation. Grounds for the Company to
terminate this Agreement For Cause shall be limited to the occurrence of any of
the following events without Board consent:
5.3.1 Executive is in material breach of any provision of this
Agreement and, except as otherwise provided in this Section 5.3, such breach
continues for a period of thirty (30) days after notice of such breach is given
to Executive by the Company;
5.3.2 Executive's engaging or in any manner participating in
any activity which is directly competitive with or intentionally injurious to
the Company or which violates any provision of Section 8 of this Agreement and
such violation continues for a period of ten days after notice of such violation
is given to Executive by the Company;
5.3.3 Executive's commission of any fraud against the
Company;
5.3.4 Intentional improper use or appropriation for his
personal use or benefit of any funds or properties of the Company not authorized
5
<PAGE>
by the Board to be so used or appropriated and the same has not been remedied
within thirty (30) days after notice of such violation is given to Executive by
the Company; and
5.3.5 Executive's conviction of any crime involving dishonesty
or moral turpitude.
5.4 WITHOUT CAUSE. The Company may terminate the Executive's employment
without cause ("Without Cause") upon delivery of written notice to the Executive
at any time. Any notice of termination given pursuant to this Section 5.4 shall
effect termination not less than thirty (30) days after the date of such notice.
SECTION 6 TERMINATION BY EXECUTIVE. Executive's term of employment with the
Company may be earlier terminated (a) for Sufficient Reason (as defined below in
Section 6.1) within sixty (60) consecutive days following the occurrence of an
event or events constituting such Sufficient Reason; or (b) without Sufficient
Reason.
6.1 "Sufficient Reason" shall mean any one or more of the following
events:
6.1.1 The failure by the Company to comply with any material
provision of this Agreement and such failure has continued for a period of
thirty (30) days after notice of such failure has been given by Executive to the
Company;
6.1.2 The assignment to Executive of any duties materially
inconsistent with Executive's status as provided in Section 1.2 or the reduction
of Executive's authority as provided hereunder; and
6.1.3 The reduction by the Company in Executive's base salary
or as the same may be increased from time to time under the terms of this
Agreement, except for across-the-board salary reductions approved by 75% of the
Board similarly affecting all management personnel of the Company; provided,
however, that in no event shall Executive's base salary be reduced to an amount
equal to less than 75% of the highest base salary at any time in effect during
Executive's employment hereunder.
SECTION 7 COMPENSATION UPON TERMINATION.
7.1 DEATH. If Executive's employment shall be terminated by death, the
Company shall pay to Executive's designee(s), beneficiary(ies), or if there is
no such designee or beneficiary, to Executive's estate, an amount equal to
Executive's base salary through the end of the three year term, plus 6 months of
Executive's base salary at the time of his death. Such designee or beneficiary
shall have the right to exercise Executive's vested Option Shares pursuant to
and in accordance with Section 3.5, which shares shall vest on the dates
provided in Section 3.5 as if Executive were still alive and employed with the
Company.
6
<PAGE>
7.2 DISABILITY. If Executive shall become disabled as provided in
Section 5.2, the Company shall continue to pay to Executive an amount which,
when combined with disability or income-continuance benefits pursuant to a
Company plan or provided under state law and received by Executive, shall equal
but not exceed Executive's base salary, provided that Executive has submitted
claims for any and all such disability benefits to which he may be entitled. For
any waiting period during which Executive receives no benefits under any
disability plan, the Company shall pay his entire base salary. The Company shall
continue to integrate such salary payments with benefits until such time as
Executive's employment is terminated in accordance with Section 5.2 hereof. Upon
any such termination, the Company shall pay to Executive an amount equal to
Executive's base salary through the end of the three year term, plus 6 months of
Executive's base salary at the time of his disability and the Executive shall
have the right to exercise the vested Option Shares pursuant to and in
accordance with Section 3.5, which shares shall vest on the dates provided in
Section 3.5.
7.3 CAUSE, WITHOUT SUFFICIENT REASON. If Executive's employment shall
be terminated by the Company For Cause, or if Executive terminates employment
hereunder without Sufficient Reason, the Company shall pay Executive his base
salary through the date of termination at the rate in effect at the time of the
notice of termination, and the Company shall thereafter have no further
obligations to Executive under this Agreement.
7.4 WITHOUT CAUSE, SUFFICIENT REASON. If (a) Executive shall terminate
Executive's employment with the Company for Sufficient Reason under Section 6.1
of this Agreement; or (b) the Company shall terminate Executive's employment
Without Cause, then upon Executive's furnishing to the Company an executed
waiver and release of claims (a form of which is attached hereto as Exhibit A),
Executive shall be entitled to the following:
7.4.1 Executive's base salary through the end of the three
year term;
7.4.2 Six months of Executive's annual base salary in effect
at the time of termination as severance pay;
7.4.3 The right to exercise Executive's vested Option Shares
pursuant to and in accordance with Section 3.5, which shares shall vest on the
dates provided in Section 3.5 as if Executive were still employed with the
Company; and
7.4.4 Continued receipt, through the end of the three year
term plus an additional 6 months, all employee benefit plans and programs in
which the Executive and Executive's family were entitled to participate
immediately prior to the date of termination, provided that the Executive's
continued participation is possible under the general terms and provisions of
such plans and programs. In the event that the Executive's participation in any
such plan or program is barred, the Company shall arrange to provide the
Executive with benefits substantially similar to those which the Executive would
otherwise have been entitled to receive under such plans and programs from which
his continued participation is barred.
7
<PAGE>
7.5 Notwithstanding the termination, all payments provided for in this
Section 7 to be made to Executive shall be made in regular periodic payments in
accordance with the Company's normal policy and practice in such payroll
matters, but in no event less frequent than semi-monthly.
7.6 Company shall carry, at its own costs, life and disability
insurance policies on Executive in sufficient amounts to meet its obligations
described in this Section 7.
SECTION 8 CONFIDENTIAL INFORMATION; NONSOLICITATION.
8.1 Executive recognizes that his employment with the Company will
involve contact with information of substantial value to the Company, which is
not old and generally known in the trade, and which gives the Company an
advantage over its competitors who do not know or use it, including but not
limited to, techniques, designs, drawings, processes, inventions, developments,
equipment, prototypes, sales and customer information, and business and
financial information relating to the business, products, practices and
techniques of the Company (hereinafter referred to as "Confidential
Information"). Executive will at all times regard and preserve as confidential
such Confidential Information obtained by Executive from whatever source and
will not, either during his employment with the Company or thereafter, publish
or disclose any part of such Confidential Information in any manner at any time,
or use the same except on behalf of the Company, without the prior written
consent of the Company. Notwithstanding the foregoing sentence, disclosure of
Confidential Information shall not be precluded if such information (i) is now,
or hereafter becomes, through no act or failure to act on the part of the
Executive, generally known or available, or (ii) is required to be disclosed by
law.
8.2 While employed by the Company and for one (1) year thereafter, the
Executive agrees that, in order to protect the Company's confidential and
proprietary information from unauthorized use, Executive will not, either
directly or through others, solicit or attempt to solicit (i) any employee,
consultant or independent contractor of the Company to terminate his or her
relationship with the Company in order to become an employee, consultant or
independent contractor to or for any other person or business entity; or (ii)
the business of any customer, vendor or distributor of the Company which, at the
time of termination or one (1) year immediately prior thereto, was listed on the
Company's customer, vendor or distributor list.
SECTION 9 SUCCESSORS. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such an agreement prior to the
8
<PAGE>
effectiveness of any such succession shall be a material breach of this
Agreement and shall entitle the Executive to compensation and all other benefits
from the Company in the same amount and on the same terms as he would be
entitled to hereunder if he terminated his employment for Sufficient Reason
hereunder.
SECTION 10 ASSIGNMENT AND BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of Executive and Executive's heirs, executors, personal
representatives, assigns, administrators and legal representatives. Because of
the unique and personal nature of Executive's duties under this Agreement,
neither this Agreement nor any rights or obligations under this Agreement shall
be assignable by Executive. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors, assigns and legal
representatives.
SECTION 11 NOTICES. All notices or demands of any kind required or permitted to
be given by the Company or Executive under this Agreement shall be given in
writing and shall be personally delivered (and receipted for) or mailed by
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: Oregon Baking Company
dba Marsee Baking
2277 N.W. Quimby Street
Portland, Oregon 97296
With a copy to: Brendan R. McDonnell, Esq.
Lane Powell Spears Lubersky LLP
520 SW Yamhill, Suite 800
Portland, Oregon 97204
If to Executive: Howard Wasserteil
3125 S.W. 66th Avenue
Portland, Oregon 97225
Any such written notice shall be deemed received when personally delivered or
three (3) days after its deposit in the United States mail as specified above.
Either Party may change its address for notices by giving notice to the other
Party in the manner specified in this Section.
SECTION 12 CHOICE OF LAW; VENUE. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Oregon without regard to
the conflict of laws provision thereof. This Agreement has been made entirely
within the State of Oregon. This Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon. If any suit or action is filed
by any party to enforce this Agreement or otherwise with respect to the subject
9
<PAGE>
matter of this Agreement, venue shall be in the federal or state courts in
Multnomah County, Oregon.
SECTION 13 INTEGRATION. This Agreement contains the complete, final and
exclusive agreement of the Parties relating to the subject matter of this
Agreement, and supersedes all prior oral and written employment agreements or
arrangements between the Parties.
SECTION 14 AMENDMENT. This Agreement cannot be amended or modified except
by a written agreement signed by Executive and the Company.
SECTION 15 WAIVER. No term, covenant or condition of this Agreement or any
breach thereof shall be deemed waived, except with the written consent of the
Party against whom the wavier in claimed, and any waiver or any such term,
covenant, condition or breach shall not be deemed to be a waiver of any
preceding or succeeding breach of the same or any other term, covenant,
condition or breach.
SECTION 16 SEVERABILITY. The finding by a court of competent jurisdiction of the
unenforceability, invalidity or illegality of any provision of this Agreement
shall not render any other provision of this Agreement unenforceable, invalid or
illegal. Such court shall have the authority to modify or replace the invalid or
unenforceable term or provision with a valid and enforceable term or provision
which most accurately represents the parties' intention with respect to the
invalid or unenforceable term or provision.
SECTION 17 INTERPRETATION; CONSTRUCTION. The headings set forth in this
Agreement are for convenience of reference only and shall not be used in
interpreting this Agreement. The Parties acknowledge that each Party and its
counsel has reviewed and revised, or had an opportunity to review and revise,
this Agreement, and the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement.
SECTION 18 REPRESENTATIONS AND WARRANTIES. Executive represents and warrants
that, to the best of Executive's knowledge, he is not restricted or prohibited,
contractually or otherwise, from entering into and performing each of the terms
and covenants contained in this Agreement, and that his execution and
performance of this Agreement will not violate or breach any other agreements
between Executive and any other person or entity.
SECTION 19 ATTORNEY FEES. If any suit or action is filed by any party to enforce
this Agreement or otherwise with respect to the subject matter of this
Agreement, the prevailing party shall be entitled to recover reasonable attorney
10
<PAGE>
fees incurred in preparation or in prosecution or defense of such suit or action
as fixed by the trial court, and if any appeal is taken from the decision of the
trial court, reasonable attorney fees as fixed by the appellate court.
SECTION 20 COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, all of which together shall
contribute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
THE COMPANY:
OREGON BAKING COMPANY
dba MARSEE BAKING
/s/ Dr. Robert Schneider
--------------------------------
By: Dr. Robert Schneider
Title: Chief Executive Officer
EXECUTIVE:
/s/ Howard Wasserteil
--------------------------------
Howard Wasserteil
11
<PAGE>
EXHIBIT A
RELEASE AND WAIVER OF CLAIMS
In exchange for payment to me of amounts pursuant to Sections 7.4 (and
for the other benefits provided therein) of my Employment Agreement (the
"Agreement"), to which this form is attached, I hereby furnish OREGON BAKING
COMPANY dba MARSEE BAKING (the "Company") with the following release and waiver.
I hereby release, and forever discharge the Company, its officers,
directors, agents, employees, stockholders, successors, assigns and affiliates,
of and from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys' fees, damages, indemnities and obligations of every kind
and nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising at any time prior to and
including my employment termination date with respect to any claims relating to
my employment and the termination of my employment, including but not limited
to, claims pursuant to any federal, state or local law relating to employment,
including, but not limited to, discrimination claims, claims under the Oregon
Fair Employment and Housing Act, and the Federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"), or claims for wrongful termination,
breach of the covenant of good faith, contract claims, tort claims, and wage or
benefit claims, including but not limited to, claims for salary, bonuses,
commissions, stock, stock options, vacation pay, fringe benefits, severance pay
or any form of compensation (other than the obligations under Sections 7.4 of
the Agreement.)
I also acknowledge that I have read and understand the following: "A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor." I
hereby expressly waive and relinquish all rights and benefits under that section
and any law of any jurisdiction of similar effect with respect to any claims I
may have against the Company.
I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this waiver and release is knowing and
voluntary, and that the consideration given for this waiver and release is in
addition to anything of value to which I was already entitled as an employee of
the Company. I further acknowledge that I have been advised, as required by the
Older Workers Benefit Protection Act, that: (a) the waiver and release granted
herein does not relate to claims which may arise after this agreement is
executed; (b) I have the right to consult with an attorney prior to executing
this agreement (although I may choose voluntarily not to do so); (c) I have
twenty-one (21) days from the date I receive this agreement, in which to
consider this agreement (although I may choose voluntarily to execute this
agreement earlier); (d) I have seven (7) days following the execution of this
agreement to revoke my consent to the agreement; and (e) this agreement shall
not be effective until the seven (7) day revocation period has expired.
Date: By:
------------------- -------------------------------
Howard Wasserteil
12
<PAGE>
ADDENDUM TO THE EMPLOYMENT AGREEMENT
BY AND BETWEEN
OREGON BAKING COMPANY, DBA MARSEE BAKING
AND
HOWARD WASSERTEIL
This Addendum to the Employment Agreement by and between
Oregon Baking Company, dba Marsee Baking, an Oregon corporation (the "Company"),
and Howard Wasserteil ("Wasserteil") dated as of July 12, 1996 (the
"Agreement"), is made to terminate certain provisions in the Agreement upon the
effective date of a Registration Statement filed by the Company under the
Securities Act of 1933, as amended, with respect to a public offering of equity
securities of the Company, underwritten on a firm commitment basis (the "Public
Offering").
RECITALS
A. Section 1.4 of the Agreement reads as follows:
"So long as executive is employed by the Company in accordance
with this Agreement, he shall be a member of the Company's Strategic
Planning Committee. Further, during such employment, the Company shall
use its best efforts to ensure that Executive remains a member of the
Board of Directors, and a member of the Board's Executive and Audit
Committees."
B. The parties desire that the rights and obligations provided under
Section 1.4 of the Agreement be terminated upon the Public Offering.
NOW THEREFORE, the parties agree as follows:
1. Subject to the Public Offering, Section 1.4 of the Agreement shall
be terminated and be of no further force or effect whatsoever.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the
date first written above.
OREGON BAKING COMPANY, dba MARSEE BAKING,
an Oregon corporation
By: /s/ Raymond W. Lindstrom
-------------------------------------
Raymond W. Lindstrom
President and Chief Executive Officer
/s/ Howard J. Wasserteil
-------------------------------------
Howard J. Wasserteil
Addendum to Employment Agreement
Page 1
AMENDED EMPLOYMENT AND STOCK GRANT AGREEMENT
AMENDED EMPLOYMENT AND STOCK GRANT AGREEMENT (the "Amended Agreement")
dated as of April 8, 1999, between OREGON BAKING COMPANY, DBA MARSEE BAKING, an
Oregon corporation (the "Company"), and JOANN VAZQUEZ ("Employee").
Recitals
--------
A. Employee is an employee of the Company. Immediately prior to the
execution of Amended Agreement, the terms of such employment relationship were
governed by an Employment and Stock Grant Agreement dated August 15, 1993,
between the Company and Employee (the "Prior Agreement").
B. The Company intends to conduct a public offering (the "Public Offering")
of its securities pursuant to a registration statement, which offering is
anticipated to close in mid-1999, but no later than December 31, 1999 (the
"Effective Date")
C. The Company and Employee wish to amend the Prior Agreement as provided
herein and supersede and replace the Prior Agreement with this Amended
Agreement.
Agreement
---------
In consideration of the foregoing recitals and the mutual promises and
conditions contained herein, the parties agree as follows:
1. PRIOR AGREEMENT. Upon the Effective Date, the Prior Agreement shall be
superseded by and replaced with this Amended Agreement. The Prior Agreement
shall have no further force or effect whatsoever following the Effective Date.
2. EMPLOYMENT. Subject to the terms and conditions contained herein, the
Company hereby employs Employee, and Employee hereby accepts such employment.
Employee shall occupy the position of Vice President of Product Development.
Employee shall devote her best efforts and attention to the performance of her
duties in such capacity. Employee shall not engage in any other business
activity during the term of her employment hereunder that would interfere with
her duties under this Amended Agreement or would constitute a breach of any
provision of this Amended Agreement.
3. DUTIES. As Vice President of Product Development for the Company,
Employee shall be responsible for managing all aspects of the production
operations of the Company's business, including but not limited to the
following, and shall perform such other duties for the Company as may be
established from time to time by the Company that are consistent with Employee's
Amended Employment and Stock Grant Agreement
Page 1
<PAGE>
position: (A) engage in product development and training of key personnel; (B)
develop recipe protection, recipe costing and merchandising concepts for new
products; (C) produce training manuals and documentation for presentation of
products and product concepts for both retail and production facilities; (D)
plan sourcing of new food products, packaging, co-packers and the like for
retail and production operation; and (E) manage quality control, conduct quality
checks, and troubleshoot quality problems. Employee's objective will be to
manage an efficient, high-quality and profitable baking operation for the
Company. Employee will initially work at the Company's retail facility located
at 2277 NW Quimby Street, Portland, Oregon. As the Company's business operations
expand to other locations, the Company and Employee will discuss Employee's
commitments at such new locations.
4. COMPENSATION.
4.1 ANNUAL SALARY. For all services rendered by Employee under this
Amended Agreement, the Company shall pay Employee a salary (the "Annual Salary")
at a mutually agreed upon rate. The Annual Salary shall be payable in regular
periodic payments in accordance with the Company's standard payroll policy less
any federal and state withholding or other employment taxes.
4.2 BONUS. In addition to the Annual Salary under Section 4.1, the
Employee may receive additional compensation as may be paid from time to time by
the Company at its sole discretion.
4.3 ANNUAL PERFORMANCE REVIEW. During each month of December during
the term of this Amended Agreement, the Company's Board of Directors and
Employee shall in good faith review the performance by, and the compensation to,
Employee for the calendar year then ending and the proposed performance by, and
compensation to, Employee for the then forthcoming calendar year. Any future
agreements between the Company and Employee regarding salary and bonus under
this Amended Agreement shall be subject to approval by the Company's Board of
Directors.
4.4 VACATION; SICK LEAVE. During the term of this Amended Agreement,
Employee will be entitled to standard paid vacation and paid sick leave in each
calendar year in accordance with the Company's policy in effect at such time.
5. TERM AND TERMINATION.
5.1 TERM. Subject to Section 9, the term of employment of Employee
under this Amended Agreement shall commence as of the Effective Date and shall
terminate on December 31, 1999 unless sooner terminated under Section 5.2 below.
After the initial term of Employee's employment, such employment shall be
extended for successive one-year periods upon approval of the Company's Board of
Directors, unless sooner terminated under Section 5.2 below.
Amended Employment and Stock Grant Agreement
Page 2
<PAGE>
5.2 TERMINATION. Each party shall have the right to terminate this
Amended Agreement and Employee's employment hereunder upon at least thirty (30)
days' prior written notice to the other party. Notwithstanding the first
sentence of this Section 5.2, the Company shall have the right to terminate this
Amended Agreement and Employee's employment hereunder immediately in the event
(i) Employee is convicted of (from which no appeal may be, or is timely, taken),
or pleads guilty to, (A) any crime involving the Company or its business, or (B)
any act of fraud, misappropriation or embezzlement, or any felony; (ii) Employee
engages in an act or series of acts of willful misconduct which has or have a
material adverse impact upon the business or financial condition of the Company;
or (iii) Employee breaches or fails to perform any provision of this Amended
Agreement. In addition, this Amended Agreement and Employee's employment
hereunder shall terminate immediately if (x) Employee dies; or (y) Employee is
permanently disabled (as defined in Section 22(e) of the Internal Revenue Code
of 1986, as amended (the "Code")).
5.3 SURVIVAL. Upon termination of this Amended Agreement under Section
5.2, all rights and obligations under this Amended Agreement shall cease except
(i) the rights and obligations under Section 4.1 of this Amended Agreement to
the extent Employee has not been compensated for services performed prior to
termination (the amount to be pro rated for the portion of the pay period prior
to termination), and (ii) the rights and obligations imposed upon Employee under
Sections 6, 7, and 8 which shall remain operative and in full force and effect
after the termination of this Amended Agreement. A termination of this Amended
Agreement shall constitute a termination of Employee's employment with the
Company for all purposes of this Amended Agreement.
5.4 REPLACEMENT. In the event either party elects to terminate this
Amended Agreement under Section 5.2, Employee shall, at the request of the
Company, during the 30-day notice period specified in Section 5.2, diligently
and in good faith assist the Company in locating and training a suitable
replacement for Employee.
6. RESTRICTIVE COVENANTS.
6.1 DEFINITIONS. For purposes of Amended Agreement:
6.1.1 "Area" means the State of Oregon and the State of
Washington.
6.1.2 "Competing Business" means any Entity that is engaged at
any location or locations within the Area in the retail and/or wholesale baking
business; provided that, a restaurant or hotel that operates a baking business
incidental to its primary restaurant or hotel business shall not be considered a
Competing Business.
6.1.3 "Entity" means any individual, corporation, partnership,
firm, joint venture, joint enterprise, association, joint-stock company, trust,
unincorporated organization, governmental or regulatory body or other similar
entity.
Amended Employment and Stock Grant Agreement
Page 3
<PAGE>
6.1.4 "Employee Group" means (A) Employee, (B) any and all
Entities that are now or hereafter, directly or indirectly through one or more
intermediaries, controlled by, in control of, or under common control with
Employee, (C) the officers, directors, executives, employees, attorneys,
accountants and other agents or representatives (in whatsoever capacity) of
Employee, or any of the Entities identified in the previous clause (B). For
purposes of Amended Agreement, each of the foregoing is a "member of the
Employee Group."
6.1.5 "Management" means the members of the Company's present
management (namely, Raymond Lindstrom, Stephen Aanderud and Howard Wasserteil).
6.1.6 The term "Marsee Group" means (A) the Company, (B) any and
all Entities that are now or hereafter, directly or indirectly through one or
more intermediaries, controlled by, in control of, or under common control with
the Company, and (C) the officers, directors, executives, employees, attorneys,
accountants and other agents or representatives (in whatsoever capacity) of the
Company or any of the Entities identified in the previous clause (B). For
purposes of Amended Agreement, each of the foregoing is a "member of the Marsee
Group."
6.1.7 "Proprietary Information" means all items of confidential
information or trade secrets regarding the baking business conducted by the
Company. Without limiting the generality of the foregoing, Proprietary
Information includes the following:
(A) Customer lists, price lists, and other confidential
information relating to the marketing and distribution of the Company's baking
goods and merchandise;
(B) Recipes and information relating to formulations, processes,
technology, and know-how used or held for use in the Company's baking business;
(C) Programs, plans and projections relating to present or future
development, expansion, promotion, marketing and distribution of any products or
services in the baking business conducted by the Company; and
(D) All notes, memoranda, correspondence, processes, systems, and
documents, and all computer programs, databases and software relating to any of
the foregoing.
"Proprietary Information" does not include:
(X) Information which is now or later becomes generally available
to the public (or to the segment thereof that is engaged in the food
manufacturing or distribution businesses) through no fault of any member of the
Employee Group, as long as the disclosure of such information, if any, by a
member of the Employee Group takes place after the information has become
generally available to the public (or to the segment thereof that is engaged in
the food manufacturing or distribution businesses);
Amended Employment and Stock Grant Agreement
Page 4
<PAGE>
(Y) Information which is publicly disclosed pursuant to the
requirement of a government agency or is disclosed as required by law or
judicial process, after proper notice to the Company; and
(Z) Those recipes owned by Employee prior to the commencement of
her employment with the Company (the "Prior Recipes"), as further described in
Section 7 below.
6.2 COVENANTS. Subject to Section 6.3:
6.2.1 NONCOMPETITION. Employee will not, directly or indirectly,
engage in any Competing Business on Employee's own behalf, or provide product
development, marketing, managerial, supervisory or consulting services or
assistance to, or lend money to or purchase any debt instrument of, or own any
equity interest in any Competing Business. Employee will not make any statement
or do any act which causes any existing or potential customer of the Company to
curtail or terminate its purchase of products offered by the Company, or which
will in any way divert, diminish or prejudice the business or goodwill of
Company.
6.2.2 NONSOLICITATION. Employee will not solicit, divert or hire
away (or attempt to solicit, divert or hire away) to or for Employee or any
Entity, any employee of the Company, whether or not such employee is a full-time
or temporary employee, whether or not such employment is pursuant to a written
agreement and whether or not such employment is for a determined period or is at
will.
6.2.3 NONDISCLOSURE OF PROPRIETARY INFORMATION. Employee will
not, without the prior written consent of the Company, cause or permit any
member of the Employee Group to disclose, divulge, communicate or otherwise make
known, directly or indirectly, to any person not a member of the Marsee Group
any Proprietary Information.
6.2.4 NONUSE OF PROPRIETARY INFORMATION. Employee will not,
without the prior written consent of the Company, cause or permit any member of
the Employee Group to make any use of the Proprietary Information for the
benefit of Employee or any Entity.
6.2.5 APPLICATION. Each of the covenants of Employee in this
Section 6.2 shall be applicable to all actions and statements of Employee,
whether made or taken directly or indirectly, in an individual capacity or as an
officer, director, partner, executive, employee, manager, consultant,
independent contractor, agent, representative or otherwise of any Entity, alone
or in conjunction with any Entity, or in any other manner whatsoever.
6.3 TERM AND APPLICATION OF NONCOMPETITION AND NONSOLICITATION
COVENANTS.
6.3.1 GENERAL. Each of the covenants of Employee in Sections
6.2.1 and 6.2.2 (collectively, the "Noncompetition/Nonsolicitation Covenants")
shall commence on the date hereof and shall expire two (2) years after the
termination of Employee's employment with the Company if the employment is
Amended Employment and Stock Grant Agreement
Page 5
<PAGE>
terminated voluntarily by Employee or if the employment is terminated by the
Company for "cause" (as defined below). For purposes of this Section 6.3.1 and
Section 6.3.2, termination of Employee's employment by the Company shall be
deemed a termination for "cause" if the termination is for one or more of the
following reasons: (i) Employee is convicted of (form which no appeal may be, or
is timely, taken), or pleads guilty to, (A) any crime involving the Company or
its business, or (B) any act of fraud, embezzlement, or any felony; (ii)
Employee engages in an act or series of acts of willful misconduct which has or
have a material adverse impact upon the business or financial condition of the
Company; (iii) Employee breaches or fails to perform any provision of Amended
Agreement; or (iv) a good faith determination by a majority of the Board of
Directors of the Company that Employee has unsatisfactorily performed her duties
as an officer of the Company.
6.3.2 VOID. Each of the Noncompetition/Nonsolicitation Covenants
shall become null and void upon the occurrence of any of the following events:
(A) The Employee's employment is terminated by the Company
without "cause."
(B) Prior to the termination of Employee's employment (whether
the termination is by the Employee voluntarily or by the Company with or without
cause), the Company and/or the Management sell or dispose of all or
substantially all of the assets or outstanding capital stock of the Company by
means of a sale, merger, reorganization or liquidation.
6.4 TERM AND APPLICATION OF NONDISCLOSURE AND NONUSE COVENANTS. Each
of the covenants of Employee in Section 6.2.3 and 6.2.4 shall commence on the
date hereof and shall continue as long as the Proprietary Information remains
confidential to the Company and does not become information of the type
described in clauses (X) and (Y) of Section 6.1.6.
7. PRIOR RECIPES; DEVELOPMENTS; TANGIBLE PROPERTY; COOKBOOK.
7.1 PRIOR RECIPES. The Company and Employee agree that each of them
shall keep a true and accurate copy of the Prior Recipes in a secure location
for purposes of identifying the Prior Recipes. The Company acknowledges that
Employee is the owner of such Prior Recipes. Employee hereby grants to the
Company an exclusive, irrevocable, perpetual and royalty-free license to use the
Prior Recipes; PROVIDED, HOWEVER, that as the owner of the Prior Recipes,
Employee shall have the right to use the Prior Recipes after the termination of
her employment with the Company provided that such use does not violate any
other provision of Amended Agreement.
7.2 DEVELOPMENTS. If at any time or times during the term of
Employee's employment hereunder, Employee (either alone or with others) makes,
conceives, discovers, authors, creates, enhances, compiles or reduces to
practice any recipe, formulation, process, technology, invention, technique,
know-how, secret, work of authorship as that term is interpreted in the U.S.
Copyright Act, as amended, or any idea protectable by any intellectual property
Amended Employment and Stock Grant Agreement
Page 6
<PAGE>
rights whatsoever or any interest therein (whether or not patentable or
registrable under copyright or similar statutes or subject to analogous
protection) (each hereinafter referred to as a "Development") that (a) relates
to the baking business of the Company or any customer of or a supplier to the
Company or any of the baking products being developed or sold by the Company or
which may be used in relation therewith, (b) results from tasks assigned to
Employee by the Company or (c) results from the use of premises or personal
property (whether tangible or intangible) owned, leased or contracted for by the
Company, each such Development and the benefits thereof shall immediately become
the sole and absolute property of the Company and its assigns. Employee will
promptly disclose to the Company (or any persons designated by it) each such
Development and hereby assigns to the Company and its assigns without further
compensation any right, title and interest Employee may have or acquire in each
such Development and all benefits and/or rights resulting therefrom and Employee
will communicate to the Company, without cost or delay, and without publishing
the same, all available information relating thereto (with all necessary plans
and models). Employee agrees to execute any instruments and to do all other
things reasonably requested by the Company (both during and after the
termination of Amended Agreement) in order to vest more fully in the Company all
ownership rights in those items hereby transferred from Employee to the Company.
7.3 TANGIBLE PROPERTY. All documents (including without limitation,
recipes), records, drawings and other tangible property furnished to Employee by
the Company or produced by her or others in connection with her employment shall
be and remain the sole property of the Company and shall be delivered to the
Company immediately when requested by the Company or upon the termination of the
Employee's employment with the Company. Employee will not take with her any such
property or any reproduction of such property upon such termination.
8. MISCELLANEOUS.
8.1 OREGON LAW. This Agreement and all amendments, modifications,
authorizations or supplements hereto, and the rights of the parties hereunder
shall be construed under and governed by the laws of the State of Oregon.
8.2 ASSIGNS. The rights and obligations of the parties under Amended
Agreement shall inure to the benefit of and shall be binding upon their
respective heirs, successors and assigns. Employee's rights and obligations, or
any particular right or obligation, under Amended Agreement constitute a
personal employment contract that may not be sold, assigned, transferred or
pledged as collateral by Employee.
8.3 WAIVER. The waiver by either party hereto of a breach of any of
the provisions of Amended Agreement by the other party hereto shall not be
construed to be a waiver of any subsequent breach of the other party hereto.
8.4 ENTIRE AGREEMENT. Subject to Section 9, this Agreement constitutes
and expresses the whole agreement of the parties and supersedes all prior
agreements (including the Prior Agreement), understandings (oral or written) and
memoranda with respect to the subject matter hereof. No amendment, modification,
Amended Employment and Stock Grant Agreement
Page 7
<PAGE>
waiver or attempted waiver of Amended Agreement or any part hereof shall be
valid or binding unless made in writing and signed by the party to be bound.
8.5 NOTICES. Any notice or other communication required or permitted
to be given pursuant to Amended Agreement shall be sufficiently given when
delivered by hand, by overnight courier or by certified mail, return receipt
requested, postage prepaid:
To Employee: Joann Vazquez
7340 SE Mallard Court
Portland, Oregon 97223
With a copy to: Thomas K. Coan, Esq.
715 S.W. Morrison St.
Portland, Oregon 97205
To the Company: Oregon Baking Company
dba Marsee Baking
2287 NW Pettygrove
Portland, Oregon 97210
With a copy to: Brendan R. McDonnell, Esq.
Tonkon Torp LLP
1600 Pioneer Tower
888 SW Fifth Avenue
Portland, Oregon 97204
or at such other address as the parties hereto shall have last designated by
notice to the other party. Any notice given by personal delivery, overnight
courier or certified mail, return receipt requested, shall be deemed to have
been delivered on the date of receipt of such delivery at the address set forth
above (or at such other address designated pursuant hereto).
8.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.7 SEVERABILITY. If any clause or any other portion of Amended
Agreement is determined to be void or unenforceable for any reason, such
determination shall not effect the validity or enforceability of any other
clause or portion of Amended Agreement, all of which shall remain in full force
and effect.
8.8 ATTORNEYS' FEES. If suit or action is filed by any party to
enforce the provisions of Amended Agreement, or otherwise with respect to the
subject matter of Amended Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees, as fixed by the trial court, and if any
Amended Employment and Stock Grant Agreement
Page 8
<PAGE>
appeal is taken from the decision of the trial court, reasonable attorneys' fees
as fixed by the appellate court.
8.9 REMEDIES. Employee acknowledges that the Company will suffer
immediate and irreparable injury in the event of a breach by Employee of any
covenant contained in Amended Agreement. Accordingly, in the event of a breach
or threatened breach by Employee of any provision of Amended Agreement, the
Company shall be entitled to an injunction restraining Employee from committing
such breach or threatened breach. Such remedy shall be in addition to any other
remedies to which the Company may be entitled at law or in equity.
9. CONDITION. Notwithstanding any of the foregoing provisions, in the event
the Company fails to close the Public Offering before December 31, 1999, this
Amended Agreement shall be null and void and of no effect whatsoever.
The parties hereto have caused Amended Agreement to be executed as of
the date first above written.
COMPANY: OREGON BAKING COMPANY
(DBA MARSEE BAKING),
AN OREGON CORPORATION
By: /s/ Raymond W. Lindstrom
----------------------------------------
Raymond W. Lindstrom
President and Chief Executive Officer
/s/ Joann Vazquez
EMPLOYEE: ----------------------------------------
Joann Vazquez
Amended Employment and Stock Grant Agreement
Page 9
Real Estate Lease
Between
Quimby Street Partners
("Landlord")
and
Oregon Baking Company
dba "Marsee Baking"
("Tenant")
<PAGE>
TABLE OF CONTENTS
1. Basic Lease Provisions and Identification of Exhibits.......................1
1.1 Basic Lease Provisions..................................................1
1.2 Identification of Exhibits..............................................2
1.3 Master Lease............................................................2
2. Leased Premises.............................................................2
3. Term........................................................................2
4. Rent, Late Charge and Deposit...............................................2
4.1 Monthly Rent............................................................2
4.2 Late Charge.............................................................3
4.3 Deposit.................................................................3
5. Taxes.......................................................................3
6. Utilities and Services......................................................3
7. Use.........................................................................4
7.1 Permitted Uses..........................................................4
7.2 Hazardous Waste and Materials...........................................4
8. Alterations.................................................................5
9. Maintenance, Repairs........................................................5
9.1 Maintenance and Repairs by Landlord.....................................5
9.2 Maintenance and Repairs by Tenant.......................................6
9.3 Failure to Maintain.....................................................6
9.4 Landlord's Duties.......................................................6
10. Removal of Tenant's Property...............................................7
11. Liens and Encumbrances.....................................................7
12. Assignment and Subletting..................................................7
13. Insurance and Indemnity....................................................8
13.1 Insurance.............................................................8
13.2 Indemnification.......................................................8
13.3 Waiver of Subrogation.................................................9
14. Eminent Domain.............................................................9
15. Tenant's Default...........................................................9
15.1 Remedies for Default.................................................10
15.2 Legal Expenses.......................................................11
16. Default by Landlord.......................................................11
17. Damage or Destruction.....................................................11
17.1 Damage...............................................................11
17.2 Business Interruption................................................12
17.3 Tenant Improvements..................................................12
17.4 Express Agreement....................................................12
18. Subordination and Attornment..............................................12
18.1 Subordination........................................................12
18.2 Attornment...........................................................12
18.3 Tenant's Certificate.................................................13
19. Access by Landlord........................................................13
20. Surrender or Abandonment of Leased Premises...............................13
20.1 Surrender of Possession..............................................13
i
<PAGE>
20.2 Abandonment..........................................................13
21. Quiet Enjoyment...........................................................14
22. Signs.....................................................................14
23. Holdover..................................................................14
24. Miscellaneous.............................................................15
24.1 Tenant Defined.......................................................15
24.2 Recording............................................................15
24.3 Notices..............................................................15
24.4 Joint Obligation.....................................................15
24.5 Time.................................................................15
24.6 Prior Agreements.....................................................15
24.7 Choice of Law........................................................16
24.8 Parking..............................................................16
24.9 Other................................................................16
Exhibit A Building Schematic
Exhibit B Option to Renew
Exhibit C Tenant improvements
Exhibit D Master Lease
ii
<PAGE>
Real Estate Lease
THIS LEASE is made and entered into this _____ day of May, 1995 between
Quimby Street Partners ("Landlord"), and Oregon Baking Company dba "Marsee
Baking" ("Tenant").
1. BASIC LEASE PROVISIONS AND IDENTIFICATION OF EXHIBITS.
1.1 Basic Lease Provisions.
----------------------
Leased Premises: Approximately 8,800 square feet of rentable floor
area, located at 2277 NW Quimby, Portland, Oregon,
97210.
Lease Term: Five Years
Commencement Date: July 1, 1995
Monthly Rent: For the period from July 1, 1995, through August 31,
1995, Tenant shall pay a monthly rent of $0.00. For
the period from September 1, 1995, through December
31, 1995, Tenant shall pay a monthly rent of
$3,498.00. For the period from January 1, 1996,
through December 31, 1996, Tenant shall pay a monthly
rent of $3,800.00. For the period from January 1,
1997, through December 31, 1997, Tenant shall pay a
monthly rent of $4,048.00. For the period from
January 1, 1998, through December 31, 1998, Tenant
shall pay a monthly rent of $4,498.00. For the period
from January 1, 1999 through June 30, 2000, Tenant
shall pay a monthly rent of $5,016.00.
Permitted Uses: Full Service Bakery
Tenant's
Representative: Howard Wasserteil
Real Estate Broker Deborah M. Thomas
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 1
<PAGE>
1.2 Identification of Exhibits.
--------------------------
The Exhibits identified below and attached to this Lease are incorporated
in this Lease by reference.
Exhibit A: Building Schematic
Exhibit B: Option to Renew
Exhibit C Tenant Improvements
Exhibit D Master Lease
1.3 Master Lease.
-------------
Except as otherwise provided in this Lease Agreement, Tenant agrees to be
bound by all obligations of the Leasee under the Master Lease attached
hereto as Exhibit D, and Tenant agrees that it will not act or fail to
act in such a manner as to cause Landlord to be in default under the
terms of the Master Lease.
2. LEASED PREMISES.
Landlord hereby leases to Tenant, and Tenant hereby accepts from Landlord,
subject to and with the benefit of the terms and provisions of this Lease,
the Leased Premises located in and the improvements which are located on the
real property described in subsection 1.1. The real property and improvements
are hereinafter referred to as the "Building."
3. TERM.
This Lease shall be in effect for the period of time specified in Section 1.1
known as "Lease Term" and hereinafter referred to as the "Term."
4. RENT, LATE CHARGE AND DEPOSIT.
4.1 MONTHLY RENT.
------------
Commencing on the Commencement Date, Tenant shall pay to Landlord,
without notice or demand and without any deduction whatsoever, the
monthly sums set forth in Subsection 1.1, above, (the "Monthly Rent"),
which Tenant shall pay in advance on or before the first day of each
calendar month of the Term.
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 2
<PAGE>
4.2 Late Charge.
-----------
If any Monthly Rent installment is not received by Landlord from Tenant
by the tenth (10th) day of the month for which such installment is due,
Tenant shall immediately pay to Landlord a late charge equal to five
percent (5%) of such installment.
4.3 Deposit.
--------
Upon execution of this Lease, Tenant shall be responsible for a deposit
equal to the last month's Monthly Rent ($5,016.00) as set forth in
Section 1.1. Such deposit shall be held by Landlord and applied toward
payment of the last month's rent of this Lease or in payment of
Landlord's damages in the event of any default hereunder by Tenant. Such
amount does not represent the full rent for the last month of this Lease
but shall be applied in partial payment thereof.
5. TAXES.
Tenant shall pay, or cause to be paid, before delinquency, any and all taxes
levied or assessed during the Term upon all Tenant's leasehold improvements,
equipment, furniture, fixtures, and any other personal property located in
the Leased Premises.
Tenant shall be liable for, and shall pay throughout the Term, all license
and excise fees and business and occupation taxes covering the business
conducted on the Leased Premises.
Landlord shall pay when due, all real property taxes and assessments levied
against the Building. However, if a separate assessment or identifiable tax
increase arises because of improvements to the Leased Premises, then Tenant
shall pay 100 percent of such increase.
6. UTILITIES AND SERVICES.
Tenant shall pay before delinquency, at its sole cost and expense, all
charges for water, gas, heat, electricity, telephone service, sewer service
charges, and all other services or utilities used in, upon or about the
Leased Premises during the Lease Term. In no event shall Landlord be liable
for an interruption or failure in the supply of any such utilities to the
Leased Premises.
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 3
<PAGE>
7. USE
7.1 Permitted Uses.
---------------
Tenant shall not use or permit or allow the use of the Leased Premises
for any business or purpose other than set forth in Subsection 1.1 above.
Tenant shall not do or permit anything to be done in or about the Leased
Premises or bring or keep anything therein which will in any way increase
the existing rate or premiums or affect any fire or other insurance upon
the Leased Premises or the Building, or cause a cancellation of any
insurance policy covering the Leased Premises or the Building or any part
thereof or any of its contents. Tenant shall not do or permit or allow
anything to be done in or about the Leased Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of
the Building. Tenant shall, at its sole cost and expense, promptly comply
with all local, state and federal laws.
7.2 Hazardous Waste and Materials.
------------------------------
(a) Tenant shall not dispose of or otherwise allow the release of any
hazardous waste or materials in, on or under the Leased Premises, or
any adjacent property, or in any improvements placed on the Leased
Premises. Tenant represents and warrants to Landlord that Tenant's
intended use of the Leased Premises does not involve the use,
production, disposal or bringing on to the Leased Premises of any
hazardous waste or materials. As used herein, the term "hazardous
waste or materials" includes any substance, waste or material defined
or designated as hazardous, toxic or dangerous (or any similar term)
by any federal, state or local statute, regulation, rule or ordinance
now or hereafter in effect. Tenant shall promptly comply with all
statutes, regulations and ordinances, and with all orders, decrees or
judgments of governmental authorities or courts having jurisdiction
relating to the use, collection, treatment, disposal, storage,
control, removal or cleanup of hazardous waste or materials in, on or
under the Leased Premises or any adjacent property, or incorporated in
any improvements, at Tenant's expense.
(b) Landlord may, but is not obligated to, enter upon the Leased Premises
and take such actions and incur such costs and expenses to effect such
compliance as it deems advisable to protect its interest in the Leased
Premises. Tenant shall reimburse Landlord for the full amount of all
costs and expenses incurred by Landlord in connection with such
compliance activities, and such obligation shall continue even after
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 4
<PAGE>
the termination of this Lease. Tenant shall notify Landlord
immediately of any release of any hazardous waste or materials on the
Leased Premises.
(c) Tenant agrees to indemnify and hold Landlord harmless against any and
all losses, liabilities, suits, obligations, fines, damages,
judgments, penalties, claims, charges, cleanup costs, remedial
actions, costs and expenses (including, without limitations,
attorneys' fees and disbursements) which may be imposed on, incurred
or paid by, or asserted against Landlord or the Leased Premises by
reason of, or in connection with (1) any misrepresentation, breach of
warranty or other default by Tenant under this Lease, or (2) the acts
or omissions of Tenant, or any subtenant or other person for whom
Tenant would otherwise be liable, resulting in the release of any
hazardous waste or materials.
8. ALTERATIONS.
Tenant shall not make any alterations, additions or improvements in or to the
Leased Premises without the prior written consent of Landlord, which consent
may be subject to such conditions as Landlord may reasonably deem
appropriate. Tenant acknowledges that the Lessor under the Master Lease must
approve any Tenant and all such alterations, additions, and improvements.
9. MAINTENANCE, REPAIRS.
9.1 Maintenance and Repairs by Landlord.
------------------------------------
Landlord shall have any roof or skylight leaks repaired prior to turning
over the premises to the Tenant. Landlord shall be responsible for the
roof, structural walls and foundation of the Leased Premises during the
Lease Term. Landlord shall repair and maintain in good order and
condition the Building's roof and the exterior of the structure itself.
However, if such maintenance and repair becomes necessary in whole or in
part due to the act, neglect, fault or omission of any duty by Tenant,
its employees, agents, licensees, customers, guests or invitees, or due
to damage caused by actual or attempted breaking and entering of the
Leased Premises or other unauthorized entry of the Leased Premises, such
maintenance and repair shall be undertaken by Landlord at Tenant's
expense. There shall be no abatement of rent and no liability of Landlord
by reason of any interference with Tenant's business arising from the
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 5
<PAGE>
making of any repairs, alterations or improvements to any portion of the
Building so long as Landlord is making reasonable good faith efforts to
minimize such interference.
9.2 Maintenance and Repairs by Tenant.
----------------------------------
Tenant by occupying the Leased Premises accepts same as being in good and
tenantable condition in accordance with Landlord's obligations. Tenant
acknowledges that Landlord has made no representations or warranties
respecting the condition of the Leased Premises or the Building, except
as specifically set forth in this Lease. Tenant shall at Tenant's sole
expense keep the Leased Premises and all interior partitions, door
surfaces, glass, fixtures, equipment (including HVAC and electrical
systems) and appurtenances (including lighting and plumbing fixtures) in
good and sanitary condition and repair, ordinary wear and tear excepted.
Tenant shall also maintain the sidewalks and landscaping surrounding the
Premises. Tenant shall at the expiration or termination of the Term
surrender to Landlord the Leased Premises and all alterations, additions
and improvements in the same condition as when received, ordinary wear
and tear excepted.
9.3 Failure to Maintain.
--------------------
If Tenant fails to keep and preserve the Leased Premises as set forth in
Subsection 9.2, above, Landlord may, at its option, put or cause the same
to be put in the condition and state of repair agreed upon, and in such
case, upon receipt of written statements from Landlord, Tenant shall
promptly pay the entire cost thereof. Landlord shall have the right,
without liability, to enter the Leased Premises for the purpose of making
such repairs upon the failure of Tenant to do so with fifteen (15) days
notice to Tenant, unless Landlord deems entry necessary without notice
due to an emergency.
9.4 Landlord's Duties.
------------------
Landlord shall not be in default under this Lease or liable for any
damages resulting from or incidental to, nor shall it be an actual or
constructive eviction of the Tenant, nor shall the rent be abated by
reason of failure to make any repair or to perform any maintenance,
unless such failure shall persist for an unreasonable time after written
notice of the need for such repair or maintenance is given to Landlord by
Tenant. Landlord shall use reasonable efforts to remedy any interruption
in the furnishing of such services.
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 6
<PAGE>
10. REMOVAL OF TENANT'S PROPERTY.
Furnishings, trade fixtures and equipment installed in the Leased Premises
at the expense of the Tenant shall remain the property of Tenant and upon
expiration and termination of this Lease, Tenant shall be conclusively
deemed to have abandoned all personal property not previously removed. If
requested in writing by Landlord, within 30 days prior to the end of the
term of this Lease, Tenant shall, prior to surrender of the Premises, remove
specific alterations, additions, improvements or installations made to the
Premises by Tenant following commencement of this Lease, and shall repair
all damage to the Premises caused by such removal and restore the Premises
to the condition in which they were prior to the installation of the items
so removed. All other fixtures, alterations, additions, improvements and/or
appurtenances attached to or built into the Leased Premises prior to or
during the Term of this Lease, whether built at Landlord's expense or at the
expense of Tenant, shall be and remain part of the Leased Premises and shall
not be removed by Tenant at the end of the Term unless Landlord agrees in
writing thereto. All such fixtures and improvements which remain a part of
the Leased Premises on termination or expiration include without limitation;
all floor coverings, drapes, paneling, molding, doors, walls and fixed
partitions, vaults, plumbing systems, electrical systems, lighting systems,
silencing equipment, all fixtures and outlets for the systems mentioned
above, and any special flooring or ceiling installations. As used in this
agreement, "trade fixtures" are defined as removable items of personal
property brought on the Leased Premises by Tenant which are necessary to
carry on Tenant's trade or business. Tenant shall be obligated to pay rent
until the removal of all trade fixtures, furnishings and equipment is
completed.
11. LIENS AND ENCUMBRANCES.
Tenant shall keep the Leased Premises and the Building, free from any liens
or encumbrances arising out of any work performed, materials furnished or
obligations incurred by Tenant, and shall indemnify and hold Landlord
harmless from any and all costs, liability or expenses (including attorneys'
fees) arising therefrom.
12. ASSIGNMENT AND SUBLETTING.
Tenant shall not assign, transfer, mortgage, pledge, hypothecate or encumber
this Lease or any interest therein, nor sublet the whole or any part of the
Leased Premises, nor shall this Lease or any interest hereunder be
assignable or transferable by operation of law or by any process or
proceeding of any court, or otherwise without the prior written consent of
Landlord.
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 7
<PAGE>
13. INSURANCE AND INDEMNITY.
13.1 Insurance.
----------
During the entire Term, Tenant shall, at its expense, maintain adequate
liability insurance with an insurance company or companies acceptable
to Landlord with a combined single limit of $1,000,000 for personal
injuries and property damage, to indemnify both Landlord and Tenant
against any such claims, demands, losses, damages, liabilities and
expenses. Landlord and Lessor under the Master Lease, shall be named as
additional insureds and shall be furnished with a certificate of such
insurance, which shall bear an endorsement that the same shall not be
canceled except upon not less than thirty (30) days prior written
notice to Landlord. Tenant shall also at its own expense maintain,
during the Term, all-risk insurance covering its furniture, fixtures,
equipment and inventory in an amount equal to the replacement cost
thereof, and insurance covering all plate glass and other glass on the
Leased Premises. Tenant shall provide Landlord with copies of the
policies of insurance or certificates thereof.
13.2 Indemnification.
----------------
Landlord shall not be liable for injury to any person, or for the loss
of or damage to any property (including property of Tenant) occurring
in or about the Leased Premises from any cause whatsoever, except for
Landlord's negligence or willful misconduct. Tenant hereby indemnifies
and holds Landlord harmless from and against and agrees to defend
Landlord against any and all claims, charges, liabilities, obligations,
penalties, damages, costs and expenses (including attorneys' fees)
arising, claimed, charged or incurred against or by Landlord from any
matter or thing arising from Tenant's use of the Leased Premises, the
conduct of its business or from any activity, work or other things
done, permitted or suffered by the Tenant in or about the Leased
Premises, and Tenant shall further indemnify and hold Landlord harmless
from and against any and all claims arising from any breach or default
in the performance of any obligation on Tenant's part or to be
performed under the terms of this Lease, or arising from any act or
negligence of the Tenant, or any officer, agent, employee, guest, or
invitee of Tenant, and from all costs, attorneys' fees, and liabilities
incurred in or about the defense of any such claim or any action or
proceeding brought thereon and in case any action or proceeding be
brought against Landlord by reason of such claim. Tenant, upon notice
from Landlord, shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord. The indemnification provided for
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 8
<PAGE>
in this paragraph with respect to any acts or omission during the Term
of this Lease shall survive any termination or expiration of this
Lease. Landlord shall not be liable for interference with light or air
or view or for any latent defect in the Leased Premises. Tenant shall
promptly notify Landlord of casualties or accidents occurring in or
about the Leased Premises.
13.3 Waiver of Subrogation.
----------------------
Landlord and Tenant hereby mutually release each other from liability
and waive all right of recovery against each other, their agents,
employees, customers and invitees for any loss in or about the Leased
Premises, from perils insured against under their respective fire and
all-risk insurance contracts, including any extended coverage
endorsements thereof, whether due to negligence or any other cause;
provided that this Subsection shall be inapplicable if it would have
the effect, but only to the extent it would have the effect, of
invalidating any insurance coverage of Landlord or Tenant. Each party
agrees to use best efforts to obtain such an agreement from its insurer
if the policy does not expressly permit a waiver of subrogation.
14. EMINENT DOMAIN.
If a condemning authority takes title by eminent domain or by agreement
in lieu thereof to the entire Building or a portion sufficient to
render the Premises unsuitable for Tenant's use, then either party may
elect to terminate this Lease effective on the date that possession is
taken by the condemning authority. Rent shall be reduced for the
remainder of the Term in an amount proportionate to the reduction in
area of the Premises caused by the taking. All condemnation proceeds
shall belong to Landlord, and Tenant shall have no claim against
Landlord or the condemnation award because of the taking.
15. TENANT'S DEFAULT.
Any of the following shall constitute a default by Tenant under this Lease:
(a) Tenant's failure to pay rent or any monetary obligation under this
Lease within 10 days after it is due.
(b) Tenant's insolvency, business failure or assignment for the benefit of
its creditors. Tenant's commencement of proceedings under any
provision of any bankruptcy or insolvency law or failure to obtain
dismissal of any petition filed against it under such laws within the
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 9
<PAGE>
time required to answer; or the appointment of a receiver for Tenant's
properties.
(c) Assignment or subletting by Tenant in violation of Section 12.
(d) Vacation or abandonment of the premises without the written consent of
Landlord or failure to occupy the Premises within 20 days after notice
tendering possession.
(e) Tenant's failure to comply with any other term or condition of this
Lease or any act or omission by Tenant causing Landlord to be in
default of its obligations under this Master Lease within twenty (20)
days following written notice from Landlord specifying the
noncompliance. If such noncompliance cannot be cured within the twenty
(20) day period, this provision shall be satisfied if Tenant commences
correction within such period and thereafter proceeds in good faith
and with reasonable diligence to effect compliance as soon as
possible.
15.1 Remedies for Default.
---------------------
In case of default as described in Section 15, Landlord shall have the
right to the following remedies which are intended to be cumulative and
in addition to any other remedies provided under applicable law:
(a) Landlord may at its option terminate the Lease by notice to
Tenant. With or without termination, Landlord may retake
possession of the Premises and may use or relet the Premises
without accepting a surrender or waiving the right to damages.
Following such retaking of possession, efforts by Landlord to
relet the Premises shall be sufficient if Landlord follows its
usual procedures for finding Tenant's for the space at rates not
less than the current rates for other comparable space in the
Building.
(b) Landlord may recover all damages caused by Tenant's default which
shall include an amount equal to rentals lost because of the
default, lease commissions paid for this Lease, and the
unamortized cost of any tenant improvements installed by Landlord
to meet Tenant's special requirements. Landlord may sue
periodically to recover damages as they occur throughout the
Lease Term, and no action for accrued damages shall bar a later
action for damages subsequently accruing. Landlord may elect in
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 10
<PAGE>
any one action to recover accrued damages plus damages
attributable to the remaining term of the Lease. Such damages
shall be measured by the difference between the rent under this
Lease and the reasonable rental value of the Premises for the
remainder of the Term discounted to the time of judgment at the
prevailing interest rate on judgments.
(c) Landlord may make any payment or perform any obligation which
Tenant has failed to perform, in which case Landlord shall be
entitled to recover from Tenant upon demand all amounts so
expended, plus interest from the date of the expenditure at the
rate of one and one-half percent (1.5%) per month. Any such
payment or performance by Landlord shall not waive Tenant's
default.
15.2 Legal Expenses.
---------------
If either party is required to bring or maintain any action (including
assertion of any counterclaim or cross-claim, or claim in a proceeding
in bankruptcy, receivership or any other proceeding instituted by a
party hereto or by others), or otherwise refers this Lease to an
attorney for the enforcement of any of the covenants, terms or
conditions of this Lease, the prevailing party in such action shall, in
addition to all other payments required herein, receive from the other
all the costs incurred by the prevailing party including reasonable
attorneys' fees which the prevailing party incurred on any appeal.
16. DEFAULT BY LANDLORD.
Landlord shall not be in default unless Landlord fails to perform
obligations required of Landlord within thirty (30) days after written
notice by Tenant to Landlord which describes the default; provided, however,
that if the nature of Landlord's obligation is such that more than thirty
(30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period
and thereafter diligently prosecutes the same to completion.
17. DAMAGE OR DESTRUCTION.
17.1 Damage.
-------
In case of damage to the Leased Premises or the Building by fire or
other casualty, Tenant shall give immediate notice to Landlord. To the
extent that the Premises are rendered untenantable, the Rent shall
proportionately abate, except in the event such damage resulted or was
contributed to directly or indirectly from the act, fault or neglect of
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 11
<PAGE>
Tenant, Tenant's officers, contractors, agents, employees, invitees or
licensees.
17.2 Business Interruption.
----------------------
No damages, compensation or claim shall be payable by Landlord for
inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Leased Premises or of the Building.
Landlord shall use its best efforts to effect such repairs promptly.
However, if Building sustains damage of fifty (50) percent or more,
either party may terminate Lease upon written notice of at least ten
(10) days.
17.3 Tenant Improvements.
--------------------
Landlord will not carry insurance of any kind on any of Tenant's
improvements or on Tenant's furniture or furnishings or on any
fixtures, equipment, improvements or appurtenances of Tenant under this
Lease, and Landlord shall not be obligated to repair any damage thereto
or replace the same.
17.4 Express Agreement.
------------------
The provisions of this Section shall be considered an express agreement
governing any case of damage or destruction of the Building or Leased
Premises by fire or other casualty.
18. SUBORDINATION AND ATTORNMENT.
18.1 Subordination.
--------------
This Lease shall be subordinate to any existing or future mortgages or
deeds of trust on the Building or on the leasehold interest held by
Landlord, and to any extensions, renewals, or replacements thereof. At
the request of Landlord, Tenant shall promptly execute and deliver all
instruments which may be appropriate to further secure and document
such subordination.
18.2 Attornment.
-----------
If the interest of Landlord is transferred to any person or entity by
reason of foreclosure or other proceedings for enforcement of any
mortgage, deed of trust or security or by delivery of a deed in lieu of
foreclosure or other proceedings, Tenant shall upon delivery to Tenant
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 12
<PAGE>
by said transferee of a nondisturbance agreement, immediately and
automatically attorn to such person or entity. In event of such
transfer, this Lease and Tenant's rights hereunder shall continue
undisturbed so long as Tenant is not in default.
18.3 Tenant's Certificate.
---------------------
Tenant shall at any time and from time to time upon not less than three
(3) days prior written notice from Landlord execute, acknowledge and
deliver to Landlord a statement in writing (a) certifying that this
Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification and certifying that this Lease
as so modified is in full force and effect), and the date to which the
rental are paid in advance, if any, and (b) acknowledging that there
are not, to Tenant's knowledge, any uncured defaults on the part of the
Landlord hereunder, or specifying such defaults if any are claimed, and
(c) setting forth the date of commencement of rents. Any such statement
may be relied upon by any prospective purchaser or encumbrancer of all
or any portion of the Building.
19. ACCESS BY LANDLORD.
Landlord or Landlord's employees, agents, and contractors shall have
the right to enter the Leased Premises with reasonable notice to
examine the same or to make such repairs, alterations, improvements or
additions as Landlord may deem necessary or desirable. If Tenant is not
personally present to permit entry and an entry is necessary, Landlord
may in case of emergency forcibly enter the same, without rendering
Landlord liable therefor. Nothing contained herein shall be construed
to impose upon Landlord any duty of repair of the Leased Premises or
Building except as otherwise specifically provided for herein.
20. SURRENDER OR ABANDONMENT OF LEASED PREMISES.
20.1 Surrender of Possession.
------------------------
Tenant shall promptly yield and deliver to Landlord possession of the
Leased Premises at the termination of this Lease. Landlord may place
and maintain a "For Rent" sign in conspicuous places on the Leased
Premises not more than sixty (60) days prior to the termination of this
Lease.
20.2 Abandonment.
------------
Should Tenant vacate or abandon the Leased Premises or be dispossessed
by process of law or otherwise for more than five (5) business days,
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 13
<PAGE>
such abandonment, vacation or dispossession shall be deemed a breach of
this Lease, and, in addition to any other rights which Landlord may
have, Landlord may remove any personal property belonging to Tenant
which remains on the Leased Premises and store the same, the cost of
such removal and storage to be charged to the account of Tenant.
21. QUIET ENJOYMENT.
Tenant, upon fully complying with and promptly performing all of the terms,
covenants and conditions of this Lease on its part to be performed, and upon
the prompt and timely payment of all sums due hereunder, shall have and
quietly enjoy the Leased Premises for the Term set forth herein as against
any adverse claim of Landlord or any party claiming under Landlord.
22. SIGNS.
Tenant shall not place or suffer to be placed on the exterior walls of the
Leased Premises or upon the roof or any exterior door or wall or on the
exterior or interior of any window thereof any sign, awning, canopy,
marquee, advertising matter, decoration, letter or other thing of any kind,
without the prior written consent of Landlord.
23. HOLDOVER.
23.1 If Tenant does not vacate the Leased Property at the time required,
Landlord shall have the option to treat Tenant as a tenant from
month-to-month, subject to all of the provisions of this lease except
the provisions for term and renewal (and at a rental rate equal to
150% of the rent last paid by Tenant during the original term), or to
eject Tenant from the Leased Property and recover damages caused by
wrongful holdover. Failure of Tenant to remove fixtures, furniture,
furnishings, or trade fixtures that Tenant is required to remove under
this lease shall constitute a failure to vacate to which this section
shall apply if the property not removed will substantially interfere
with occupancy of the Leased Property by another tenant or with
occupancy by Landlord for any purpose including preparation for a new
tenant.
23.2 If a month-to-month tenancy results from a holdover by Tenant under
this section [sic] 23, the tenancy shall be terminable at the end of
any monthly rental period on written notice from Landlord given not
less than ten (10) days prior to the termination date which shall be
specified in the notice. Landlord waives any notice that would
otherwise by provided by law with respect to a month-to-month tenancy.
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 14
<PAGE>
24. MISCELLANEOUS.
24.1 Tenant Defined.
---------------
The word "Tenant" as used herein shall mean each and every person,
partnership or corporation who is mentioned as a Tenant herein or who
executes this Lease as Tenant.
24.2 Recording.
----------
Tenant shall not record this Lease without the prior written consent of
Landlord.
24.3 Notices.
-------
Any notice required in accordance with any of the provisions herein if
to Landlord shall be delivered or mailed by registered or certified
U.S. mail to the address of Landlord as set forth by the signature of
the Parties, or at such other place as Landlord may in writing from
time to time direct to Tenant, and if to Tenant, shall be delivered or
mailed by registered or certified mail to Tenant at the Leased
Premises. If there is more than one Tenant, any notice required or
permitted hereunder may be given by or to any one thereof, and shall
have the same force and effect as if given by or to all thereof.
Notices shall be deemed received on the date hand delivered or on the
date that is three (3) days after proper mailing if sent by registered
or certified U.S. mail.
24.4 Joint Obligation.
----------------
If there be more than one Tenant, the obligations hereunder imposed
shall be joint and several.
24.5 Time.
----
Time is of the essence of this Lease and each and all of its provisions
in which performance is a factor.
24.6 Prior Agreements.
-----------------
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior
agreements or understanding pertaining to any such matters shall be
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 15
<PAGE>
effective for any purpose. No provisions of this Lease me be amended or
added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest. This Lease shall not
be effective or binding on any party until fully executed by both
parties hereto.
24.7 Choice of Law.
--------------
This Lease shall be governed by the laws of the state in which the
Leased Premises are located.
24.8 Parking.
-------
Tenant shall have exclusive rights to the loading and parking areas as
they currently exist.
24.9 Other.
------
Existing racking (blue metal) shall remain on the premises for Tenant's
use during the Lease Term.
IN WITNESS WHEREOF, the parties hereto have executed this instrument
the day and year first above set forth.
LANDLORD TENANT
Quimby Street Partners Oregon Baking Company
PO Box 529 dba "Marsee Baking"
Eugene, OR 97440 2277 NW Quimby Street
Portland, OR 97210
/s/ Illegible, Partner /s/ Howard Wasserteil, Pres.
- ------------------------- ----------------------------
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 16
<PAGE>
Exhibit B
Quimby Street Partners
Real Property Lease
Option to Renew.
- ----------------
If Tenant is not then in default, Tenant shall have the right and option to
renew this Lease for an additional five (5) year term commencing July 1, 2000
and terminating June 30, 2005. In the event Tenant exercises the option to
renew, Tenant shall give Landlord written notice of intent to renew not less
than ninety (90) days and not more than one-hundred eighty (180) days prior to
the end of the original Term. In the event Tenant is not in default and gives
the notice to Landlord within the time set forth above, this Lease shall be
renewed for a period of five (5) years upon the same terms and conditions as set
forth herein except for rent which shall be mutually agreed upon by both
parties.
If Tenant is not then in default, Tenant shall have the right and option to
renew this Lease for an additional five-year term commencing July 1, 2005, and
terminating June 30, 2010. In the event Tenant exercises the option to renew,
Tenant shall give Landlord written notice of intent to renew not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
end of the first option term. In the event Tenant is not in default and gives
the notice to Landlord within the time set forth above, this Lease shall be
renewed for a period of five (5) years upon the same terms and conditions as set
forth herein except for rent which shall be mutually agreed upon by both
parties.
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 17
<PAGE>
Exhibit C
Tenant Improvements
Quimby Street Partners
Real Property Lease
Tenant Improvements
- -------------------
Landlord shall:
1. Remove all unused conduit and wiring located in the warehouse area
including the ceiling.
2. Paint interior of warehouse space including walls and ceiling.
Method of application to be approved by Tenant.
3. Paint the west side and all trim on the exterior of the building.
4. Provide up to $10,000 for floor improvements.
Tenant shall:
1. Install two (2) ADA compliant restrooms.
2. Install Heating, Ventilation, and Air Conditioning systems (HVAC)
as necessary for Tenant's use.
3. Provide all other improvements necessary for Tenant's use.
Tenant shall have the right to make improvements to the premises as
are necessary for the ordinary conduct of business. Such Tenant's
work shall not proceed until Landlord's written approval of each of
the following items:
(a) Tenant's contractor;
(b) public liability and property damage insurance carried by
Tenant or its contractor; and
(c) schematic plans and specification which shall beprepared
[sic] by Tenant or Tenant's Planner at Tenant's expense.
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 18
<PAGE>
All such Tenant's work shall be done in strict conformity with such final plans
and specifications. Tenant shall be responsible for obtaining any necessary
building permits and all work shall be performed in accordance with the building
permits and all applicable governmental regulations.
Please Initial
/s/ Illegible /s/ HW
------------- ---------
Landlord Tenant
Lease Agreement - 19
<PAGE>
Exhibit D
LEASE AGREEMENT
BETWEEN: J.H. May and Agnes E. May ("Lessor")
7810 S.W. May Way
-------------------------
Portland, OR 97225
-------------------------
AND: E. Danell Giustina and ("Lessee")
James Ivory
P.O. Box 529
Eugene, Oregon 97440-0529
EFFECTIVE
DATE: March 1, 1994
-------------------------
RECITALS
--------
A. Lessor is the owner of that certain real property located in Portland,
Multnomah County, Oregon, and more particularly described as follows (the
"Leased Property"):
2277 N.W. Quimby, legally described as Lots 17 and 18, Block 309,
Couch's Addition to the City of Portland, together with the following
improvements:
A concrete building of approximately 8,800 square feet.
B. Lessee desires to lease the Leased Property from Lessor, and Lessor desires
to lease the Leased Property to Lessee, upon the terms and conditions described
below:
AGREEMENT
---------
1. TERM OF LEASE.
1.1 INITIAL TERM. Lessor leases to Lessee the Leased Property for an initial
term of twenty-five (25) years commencing March 1, 1994.
1.2 RENEWAL TERM. If Lessee is not in default at the time the option is
exercised, or at the time the renewal term is to commence, Lessee shall have the
option to renew this lease for one successive term of ten (10) years, as
follows:
1.2.1 The option may be exercised by written notice to Lessor given
not less than one hundred eighty (180) days prior to the last
day of the initial 25-year term. The giving of such notice shall
be sufficient to make the lease binding for the renewal term
without further act of the parties.
LEASE AGREEMENT - 1
<PAGE>
1.2.2 The terms and conditions of the lease for the renewal term shall
be identical with those set forth herein, with rent to be
determined in accordance with Section 2.2 below.
1.3 EXTENSION OF LEASE TERM. If, during the initial lease term or the renewal
term, Lessee constructs or installs improvements on the Leased Property which is
capable of being amortized or depreciated under the Internal Revenue Code for a
period exceeding the remainder of the lease term, including any option to renew,
Lessee shall have the option to extend the lease term to a date through and
including the expiration of the applicable amortization or depreciation period
applicable to said improvement(s); provided, however, that Lessor shall have the
right, at Lessor's option, to reimburse Lessee an amount equal to the
unamortized or nondepreciable portion of said improvements existing on the date
of the expiration of the lease term, including any renewal term, in which event
the extension provided for hereunder shall not apply; and provided further, that
said extension shall not apply in the event Lessee shall be entitled to deduct
the unamortized or nondepreciable portion of the improvements upon the
expiration of the lease term, including any renewal term. The foregoing
notwithstanding, Lessee shall not be entitled to extend the lease term more than
five (5) years beyond the expiration of the renewal term described in Section
1.2 above.
2. RENTAL. Rent for the initial term and the renewal term, if any, shall be and
payable on the 1st day of each month, in the following amounts:
2.1 BASE RENT. For the first three (3) years of the initial term, the sum of
$2,675.00 per month.
2.2 RENTAL ADJUSTMENT. On each third anniversary date of the rental
commencement date described in Section 1.1 above, including any renewal term,
the base rent shall be adjusted in the same percentage as the increase, if any,
in the CONSUMER PRICE INDEX published by the UNITED STATES DEPARTMENT OF LABOR,
BUREAU OF LABOR STATISTICS (the "Index"), for the Portland, Oregon Metropolitan
area. The change shall be computed by comparing the Index for the latest
available month preceding the month in which the adjustment is to be made with
the same month of the year three years prior; provided, however, that in no
event shall the monthly base rental be increased less than 2% per year or more
than 5% per year compounded per adjustment period. If the Index cited above is
revised or discontinued, reference shall be made to the nearest comparable data
customarily used at that time in commercial real estate leases in the Portland,
Oregon Metropolitan area.
3. TAXES, INSURANCE AND UTILITIES.
3.1 PROPERTY TAXES. Lessee shall pay as due all taxes on its personal
property located on the Leased Property. Lessee shall pay when due all real
property taxes and any and all special assessments levied against the Leased
Property and attributable to the term of this lease, including any renewal term.
LEASE AGREEMENT - 2
<PAGE>
Such taxes and assessments for the initial year and the final year of the lease
term, including any renewal term, shall be prorated between Lessor and Lessee
effective the inception date and the expiration date, respectively. As used
herein, real property taxes include any fee or charge relating to the ownership,
use or rental of the Leased Property, other than taxes on the net income of
Lessor or Lessee.
3.2 INSURANCE. Lessee agrees to obtain and maintain the following insurance
coverages during the term of this lease, and any renewal thereof:
3.2.1 Lessee shall be responsible for procuring and maintaining
comprehensive general liability insurance with a responsible
company with limits of liability in an amount at least equal to
$1,000,000 per occurrence, and $500,000 for damage to property.
Such insurance shall cover all risks arising directly or
indirectly out of Lessee's activities on or any condition of the
premises, whether or not related to an occurrence caused or
contributed to by Lessor's negligence.
3.2.2 Lessee shall keep the Leased Property and all improvements
thereon insured at Lessee's expense against fire and other risks
covered by a standard fire insurance policy with an endorsement
for extended coverage. Lessee shall also be responsible for
procuring and maintaining insurance on any personal property
brought upon the Leased Property by Lessee.
3.2.3 All insurance policies required under the provisions of this
Section 3 shall name Lessor as an additional insured and shall
bear endorsements requiring at least 10-days' written notice to
Lessor prior to any change or cancellation, and certificates
evidencing such insurance shall be delivered to Lessor as soon
as practicable following the execution of this Agreement.
3.3 WAIVER OF SUBROGATION. Neither party shall be liable to the other (or to
the other's successors or assigns) for any loss or damage caused by fire or any
of the risks enumerated in a standard fire insurance policy with an extended
coverage endorsement, and in the event of an insured's loss, neither party's
insurance company shall have a subrogated claim against the other. This waiver
shall be valid only if the insurance policy in question permits waiver of
subrogation or if the insurance company agrees in writing that such a waiver
will not affect coverage under the policies. Each party agrees to use best
efforts to obtain such an agreement from its insurer if the policy does not
expressly permit a waiver of subrogation.
3.4 UTILITIES. Lessee agrees to pay all charges for utilities servicing
the Leased Property.
LEASE AGREEMENT - 3
<PAGE>
4. MAINTENANCE AND IMPROVEMENTS.
4.1 MAINTENANCE OF LEASED PROPERTY. Lessor agrees to repair the existing
leaks around the skylights on the roof of the Leased Property at or immediately
following the inception of this lease. Except for said roof repairs, Lessee
shall maintain the Leased Property in good condition and shall not commit,
permit, or suffer waste to the Leased Property, and Lessee shall be responsible
for any subsequent repairs and maintenance of any kind whatsoever which shall be
necessary during the term of this lease, including any renewal term. Upon
expiration or earlier termination of this lease, Lessee agrees to surrender
possession of the Leased Property to Lessor in substantially the same or better
condition as it was as of the effective date of this Agreement.
4.2 IMPROVEMENTS. Lessee shall have the right to construct improvements and
make alterations to the Leased Property with the written consent of Lessor,
which consent shall not be unreasonably withheld. Any and all improvements
constructed, installed, erected or performed upon the Leased Property, and which
are affixed or installed in such a manner as to become a part of the Leased
Property (the "Improvements") during the term of this lease, including any
renewal terms, shall, at Lessor's option, become and remain the property of
Lessor at the expiration or earlier termination of this lease (including any
renewal terms).
5. PEACEFUL ENJOYMENT AND INDEMNIFICATION.
5.1 LESSOR'S WARRANTY. Lessor warrants that it is the owner of the Leased
Property and has the right to enter into this Agreement. Lessor will defend
Lessee's right to quiet enjoyment of the Leased Property from the lawful claims
of all persons during the lease term, and any renewal thereof.
5.2 INDEMNIFICATION. Lessee shall indemnify and defend Lessor from any claim,
loss or liability arising out of or relating to any activity of Lessee on or
about the Leased Property or any condition of the Leased Property in the
possession or under the control of Lessee, including any such claim, loss, or
liability that may be caused or contributed in whole or in part by Lessor's own
negligence or failure to effect any repair or maintenance required by this
lease. Lessor shall have no liability to Lessee for any injury, loss, or damage
caused by third parties, or by any condition of the Leased Property.
6. COMPLIANCE WITH LAW AND HAZARDOUS MATERIALS.
6.1 Lessee agrees to comply with all laws, rules, orders, ordinances,
regulations and requirements of federal, state and local authorities pertaining
to Lessee's use of the Leased Property, including, but not limited to, any and
all such laws, rules, regulations and requirements pertaining to the handling,
storage and disposal of Hazardous Materials. Lessee shall not be responsible for
the presence of any Hazardous Material or other contamination on the Lease
Property at or prior to the effective date of this lease.
LEASE AGREEMENT - 4
<PAGE>
6.2 As used in this Agreement, the term "Hazardous Material" means any
hazardous or toxic substances, material or waste, including, but not limited to,
those substances, materials and wastes in the UNITED STATES DEPARTMENT OF
TRANSPORTATION HAZARDOUS MATERIALS TABLE (49 C.F.R. SS. 172.101), or by the
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY as hazardous substances (40 C.F.R.
PART 302) and amendments thereto, petroleum products, or other such substances,
materials and wastes that are or become regulated under any applicable local,
state or federal law.
7. ASSIGNMENT, SUBLEASE AND SUCCESSOR INTEREST.
7.1 Lessee reserves the right to sublease all or any portion of the Leased
Property without Lessor's prior consent; provided, however, that any such
sublessee shall be bound by the terms and conditions imposed upon Lessee
hereunder, and no such sublease shall relieve Lessee of any of Lessee's
obligations hereunder. This lease shall be binding upon and inure to the benefit
of the parties to this lease agreement, their heirs, successors and assigns.
8. DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. The following shall be events of default:
8.1.1 Failure to pay rent within 10 days of its due date; provided,
however, that Lessee shall not be deemed in default for failure
to pay rent unless written notice of such default is given by
Lessor to Lessee and Lessee fails to pay any such due and unpaid
rent within 10 days after delivery of such notice (provided
further, however, that Lessor shall not be required to give more
than two such written notices within any 12-month period).
8.1.2 Dissolution, termination of existence, insolvency, appointment
of a receiver of any of the Leased Property, assignment for the
benefit of creditors, or commencement of any proceedings under
any bankruptcy or insolvency laws by or against Lessee;
8.1.3 Failure of Lessee to comply with any other term or condition, or
fulfill any other obligation of this lease within 30 days after
written notice by Lessor specifying the nature of the default
with reasonable particularity. If the default is of such a
nature that it cannot be completely remedied within the 30-day
period, this provision shall be complied with if Lessee begins
correction of the default within the 30-day period and
thereafter proceeds with reasonable diligence and good faith to
effect the remedy as soon as possible.
8.2 REMEDIES ON DEFAULT. In the event of a default, the lease may be
terminated at the option of Lessor by written notice to Lessee. Whether or not
the lease is terminated by the election of Lessor or otherwise, Lessor shall be
LEASE AGREEMENT - 5
<PAGE>
entitled to recover damages from Lessee for the default, and Lessor may reenter,
take possession of the premises, and remove any persons or property by legal
action or by self-help with the use of reasonable force and without liability
for damages and without having accepted a surrender.
8.3 RELETTING. Following reentry or abandonment, Lessor may relet the Leased
Property and in that connection may make any suitable alterations or refurbish
the Leased Property, or both, or change the character or use of the Leased
Property, but Lessor shall not be required to relet for any use or purpose other
than that specified in the lease or which Lessor may reasonably consider
injurious to the Leased Property, or to any tenant that Lessor may consider
objectionable. Lessor may relet all or part of the Leased Property, alone or in
conjunction with other properties, for a term longer or shorter than the term of
this lease, upon any reasonable terms and conditions, including the granting of
some rent-free occupancy or other rent concession.
8.4 DAMAGES. In the event of termination or retaking of possession following
default, Lessor shall be entitled to recover immediately, without waiting until
the due date of any further rent or under the date fixed for expiration of the
lease term, the following amounts as damages:
8.4.1 The loss of rental from the date of default until a new tenant
is, or with the exercise of reasonable efforts could have been,
secured and paying out.
8.4.2 The reasonable costs of reentry and reletting including without
limitation the cost of any cleanup, refurbishing, removal of
Lessee's property and fixtures, costs incurred under Section
8.6, or any other expenses occasioned by Lessee's default
including but not limited to, any remodeling or repair costs,
attorney fees, court costs, broker commissions, and advertising
costs.
8.4.3 Any excess of the value of the rent and all of Lessee's other
obligations under this lease over the reasonable expected return
from the premises for the period commencing on the earlier of
the date of trial, or if no trial, the date of the entry of a
judgment, or the date the premises are relet, and continuing
through the end of the term. The present value of future amounts
will be computed using a discount rate equal to the prime loan
rate of major Oregon banks in effect on the date of trial, or,
if no trial, on the date of the entry of a judgment.
8.5 RIGHT TO SUE MORE THAN ONCE. Lessor may sue periodically to recover
damages during the period corresponding to the remainder of the lease term, and
no action for damages shall bar a later action for damages subsequently
accruing.
8.6 LANDLORD'S RIGHT TO CURE DEFAULTS. If Lessee fails to perform any
obligation under this lease, Lessor shall have the option to do so after 30
LEASE AGREEMENT - 6
<PAGE>
days' written notice to Lessee. All of Lessor's expenditures to correct the
default shall be reimbursed by Lessee on demand with interest at the rate of 9%
per annum from the date of expenditure by Lessor. Such action by Lessor shall
not waive any other remedies available to Lessor because of the default.
8.7 REMEDIES CUMULATIVE. The foregoing remedies shall be in addition to and
shall not exclude any other remedy available to Lessor under applicable law.
9. SURRENDER AT EXPIRATION.
9.1 CONDITION OF PREMISES. Upon expiration of the lease term or earlier
termination on account of default, Lessee shall deliver all keys to Lessor and
surrender the Lease Property in first-class condition and broom clean.
Alterations constructed by Lessee with permission from Lessor shall not be
removed or restored to the original condition unless the terms of permission for
the alteration so require. Depreciation and wear from ordinary use for the
purpose for which Lessee is responsible shall be completed to the latest
practical date prior to such surrender. Lessee's obligations under this section
shall be subordinate to the provisions relating to destruction.
9.2 FIXTURES.
9.2.1 All fixtures placed upon the Leased Property during the term,
other than Lessee's trade fixtures, shall, at Lessor's option,
become the property of Lessor. If Lessor so elects, Lessee shall
remove any or all fixtures that would otherwise remain the
property of Lessor, and shall repair any physical damage
resulting from the removal. If Lessee fails to remove such
fixtures, Lessor may do so and charge the cost to Lessee with
interest at the legal rate from the date of expenditure.
9.3 HOLDOVER.
9.3.l If Lessee does not vacate the Leased Property at the time
required, Lessor shall have the option to treat Lessee as a
tenant from month to month, subject to all of the provisions of
this lease except the provisions for term and renewal (and at a
rental rate equal to 150% of the rent last paid by Lessee during
the original term), or to eject Lessee from the Leased Property
and recover damages caused by wrongful holdover. Failure of
Lessee to remove fixtures, furniture, furnishings, or trade
fixtures that Lessee is required to remove under this lease
shall constitute a failure to vacate to which this section shall
apply if the property not removed will substantially interfere
with occupancy of the Leased Property by another tenant or with
occupancy by Lessor for any purpose including preparation for a
new tenant.
LEASE AGREEMENT - 7
<PAGE>
9.3.2 If a month-to-month tenancy results from a holdover by Lessee
under this Section 9.3, the tenancy shall be terminable at the
end of any monthly rental period on written notice from Lessor
given not less than 10 days prior to the termination date which
shall be specified in the notice. Lessor waives any notice that
would otherwise be provided by law with respect to a
month-to-month tenancy.
10. DAMAGE AND DESTRUCTION.
10.1 PARTIAL DAMAGE. If the improvements on the Leased Property are partly
damaged and Section 10.2 does not apply, said improvements shall, to the extent
of the availability of insurance proceeds, be repaired, and Lessee shall have
the option to make any additional repairs not covered by insurance.
10.2 DESTRUCTION. If the premises are destroyed or damaged such that the cost
of repair exceeds 50% of the value of the structure before the damage, either
party may elect to terminate the lease as of the date of the damage or
destruction by notice given to the other in writing not more than forty-five
(45) days following the date of damage; provided, however, that Lessee shall
have the option, exercisable within said 45 days, to cause the structure to be
rebuilt to at least as good a condition as it was in immediately prior to said
damage, and shall be entitled to utilize all available insurance proceeds for
that purpose. In the event of termination under this Section 10.2, all rights
and obligations of the parties shall cease as of the effective date of
termination, and Lessee shall be entitled to the reimbursement of any prepaid
amounts paid by Lessee and attributable to the anticipated term. Any repairs to
be performed pursuant to this Section 10.2 or Section 10.1 above shall be
commenced as soon as reasonably possible and thereafter shall proceed without
interruption except for work stoppages on account of labor disputes and matters
beyond Lessee's reasonable control.
10.3 RENT ABATEMENT. Rent shall be abated during the repair of any damage to
the extent the premises are untenantable.
11. EMINENT DOMAIN.
11.1 PARTIAL TAKING. If a portion of the Leased Property is condemned
and Section 11.2 below does not apply, the lease shall continue on the following
terms:
11.1.1 Lessor shall be entitled to all of the proceeds of condemnation,
and Lessee shall have no claim against Lessor as a result of the
condemnation.
11.1.2 Lessor shall proceed as soon as reasonably possible to make such
repairs and alterations to the Leased Property as are necessary
to restore the remaining premises to a condition as comparable
LEASE AGREEMENT - 8
<PAGE>
as reasonably practicable to that existing at the time of the
condemnation.
11.1.3 After the date on which title vests in the condemning authority
or an earlier date on which alterations or repairs are commenced
by Lessor to restore the balance of the Leased Property in
anticipation of taking, the rental to be paid hereunder shall be
reduced in proportion to the reduction in value of the Leased
Property as an economic unit on account of the partial taking.
If the parties are unable to agree on the amount of the
reduction of rent, the amount shall be determined by arbitration
in the manner provided hereinbelow.
11.1.4 If a portion of Lessor's property not included in the Leased
Property is taken and severance damages are awarded on account
of the Leased Property, or an award is made for detriment to the
Leased Property as a result of activity by a public body not
involving a physical taking of any portion of the Leased
Property, this shall be regarded as a partial condemnation to
which this Section shall apply, and the rent shall be reduced to
the extent of reduction in the rental value of the Leased
Property as though a portion had been physically taken.
11.2 TOTAL TAKING. If a condemning authority takes all of the Leased
Property, or a portion sufficient to render the remaining premises reasonably
unsuitable for the use that Lessee was then making of the premises, the lease
shall terminate as of the date title vests in the condemning authorities. The
parties shall be entitled to share in the condemnation proceeds in proportion to
the values of their respective interests in the Leased Property.
11.3 SALE IN LIEU OF CONDEMNATION. Sale of all or part of the Leased Property
to a purchaser with the power of eminent domain in the face of a threat or
probability of the exercise of the power shall be treated for the purposes of
this Section 11 as a taking by condemnation.
12. MISCELLANEOUS.
12.1 NONWAIVER. Waiver by either party of strict performance of any provision
of this lease shall not be a waiver of or prejudice the party's right to require
strict performance of the same provision in the future or of any other
provision.
12.2 ATTORNEY FEES. If suit or action is instituted in connection with
any controversy arising out of this lease, the prevailing party shall be
entitled to recover in addition to costs such sum as the court may adjudge
reasonable as attorney fees at trial, on petition for review, and on appeal.
LEASE AGREEMENT - 9
<PAGE>
12.3 NOTICES. Any notice required or permitted under this lease shall be
given when actually delivered or 48 hours after deposited in United States mail
as certified mail addressed to the address first given in this lease or to such
other address as may be specified from time to time by either of the parties in
writing.
12.4 RECORDATION. This lease shall not be recorded without the written
consent of Lessor. Lessor and Lessee shall execute and acknowledge a memorandum
of this lease in a form suitable for recording, and Lessee may record the
memorandum. Upon the expiration or earlier termination of this lease, Lessee
agrees to execute such documents as may reasonably be required in order to
remove said memorandum as a cloud on the title to the Leased Property.
12.5 ENTRY FOR INSPECTION. Lessor shall have the right, upon 48 hours' prior
written notice (except in the case of an emergency) to enter upon the Leased
Property at any time to determine Lessee's compliance with this lease, to make
necessary repairs to the building or to the Leased Property, or to show the
Leased Property to any prospective tenant or purchaser, and in addition shall
have the right, at any time during the last two months of the term of this
lease, to place and maintain upon the Leased Property notices for leasing or
selling of the Leased Property.
12.6 INTEREST ON RENT AND OTHER CHARGES. Any rent or other payment required
by Lessee by this lease shall, if not paid within ten (10) days after it is due,
bear interest at the rate of 10% per annum (but not in any event at a rate
higher than the maximum rate of interest permitted by law) from the due date
until paid.
12.7 PRORATION OF RENT. In the event of commencement or termination of this
lease at a time other than the beginning or end of one of the specified rental
periods, then the rent shall be prorated as of the date of commencement or
termination and in the event of termination for reasons other than default, all
prepaid rent shall be refunded to Lessee or paid on its account.
12.8 TIME OF ESSENCE. Time is of the essence of the performance of each of
Lessee's obligations under this lease.
12.9 SECURITY DEPOSIT. To secure Lessee's compliance with all terms of this
lease, Lessee has paid Lessor the sum of $2,675.00 as a deposit. This deposit
shall be a debt from Lessor to Lessee, refundable within thirty (30) days after
the expiration of the fifth anniversary date of the effective date of this
lease, or other termination not caused by Lessee's default. Lessor shall have
the right to offset against the deposit any sums owing from Lessee to Lessor and
not paid when due, any damages caused by Lessee's default, the cost of curing
any default by Lessee should Lessor elect to do so, and the cost of performing
any repair or cleanup that is Lessee's responsibility under this lease.
13. RIGHT OF FIRST REFUSAL. Lessor agrees not to sell, transfer, exchange, grant
an option to purchase, or otherwise dispose of the Leased Property, or any part
of, or interest in, the Leased Property during the term of this lease, including
LEASE AGREEMENT - 10
<PAGE>
any renewal term, without first offering the Leased Property to Lessee on the
terms and conditions set forth herein.
13.1 In the event Lessor receives from a third party (the "Third Party
Offeror") a bona fide offer to purchase the Leased Property, or a part of it, or
an interest in it, which is otherwise acceptable to Lessor, Lessor shall give
Lessee written notice (the "Notice") of the price, terms, and conditions of the
offer and deliver a copy of the executed offer (the "Offer") to Lessee.
13.2 Within five (5) days of Lessor's receipt of the Notice and a copy of the
Offer, Lessee shall have the prior and preferential right to purchase the Leased
Property (or the part of or interest in the property covered by the Offer, as
the case may be) at the same price and on the same terms and conditions as are
contained in the Offer, provided Lessee shall receive a credit against the sales
price in an amount equal to any brokerage commission that Lessor may save by
selling the Leased Property to Lessee rather than the Third Party Offeror.
13.3 In the event Lessee fails to provide written notice to Lessor of its
exercise of its right to purchase the Leased Property pursuant to the terms of
this Section 13, then Lessor shall be entitled to sell the property according to
the terms of the Offer to the Third Party Offeror, subject to the terms of
Section 13.4 below.
13.4 If Lessee fails to timely exercise its right to purchase the
Leased Property pursuant to the terms hereof, and for any reason Lessor shall
not sell or convey the Leased Property (or a portion thereof or interest
therein, as the case may be) to the Third Party Offeror on the terms contained
in the Offer within the time set forth in the Offer, then Lessor must resubmit
the Offer as well as any other offer to Lessee before selling the property, and
such Offer shall be subject to Lessee's first of first refusal hereunder.
13.5 The right of first refusal granted hereunder shall not apply to a
conveyance of the Leased Property to any trust, partnership, limited
partnership, joint venture, corporation or other entity in which Lessor's own
and control a 100% ownership interest. In addition, this right of first refusal
will not apply to a conveyance of the property to Lessor's heirs or devisees as
a result of the death of either or both of the above-named lessors. This right
of first refusal shall, however, be binding upon and enforceable against any of
the permitted transferees described in this Section 13.5.
14. ARBITRATION.
14.1 APPOINTMENT OF ARBITRATOR. If any dispute arises between the parties as
to a matter which this lease says should be arbitrated, or as to any other
questions involving apportionment or evaluation, either party may request
arbitration and appoint as a [sic] arbitrator an independent real estate
appraiser having knowledge of valuation of rental properties comparable to the
Leased Property. The other parties shall also choose an arbitrator with such
qualifications, and the two arbitrators shall choose a third. If the choice of
the second or third arbitrator is not made within twenty (20) days of the
choosing of the prior arbitrator, then either party may apply to the presiding
judge of the Circuit Court in the county in which the Leased Property is located
LEASE AGREEMENT - 11
<PAGE>
to appoint the required arbitrator.
14.2 PROCEDURE FOR ARBITRATION. The arbitration shall proceed according to
the Oregon Statutes governing arbitration, and the award of the arbitrator shall
have the effect therein provided. The arbitration shall take place in the county
where the Leased Property is located. Cost of the arbitration shall be shared
equally by the parties, but each party shall pay its own attorney fees incurred
in connection therewith. The outcome of said arbitration shall be binding upon
the parties, their heirs, administrators, successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the
day and year written above.
LESSOR:
/s/ J. H. May
-----------------------------------
J. H. May
/s/ Agnes E. May
-----------------------------------
Agnes E. May
LESSEE:
/s/ E. Danell Giustina
-----------------------------------
E. Danell Giustina
/s/ James Ivory
-----------------------------------
James Ivory
LEASE AGREEMENT - 12
<PAGE>
AMENDMENT TO LEASE
This Amendment to Lease Agreement is entered into on the 12th day of June, 1995,
------
between Quimby Street Partners ("Landlord") and Oregon Baking Company dba
"Marsee Baking" ("Tenant").
RECITALS
A. Landlord and Tenant entered into a Lease Agreement ("The Lease") on June
12, 1995.
B. Landlord and Tenant hereby agree to amend the lease as follows:
1. Section 1.2 of the Lease shall be superseded and replaced by the
following:
1.2 Identification of Exhibits.
--------------------------
The Exhibits identified below are attached to this
Lease are incorporated in this Lease by reference.
Exhibit A: Building Schematic
Exhibit B: Option to Renew
Exhibit C: Tenant improvements
Exhibit D: Master Lease
Exhibit E: Personal Guarantee
2. Exhibit E, attached hereto.
3. Except as expressly provided herein, all other provisions of the
lease and the Exhibits and Addenda thereto shall remain as set
forth therein. In the event of a conflict between this Amendment
and the Lease proper, the provisions of this Amendment shall
prevail.
In witness whereof, the parties have executed this Amendment to Lease as
of the date specified above.
LANDLORD TENANT
Quimby Street Partners Oregon Baking Company
PO Box 529 dba "Marsee Baking"
Eugene, OR 97440 2277 NW Quimby Street
Portland, OR 97210
/s/ Illegible, Partner. /s/ Howard Wasserteil
- --------------------------- ----------------------------
<PAGE>
EXHIBIT E
Personal Guarantee
- ------------------
In consideration of the making of this Lease between Quimby Street Partners
("Landlord") and Oregon Baking Company dba "Marsee Baking" ("Tenant"), the
undersigned personally guarantee the payment of rent to be paid by the Tenant
and the performance by the Tenant of all terms, conditions, covenants and
agreements of the Lease.
/s/ Howard Wasserteil /s/ Robert Schneider
- --------------------- --------------------
Howard Wasserteil Robert Schneider
INDUSTRIAL REAL ESTATE LEASE
[LOGO] (MULTI-TENANT FACILITY)
CB Commercial Real Estate Group, Inc.
Brokerage and Management
Licensed Real Estate Broker
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read in conjunction with the Basic Terms.
Section 1.01. DATE OF LEASE: NOVEMBER 28, 1994
-----------------------------------------------
Section 1.02. LANDLORD (INCLUDE LEGAL ENTITY): WEST WILLOWS ASSOCIATES, A
-----------------------------
WASHINGTON GENERAL PARTNERSHIP
- --------------------------------------------------------------------------------
Address of Landlord: P.O. BOX 53525
------------------------------------------------------------
BELLEVUE, WA 98015
- --------------------------------------------------------------------------------
Section 1.03. TENANT (INCLUDE LEGAL ENTITY): BERNIES BAGELS, A WASHINGTON
------------------------------
CORPORATION
- --------------------------------------------------------------------------------
Address of Tenant: 15600 N.E. 8TH
--------------------------------------------------------------
BELLEVUE, WA 98007
- --------------------------------------------------------------------------------
Section 1.04. PROPERTY: The Property is part of Landlord's multi-tenant
real property development known as BUILDING C - WILLOWS PACIFIC BUSINESS PARK
-------------------------------------------
and described or depicted in Exhibit "A" (the "Project"). The Project includes
the land, the buildings and all other improvements located on the land, and the
common areas described in Paragraph 4.05(a). The Property is (include street
address, approximate square footage and description)
----------------------------
15413 N.E. 95TH
- --------------------------------------------------------------------------------
REDMOND, WA 98052
- --------------------------------------------------------------------------------
APPROXIMATELY 13,000 SF OF WHICH APPROXIMATELY 3,000
- --------------------------------------------------------------------------------
SF IS BUILT OUT AS OFFICE SPACE.
- --------------------------------------------------------------------------------
<PAGE>
Section 1.05. LEASE TERM: SEVEN (7) years NO months BEGINNING ON
----------- ---- --------
FEBRUARY 1, 1995 or such other date as is specified in this Lease, and ENDING ON
- ----------------
JANUARY 31, 2002 .
- --------------------------------------------------------------------------------
Section 1.06. PERMITTED USES: (See Article Five) GENERAL OFFICES,
--------------------
WAREHOUSING AND MANUFACTURING USES PERMITTED BY LOCAL ZONING LAWS.
- --------------------------------------------------------------------------------
Section 1.07. TENANT'S GUARANTOR: (If none, so state) BERNARD GORDON
----------------------
Section 1.08. BROKERS: (See Article Fourteen) (If none, so state)
Landlord's Broker: AL HODGE, CB COMMERCIAL REAL ESTATE GROUP, INC.
--------------------------------------------------------------
Tenant's Broker: STEVE GORDON, SM GORDON AND ASSOCIATES
----------------------------------------------------------------
Section 1.09. COMMISSION PAYABLE TO LANDLORD'S BROKER: (See Article
Fourteen) $PER SEPARATE AGREEMENT
-----------------------------------------------------------------------
Section 1.10. INITIAL SECURITY DEPOSIT: (See Section 3.03) $ 7,514.00
-----------------
Section 1.11. VEHICLE PARKING SPACES ALLOCATED TO TENANT: (See Section
4.05) NOT APPLICABLE
---------------------------------------------------------------------------
Section 1.12. RENT AND OTHER CHARGES PAYABLE BY TENANT:
(a) BASE RENT: SEE RENT SCHEDULE EXHIBIT "C" Dollars($ )
------------------------------------ ----------------
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02);
(ii) Utilities (See Section 4.03); (iii) Insurance Premiums (See Section 4.04);
(iv) Tenant's Initial Pro Rata Share of Common Area Expenses 62 % (See Section
4.05); (v) Impounds for Insurance Premiums and Property Taxes (See Section
4.08); (vi) Maintenance, Repairs and Alterations (See Article Six); (vii)
Property management fee shall be $100.00 per month.
Section 1.13. LANDLORD'S SHARE OF PROFIT ON ASSIGNMENT OR SUBLEASE: (See
Section 9.05) FIFTY PERCENT percent ( 50 %) of the Profit (the "Landlord's
------------------ ---------
Share").
Section 1.14. RIDERS: The following Riders are attached to and made a part
of this Lease: (If none, so state)
EXHIBIT A: SITE PLAN, EXHIBIT B: PREMISES, EXHIBIT C: ADDITIONAL TERMS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
ARTICLE TWO: LEASE TERM
Section 2.01. LEASE OF PROPERTY FOR LEASE TERM. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end on the date specified in Section 1.05 above, unless the beginning
or end of the Lease Term is changed under any provision of this Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term, unless advanced or delayed under any provision of
this Lease.
Section 2.02. DELAY IN COMMENCEMENT. Landlord shall not be liable to Tenant
if Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord's non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. If Landlord does not deliver possession of the Property to Tenant within
sixty (60) days after the Commencement Date, Tenant may elect to cancel this
Lease by giving written notice to Landlord within ten (10) days after the sixty
(60)-day period ends. If Tenant gives such notice, the Lease shall be cancelled
and neither Landlord nor Tenant shall have any further obligations to the other.
If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Tenant. If delivery of possession of the Property to Tenant is
delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to
this Lease setting forth the actual Commencement Date and the expiration date of
the Lease. Failure to execute such amendment shall not affect the actual
Commencement Date and expiration date of the Lease.
Section 2.03. EARLY OCCUPANCY. If Tenant occupies the Property prior to the
Commencement Date, Tenant's occupancy of the Property shall be subject to all of
the provisions of this Lease. Early occupancy of the Property shall not advance
the expiration date of this Lease. Tenant shall pay Base Rent and all other
charges specified in this Lease for the early occupancy period.
Section 2.04. HOLDING OVER. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify Landlord against all damages which Landlord incurs from
Tenant's delay in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a
"month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a month-to-month tenancy, except that the Base Rent then in effect shall be
increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.01. TIME AND MANNER OF PAYMENT. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand.
The Base Rent shall be payable at Landlord's address or at such other place as
Landlord may designate in writing.
[Section 3.02 STRICKEN]
Section 3.03 SECURITY DEPOSIT; INCREASES.
(a) Upon the execution of this Lease, Tenant shall deposit with Landlord a
cash Security Deposit in the amount set forth in Section 1.10 above. Landlord
may apply all or part of the Security Deposit to any unpaid rent or other
charges due from Tenant or to cure any other defaults of Tenant. If Landlord
uses any part of the Security Deposit, Tenant shall restore the Security Deposit
to its full amount within ten (10) days after Landlord's written request.
Tenant's failure to do so shall be a material default under this Lease. No
interest shall be paid on the Security Deposit. Landlord shall not be required
to keep the Security Deposit separate from its other accounts and no trust
relationship is created with respect to the Security Deposit.
(b) Each Time the Base Rent is increased, Tenant shall deposit additional
funds with Landlord sufficient to increase the Security Deposit to an amount
which bears the same relationship to the adjusted Base Rent as the initial
Security Deposit bore to the initial Base Rent.
2
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
Section 3.04. TERMINATION; ADVANCE PAYMENTS. Upon termination of this Lease
under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any
other termination not resulting from Tenant's default, and after Tenant has
vacated the Property in the manner required by this Lease, Landlord shall refund
or credit to Tenant (or Tenant's successor) the unused portion of the Security
Deposit, any advance rent or other advance payments made by Tenant to Landlord,
and any amounts paid for real property taxes and other reserves which apply to
any time periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. ADDITIONAL RENT. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.02. PROPERTY TAXES.
(a) REAL PROPERTY TAXES. Tenant shall pay all real property taxes on the
Property (including any fees, taxes or assessments against, or as a result of,
any tenant improvements installed on the Property by or for the benefit of
Tenant) during the Lease Term. Subject to Paragraph 4.02(c) and Section 4.08
below, such payment shall be made at least ten (10) days prior to the
delinquency date of the taxes. Within such ten (10) -day period, Tenant shall
furnish Landlord with satisfactory evidence that the real property taxes have
been paid. Landlord shall reimburse Tenant for any real property taxes paid by
Tenant covering any period of time prior to or after the Lease Term. If Tenant
fails to pay the real property taxes when due, Landlord may pay the taxes and
Tenant shall reimburse Landlord for the amount of such tax payment as Additional
Rent.
(b) DEFINITION OF "REAL PROPERTY TAX." "Real property tax" means: (i) any
fee, license fee, license tax, business license fee, commercial rental tax,
levy, charge, assessment, penalty or tax imposed by any taxing authority against
the Property; (ii) any tax on the Landlord's right to receive, or the receipt
of, rent or income from the Property or against Landlord's business of leasing
the Property; (iii) any tax or charge for fire protection, streets, sidewalks,
road maintenance, refuse or other services provided to the Property by any
governmental agency; (iv) any tax imposed upon this transaction or based upon a
re-assessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Property; and (v) any charge or fee replacing any tax previously included within
the definition of real property tax. "Real property tax" does not, however,
include Landlord's federal or state income, franchise, inheritance or estate
taxes.
(c) JOINT ASSESSMENT. If the Property is not separately assessed, Landlord
shall reasonably determine Tenant's share of the real property tax payable by
Tenant under Paragraph 4.02(a) from the assessor's worksheets or other
reasonably available information. Tenant shall pay such share to Landlord within
fifteen (15) days after receipt of Landlord's written statement.
(d) PERSONAL PROPERTY TAXES.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the Property.
(ii) If any of Tenant's personal property is taxed with the Property,
Tenant shall pay Landlord the taxes for the personal property within fifteen
(15) days after Tenant receives a written statement from Landlord for such
personal property taxes.
Section 4.03. UTILITIES. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property. However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement.
<PAGE>
Section 4.04. INSURANCE POLICIES.
(a) LIABILITY INSURANCE. During the Lease Term, Tenant shall maintain a
policy of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the Property. Tenant
shall name Landlord as an additional insured under such policy. The initial
amount of such insurance shall be One Million Dollars ($1,000,000) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord's professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and non-contributing; (ii)
contain cross-liability endorsements; and (iii) insure Landlord against Tenant's
performance under Section 5.05, if the matters giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and coverage
of such insurance shall not limit Tenant's liability nor relieve Tenant of any
other obligation under this Lease. Landlord may also obtain comprehensive public
liability insurance in an amount and with coverage determined by Landlord
insuring Landlord against liability arising out of ownership, operation, use or
occupancy of the Property. The policy obtained by Landlord shall not be
contributory and shall not provide primary insurance.
(b) PROPERTY AND RENTAL INCOME INSURANCE. During the Lease Term, Landlord
shall maintain policies of insurance covering loss of or damage to the Property
in the full amount of its replacement value. Such policy shall contain an
Inflation Guard Endorsement and shall provide protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, special extended perils (all risk), sprinkler leakage and
any other perils which Landlord deems reasonably necessary. Landlord shall have
the right to obtain flood and earthquake insurance if required by any lender
holding a security interest in the Property. Landlord shall not obtain insurance
for Tenant's fixtures or equipment or building improvements installed by Tenant
on the Property. During the Lease Term, Landlord shall also maintain a rental
income insurance policy, with loss payable to Landlord, in an amount equal to
one year's Base Rent, plus estimated real property taxes and insurance premiums.
Tenant shall be liable for the payment of any deductible amount under Landlord's
or Tenant's insurance policies maintained pursuant to this Section 4.04, in an
amount not to exceed Ten Thousand Dollars ($10,000). Tenant shall not do or
permit anything to be done which invalidates any such insurance policies.
(c) PAYMENT OF PREMIUMS. Subject to Section 4.08, Tenant shall pay all
premiums for the insurance policies described in Paragraphs 4.04(a) and (b)
(whether obtained by Landlord or Tenant) within fifteen (15) days after Tenant's
receipt of a copy of the premium statement or other evidence of the amount due,
except Landlord shall pay all premiums for non-primary comprehensive public
liability insurance which Landlord elects to obtain as provided in Paragraph
4.04(a). For insurance policies maintained by Landlord which cover improvements
3
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
on the entire Project, Tenant shall pay Tenant's prorated share of the premiums,
in accordance with the formula in Paragraph 4.05(e) for determining Tenant's
share of Common Area costs. If insurance policies maintained by Landlord cover
improvements on real property other than the Project, Landlord shall deliver to
Tenant a statement of the premium applicable to the Property showing in
reasonable detail how Tenant's share of the premium was computed. If the Lease
Term expires before the expiration of an insurance policy maintained by
Landlord, Tenant shall be liable for Tenant's prorated share of the insurance
premiums. Before the Commencement Date, Tenant shall deliver to Landlord a copy
of any policy of insurance which Tenant is required to maintain under this
Section 4.04. At least thirty (30) days prior to the expiration of any such
policy, Tenant shall deliver to Landlord a renewal of such policy. As an
alternative to providing a policy of insurance, Tenant shall have the right to
provide Landlord a certificate of insurance, executed by an authorized officer
of the insurance company, showing that the insurance which Tenant is required to
maintain under this Section 4.04 is in full force and effect and containing such
other information which Landlord reasonably requires.
(d) GENERAL INSURANCE PROVISIONS.
(i) Any insurance which Tenant is required to maintain under this Lease
shall include a provision which requires the insurance carrier to give Landlord
not less than thirty (30) days' written notice prior to any cancellation or
modification of such coverage.
(ii) If Tenant fails to deliver any policy, certificate or renewal to
Landlord required under this Lease within the prescribed time period or if any
such policy is cancelled or modified during the Lease Term without Landlord's
consent, Landlord may obtain such insurance, in which case Tenant shall
reimburse Landlord for the cost of such insurance within fifteen (15) days after
receipt of a statement that indicates the cost of such insurance.
(iii) Tenant shall maintain all insurance required under this Lease
with companies holding a "General Policy Rating" of A-12 or better, as set forth
in the most current issue of "Best Key Rating Guide". Landlord and Tenant
acknowledge the insurance markets are rapidly changing and that insurance in the
form and amounts described in this Section 4.04 may not be available in the
future. Tenant acknowledges that the insurance described in this Section 4.04 is
for the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease, Tenant
shall nevertheless maintain insurance coverage which is customary and
commercially reasonable in the insurance industry for Tenant's type of business,
as that coverage may change from time to time. Landlord makes no representation
as to the adequacy of such insurance to protect Landlord's or Tenant's
interests. Therefore, Tenant shall obtain any such additional property or
liability insurance which Tenant deems necessary to protect Landlord and Tenant.
(iv) Unless prohibited under any applicable insurance policies
maintained, Landlord and Tenant each hereby waive any and all rights of recovery
against the other, or against the officers, employees, agents or representatives
of the other, for loss of or damage to its property or the property of others
under its control, if such loss or damage is covered by any insurance policy in
force (whether or not described in this Lease) at the time of such loss or
damage. Upon obtaining the required policies of insurance, Landlord and Tenant
shall give notice to the insurance carriers of this mutual waiver of
subrogation.
<PAGE>
Section 4.05. COMMON AREAS; USE, MAINTENANCE AND COSTS.
(a) COMMON AREAS. As used in this Lease, "Common Areas" shall mean all
areas within the Project which are available for the common use of tenants of
the Project and which are not leased or held for the exclusive use of Tenant or
other tenants, including, but not limited to, parking areas, driveways,
sidewalks, loading areas, access roads, corridors, landscaping and planted
areas. Landlord, from time to time, may change the size, location, nature and
use of any of the Common Areas, convert Common Areas into leaseable areas,
construct additional parking facilities (including parking structures) in the
Common Areas, and increase or decrease Common Area land and/or facilities.
Tenant acknowledges that such activities may result in inconvenience to Tenant.
Such activities and changes are permitted if they do not materially affect
Tenant's use of the Property.
(b) USE OF COMMON AREAS. Tenant shall have the nonexclusive right (in
common with other tenants and all others to whom Landlord has granted or may
grant such rights) to use the Common Areas for the purposes intended, subject to
such reasonable rules and regulations as Landlord may establish from time to
time. Tenant shall abide by such rules and regulations and shall use its best
effort to cause others who use the Common Areas with Tenant's express or implied
permission to abide by Landlord's rules and regulations. At any time, Landlord
may close any Common Areas to perform any acts in the Common Areas as, in
Landlord's judgment, are desirable to improve the Project. Tenant shall not
interfere with the rights of Landlord, other tenants or any other person
entitled to use the Common Areas.
(c) SPECIFIC PROVISION RE: VEHICLE PARKING. Tenant shall be entitled to use
the number of vehicle parking spaces in the Project allocated to Tenant in
Section 1.11 of the Lease without paying any additional rent. Tenant's parking
shall not be reserved and shall be limited to vehicles no larger than standard
size automobiles or pickup utility vehicles. Tenant shall not cause large trucks
or other large vehicles to be parked within the Project or on the adjacent
public streets. Temporary parking of large delivery vehicles in the Project may
be permitted by the rules and regulations established by Landlord. Vehicles
shall be parked only in striped parking spaces and not in driveways, loading
areas or other locations not specifically designated for parking. Handicapped
spaces shall only be used by those legally permitted to use them. If Tenant
parks more vehicles in the parking area than the number set forth in Section
1.11 of this Lease, such conduct shall be a material breach of this Lease. In
addition to Landlord's other remedies under the Lease, Tenant shall pay a daily
charge determined by Landlord for each such additional vehicle.
(d) MAINTENANCE OF COMMON AREAS. Landlord shall maintain the Common Areas
in good order, condition and repair and shall operate the Project, in Landlord's
sole discretion, as a first-class industrial/commercial real property
development. Tenant shall pay Tenant's pro rata share (as determined below) of
all costs incurred by Landlord for the operation and maintenance of the Common
Areas. Common Area costs include, but are not limited to, costs and expenses for
the following: gardening and landscaping; utilities, water and sewage charges;
maintenance of signs (other than tenants' signs); premiums for liability,
property damage, fire and other types of casualty insurance on the Common Areas
and worker's compensation insurance; all property taxes and assessments levied
on or attributable to the Common Areas and all Common Area improvements; all
personal property taxes levied on or attributable to personal property used in
connection with the Common Areas; straight-line depreciation on personal
property owned by Landlord which is consumed in the operation or maintenance of
the Common Areas; rental or lease payments paid by Landlord for rented or leased
4
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
personal property used in the operation or maintenance of the Common Areas; fees
for required licenses and permits; repairing, resurfacing, repaving,
maintaining, painting, lighting, cleaning, refuse removal, security and similar
items; reserves for roof replacement and exterior painting and other appropriate
reserves; and a reasonable allowance to Landlord for Landlord's supervision of
the Common Areas (not to exceed five percent (5%) of the gross rents of the
Project for the calendar year). Landlord may cause any or all of such services
to be provided by third parties and the cost of such services shall be included
in Common Area costs. Common Area costs shall not include depreciation of real
property which forms part of the Common Areas.
(e) TENANT'S SHARE AND PAYMENT. Tenant shall pay Tenant's annual pro rata
share of all Common Area costs (prorated for any fractional month) upon written
notice from Landlord that such costs are due and payable, and in any event prior
to delinquency. Tenant's pro rata share shall be calculated by dividing the
square foot area of the Property, as set forth in Section 1.04 of the Lease, by
the aggregate square foot area of the Project which is leased or held for lease
by tenants, as of the date on which the computation is made. Tenant's initial
pro rata share is set out in Paragraph 1.12(b). Any changes in the Common Areas
costs and/or the aggregate area of the Project leased or held for lease during
the Lease Term shall be effective on the first day of the month after such
change occurs. Landlord may, at Landlord's election, estimate in advance and
charge to Tenant as Common Area costs, all real property taxes for which Tenant
is liable under Section 4.02 of the Lease, all insurance premiums for which
Tenant is liable under Section 4.04 of the Lease, all maintenance and repair
costs for which Tenant is liable under Section 6.04 of the Lease, and all other
Common Area costs payable by Tenant hereunder. At Landlord's election, such
statements of estimated Common Area costs shall be delivered monthly, quarterly
or at any other periodic intervals to be designated by Landlord. Landlord may
adjust such estimates at any time based upon Landlord's experience and
reasonable anticipation of costs. Such adjustments shall be effective as of the
next rent payment date after notice to Tenant. Within sixty (60) days after the
end of each calendar year of the Lease Term, Landlord shall deliver to Tenant a
statement prepared in accordance with generally accepted accounting principles
setting forth, in reasonable detail, the Common Area costs paid or incurred by
Landlord during the preceding calendar year and Tenant's pro rata share. Upon
receipt of such statement, there shall be an adjustment between Landlord and
Tenant, with payment to or credit given by Landlord (as the case may be) so that
Landlord shall receive the entire amount of Tenant's share of such costs and
expenses for such period.
Section 4.06. LATE CHARGES. Tenant's failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after if becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
<PAGE>
Section 4.07. INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this Lease
is higher than the rate permitted by law, the interest rate is hereby decreased
to the maximum legal interest rate permitted by law.
Section 4.08. IMPOUNDS FOR INSURANCE PREMIUMS AND REAL PROPERTY TAXES. If
requested by any ground lessor or lender to whom Landlord has granted a security
interest in the Property, or if Tenant is more than ten (10) days late in the
payment of rent more than once in any consecutive twelve (12) -month period,
Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real
property taxes and insurance premiums payable by Tenant under this Lease,
together with each payment of Base Rent. Landlord shall hold such payments in a
non-interest bearing impound account. If unknown, Landlord shall reasonably
estimate the amount of real property taxes and insurance premiums when due.
Tenant shall pay any deficiency of funds in the impound account to Landlord upon
written request. If Tenant defaults under this Lease, Landlord may apply any
funds in the impound account to any obligation then due under this Lease.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. PERMITTED USES. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.
Section 5.02. MANNER OF USE. Tenant shall not cause or permit the Property
to be used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
tenants of the Project, or which constitutes a nuisance or waste. Tenant shall
obtain and pay for all permits, including a Certificate of Occupancy, required
for Tenant's occupancy of the Property and shall promptly take all actions
necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.
Section 5.03. HAZARDOUS MATERIALS. As used in this Lease, the term
"Hazardous Material" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state or
local laws or regulations, including without limitation petroleum-based
products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia compounds and other chemical products, asbestos, PCBs and
similar compounds, and including any different products and materials which are
subsequently found to have adverse effects on the environment or the health and
safety of persons. Tenant shall not cause or permit any Hazardous Material to be
generated, produced, brought upon, used, stored, treated or disposed of in or
about the Property by Tenant, its agents, employees, contractors, sublessees or
invitees without the prior written consent of Landlord. Landlord shall be
entitled to take into account such other factors or facts as Landlord may
reasonably determine to be relevant in determining whether to grant or withhold
consent to Tenant's proposed activity with respect to Hazardous Material. In no
event, however, shall Landlord be required to consent to the installation or use
of any storage tanks on the Property.
Section 5.04. SIGNS AND AUCTIONS. Tenant shall not place any signs on the
Property without Landlord's prior written consent. Tenant shall not conduct or
permit any auctions or sheriff's sales at the Property.
Section 5.05. INDEMNITY. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
5
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's gross
negligence or willful misconduct. As used in this Section, the term "Tenant"
shall include Tenant's employees, agents, contractors and invitees, if
applicable.
Section 5.06. LANDLORD'S ACCESS. Landlord or its agents may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties; to do any other act or to inspect and
conduct tests in order to monitor Tenant's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for any other purpose Landlord deems necessary. Landlord shall give
Tenant prior notice of such entry, except in the case of an emergency. Landlord
may place customary "For Sale" or "For Lease" signs on the Property.
Section 5.07. QUIET POSSESSION. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Property for the
full Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01. EXISTING CONDITIONS. Tenant accepts the Property in its
condition as of the execution of the Lease, subject to all recorded matters,
laws, ordinances, and governmental regulations and orders. Except as provided
herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the condition of the Property or the suitability
of the Property for Tenant's intended use. Tenant represents and warrants that
Tenant has made its own inspection of any inquiry regarding the condition of the
Property and is not relying on any representations of Landlord or any Broker
with respect thereto. If Landlord or Landlord's Broker has provided a Property
Information Sheet or other Disclosure Statement regarding the Property, a copy
is attached as an exhibit to the Lease.
Section 6.02. EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant. Tenant's
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Property or upon other portions of the Project, or from other sources or places;
or (d) any act or omission of any other tenant of the Project. Landlord shall
not be liable for any such damage or injury even though the cause of or the
means of repairing such damage or injury are not accessible to Tenant. The
provisions of this Section 6.02 shall not, however, exempt Landlord from
liability for Landlord's gross negligence or willful misconduct.
<PAGE>
Section 6.03. LANDLORD'S OBLIGATIONS.
(a) Except as provided in Article Seven (Damage or Destruction) and Article
Eight (Condemnation), Landlord shall keep the following in good order, condition
and repair: all components of electrical, mechanical, plumbing, heating and air
conditioning systems and facilities located in the Property which are concealed
or used in common by tenants of the Project. However, Landlord shall not be
obligated to maintain or repair windows, doors, plate glass or the interior
surfaces of exterior walls. Landlord shall make repairs under this Section 6.03
within a reasonable time after receipt of written notice from Tenant of the need
for such repairs.
(b) Tenant shall pay or reimburse Landlord for all costs Landlord incurs
under Paragraph 6.03(a) above as Common Area costs as provided for in Section
4.05 of the Lease. Tenant waives the benefit of any statute in effect now or in
the future which might give Tenant the right to make repairs at Landlord's
expense or to terminate this Lease due to Landlord's failure to keep the
Property in good order, condition and repair.
Section 6.04. TENANT'S OBLIGATIONS.
(a) Except as provided in Section 6.03, Article Seven (Damage or
Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of
the Property (including structural, nonstructural, interior, systems and
equipment) in good order, condition and repair (including interior repainting
and refinishing, as needed). If any portion of the Property or any system or
equipment in the Property which Tenant is obligated to repair cannot be fully
repaired or restored, Tenant shall promptly replace such portion of the Property
or system or equipment in the Property, regardless of whether the benefit of
such replacement extends beyond the Lease Term; but if the benefit or useful
life of such replacement extends beyond the Lease Term (as such term may be
extended by exercise of any options), the useful life of such replacement shall
be prorated over the remaining portion of the Lease Term (as extended), and
Tenant shall be liable only for that portion of the cost which is applicable to
the Lease Term (as extended). Tenant shall maintain a preventive maintenance
contract providing for the regular inspection and maintenance of the heating and
air conditioning system by a licensed heating and air conditioning contractor,
unless Landlord maintains such equipment under Section 6.03 above. If any part
of the Property or the Project is damaged by any act or omission of Tenant,
Tenant shall pay Landlord the cost of repairing or replacing such damaged
property, whether or not Landlord would otherwise be obligated to pay the cost
of maintaining or repairing such property. It is the intention of Landlord and
Tenant that at all times Tenant shall maintain the portions of the Property
which Tenant is obligated to maintain in an attractive, first-class and fully
operative condition.
(b) Tenant shall fulfill all of Tenant's obligations under this Section
6.04 at Tenant's sole expense. If Tenant fails to maintain, repair or replace
the Property as required by this Section 6.04, Landlord may, upon ten (10) days'
prior notice to Tenant (except that no notice shall be required in the case of
an emergency), enter the Property and perform such maintenance or repair
(including replacement, as needed) on behalf of Tenant. In such case, Tenant
shall reimburse Landlord for all costs incurred in performing such maintenance
or repair immediately upon demand.
6
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
Section 6.05. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
(a) Tenant shall not make any alterations, additions, or improvements to
the Property without Landlord's prior written consent, except for non-structural
alterations which do not exceed Ten Thousand Dollars ($10,000) in cost
cumulatively over the Lease Term and which are not visible from the outside of
any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written request. All alterations, additions, and improvements
shall be done in a good workmanlike manner, in conformity with all applicable
laws and regulations, and by a contractor approved by Landlord. Upon completion
of any such work, Tenant shall provide Landlord with "as built" plans, copies of
all construction contracts, and proof of payment for all labor and materials.
(b) Tenant shall pay when due all claims for labor and material furnished
to the Property. Tenant shall give Landlord at least twenty (20) days' prior
written notice of the commencement of any work on the Property, regardless of
whether Landlord's consent to such work is required. Landlord may elect to
record and post notices of non-responsibility on the Property.
Section 6.06. CONDITION UPON TERMINATION. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or Destruction). In addition, Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) prior to the expiration of the Lease and to
restore the Property to its prior condition, all at Tenant's expense. All
alterations, additions and improvements which Landlord has not required Tenant
to remove shall become Landlord's property and shall be surrendered to Landlord
upon the expiration or earlier termination of the Lease, except that Tenant may
remove any of Tenant's machinery or equipment which can be removed without
material damage to the Property. Tenant shall repair, at Tenant's expense, any
damage to the Property caused by the removal of any such machinery or equipment.
In no event, however, shall Tenant remove any of the following materials or
equipment (which shall be deemed Landlord's property) without Landlord's prior
written consent: any power wiring or power panels; lighting or lighting
fixtures; wall coverings; drapes, blinds or other window coverings; carpets or
other floor coverings; heaters, air conditioners or any other heating or air
conditioning equipment; fencing or security gates; or other similar building
operating equipment and decorations.
<PAGE>
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. PARTIAL DAMAGE TO PROPERTY.
(a) Tenant shall notify Landlord in writing immediately upon the occurrence
of any damage to the Property. If the Property is only partially damaged (i.e.,
less than fifty percent (50%) of the Property is untenantable as a result of
such damage or less than fifty percent (50%) of Tenant's operations are
materially impaired) and if the proceeds received by Landlord from the insurance
policies described in Paragraph 4.04(b) are sufficient to pay for the necessary
repairs, this Lease shall remain in effect and Landlord shall repair the damage
as soon as reasonably possible. Landlord may elect (but is not required) to
repair any damage to Tenant's fixtures, equipment, or improvements.
(b) If the insurance proceeds received by Landlord are not sufficient to
pay the entire cost of repair, or the cause of the damage is not covered by the
insurance policies which Landlord maintains under Paragraph 4.04(b), Landlord
may elect either to (i) repair the damage as soon as reasonably possible, in
which case this Lease shall remain in full force and effect, or (ii) terminate
this Lease as of the date the damage occurred. Landlord shall notify Tenant
within thirty (30) days after receipt of notice of the occurrence of the damage
whether Landlord elects to repair the damage or terminate the Lease. If Landlord
elects to repair the damage, Tenant shall pay Landlord the "deductible amount"
(if any) under Landlord's insurance policies and, if the damage was due to an
act or omission of Tenant, or Tenant's employees, agents, contractors or
invitees, the difference between the actual cost of repair and any insurance
proceeds received by Landlord. If Landlord elects to terminate the Lease, Tenant
may elect to continue this Lease in full force and effect, in which case Tenant
shall repair any damage to the Property and any building in which the Property
is located. Tenant shall pay the cost of such repairs, except that upon
satisfactory completion of such repairs, Landlord shall deliver to Tenant
insurance proceeds received by Landlord for the damage repaired by Tenant.
Tenant shall give Landlord written notice of such election within ten (10) days
after receiving Landlord's termination notice.
(c) If the damage to the Property occurs during the last six (6) months of
the Lease Term and such damage will require more than thirty (30) days to
repair, either Landlord or Tenant may elect to terminate this Lease as of the
date the damage occurred, regardless of the sufficiency of any insurance
proceeds. The party electing to terminate this Lease shall give written
notification to the other party of such election within thirty (30) days after
Tenant's notice to Landlord of the occurrence of the damage.
Section 7.02. SUBSTANTIAL OR TOTAL DESTRUCTION. If the Property is
substantially or totally destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage as described in Section 7.01), and
regardless of whether Landlord receives any insurance proceeds, this Lease shall
terminate as of the date the destruction occurred. Notwithstanding the preceding
sentence, if the Property can be rebuilt within six (6) months after the date of
destruction, Landlord may elect to rebuild the Property at Landlord's own
expense, in which case this Lease shall remain in full force and effect.
Landlord shall notify Tenant of such election within thirty (30) days after
Tenant's notice of the occurrence of total or substantial destruction. If
Landlord so elects, Landlord shall rebuild the Property at Landlord's sole
expense, except that if the destruction was caused by an act or omission of
Tenant, Tenant shall pay Landlord the difference between the actual cost of
rebuilding and any insurance proceeds received by Landlord.
Section 7.03. TEMPORARY REDUCTION OF RENT. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes. Except for such possible reduction in Base Rent,
insurance premiums and real property taxes, Tenant shall not be entitled to any
compensation, reduction, or reimbursement from Landlord as a result of any
damage, destruction, repair, or restoration of or to the Property.
7
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
Section 7.04. WAIVER. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to Tenant,
only the amount of any award specifically designated for loss or damage to
Tenant's trade fixtures or removable personal property; and (c) third, to
Landlord, the remainder of such award, whether as compensation for reduction in
the value of the leasehold, the taking of the fee, or otherwise. If this Lease
is not terminated, Landlord shall repair any damage to the Property caused by
the Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to either terminate this Lease or make
such repair at Landlord's expense.
<PAGE>
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. LANDLORD'S CONSENT REQUIRED. No portion of the Property or of
Tenant's interest in this Lease may be acquired by any other person or entity,
whether by sale, assignment, mortgage, sublease, transfer, operation of law, or
act of Tenant, without Landlord's prior written notice, except as provided in
Section 9.02 below. Landlord has the right to grant or withhold its consent as
provided in Section 9.05 below. Any attempted transfer without consent shall be
void and shall constitute a non-curable breach of this Lease. If Tenant is a
partnership, any cumulative transfer of more than twenty percent (20%) of the
partnership interests shall require Landlord's consent. If Tenant is a
corporation, any change in the ownership of a controlling interest of the voting
stock of the corporation shall require Landlord's consent.
Section 9.02. TENANT AFFILIATE. Tenant may assign this Lease or sublease
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all of
Tenant's obligations under this Lease.
Section 9.03. NO RELEASE OF TENANT. No transfer permitted by this Article
Nine, whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord's acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant's transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant's transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant's liability under
this Lease.
Section 9.04. OFFER TO TERMINATE. If Tenant desires to assign the Lease or
sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. If Landlord does
not so elect, the Lease shall continue in effect until otherwise terminated and
the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.
Section 9.05. LANDLORD'S CONSENT.
(a) Tenant's request for consent to any transfer described in Section 9.01
shall set forth in writing the details of the proposed transfer, including the
name, business and financial condition of the prospective transferee, financial
details of the proposed transfer (e.g., the term of and the rent and security
deposit payable under any proposed assignment or sublease), and any other
information Landlord deems relevant. Landlord shall have the right to withhold
consent, if reasonable, or to grant consent, based on the following factors: (i)
the business of the proposed assignee or subtenant and the proposed use of the
Property; (ii) the net worth and financial reputation of the proposed assignee
or subtenant; (iii) Tenant's compliance with all of its obligations under the
Lease; and (iv) such other factors as Landlord may reasonably deem relevant. If
Landlord objects to a proposed assignment solely because of the net worth and/or
financial reputation of the proposed assignee, Tenant may nonetheless sublease
(but not assign), all or a portion of the Property to the proposed transferee,
but only on the other terms of the proposed transfer.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Tenant shall pay to Landlord as Additional Rent under the Lease the
Landlord's Share (stated in Section 1.13) of the Profit (defined below) on such
transaction as and when received by Tenant, unless Landlord gives written notice
to Tenant and the assignee or subtenant that Landlord's Share shall be paid by
the assignee or subtenant to Landlord directly. The "Profit" means (A) all
amounts paid to Tenant for such assignment or sublease, including "key" money,
monthly rent in excess of the monthly rent payable under the Lease, and all fees
and other consideration paid for the assignment or sublease, including fees
under any collateral agreements, less (B) costs and expenses directly incurred
by Tenant in connection with the execution and performance of such assignment or
sublease for real estate broker's commissions and costs of renovation or
construction of tenant improvements required under such assignment or sublease.
Tenant is entitled to recover such costs and expenses before Tenant is obligated
to pay the Landlord's Share to Landlord. The Profit in the case of a sublease of
8
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
less than all the Property is the rent allocable to the subleased space as a
percentage on a square footage basis.
(ii) Tenant shall provide Landlord a written statement certifying all
amounts to be paid from any assignment or sublease of the Property within thirty
(30) days after the transaction documentation is signed, and Landlord may
inspect Tenant's books and records to verify the accuracy of such statement. On
written request, Tenant shall promptly furnish to Landlord copies of all the
transaction documentation, all of which shall be certified by Tenant to be
complete, true and correct. Landlord's receipt of Landlord's Share shall not be
a consent to any further assignment or subletting. The breach of Tenant's
obligation under this Paragraph 9.05(b) shall be a material default of the
Lease.
Section 9.06. NO MERGER. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. COVENANTS AND CONDITIONS. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.
Section 10.02. DEFAULTS. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the Property
results in the cancellation of any insurance described in Section 4.04;
(b) If Tenant fails to pay rent or any other charge when due;
(c) If Tenant fails to perform any of Tenant's non-monetary obligations
under this Lease for a period of thirty (30) days after written notice from
Landlord; provided that if more than thirty (30) days are required to complete
such performance, Tenant shall not be in default if Tenant commences such
performance within the thirty (30) -day period and thereafter diligently pursues
its completion. However, Landlord shall not be required to give such notice if
Tenant's failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Paragraph is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.
<PAGE>
(d) (i) If Tenant makes a general assignment or general arrangement for the
benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.
(e) If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any portion of
Tenant's obligations under the Lease. Unless otherwise expressly provided, no
guaranty of the Lease is revocable.
Section 10.03. REMEDIES. On the occurrence of any material default by
Tenant, Landlord may, at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Property to Landlord. In such event, Landlord shall
be entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant's default, including (i) the worth at the time of the award of the unpaid
Base Rent, Additional Rent and other charges which Landlord had earned at the
time of the termination; (ii) the worth at the time of the award of the amount
by which the unpaid Base Rent, Additional Rent and other charges which Landlord
would have earned after termination until the time of the award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; (iii) the worth at the time of the award of the amount by which the
unpaid Base Rent, Additional Rent and other charges which Tenant would have paid
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss that Tenant proves Landlord could have reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under the
Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, any costs or expenses Landlord incurs
in maintaining or preserving the Property after such default, the cost of
recovering possession of the Property, expenses of reletting, including
necessary renovation or alteration of the Property, Landlord's reasonable
attorneys' fees incurred in connection therewith, and any real estate commission
paid or payable. As used in subparts (i) and (ii) above, the "worth at the time
of the award" is computed by allowing interest on unpaid amounts at the rate of
fifteen percent (15%) per annum, or such lesser amount as may then be the
maximum lawful rate. As used in subpart (iii) above, the "worth at the time of
the award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one percent
(1%). If Tenant has abandoned the Property, Landlord shall have the option of
(i) retaking possession of the Property and recovering from Tenant the amount
specified in this Paragraph 10.03(a), or (ii) proceeding under Paragraph
10.03(b);
(b) Maintain Tenant's right to possession, in which case this Lease shall
continue in effect whether or not Tenant has abandoned the Property. In such
event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;
(c) Pursue any other remedy now or hereafter available to Landlord under
the laws or judicial decisions of the state in which the Property is located.
Section 10.04. REPAYMENT OF "FREE" RENT. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent".
9
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession. In such case Abated Rent shall
be calculated based on the full initial rent payable under this Lease.
Section 10.05. AUTOMATIC TERMINATION. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.
Section 10.6. CUMULATIVE REMEDIES. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. SUBORDINATION. Landlord shall have the right to subordinate
this Lease to any ground lease, deed of trust or mortgage encumbering the
Property, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or extensions thereof, whenever made
or recorded. Tenant shall cooperate with Landlord and any lender which is
acquiring a security interest in the Property or the Lease. Tenant shall execute
such further documents and assurances as such lender may require, provided that
Tenant's obligations under this Lease shall not be increased in any material way
(the performance of ministerial acts shall not be deemed material), and Tenant
shall not be deprived of its rights under this Lease. Tenant's right to quiet
possession of the Property during the Lease Term shall not be disturbed if
Tenant pays the rent and performs all of Tenant's obligations under this Lease
and is not otherwise in default. If any ground lessor, beneficiary or mortgagee
elects to have this Lease prior to the lien of its ground lease, deed of trust
or mortgage and gives written notice thereof to Tenant, this Lease shall be
deemed prior to such ground lease, deed of trust or mortgage whether this Lease
is dated prior or subsequent to the date of said ground lease, deed of trust or
mortgage or the date of recording thereof.
<PAGE>
Section 11.02. ATTORNMENT. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.03. SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
Section 11.04. ESTOPPEL CERTIFICATES.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge and
deliver to Landlord a written statement certifying: (i) that none of the terms
or provisions of this Lease have been changed (or if they have been changed,
stating how they have been changed); (ii) that this Lease has not been cancelled
or terminated; (iii) the last date of payment of the Base Rent and other charges
and the time period covered by such payment; (iv) that Landlord is not in
default under this Lease (or, if Landlord is claimed to be in default, stating
why); and (v) such other representations or information with respect to Tenant
or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrancer of the Property may require. Tenant shall deliver such
statement to Landlord within ten (10) days after Landlord's request. Landlord
may give any such statement by Tenant to any prospective purchaser or
encumbrancer of the Property. Such purchase or encumbrancer may rely
conclusively upon such statement as true and correct.
(b) If Tenant does not deliver such statement to Landlord within such ten
(10) -day period, Landlord, and any prospective purchaser or encumbrancer, may
conclusively presume and rely upon the following facts: (i) that the terms and
provisions of this Lease have not been changed except as otherwise represented
by Landlord; (ii) that this Lease has not been cancelled or terminated except as
otherwise represented by Landlord; (iii) that not more than one month's Base
Rent or other charges have been paid in advance; and (iv) that Landlord is not
in default under the Lease. In such event, Tenant shall be estopped from denying
the truth of such facts.
Section 11.05. TENANT'S FINANCIAL CONDITION. Within ten (10) days after
written request from Landlord, Tenant shall deliver to Landlord such financial
statements as Landlord reasonably requires to verify the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender designated by Landlord any financial statements required
by such lender to facilitate the financing or refinancing of the Property.
Tenant represents and warrants to Landlord that each such financial statement is
a true and accurate statement as of the date of such statement. All financial
statements shall be confidential and shall be used only for the purposes set
forth in this Lease.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01. LEGAL PROCEEDINGS. If Tenant or Landlord shall be in breach
or default under this Lease, such party (the "Defaulting Party") shall reimburse
the other party (the "Nondefaulting Party") upon demand for any costs or
expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
10
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys' fees and
costs. The losing party in such action shall pay such attorneys' fees and costs.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands an liability Landlord may incur if Landlord becomes or
is made a party to any claim or action (a) instituted by Tenant against any
third party, or by any third party against Tenant, or by or against any person
holding any interest under or using the Property by license of or agreement with
Tenant; (b) for foreclosure of any lien for labor or material furnished to or
for Tenant or such other person; (c) otherwise arising out of or resulting from
any act or transaction of Tenant or such other person; or (d) necessary to
protect Landlord's interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 11 of the United States Code, as amended. Tenant
shall defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs Landlord incurs in any such
claim or action.
Section 12.02. LANDLORD'S CONSENT. Tenant shall pay Landlord's reasonable
attorneys' fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. NON-DISCRIMINATION. Tenant promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.
Section 13.02. LANDLORD'S LIABILITY; CERTAIN DUTIES.
(a) As used in this Lease, the term "Landlord" means only the current owner
or owners of the fee title to the Property or Project or the leasehold estate
under a ground lease of the property or Project at the time in question. Each
Landlord is obligated to perform the obligations of Landlord under this Lease
only during the time such Landlord owns such interest or title. Any Landlord who
transfers its title or interest is relieved of all liability with respect to the
obligations of Landlord under this Lease to be performed on or after the date of
transfer. However, each Landlord shall deliver to its transferee all funds that
Tenant previously paid if such funds have not yet been applied under the terms
of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to perform
any of its obligations under this Lease to Landlord and to any ground lessor,
mortgagee or beneficiary under any deed of trust encumbering the Property whose
name and address have been furnished to Tenant in writing. Landlord shall not be
in default under this Lease unless Landlord (or such ground lessor, mortgagee or
beneficiary) fails to cure such non-performance within thirty (30) days after
receipt of Tenant's notice. However, if such non-performance reasonably requires
more than thirty (30) days to cure, Landlord shall not be in default if such
cure is commenced within such thirty (30) -day period and thereafter diligently
pursued to completion.
<PAGE>
(c) Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations under
this Lease is limited to Landlord's interest in the Property and the Project,
and neither the Landlord nor its partners, shareholders, officers or other
principals shall have any personal liability under this Lease.
Section 13.03. SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 13.04. INTERPRETATION. The captions of the Articles or Sections of
this Lease are to assist the parties in reading this Lease and are not a part of
the terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Property with Tenant's expressed or
implied permission.
Section 13.05. INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This Lease
is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.06. NOTICES. All notice required or permitted under this Lease
shall be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid. Notices to Tenant shall be delivered
to the address specified in Section 1.03 above, except that upon Tenant's taking
possession of the Property, the Property shall be Tenant's address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Section 1.02 Above. All notices shall be effective upon delivery. Either party
may change its notice address upon written notice to the other party.
Section 13.07. WAIVERS. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
Section 13.08. NO RECORDATION. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form" memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.
Section 13.09. BINDING EFFECT; CHOICE OF LAW. This Lease binds any
party who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.
Section 13.10. CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
11
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
person or entity signing this Lease for Tenant represents and warrants that he
or it is a general partner of the partnership, that he or it has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall given written notice to
Landlord of any general partner's withdrawal or addition. Within thirty (30)
days after this Lease is signed, Tenant shall deliver to Landlord a copy of
Tenant's recorded statement of partnership or certificate of limited
partnership.
Section 13.11. JOINT AND SEVERAL LIABILITY. All parties signing this Lease
as Tenant shall be jointly and severally liable for all obligations of Tenant.
Section 13.12. FORCE MAJEURE. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions.
Section 13.13. EXECUTION OF LEASE. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.
Section 13.14. SURVIVAL. All representations and warranties of Landlord and
Tenant shall survive the termination of this Lease.
<PAGE>
ARTICLE FOURTEEN: BROKERS
Section 14.01. BROKER'S FEE. When this Lease is signed by and delivered to
both Landlord and Tenant, Landlord shall pay a real estate commission to
Landlord's Broker named in Section 1.08 above, if any, as provided in the
written agreement between Landlord and Landlord's Broker, or the sum stated in
Section 1.09 above for services rendered to Landlord by Landlord's Broker in
this transaction. Landlord shall pay Landlord's Broker a commission if Tenant
exercises any option to extend the Lease Term or to buy the Property, or any
similar option or right which Landlord may grant to Tenant, or if Landlord's
Broker is the procuring cause of any other lease or sale entered into between
Landlord and Tenant covering the Property. Such commission shall be the amount
set fourth in Landlord's Broker's commission schedule in effect as of the
execution of this Lease. If a Tenant's Broker is named in Section 1.08 above,
Landlord's Broker shall pay an appropriate portion of its commission to Tenant's
Broker if so provided in any agreement between Landlord's Broker and Tenant's
Broker. Nothing contained in this Lease shall impose any obligation on Landlord
to pay a commission or fee to any party other than Landlord's Broker.
Section 14.02. PROTECTION OF BROKERS. If Landlord sells the Property, or
assigns Landlord's interest in this Lease, the buyer or assignee shall, by
accepting such conveyance of the Property or assignment of the Lease, be
conclusively deemed to have agreed to make all payments to Landlord's Broker
thereafter required of Landlord under this Article Fourteen. Landlord's Broker
shall have the right to bring a legal action to enforce or declare rights under
this provision. The prevailing party in such action shall be entitled to
reasonable attorneys' fees to be paid by the losing party. Such attorneys' fees
shall be fixed by the court in such action. This Paragraph is included in this
Lease for the benefit of Landlord's Broker.
Section 14.03. AGENCY DISCLOSURE; NO OTHER BROKERS. Landlord and Tenant
each warrant that they have dealt with no other real estate broker(s) in
connection with this transaction except: CB COMMERCIAL REAL ESTATE GROUP, INC.,
who represents THE LANDLORD ,
-----------------------------------------------------------------
and STEVE GORDON , who
----------------------------------------------------------------------------
represents THE TENANT .
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
In the event that CB COMMERCIAL RESTATE GROUP, INC. represents both
Landlord and Tenant, Landlord and Tenant hereby confirm that they were timely
advised of the dual representation and that they consent to the same, and that
they do not expect said broker to disclose to either of them the confidential
information of the other party.
ARTICLE FIFTEEN: COMPLIANCE
The parties hereto agree to comply with all applicable federal, state and
local laws, regulations, codes, ordinances and administrative orders having
jurisdiction over the parties, property or the subject matter of this Agreement,
including, but to limited to, the 1964 Civil Rights Act and all amendments
thereto, the Foreign Investment In Real Property Tax Act, the Comprehensive
Environmental Response Compensation and Liability Act, and The Americans with
Disabilities Act.
ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED HERETO
OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED, PLEASE
DRAW A LINE THROUGH THE SPACE BELOW.
12
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialed all Riders which
are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on 21 March , 1995 WEST WILLOWS ASSOCIATES
----------------- ---- --------------------------------------
at BELLEVUE, WA A WASHINGTON GENERAL PARTNERSHIP
-------------------------------- --------------------------------------
By: /s/ Jack Martin
---------------------------------
Jack Martin
Its: GENERAL PARTNER
---------------------------------
By:
---------------------------------
Its:
---------------------------------
"TENANT"
Signed on 22nd day , 1995 BERNIES BAGELS
----------------- ---- --------------------------------------
at Redmond, WA A WASHINGTON CORPORATION
-------------------------------- --------------------------------------
By: /s/ Bernard Gordon
---------------------------------
Bernard Gordon
Its: PRESIDENT
---------------------------------
By:
---------------------------------
Its:
---------------------------------
IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH
A PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON
WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE
POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE
TANKS.
THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE
DIRECTION OF THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND
OFFICE REALTORS -registered trademark-, INC. NO REPRESENTATION OR RECOMMENDATION
IS MADE BY THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND
OFFICE REALTORS -registered trademark-, INC., ITS LEGAL COUNSEL, THE REAL ESTATE
BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR AGENTS, AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT OR TAX CONSEQUENCES OF THIS LEASE OR OF THIS TRANSACTION. LANDLORD
AND TENANT SHOULD RETAIN LEGAL COUNSEL TO ADVISE THEM ON SUCH MATTERS AND SHOULD
RELY UPON THE ADVICE OF SUCH LEGAL COUNSEL.
13
copyright
1988 Southern California Chapter SIOR Initials /s/ JM
of the Society of Industrial TM -----------
and Office Realtors, Inc. (Multi-Tenant Net Form) /s/ BG
-----------
<PAGE>
CORPORATION
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 21st day of March, 1995, personally appeared before me
------- ---------
Jack Martin, to me known to be the General Partner of West Willows Assoc, the
- ----------- --------------- -------------------
corporation that executed the within and foregoing instrument and acknowledged
that he signed the same as his free and voluntary act and deed, for the uses and
---- -----
purposes therein mentioned and on oath stating that he is authorized to execute
----
said instrument.
Witness my hand and seal hereto affixed the day and year in this
certificate above-written.
/s/ Susan C. Lutzhe
------------------------------------------
[Official NOTARY PUBLIC in and for the
Seal] State of Washington, residing at
Bellevue
------------------------------------------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 22nd day of March, 1995, personally appeared before me
------ ------------
Bernard Gordon, to me known to be the President of Bernie's Bagels, the
- -------------------- ---------- ---------------
corporation that executed the within and foregoing instrument and acknowledged
that he signed the same as his free and voluntary act and deed, for the
------- -------
uses and purposes therein mentioned and on oath stating that he is authorized
-----
to execute said instrument.
Witness my hand and seal hereto affixed the day and year in this
certificate above-written.
/s/ Susan C. Lutzhe
------------------------------------------
[Offical NOTARY PUBLIC in and for the
Seal] State of Washington, residing at
Bellevue
------------------------------------------
<PAGE>
EXHIBIT "A"
[Diagram of Floor Plan of 15413 N.E. 95th, Redmond, WA Warehouse]
/s/ JM
------
/s/ BG
------
<PAGE>
EXHIBIT "B"
[Diagram of Building Layout]
/s/ JM
------
/s/ BG
------
<PAGE>
EXHIBIT C-ADDITIONAL TERMS
This Exhibit C is in reference to the Industrial Real Estate lease dated
November 28, 1994 by and between West Willows Associates, as Landlord and
Bernies Bagels, as Tenant for the property commonly known as Willows Pacific
Business Park.
Section 1.12(A) Base Rent:
- --------------------------
Months 1 through 5: $514.00 per month NNN
Months 6 through 42: $7,514.00 per month NNN
Months 43 through 84: $8,214.00 per month NNN
CLEAN UP: Tenant shall keep the premise in clean and orderly condition and shall
contain all machine cleaning and food waste within the building. Dumpsters shall
be kept closed and all food property disposed of.
TENANT IMPROVEMENT ALLOWANCE: Landlord shall provide a tenant improvement
allowance of $30,000.00.
The allowance shall be amortized over seven (7) years at a rate of 11% -(the
amount is reflected in the rental rate shown above).
Landlord shall generally clean up the building including fixing the ceiling in
the warehouse and the door trim on back roll-up doors.
OPTION TO RENEW: Provided written notice is given to the Landlord sixty (60)
days in advance of the expiration of this Lease and that Tenant has faithfully
performed hereunder, Tenant shall have the right to extend this Lease for a
period of five (5) years from the date of expiration hereof upon the terms and
conditions as herein contained except that the Base Rent shall be adjusted to
$8,500.00 per month NNN.
Landlord Initials /s/ JM
-------
Tenant Initials /s/ BG
---------
<PAGE>
Legal Description of Property
-----------------------------
A certain tract of land situated in King County, Washington and more
particularly described as follows:
LOT 3 AND AN UNDIVIDED ONE-QUARTER INTEREST IN TRACT A, AS DESCIBED IN
AND DELINEATED ON CITY OF REDMOND LOT LINE ADJUSTMENT NO. SS-84-26,
RECORDED UNDER KING COUNTY RECORDING NO. 8504040313, BEING A REVISION OF
CITY OF REDMOND SHORT PLAT NO. SS-79-7, RECORDED UNDER KING COUNTY
RECORDING NO. 8007090620, AND BEING A PORTION OF LOT 14 OF WILLOWS
INDUSTRIAL CENTER, ACCORDING TO THE PLAT RECORDED IN VOLUME 103 OF PLATS,
PAGES 2 THROUGH 5, INCLUSIVE, IN KING COUNTY, WASHINGTON
A-1
<PAGE>
ASSIGNMENT OF AND CONSENT TO ASSIGNMENT OF LEASE
This Assignment of and Consent to Assignment of Lease is made on this 26th day
of December, 1997, between Benaroya Capital Company, LLC ("Lessor"), successor
in interest to West Willows Associates, whose address is 1004 Fourth Avenue,
Suite 4700, Seattle, Washington 98154, and Bernie's Bagels, whose address is
15413 N.E. 95th Street, Redmond, WA 98052 ("Assignor") and Oregon Baking Company
dba Marsee Baking, whose address is 2287 N.W. Pettygrove, Portland, OR 97296
("Assignee"), who agree as follows:
1. RECITALS. This Assignment of Lease is made with reference to the following
facts and objectives:
(a) Lessor and Assignor, as Lessee, entered into a written Lease dated
December 15, 1994 (the "Lease"), in which Lessor leased to Assignor
and Assignor leased from Lessor Premises located in the city of
Redmond, County of King, Washington, commonly known as Willows 1
("Building").
(b) Assignor desires to assign all of its right, title and interest in the
Lease to Assignee ("Assignment").
(c) Lessor shall consent to the proposed Assignment on the conditions set
forth in this Assignment.
2. EFFECTIVE DATE OF ASSIGNMENT. The Assignment in this Agreement shall take
effect on January 1, 1998, and Assignor shall give possession of the
Premises to Assignee on that date.
3. ASSIGNMENT AND ASSUMPTION. Assignor assigns and transfers to Assignee all
of its right, title and interest in the Lease, and Assignee accepts the
Assignment and assumes and agrees to perform, from the date the Assignment
becomes effective, as a direct obligation to Lessor, all of the provisions
of the Lease and the Promissory Note representing a Security Deposit as
referenced in Section 7 below.
4. LESSOR'S CONSENT. Lessor consents to the Assignment without waiver of the
restrictions in the Lease concerning further assignment or subleasing.
5. ASSIGNOR'S LIABILITY. Assignor shall remain primarily liable for the
performance of the provisions and obligations under the Lease, including
without limitation all obligations existing as of the date of this
Agreement.
6. DEFAULT OF LEASE: NOTICE TO ASSIGNOR.
(a) Notice to Assignor. Lessor will send to assignor any notices of
default that Lessor sends to Assignee.
(b) Right to Cure. If Assignee is in default of the Lease, Assignor shall
have the right to cure any default of Assignee on the same terms and
conditions as contained in the Lease.
7. PREPAID RENT, SECURITY DEPOSITS AND LAST MONTH'S RENT. The parties
acknowledge that Lessor now holds a promissory note payable by Lessee and
guaranteed by Bernard Gordon, individually, in the amount of 57,260.00.
This promissory note is intended to represent a security deposit and is to
be applied subject to the provisions of the Lease.
8. MISCELLANEOUS.
1
<PAGE>
(a) Attorneys' Fees. If any party commences an action against any of the
parties arising out of or in connection with this Assignment of Lease,
the prevailing party or parties shall be entitled to recover from the
losing party or parties reasonable attorney's fees and costs of suit
at trial or on appeal.
(b) Notice. Any notice, demand, request, consent, approval or
communication that any party desires or is required to give to any
other party or any other person shall be in writing and either served
personally or sent by facsimile copy with automatic confirmation. Any
notice, demand, request, consent, approval or communication that
either party desires or is required to give to the party shall be
addressed to the other party at the address set forth in the
introductory paragraph of this Assignment. Either party may change its
address or facsimile number by notifying the other party of the change
of the address in writing. Notice shall be deemed communicated
immediately.
(c) Successors. This Assignment shall be binding on and inure to the
benefit of the parties and their successors, except as provided in
Section 9, ASSIGNMENT and SUBLEASING of the Lease Agreement between
Lessor and Assignor dated December 15, 1994.
9. EXHIBITS TO ASSIGNMENT OF LEASE.
(a) Exhibit A - Lease dated December 15, 1994.
ASSIGNOR
/s/ B. Gordon 12-30-97
- ----------------------------------- --------------------------
By Date
Pres.
- -----------------------------------
Its
LESSOR
By: The Benaroya Company
/s/ Illegible 12-31-97
- ----------------------------------- --------------------------
By Date
Vice President
- -----------------------------------
Its
ASSIGNEE
Howard Wasserteil 12/30/97
- ----------------------------------- --------------------------
By Date
Exec. V. P.
- -----------------------------------
Its Marsee Baking
2
<PAGE>
STATE OF WASHINGTON )
)ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that Marc G.
Nemirow is the person who appeared before me, a Notary Public in and for the
State of Washington duly commissioned and sworn, and acknowledged that he is the
Vice President of The Benaroya Company, a Washington corporation, who executed
the within and foregoing instrument, and acknowledged the instrument to be the
free and voluntary act and deed of said company for the uses and purposes
therein mentioned, and on oath stated that affiant is authorized to execute said
instrument on behalf of said company.
IN WITNESS WHEREOF I have hereunto sent my hand and affixed my official seal the
day and year first above written.
/s/ Debbie B. Jones
---------------------------------------------
Notary Public in and for the
State of Washington
[NOTARY SEAL] -------------------------------------
residing at Shoreline
----------------------------------
Commission expires 7-21-98
---------------------------
Print Name Debbie B. Jones
-----------------------------------
STATE OF OR )
) ss.
COUNTY OF Multnomah )
I certify that I know or have satisfactory evidence that Howard Wasserteil
-----------------
is the person who appeared before me, a Notary Public in and for the State of
Oregon duly commissioned and sworn, and acknowledged that he/she is the
Exec. V. P , a, who executed the within and foregoing instrument,
- ------------ --------------
and acknowledged the instrument to be the free and voluntary act and deed
of said company for the uses and purposes therein mentioned, and on oath stated
that affiant is authorized to execute said instrument on behalf of said company.
IN WITNESS WHEREOF I have hereunto sent my hand and affixed my official seal the
day and year first above written.
/s/ Natasha Supina
---------------------------------------------
Notary Public in and for the
State of OR
-------------------------------------
residing at U. S. Bank
----------------------------------
[NOTARY SEAL] Commission expires September 7, 1999
---------------------------
Print Name Natasha Supina
-----------------------------------
3
<PAGE>
STATE OF WA )
) ss.
COUNTY OF King )
I certify that I know or have satisfactory evidence that
Bernie Gordon is the person who appeared before me, a Notary Public in and for
- --------------
the State of Washington duly commissioned and sworn, and acknowledged that
he/she is the President Bernies Bagels, a, who executed the within and
------------ --------------
foregoing instrument, and acknowledged the instrument to be the free and
voluntary act and deed of said company for the uses and purposes therein
mentioned, and on oath stated that affiant i s authorized to execute said
instrument on behalf of said company.
IN WITNESS WHEREOF I have hereunto sent my hand and affixed my official seal the
day and year first above written.
/s/ LaRayne B. Rieland
---------------------------------------------
Notary Public in and for the
State of Washington
-------------------------------------
residing at Seattle WA
----------------------------------
Commission expires 10/28/2001
---------------------------
Print Name LaRayne B. Rieland
-----------------------------------
4
INVESTORS RIGHTS AGREEMENT
THIS INVESTORS RIGHTS AGREEMENT (this "Agreement") is made as of
January 9, 1998, by and among Oregon Baking Company, dba Marsee Baking (the
"Company"), and each purchaser of the Company's Series C Preferred Stock and
Series D Preferred Stock who executes a signature page to this Agreement
(individually, an `Investor" and collectively, the "Investors").
The parties hereby agree as follows:
1. GENERAL
1.1 DEFINITIONS. As used in this Agreement, the following terms will
have the following respective meanings:
(a) "Agreement" has the meaning set forth in the first paragraph
hereof.
(b) "Company" has the meaning set forth in the first paragraph of
this Agreement.
(c) "Equity Securities" means (i) any Common Stock, Preferred
Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security of the
Company (including any option to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock or other security of the Company or (iv) any such
warrant or right.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Holder" means any person owning of record Registrable
Securities or any assignee of record of such Registrable Securities in
accordance with section 2.9 hereof.
(f) "Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
(g) "Initiating Holders" means the Holders of at least 20% of the
Registrable Securities then outstanding.
(h) "Investor" has the meaning set forth in the first paragraph
of this Agreement.
(i) "Qualified Public Offering" means a public offering of equity
securities of the Company having an aggregate offering price to the public in
excess of $7,500,000.
INVESTORS RIGHTS AGREEMENT
Page 1
<PAGE>
(j) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or document.
(k) "Registrable Securities" means (i) Common Stock of the
Company issued or issuable upon conversion of the Shares; and (ii) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities will not include any securities sold by a person to the public either
pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
(l) "Registrable Securities then outstanding" means the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (i) are then issued and
outstanding or (ii) are issuable pursuant to then exercisable or convertible
securities.
(m) "Registration Expenses" means all expenses incurred by the
Company in complying with Sections 2.2 and 2.3, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which will be paid in any
event by the Company).
(n) "Securities Act" means the Securities Act of 1933, as
amended.
(o) "Selling Expenses" means all underwriting discounts and
selling commissions applicable to the sale.
(p) "Shares" means the Company's Series C Preferred Stock and/or
Series D Preferred Stock sold to an Investor.
(q) "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC that permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
(r) "SEC" means the Securities and Exchange Commission.
(s) "Violation" has the meaning set forth in Section 2.8(a) of
this Agreement.
INVESTORS RIGHTS AGREEMENT
Page 2
<PAGE>
2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER
(a) No Holder will make any disposition of all or any portion of
the Shares or Registrable Securities unless and until:
(1) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(2) (a) The transferee has agreed in writing to be bound by this
Section 2.1, (b) such Holder has notified the Company of the proposed
disposition and has furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (c) if reasonably
requested by the Company, such Holder has furnished the Company with an opinion
of counsel, reasonably satisfactory to the Company, that such disposition will
not require registration of such shares under the Securities Act.
(3) Notwithstanding the provisions of sections 2.1(a)(1) and
2.1(a)(2), no such registration statement or opinion of counsel will be
necessary for a transfer by a Holder that is (a) a partnership to its partners
or former partners in accordance with partnership interests, (b) a corporation
to its shareholders in accordance with their interests in the corporation, (c) a
limited liability company to its members or former members in accordance with
their interests in the limited liability company, or (d) to a Holder's family
member or trust for the benefit of an individual Holder or a Holder's family
member or members, provided that the transferee will be subject to the terms of
this Section 2.1 to the same extent as if he, she or it were an original Holder
hereunder.
(b) Each certificate representing Shares or Registrable
Securities will be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under applicable
state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company will reissue promptly unlegended certificates at
the request of any holder thereof if the holder has obtained an opinion of
counsel (which counsel may be counsel to the Company) reasonably acceptable to
the Company to the effect that the securities represented by such certificate,
INVESTORS RIGHTS AGREEMENT
Page 3
<PAGE>
may lawfully be so disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities will be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 PIGGYBACK REGISTRATION
(a) The Company will notify all Holders of Registrable Securities
in writing at least 30 days prior to the filing of any registration statement
under the Securities Act for purposes of a public offering of securities of the
Company (including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but excluding registration
statements relating to employee benefit plans or with respect to corporate
reorganizations or other business combination or acquisition transactions under
Rule 145 of the Securities Act, as amended from time to time, or any successor
rule thereto) and will afford each such Holder an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
Holder. Each Holder desiring to include in any such registration statement all
or any part of the Registrable Securities (in the case of a Holder) held by it
will, within 15 days after the above-described notice from the Company, so
notify the Company in writing. Such notice will state the intended method of
disposition of the securities by such person. If a Holder decides not to include
all such securities in any registration statement thereafter filed by the
Company, such person will nevertheless continue to have the right to include any
such securities in any subsequent such registration statement or registration
statements as may be filed by the Company with respect to offerings or its
securities, all upon the terms and subject to the conditions set forth herein.
(b) If the registration statement under which the Company gives
notice under this Section 2.2 is for an underwritten offering, the Company will
so advise the Holders of Registrable Securities as a part of such notice. In
such event, the right of any Holder to be included in a registration pursuant to
this Section 2.2 will be conditioned upon Holder's participation in such
underwriting and the inclusion of such person's securities as described above in
the underwriting to the extent provided herein. All such persons proposing to
distribute their securities through such underwriting will enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting will
be allocated on a pro rata basis based upon the number of shares entitled to be
included in such registration between the Holders and any other shareholders to
whom the Company hereinafter grants such registration rights. Notwithstanding
the foregoing, in no event will the amount of securities of the selling holders
included in the registration be reduced below 20% of the total amount of
securities included in such registration, unless such offering is the Initial
Offering and such registration does not include shares of any other selling
INVESTORS RIGHTS AGREEMENT
Page 4
<PAGE>
shareholders, in which event any or all of the securities of Holders may be
excluded in accordance with the advice of the Company's underwriters.
(c) The Company will have the right to terminate or withdraw any
registration initiated by it under this Section 2.2 prior to the effectiveness
of such registration whether or not any Holder has elected to include securities
in such registration. The Registration Expenses of such withdrawn registration
will be borne by the Company in accordance with Section 2.4.
2.3 FORM S-3 REGISTRATION
(a) If the Company receives a written request from the Initiating
Holders that the Company file a registration statement on Form S-3 under the
Securities Act covering the registration of Registrable Securities having an
aggregate offering price to the public in excess of $1,000,000, then the Company
will, within 10 days of the receipt thereof, give written notice of such request
to all other Holders and effect, as soon as practicable, the registration on
Form S-3 under the Securities Act of all Registrable Securities that the Holders
request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they will so advise the Company as a part of their request made pursuant to this
Section 2.3 and the Company will include such information in the written notice
referred to in Section 2.3(a). In such event, the right of any Holder to include
its Registrable Securities in such registration will be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting will enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company (which underwriter or underwriters will be reasonably acceptable to a
majority in interest of the Initiating Holders). Notwithstanding any other
provision of this Section 2.3, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company will so advise
all Holders of Registrable Securities that would otherwise be underwritten
pursuant hereto, and the number of shares that may be included in the
underwriting will be allocated to the Holders of such Registrable Securities on
a pro rata basis based on the number of Registrable Securities held by all such
Holders (including the Initiating Holders). Any Registrable Securities excluded
or withdrawn from such underwriting will be withdrawn from the registration.
(c) The Company will not be required to effect more than one (1)
registration pursuant to this Section 2.3 per any twelve (12) month period or
if:
(1) Form S-3 (or any similar form) is not available for such
offering by the Holders, or
INVESTORS RIGHTS AGREEMENT
Page 5
<PAGE>
(2) the Company furnishes to the Holders a certificate signed by
the Board of Directors stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration to be effected at such time, in which
event the Company will have the right to defer such filing for a period of not
more than 120 days after receipt of the request of the Initiating Holders;
provided that such right to delay a request will be exercised by the Company nor
more than once in any one-year period.
2.4 EXPENSES OF REGISTRATION. Except as specifically provided in this
Agreement, all Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2.2 or 2.3 will be
borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder will be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company will not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.3, the request of which has been
subsequently withdrawn by the Initiating Holders unless the withdrawal is based
upon material adverse information concerning the Company of which the Initiating
Holders were not aware at the time of such request. If the Holders are required
to pay the Registration Expenses, such expenses will be borne by the holders of
securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company will, as soon as
practicable:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective and keep such registration
statement effective for up to 120 days or, if earlier, until the participating
Holder or Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as will be reasonably requested by the Holders.
INVESTORS RIGHTS AGREEMENT
Page 6
<PAGE>
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter or underwriters of such offering. Each
Holder participating in such underwriting will also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(g) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (1) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (2) a letter,
dated as of such date, from the independent certified public accountants to the
Company, in form and substance as is customarily given to underwriters in an
underwritten public offering and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed to the underwriters,
if any, and if permitted by applicable accounting standards, to the Holders
requesting registration of Registrable Securities.
2.6 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 2 will terminate and be of no further force and
effect three years after the closing of the Company's Initial Offering. In
addition, a Holder's registration rights will expire if (a) the Company has
completed its Initial Offering and is subject to the provisions of the Exchange
Act and (b) all Registrable Securities held by such Holder (together with its
affiliates, partners and former partners) may be sold under Rule 144 during any
91-day period.
2.7 DELAY OF REGISTRATION; FURNISHING INFORMATION
(a) No Holder will have any right to obtain or seek an injunction
restraining or otherwise delaying any registration hereunder as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It will be a condition precedent to the obligations of the
Company to take any action pursuant to Sections 2.2 or 2.3 that the selling
Holders will furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as will be requested by the Company and required to effect the
registration of such Holder's Registrable Securities.
INVESTORS RIGHTS AGREEMENT
Page 7
<PAGE>
2.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2 or 2.3:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, shareholders, officers, directors
and legal counsel of such Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act against
any losses, claims, damages, or liabilities (joint or several) to which any of
such persons may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (individually a
"Violation") by the Company: (1) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto; (2) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, not misleading; or (3) any violation of any rule or
regulation promulgated under the Securities Act, the Exchange Act, or any state
securities law in connection with the offering covered by such registration
statement; and the Company will reimburse each such Holder, partner,
shareholder, officer, director, underwriter or controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 2.8(a) will not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company,
which consent will not be unreasonably withheld, nor will the Company be liable
in any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration is being effected, indemnify and hold harmless the
Company, each of its directors, officers and legal counsel, any underwriter (as
defined in the Securities Act) for the Company and each person, if any, who
controls the Company or underwriter within the meaning of the Securities Act,
and any other Holder selling securities under such registration statement, any
of such of the Holder's partners, shareholders, directors, officers, or legal
counsel, any underwriter (as defined in the Securities Act) for such Holder or
any person who controls such Holder or underwriter, against any losses, claims,
damages or liabilities (joint or several) to which any of such persons may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation by the Company, in
each case to the extent (and only to the extent) that such violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by any such
INVESTORS RIGHTS AGREEMENT
Page 8
<PAGE>
person in connection with investigating or defending any such loss, claim,
damage, liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.8(b) will not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent will not be unreasonably withhold; provided
further, that in no event will any indemnity under this Section 2.8(b) exceed
the net proceeds from the offering received by the indemnifying Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party will have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party will
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, will relieve such indemnifying party of any liability to the
indemnified party under this Section 2.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.8.
(d) If the indemnification provided for in this Section 2.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, will to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage, or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation or Violations that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party will be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, that in no event will any contribution by
a Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and the Holders under this
Section 2.8 will survive completion of any offering of Registrable Securities in
a registration statement. No indemnifying party, in the defense of any such
INVESTORS RIGHTS AGREEMENT
Page 9
<PAGE>
claim or litigation, will, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
(f) The obligations of the Holders under this section 2.8 are
several and not joint.
2.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities that (a) is a
subsidiary, parent, general partner, limited partner, or retired partner of a
Holder, provided the transferee agrees in writing to be subject to the terms of
this Agreement to the same extent as if the transferee were the original Holder
hereunder, (b) is a Holder's family member or trust for the benefit of an
individual Holder or a Holder's family member of members, or (c) acquires at
least 10,000 shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, that the transferor will, within 10 days after
such transfer, furnish to the Company written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned and such transferee will agree to be
subject to all restrictions set forth in this Agreement.
2.10 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively) only with the
written consent of the Company and the Holders of a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section
2.10 will be binding upon each Holder and Company.
2.11 "MARKET STAND-OFF" AGREEMENTS. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder will not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) for a period specified by
representative of the underwriters not to exceed 180 days following the
effective date of a registration statement of the Company filed under the
Securities Act; provided that the obligations described in this Section 2.11
will not apply to a registration relating solely to employee benefit plans or a
registration relating solely to a SEC Rule 145 transaction. The Company may
impose stop-transfer instructions with respect to the shares of Common Stock (or
other securities) subject to the foregoing restriction until the end of said
period.
2.12 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC that may permit the
sale of the Registrable Securities to the public without registration, the
Company will:
INVESTORS RIGHTS AGREEMENT
Page 10
<PAGE>
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration for an offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities, furnish
to such Holder promptly upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
3. COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING
(a) The Company will maintain true books and records of account
in which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as will be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of
the Company, and in any event within 90 days thereafter, the Company will
furnish each Investor an audited consolidated balance sheet of the Company as at
the end of such fiscal year, and audited consolidated statements of income, cash
flows and shareholders' equity of the Company for such year, all prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements will be
accompanied by a report and opinion thereon by independent public accountants
selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within 30 days
thereafter, a consolidated balance sheet of the Company as of the end of each
such quarterly period and consolidated statements of income, cash flows and
stockholders' equity of the Company for the same period, and a consolidated
balance sheet of the Company as of the end of each such current fiscal year to
date and consolidated statements of income cash flows and stockholders' equity
of the Company for the same period, prepared in accordance with generally
accepted accounting principles consistently applied, with the exception that no
INVESTORS RIGHTS AGREEMENT
Page 11
<PAGE>
notes need to be attached to such statements and year-end audit adjustments need
not have been made.
3.2 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Series C and Series D Preferred Stock, all Common Stock issuable from
time to time upon such conversion.
3.3 TERMINATION OF COVENANTS. All covenants of the Company contained
in Section 3 will expire and terminate at the same time as the Registration
Rights terminate under Section 2.6.
4. RIGHTS OF FIRST REFUSAL
4.1 SUBSEQUENT OFFERINGS BY THE COMPANY. Subject to the terms and
conditions specified in this Section 4.1, the Company hereby grants to the
Investor a right of first offer with respect to future sales by the Company of
its First Offer Shares (as hereinafter defined). For purposes of this Section
4.1, Investor includes any general partners and affiliates of Investor. Investor
shall be entitled to apportion the right of first offer hereby granted it among
itself and its partners and affiliates in such proportions as it deems
appropriate. Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("First Offer Shares"), the Company shall first make an offering
of such First Offer Shares to the Investor in accordance with the following
provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Investor stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii) the price and
terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after giving of the Notice, the
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock held by or issuable to
Investor upon conversion of the shares of Series C Preferred Stock and/or Series
D Preferred Stock then held by such Investor bears to the total number of shares
of Common Stock of the Company then outstanding (assuming full conversion and
exercise of all convertible or exercisable securities) issued and held.
(c) If all Shares referred to in the Notice which Investor is
entitled to obtain pursuant to subsection 4.1(b) are not elected to be obtained
as provided in such subsection, the Company may, during the 120-day period
following the expiration of the period provided in subsection 4.1(b) hereof,
offer the remaining unsubscribed portion of such Shares to any person or persons
at a price not less than and upon terms no more favorable to the offeree, than
as specified in the Notice. If the Company does not enter into an agreement for
the sale of the Shares within such 120-day period, or if such agreement is not
consummated within 60 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the subscriber in accordance herewith.
INVESTORS RIGHTS AGREEMENT
Page 12
<PAGE>
(d) The right of first offer in this Section 4.1 shall not be
applicable (i) to the issuance or sale of shares of common stock (or options
therefor) to directors, employees or consultants under any stock issuance or
option plan now in effect or hereafter adopted by the Company for the primary
purpose of soliciting or retaining their services, (ii) to or after consummation
of bona fide, firmly underwritten public offering of shares of common stock,
registered under the Securities Act of 1933, as amended, at an offering price of
at least $10.00 per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) and $7,500,000 in the aggregate, (iii)
the issuance of securities pursuant to the conversion or exercise of convertible
or exercisable securities, (iv) the issuance of securities in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise; (v) any
shares of the Company's capital stock or warrants to purchase such shares issued
pursuant to any equipment leasing arrangement, or banking financing; (vi) shares
of the Company's Common Stock or Preferred Stock issued in connection with
strategic transactions involving the Company and other entities, including joint
ventures, manufacturing, marketing or distribution arrangements; provided that
such strategic transactions and the issuance of shares therein has been approved
by the Company's Board of Directors; or (vii) sale of shares, or warrants to
purchase shares of up to 105,000 of the Company's Series C Preferred Stock at a
purchase or exercise price not less than $4.00 per share.
(e) AMENDMENTS AND WAIVERS. The rights of the Investor under
Section 4.1 may be amended and the observance of any term of such rights may be
waived (either generally or in a particular instance and either retroactively or
prospectively), (i) with the written consent of the Company and the Investor, or
(ii) with the written consent of the Company and the holders of a majority of
the shares of Common Stock that have been issued or shall be issuable upon
conversion of the Series C Preferred Stock and/or Series D Preferred Stock
(whether or not such shares are sold of the date hereof). Any amendment or
waiver effected in accordance with item (ii) above shall be binding upon each
Investor even though such Investor was not party to such consent.
5. MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement will be governed by and construed
under the laws of the State of Oregon as applied to agreements among Oregon
residents entered into and to be performed entirely within Oregon. The Company
and each Investor hereby consent to jurisdiction and venue in any state court or
federal court located in Multnomah County, Oregon in the event suit is brought
for the interpretation or enforcement of any provision of this Agreement.
Jurisdiction and venue in Multnomah County, Oregon shall be exclusive with
respect to any disputes arising out of the transactions contemplated by this
Agreement, except for actions for the enforcement of judgments.
5.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein will survive any investigation made by any Holder and the
closing of the transactions contemplated hereby. All statements as to factual
INVESTORS RIGHTS AGREEMENT
Page 13
<PAGE>
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby will be deemed to be representations and warranties by the
Company solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors, and administrators of the parties
hereto and will inure to the benefit of and be enforceable by each person who is
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes.
5.4 SEVERABILITY. In case any provisions of the Agreement is invalid,
illegal, or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any be affected or impaired thereby.
5.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement only
may be amended or modified upon the written consent of the Company and the
Holders of a majority of the Registrable Securities and only with such requisite
consent.
(b) Except as otherwise expressly provided, any obligation of the
Company and any right of the Holders under this Agreement only may be waived, in
whole or in part, with the written consent of the Company and the Holders of a
majority of the Registrable Securities.
(c) Any amendment or waiver effected pursuant to this Section 5.5
shall be effective against all Investors even though one or more of such
Investors may not have agreed to such amendment or waiver.
(d) The parties acknowledge that the Company intends to sell
shares of its Series C Preferred Stock after the date hereof and that any person
who hereinafter purchases shares of the Company's Series C Preferred Stock may,
at such person's sole election, become a party to this Agreement, and that the
addition of such parties to this Agreement shall not be considered an amendment
of this Agreement requiring the consent of the parties hereto.
5.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder upon any breach, default or noncompliance
of the Company under this Agreement will impair any such right, power or remedy,
nor will it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. Any waiver, permit, consent, or approval of
any kind or character on any Holder's part of any breach, default, or
noncompliance under this Agreement must be in writing and will be effective only
INVESTORS RIGHTS AGREEMENT
Page 14
<PAGE>
to the extent specifically set forth in such writing. All remedies, either under
this Agreement, by law or otherwise afforded to Holders, will be cumulative and
not alternative.
5.7 NOTICES. All notices required or permitted hereunder will be
in writing and will be deemed effectively given: (1) upon personal delivery to
the party to be notified, (2) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (3) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (4) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications will be sent to the party to
be notified at the address as set forth on the signature pages hereof or at such
other address as such party may designate by 10 days' advance written notice to
the other parties hereto.
5.8 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute will be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement including, without limitation, reasonable fees and
expenses of attorneys and accountants, which will include, without limitation,
all fees, costs and expenses of appeals.
5.9 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience or reference only and are not
to be considered in construing this Agreement.
5.10 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which will be an original, but all of which together
will constitute one instrument.
5.11 FURTHER ASSURANCES. Each party to this Agreement shall do
and perform or cause to be done and performed all such further acts and things
and shall execute and deliver all such other agreements, certificates,
instruments or documents as any other party may reasonably request from time to
time in order to carry out the intent and purposes of this Agreement. No party
to this Agreement shall voluntarily undertake any course of action inconsistent
with satisfaction of the requirements applicable to them set forth in such
instruments and documents, and each party shall promptly do all such acts and
take all such measures as may be appropriate to enable them to perform as early
as practicable the obligations herein and therein required to be performed by
them.
5.12 ENTIRE AGREEMENT. This Agreement and the Purchase Agreement
constitute the entire agreement among the parties and no party shall be liable
or bound to any other party in any manner by an warranties, representations, or
covenants except as specifically set forth in this Agreement or the Purchase
Agreement. Nothing in this Agreement, express or implied, is intended to confer
upon any third party any rights, remedies, obligations, or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.
INVESTORS RIGHTS AGREEMENT
Page 15
<PAGE>
The parties have executed this Agreement as of the date set forth in
the first paragraph hereof.
OREGON BAKING COMPANY, dba
MARSEE BAKING
By: /s/ Brad Barnett
--------------------------------------
Its: ------------------------------------
Address:
--------------------------------
---------------------------------
/s/ Joseph F. Tanous
------------------------------------
Joseph F. Tanous
Address:
---------------------------
------------------------------------
/s/ John Durbetaki
------------------------------------
John Durbetaki
Address: 37425 SW Laurelwood Rd
--------------------------
Gaston OR 97119
------------------------------------
<PAGE>
INVESTORS
/s/ Gary Holmes
------------------------------------
GARY HOLMES
Address:
---------------------------
------------------------------------
/s/ Ray Zimmerman
------------------------------------
RAYMOND ZIMMERMAN
Address:
---------------------------
------------------------------------
ROITENBERG INVESTMENTS, INC.
By: /s/ Harold Roitenberg
---------------------------------
Its: President
--------------------------------
Address: Suite 1065
----------------------------
5500 Wayzata Boulevard
------------------------------------
Minneapolis, MN 55416
------------------------------------
BERNIE'S BAGELS, INC., a Washington
corporation
By: /s/ Bernie Gordon
---------------------------------
Its: Co-President
--------------------------------
Address:
---------------------------
------------------------------------
<PAGE>
AMENDMENT TO INVESTORS RIGHTS AGREEMENT
This Amendment is made effective as of the 11th day of September, 1998,
by and among Oregon Baking Company, dba Marsee Baking (the "Company"), and
certain holders of the Company's Series C Preferred Stock and Series D Preferred
Stock who together hold a majority of the Series C and Series D Preferred Stock
outstanding on the date hereof (the "Majority Investors").
RECITALS
A. The Company and the Majority Investors, and certain other
investors (the "Other Investors") are parties to that certain
Investors Rights Agreement dated January 9, 1998 (the
"Agreement").
B. The Company and the Majority Investors desire to amend the final
sentence of Section 4.1(d) of the Agreement (Rights of First
Refusal upon Subsequent Offerings by the Company), in order to
effect the following: (i) the repricing of the Company's Series C
Preferred Stock to $32.50 per share from $40.00 per share, (ii)
the increase the number of shares of Series C Preferred Stock
approved for issuance from 105,000 to 168,000 shares, and (iii) to
exempt from application of the right of first refusal issuances of
shares of the Company's Common Stock to shareholders of the
Company who make loans to the Company or guarantee the Company's
debts.
NOW, THEREFORE, in consideration of the premises, provisions and the
respective agreements hereinafter set forth, the parties hereby agree as
follows:
1. Section 4.1(d) of the Agreement is hereby restated in its entirety
to read:
(d) The right of first offer in this Section 4.1 shall not be
applicable (i) to the issuance or sale of shares of common stock (or options
therefor) to directors, employees or consultants under any stock issuance or
option plan now in effect or hereafter adopted by the Company for the primary
purpose of soliciting or retaining their services, (ii) to or after consummation
of bona fide, firmly underwritten public offering of shares of common stock,
registered under the Securities Act of 1933, as amended, at an offering price of
at least $10.00 per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) and $7,500,000 in the aggregate, (iii)
the issuance of securities pursuant to the conversion or exercise of convertible
or exercisable securities, (iv) the issuance of securities in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise; (v) any
shares of the Company's capital stock or warrants to purchase such shares issued
pursuant to any equipment leasing arrangement, or banking financing; (vi) shares
of the Company's Common Stock or Preferred Stock issued in connection with
strategic transactions involving the Company and other entities, including joint
ventures, manufacturing, marketing or distribution arrangements; provided that
such strategic transactions and the issuance of shares therein has been approved
<PAGE>
by the Company's Board of Directors; (vii) sale of shares, or warrants to
purchase shares, of up to 168,000 the Company's Series C Preferred Stock at a
purchase or exercise price not less than $32.50 per share; or (viii) the
issuance of shares of the Company's Common Stock or options therefor to
shareholders of the Company who make loans to the Company or guarantee the
Company's debts.
2. This Amendment shall be effective as to all prior issuances that
would have been excluded from the Investors' Right of First Refusal under
section 4.1(d) of the Agreement, had the amended provision been in effect at the
time of such issuance.
3. This Amendment shall be effective as to the Majority Investors and
the Other Investors even though the Other Investors did not they execute this
Amendment, pursuant to Section 4.1(e) of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date set forth in the first paragraph hereof.
OREGON BAKING COMPANY, dba
MARSEE BAKING
By: /s/ Howard Wasserteil
-------------------------------
Its: Exec VP/Secretary
------------------------------
Address:
--------------------------
2287 NW Pettygrove
-----------------------------------
Portland, OR 97210
-----------------------------------
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date set forth in the first paragraph hereof.
INVESTOR: /s/ Joseph Tanous
-----------------------------------
Joseph Tanous
INVESTOR: /s/ John Durbetaki
-----------------------------------
John Durbetaki
INVESTOR: /s/ Gary S. Holmes
-----------------------------------
Gary Holmes
INVESTOR: /s/ Ray Zimmerman
-----------------------------------
Raymond Zimmerman
INVESTOR: /s/ Harold Roitenberg
-----------------------------------
Harold Roitenberg
OREGON BAKING COMPANY
(d/b/a MARSEE BAKING)
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is entered into as of
the __ day of ______________________ by and between Oregon Baking Company, d/b/a
Marsee Baking, an Oregon corporation (the "Company") and the indemnitees listed
on the signature pages hereto (individually, as "Indemnitee" and collectively,
the "Indemnitees").
RECITALS
It is essential to the Company to attract and retain as directors and
officers of the Company the most capable persons available and persons who have
significant experience in business, corporate and financial matters.
The Company has identified the Indemnitees as persons possessing the
requisite background and abilities and desires him to serve as an officer or as
a member of its Board of Directors.
The substantial increase in corporate litigation may, from time to
time, subject directors and officers to burdensome litigation, the risks of
which frequently outweigh the advantages of serving in such capacity.
The cost of directors' and officers' liability insurance has increased
significantly, and the availability of such insurance has been severely limited.
The Company and Indemnitees recognize that serving as a director and/or
officer of a corporation at times calls for subjective evaluations and judgments
upon which reasonable persons may differ and that, in that context, it is
anticipated and expected that directors and officers of corporations will and do
from time to time commit actual or alleged errors or omissions in the good faith
exercise of their corporate duties and responsibilities.
In accordance with what is now and has always been the express policy
of the Company the Company wishes to provide, in contractual form, for such
indemnification and for the advancing of expenses to Indemnitees to the maximum
extent permitted by law.
In view of the considerations set forth above, the Corporation and each
Indemnitee agree as follows:
Indemnification Agreement - 1
<PAGE>
1. AGREEMENT TO SERVE.
The Indemnitee shall serve as a director and/or officer of the
Corporation for so long as the Indemnitee is duly elected or appointed or until
such time as the Indemnitee tenders a resignation in writing.
2. DEFINITIONS.
As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought in the right of the
Corporation or otherwise and whether of a civil, criminal, administrative or
investigative nature, in which the Indemnitee may be or may have been involved
as a party, witness or otherwise, by reason of the fact that the Indemnitee is
or was a director and/or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, whether or
not serving in such capacity at the time any liability or expense is incurred
for which exculpation, indemnification or reimbursement can be provided under
this Agreement.
(b) The term "Expenses" includes, without limitation, expense of
investigations, judicial or administrative proceedings or appeals, amounts paid
in settlement by the Indemnitee, attorney, accountant and other professional
fees and disbursements and any expenses of establishing a right to
indemnification under Section 8 of this Agreement, but shall not include the
amount of judgments or fines against the Indemnitee.
(c) References to "other enterprise" shall include, without limitation,
employee benefit plans; references to "fines" shall include any excise tax
assessed with respect to any employee benefit plan; references to "serving at
the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants, or its beneficiaries; and a person
who acted in good faith and in a manner reasonably believed to be in the
interest of an employee benefit plan shall be deemed to have acted in a manner
"not opposed to the best interests of the Corporation" as referred to in this
Agreement.
3. LIMITATION OF LIABILITY.
(a) To the fullest extent permitted by law, the Indemnitee shall not
be subject to loss, liability, expense or damage of any kind or nature
whatsoever in respect of the Indemnitee's errors or omissions (or alleged errors
or omissions) in serving the Corporation or its shareholders so long as (i) the
Indemnitee shall act in good faith and in a manner which he reasonably believes
not to be opposed to the best interests of the Corporation and (ii) such errors
or omissions, if any, are not shown by clear and convincing evidence to have
involved:
Indemnification Agreement - 2
<PAGE>
(i) a breach of the Indemnitee's duty of loyalty;
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(iii) any act from which the Indemnitee derives improper personal
benefit; or
(iv) the unlawful payment of dividends or the unlawful repurchase of
stock.
(b) Without limiting the generality of (a) above and to the fullest
extent permitted by law, the Indemnitee shall have no personal liability to the
Corporation, its shareholders or any other person claiming derivatively through
the Corporation, regardless of the theory or principle under which such
liability may be asserted, for:
(i) punitive, exemplary or consequential damages;
(ii) treble or other damages computed based upon any multiple of
damages actually and directly proved to have been sustained;
(iii) fees of attorneys, accountants, expert witnesses or professional
consultants; or
(iv) civil fines or penalties of any kind or nature whatsoever.
4. INDEMNITY IN THIRD-PARTY PROCEEDINGS.
To the fullest extent permitted by law, the Corporation shall indemnify
the Indemnitee in accordance with the provisions of this Section 4 if the
Indemnitee is a party to or threatened to be made a party to any Proceeding
(other than a Proceeding by or in the right of the Corporation to procure a
judgment in its favor), against all Expenses, judgments and fines actually and
reasonably incurred by the Indemnitee in connection with such Proceeding, if the
Indemnitee acted in good faith and in a manner which the Indemnitee reasonably
believed to be in or not opposed to the best interest of the Corporation and, in
the case of a criminal proceeding, in addition, had no reasonable cause to
believe that the Indemnitee's conduct was unlawful. The termination of any such
Proceeding by judgment, order of court, settlement, conviction or upon a plea of
nolo contendere, or its equivalent, shall not, of itself, create a presumption
that the Indemnitee did not act in good faith and in a manner which the
Indemnitee reasonably believed to be in the best interests of the Corporation,
and with respect to any criminal proceeding, that the Indemnitee had reasonable
cause to believe that the Indemnitee's conduct was unlawful.
5. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify the Indemnitee in accordance with the
provisions of this Section 5 if the Indemnitee is a party to or threatened to be
made a party to any Proceeding by or in the right of the Corporation to procure
a judgment in its favor, against all Expenses actually and reasonably incurred
Indemnification Agreement - 3
<PAGE>
by the Indemnitee in connection with the defense or settlement of such
Proceeding, if the Indemnitee acted in good faith and in a manner which the
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation.
6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding any other provisions of this Agreement, to the extent
that the Indemnitee has been successful on the merits or otherwise, in defense
of any Proceeding or in defense of any action without prejudice, the Indemnitee
shall be indemnified against all Expenses incurred in connection therewith.
7. ADVANCES OF EXPENSES.
The Expenses incurred by the Indemnitee pursuant to Sections 4, 5 and 9
in any Proceeding shall be paid by the Corporation in advance of the final
disposition of the Proceeding at the written request of the Indemnitee, if the
Indemnitee shall undertake to repay such amount to the extent that it is
ultimately determined by a court that the Indemnitee is not entitled to
indemnification. Such advance shall be made without regard to the Indemnitee's
ability to repay such Expenses. The Corporation is expressly authorized to
establish a trust, escrow account or other secured funding source for the
payment of advances made and to be made pursuant to this Section 7 or of
Expenses incurred by the Indemnitee pursuant to Sections 4, 5 and 9 in any
Proceeding.
8. RIGHT OF THE INDEMNITEE TO INDEMNIFICATION UPON APPLICATION.
Any indemnification or advance under Sections 4, 5, 7 or 9 shall be
made no later than 45 days after receipt of the written request of the
Indemnitee, unless a determination is made within such 45-day period by (a) the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the applicable Proceeding, or (b) independent legal counsel
in a written opinion (which counsel shall be appointed if such a quorum is not
obtainable), that the Indemnitee has not met the relevant standards for
indemnification set forth in Sections 4, 5 or 9 or that an exclusion set forth
in Section 10 is applicable.
The right to indemnification or advances as provided by this Agreement
shall be enforceable by the Indemnitee in any court of competent jurisdiction.
The burden of proving by clear and convincing evidence that indemnification or
advances are not appropriate shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors or independent legal counsel)
to have made a determination prior to the commencement of such action that
indemnification or advances are proper in the circumstances because the
Indemnitee has met the applicable standard of conduct nor an actual
determination by the Corporation (including its Board of Directors or
independent legal counsel) that the Indemnitee has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the Indemnitee has not met the applicable standard of conduct. The
Indemnitee's expenses incurred in connection with successfully establishing the
Indemnitee's right to indemnification or advances, in whole or in part, in any
Proceeding shall also be indemnified by the Corporation.
Indemnification Agreement - 4
<PAGE>
9. ADDITIONAL INDEMNIFICATION.
(a) Notwithstanding any limitation in Section 4 or 5, the Corporation
shall indemnify the Indemnitee to the fullest extent permitted by law in
accordance with the provisions of this Section 9(a) if the Indemnitee is a party
to or threatened to be made a party to any Proceeding (including a Proceeding by
or in the right of the Corporation to procure a judgment in its favor) involving
a claim against the Indemnitee for breach of fiduciary duty by the Indemnitee,
against any judgments and all Expenses actually and reasonably incurred by the
Indemnitee in connection with such Proceeding, except that the Corporation shall
not make any indemnity under this Section 9(a):
(i) on account of the Indemnitee's conduct that constitutes a
breach of the Indemnitee's duty of loyalty to the Corporation
or its shareholders;
(ii) on account of the Indemnitee's acts or omissions not in good
faith, intentional misconduct, knowing violations of law,
fraud or deliberately dishonest conduct; or
(iii) if a final decision by a court having jurisdiction in the
matter determines that such indemnification is unlawful.
(b) Notwithstanding any limitation in Section 4, 5 or 9(a), the
Corporation shall indemnify the Indemnitee with respect to any Proceeding
against Expenses, judgments and fines to the fullest extent permitted by the
Act, including the nonexclusivity provision of ORS 670.414 and including any
amendments to the Act adopted after the date hereof that may increase the extent
to which a corporation may indemnify its officers and directors.
(c) The indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which the Indemnitee may be entitled under the
Articles, the Bylaws, any other agreement, any vote of shareholders or
directors, the Act, or otherwise, both as to action in the Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification under this Agreement shall continue as to the Indemnitee even
though the Indemnitee may have ceased to be a director or officer and shall
inure to the benefit of the heirs, executors, administrators, and personal
representatives of the Indemnitee.
10. INDEMNITY EXCLUSIONS.
Notwithstanding any provision in this Agreement other than Section 6,
the Corporation shall not be obligated under this Agreement to make any
indemnification or advances in connection with any claim made against the
Indemnitee:
(a) for which payment is required to be made to or on behalf of the
Indemnitee under any insurance policy, except with respect to any excess amount
Indemnification Agreement - 5
<PAGE>
to which the Indemnitee is entitled under this Agreement beyond the amount of
payment under such insurance policy; or
(b) with respect to a transaction in which the Indemnitee received an
improper personal benefit; or
(c) for an accounting of profits made from the purchase and sale by the
Indemnitee of securities of the Corporation within the meaning of Section 16(b)
of the Securities Exchange Act of 1934 and amendments thereto or similar
provision of any state statutory law or common law.
11. PARTIAL INDEMNIFICATION.
If the Indemnitee is entitled under any provisions of this Agreement to
indemnification by the Corporation for some or a portion of the Expenses,
judgments ad fines actually and reasonably incurred by the Indemnitee in the
investigation, defense, appeal or settlement of any Proceeding, but not however,
for the total amount thereof, the Corporation shall nevertheless indemnify the
Indemnitee for the portion of such Expenses, judgments or fines to which the
Indemnitee is entitled.
12. SUBROGATION.
In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
director or officer. The director or officer shall execute all documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Corporation effectively to bring suit to enforce such rights.
13. SEVERABILITY.
If this Agreement or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify the Indemnitee as to Expenses, judgments and fines with
respect to any Proceeding to the full extent permitted by any applicable portion
of this Agreement that shall not have been invalidated or by any other
applicable law.
14. NOTICE.
The Indemnitee shall, as a condition precedent to the Indemnitee's
right to be indemnified under this Agreement, give to the Corporation notice in
writing as soon as practicable of any claim made against the Indemnitee for
which indemnity will or could be sought under this Agreement. Notice to the
Corporation shall be directed to the Corporation at its principal business
office or such other address as the Corporation shall designate in writing to
the Indemnitee. Notice shall be deemed received three days after the date
postmarked if sent by prepaid mail, properly addressed. In addition, the
Indemnification Agreement - 6
<PAGE>
Indemnitee shall give the Corporation such information and cooperation as it may
reasonably require and as shall be within the Indemnitee's power.
15. APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with
the internal laws of the state of Oregon without regard to the principles of
conflict of laws.
16. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the Corporation and its successors
and assigns.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
duly executed and signed as of the day and year first above written.
INDEMNITEE OREGON BAKING COMPANY
By:
- ------------------------ --------------------------
SEPARATION AGREEMENT AND RELEASE
The parties to this Agreement are Brad Barnett ("Barnett") and
Oregon Baking Company, dba Marsee Baking, an Oregon corporation ("Marsee").
RECITALS:
Barnett has resigned his employment as a President with
Marsee.
Barnett and Marsee have agreed upon various terms and
conditions relating to Barnett's separation from Marsee as set forth in this
Agreement.
Barnett and Marsee have agreed upon a Nondisclosure,
Noncompetition and Nonsolicitation Agreement effective the same date hereof.
THEREFORE, in consideration of the mutual covenants set forth
herein, the parties agree as follows:
AGREEMENT:
1. EMPLOYMENT SEPARATION. Barnett has delivered, and Marsee
has accepted, Barnett's resignation as an employee of Marsee effective as of
12:00 midnight, December 31, 1998 ("Separation Date").
2. RESIGNATION. Effective February 9, 1999, Barnett
acknowledges that he resigned from his director position with Marsee. Further,
Barnett acknowledges and confirms that, effective December 31, 1998, he resigned
from his position as Marsee's President and any other officer position he may
have held.
3. PAYMENT. Barnett acknowledges that he has received payment
in full for all salary and benefits to which he is entitled through the
Separation Date. Marsee will continue to pay Barnett as separation pay his
semi-monthly salary of $5,208.33 in accordance with Marsee's standard payroll
schedule and procedure until the earliest to occur of the following: (i) the
completion of the six month period following the Separation Date or (ii) the
date Barnett commences a full time employment relationship. Marsee will withhold
taxes and other withholdings on his separation payments in accordance with all
applicable local, state and federal laws.
4. BENEFITS. Marsee shall pay Barnett two weeks of accrued,
unused vacation for 1998, such payment to be made at the time of Barnett's
January 20, 1999 separation payment. At Barnett's expense, Marsee shall continue
Separation Agreement and Release
Page 1
<PAGE>
Barnett's group health insurance coverage, outside of COBRA, for six months
beginning in January 1999 and continuing through June 1999. Beginning with July
1999, Barnett shall be responsible for his own COBRA payments for any remaining
period of COBRA eligibility.
5. NEW STOCK OPTION. Seven days after executing this
Agreement, Barnett shall receive a nonqualified stock option to purchase up to
60,000 shares of Marsee's Common Stock at $1.00 per share (the "Stock Option")
subject to the standard terms and conditions of Marsee's 1998 Nonqualified Stock
Option Plan and Stock Option Agreement (and related Stock Purchase Agreement).
Notwithstanding any provisions to the contrary in the Stock Option Plan, Stock
Option Agreement or Stock Purchase Agreement, the Stock Option shall be fully
vested and exercisable at any time until the expiration of the term as provided
in the Stock Option Agreement (i.e., 36 months from the Separation Date).
6. "MARKET STAND-OFF" AGREEMENTS. Barnett agrees that he will
not sell or otherwise transfer or dispose of any Common Stock (or other
securities, including options) of Marsee held by such Holder for a period of 24
months following the effective date of a registration statement of Marsee filed
under the Securities Act. Marsee may impose stop-transfer instructions with
respect to the shares of Common Stock (or other securities, including options)
subject to the foregoing restriction until the end of said period.
7. TERMINATION OF PRIOR OPTION. Barnett agrees that the stock
option to purchase up to 100,000 shares of Marsee's Common Stock granted under
Marsee's 1997 Stock Option/Issuance Plan is hereby terminated and relinquished
forever. Barnett agrees to deliver any original documents in his possession
evidencing such option to Marsee within seven (7) days of execution of this
Agreement.
8. NONDISCLOSURE AND NONSOLICITATION AGREEMENT. Concurrently
with the execution of this Separation Agreement and Release, the parties shall
execute a Nondisclosure and Nonsolicitation Agreement in the form attached
hereto.
9. RELEASE. Except as otherwise provided in this Agreement,
Barnett hereby waives any legal rights and releases and forever discharges
Marsee and its parents and affiliates and their respective directors, officers,
employees, shareholders, attorneys, insurers, accountants, agents of any kind
whatsoever, successors and assigns, from any and all liabilities, demands,
claims, suits, actions, charges, damages, judgments, levies or executions,
whether known or unknown, liquidated, fixed, contingent, direct or indirect,
which have been, could have been or could be raised against Marsee for any
matter whatsoever at any time before execution of this Agreement. Barnett
acknowledges the full and final waiver and release of all claims which he has or
may have against Marsee, specifically including, but not limited to, all claims
for relief or remedy of any type under any state or federal laws, including, but
not limited to, the federal and state statutes relating to civil rights,
employment discrimination (based on race, color, age, sex, national origin,
marital status, handicap, veterans status, religion, workers compensation and
family relationship), labor, employment rights or benefits, or relating to
employment or termination of employment, wage payments, all as amended, and
including, but not limited to, claims based on alleged breach of employment
contract, breach of fiduciary duty, misrepresentation, fraud, fraud in the
inducement, defamation, tortious conduct of any type arising from or relating to
Separation Agreement and Release
Page 2
<PAGE>
Barnett's employment or termination of employment (including without limitation
Barnett's entry into this Agreement), or any other common law theories; and
including, but not limited to, claims under Title VII of the Civil Rights Act of
1964 (as amended) and the Age Discrimination in Employment Act (as amended); and
including, but not limited to, any claims for additional compensation, shares of
Marsee's capital stock or options or rights to purchase such shares (other than
the Stock Option referenced in Section 4 of this Agreement and his nonqualified
option to purchase up to 1,666 shares of Marsee's Common Stock), back pay or
benefits of any type; and including, but not limited to, any claim for attorney
fees or costs, for reinstatement or reemployment, or for compensatory or
punitive damages under any applicable statutes or common law theories, except to
the extent that waiver or release of future claims is specifically prohibited by
law.
10. NO ADMISSION OF LIABILITY. Nothing in this Agreement shall
be construed or interpreted in any manner as an admission of liability by any of
the parties released hereby, each of whom expressly denies liability.
11. OLDER WORKERS' BENEFIT PROTECTION ACT. This Agreement is
made in accordance with the Older Workers' Benefit Protection Act (the "Act").
In accordance with the Act, Barnett acknowledges that:
(a) He has been advised in writing of his right to consult
with an attorney prior to executing this Agreement;
(b) He is aware of, and waives, all rights and claims to
which he may be entitled under the Act other than those
rights or claims that may arise after this Agreement is
executed;
(c) As consideration for executing this Agreement, he has
received compensation of value to which he would not
otherwise be entitled;
(d) He has been given 21 days from the date of receipt for
consideration of this offer, which will expire at the
end of the 21-day period; and
(e) He shall have a period of seven days immediately
following the date of his execution of this Agreement in
which he may revoke the Agreement at his sole election,
by delivering to Marsee on or before the seventh day
following execution the revocation on the last page of
this Agreement, signed and dated.
11. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the state of Oregon without regard
to Oregon conflict of law principles. Any proceeding related to this Agreement
shall be commenced and maintained only in the state or federal courts in
Portland, Oregon and the parties hereby irrevocably submit to the jurisdiction
of any state or federal court sitting in Portland, Oregon, in any action or
proceeding brought to enforce or otherwise arising out of, in connection with,
Separation Agreement and Release
Page 3
<PAGE>
or relating to this Agreement, and hereby waives any objection to venue in any
such court and any claim that such forum is inconvenient.
12. ENTIRE AGREEMENT. This Agreement is an integrated
agreement which constitutes the entire agreement between the parties with
respect to its subject matter and supersedes all prior agreements,
representations, or understandings, written or oral, with respect to the subject
matter (including without limitation his employment offer letter dated June 24,
1997, as amended). The parties further acknowledge that the terms of this
Agreement are contractual and not mere recitals.
13. SEVERABILITY. In the event any provision of this Agreement
is found to be unenforceable, the parties intend that the remainder of the
Agreement be given full force and effect.
14. ACKNOWLEDGMENT. Barnett acknowledges: (a) that he has had
a full and fair opportunity to review this Agreement and to consult with his
attorney with respect hereto; (b) that he fully understands all of the terms of
this Agreement; and (c) that he has freely and voluntarily entered into this
Agreement.
EFFECTIVE as of 3-12 , 1999.
-------------------
/s/ Brad Barnett
---------------------------------
Brad Barnett
OREGON BAKING COMPANY, dba MARSEE
BAKING, an Oregon corporation
By /s/ Ray Lindstrom
-------------------------------
Title: C.E.O.
---------------------------
Attachment:
Nondisclosure and Nonsolicitation Agreement
Separation Agreement and Release
Page 4
CONSULTING AGREEMENT
This Agreement made and entered into this 12th day of January,
1999 by and between Marsee Baking (MB), the Viking Group, LLC (Viking) and
Anthony Kamin (Kamin).
WITNESSETH
WHEREAS, MB is a private corporation whose principal offices
are located at 2287 N.W. Pettygrove, Portland, Oregon, 97210, and
WHEREAS, Viking is a private corporation whose principal
offices are located at 8626 South Florence, Tulsa, Oklahoma, 74137 and Kamin is
an Illinois resident whose principal offices are located at 350 W. Belden, Suite
606, Chicago, Illinois 60614 and together possess substantial expertise and
experience in strategic and financial planning, corporate structuring, financial
analysis, management of companies in the food industry, and
WHEREAS, MB desires to assure the availability of Viking Group
and Kamin as consultants and advisors as herein provided,
NOW, THEREFORE, in consideration of the premises hereof and
the mutual agreements hereinafter set forth, the parties hereby agree as
follows:
1. MB hereby engages Viking and Kamin as consultants to
render, and Viking and Kamin hereby accepts such engagement, during the period
commencing December 3, 1998 and terminating December 11, 1999 ("Expiration
Date"), to render such advisory and consultative services that MB may reasonably
request from time to time in order that MB may benefit from Viking and Kamin's
expertise, knowledge, reputation and contacts. Viking and Kamin shall be
available upon reasonable notice to advise and consult with MB's officers and
directors at reasonable times by telephone, mail, and in person. Viking and
Kamin agree to execute a standard form of confidentiality agreement to protect
MB's confidential and proprietary information.
2. It is understood and agreed that Viking and Kamin are
presently engaged and intend to engage in various other businesses and advisory
and consulting relationships and Viking and Kamin shall be permitted from time
to time in their sole discretion to engage in the conduct of any other business
and any other advisory or consulting relationship and perform any and all
services with respect thereto; provided, however, during the term of this
Agreement, without MB's written consent, Viking and Kamin agree not to provide
advisory or consulting services to any entity that is a direct competitor of
Marsee Baking. A direct competitor is defined as a multi-store, upscale retail
bakery.
3. It is understood and agreed that MB will provide Viking and
Kamin with information upon which Viking and Kamin will rely in rendering advice
and consulting hereunder and that MB shall be solely responsible for the
accuracy and completeness of such information. MB may, in its sole discretion,
<PAGE>
proceed in accordance with or contrary to any advice given by Viking and Kamin
and Viking and Kamin shall not be responsible or liable for any advice or other
consultation given by them in good faith.
4. MB shall defend, indemnify and save harmless Viking and
Kamin from and against all claims arising from or in any manner related to the
services of Viking and Kamin, other than based on the gross negligence,
recklessness or willful misconduct of Viking or Kamin, and shall pay the
reasonable cost of legal services within 7 days of billing incurred by Viking
and Kamin in defending themselves. In that respect, Viking and Kamin may choose
his or its own counsel in defending himself.
5. MB agrees to sell each of Viking and Kamin a 5 year warrant
to purchase up to 125,000 shares of MB's Common Stock at an exercise price of
$1.00 per share. The purchase price for each warrant shall be $500 payable at
the time of issuance. The shares underlying such warrants will have piggyback
registration rights on any public offering on the same terms and conditions
granted to the holders of the Series C and Series D Preferred Stock.
6. In addition to the aforesaid compensation, MB shall pay to
Viking and Kamin upon receipt of reasonable verification all of their
out-of-pocket expenses incurred in connection with his services to MB up to a
maximum amount of $25,000. Viking and Kamin will request pre-approval from MB on
any expense exceeding $1,500.
7. Any controversies or claims arising out of, or relating to
this Agreement or the breach thereof, shall be settled by arbitration in
accordance with the commercial rules of the American Arbitration Association in
Denver, Colorado, which decision shall be final and binding on the parties, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof. In addition to all other remedies provided in law or equity, the
arbitrator is hereby authorized to assess costs and attorneys fees against
either party if the arbitrator finds, based on all the facts and circumstances,
that the conduct of or the claims made by such party were unreasonable or
substantially without merit.
8. This Agreement shall be construed in accordance with and
governed by the laws of the State of Colorado without regard to its rules
relating to conflicts of law.
9. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party by facsimile, in person or by courier.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date set
forth above.
OREGON BAKING COMPANY,
dba MARSEE BAKING
By: /s/ Ray Lindstrom
--------------------------
Ray Lindstrom
President and CEO
/s/ Anthony Kamin
---------------------------
Anthony Kamin
VIKING GROUP, LLC
By: /s/ Mike Morrissett
----------------------------
Its:
----------------------------
-3-
UNDERWRITER'S WARRANT AGREEMENT (the "Underwriter's Warrant Agreement"
or "Agreement"), dated as of ____________, 1999, between Oregon Baking Company
(the "Company") and Barron Chase Securities, Inc. (the "Underwriter").
W I T N E S S E T H:
--------------------
WHEREAS, the Underwriter has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Company and the Underwriter, to act as the Underwriter in connection with the
Company's proposed public offering of 1,750,000 shares of the Company's Common
Stock at $5.00 per share and 1,750,000 Warrants ("Public Warrants") at $.125 per
Public Warrant (the "Public Offering"); and
WHEREAS, the Company proposes to issue to the Underwriter and/or
persons related to the Underwriter as those persons are defined in Rule 2710 of
the NASD Conduct Rules (the "Holder"), 175,000 warrants ("Common Stock
Underwriter Warrants") to purchase 175,000 shares of the Company's Common Stock
(the "Shares") and 175,000 warrants ("Warrant Underwriter Warrants") to purchase
175,000 Common Stock Purchase Warrants ("Underlying Warrants") exercisable to
purchase 175,000 shares of the Company's Common Stock. The "Common Stock
Underwriter Warrants" and the "Warrant Underwriter Warrants" are collectively
referred to as the "Warrants". The "Shares" and the "Underlying Warrants" are
collectively referred to as the "Warrant Securities"; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Holders in consideration for, and as part of
the compensation in connection with, the Underwriter acting as Underwriter
pursuant to the Underwriting Agreement.
NOW, THEREFORE, in consideration of the premises, the payment to the
Company of TEN DOLLARS AND NO CENTS ($10.00), the agreements herein set forth
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. GRANT AND PERIOD.
The above recitals are true and correct. The Public Offering has been
registered under a Registration Statement on Form SB-2 (File No. _________) and
declared effective by the Securities and Exchange Commission (the "SEC" or
"Commission") on _______, 1999 (the "Effective Date"). This Agreement, relating
to the purchase of the Warrants, is entered into pursuant to the Underwriting
Agreement between the Company and the Underwriter in connection with the Public
Offering.
1
<PAGE>
Pursuant to the Warrants, the Holders are hereby granted the right to
purchase from the Company, at any time during the period commencing on the
Effective Date and expiring five (5) years thereafter (the "Expiration Time"),
up to 175,000 Shares at an initial exercise price (subject to adjustment as
provided in Article 8 hereof) of $8.25 per share (165% of the public offering
price) and/or 175,000 non-redeemable Underlying Warrants at an initial exercise
price of $.20625 per warrant (165% of the public offering price) (the "Exercise
Price" or "Purchase Price"), subject to the terms and conditions of this
Agreement. Each Underlying Warrant is exercisable to purchase one (1) share of
Common Stock at $8.25 per share during the five (5) year period commencing on
the Effective Date.
Except as specifically otherwise provided herein, the Shares and the
Underlying Warrants constituting the Warrant Securities shall bear the same
terms and conditions as such securities described under the caption "Description
of Securities" in the Registration Statement, and as designated in the Company's
Articles of Incorporation and any amendments thereto, and the Underlying
Warrants shall be governed by the terms of the Warrant Agreement executed in
connection with the Company's public offering (the "Warrant Agreement"), except
as provided herein, and the Holders shall have registration rights under the
Securities Act of 1933, as amended (the "Act"), for the Warrants, the Shares,
the Underlying Warrants, and the shares of Common Stock underlying the
Underlying Warrants, as more fully described in paragraph seven (7) of this
Underwriter's Warrant Agreement. In the event of any extension or change of the
expiration date or reduction or change of the exercise price of the Public
Warrants, the same expiration date and percentage price change to the Underlying
Warrants shall be simultaneously effected, except that the Underlying Warrants
shall expire no later than five (5) years from the Effective Date.
2. WARRANT CERTIFICATES.
The warrant certificates (the "Warrant Certificate") delivered and to
be delivered pursuant to this Agreement shall be in the form set forth in the
form of Warrant Certificate, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. EXERCISE OF WARRANT.
3.1 FULL EXERCISE.
(i) The Holder hereof may effect a cash exercise of the Common
Stock Underwriter Warrants and/or the Warrant Underwriter Warrants
and/or the Underlying Warrants by surrendering the Warrant Certificate,
together with a Subscription in the form of Exhibit "A" attached
2
<PAGE>
thereto, duly executed by such Holder to the Company, at any time prior
to the Expiration Time, at the Company's principal office, accompanied
by payment in cash or by certified or official bank check payable to
the order of the Company in the amount of the aggregate purchase price
(the "Aggregate Price"), subject to any adjustments provided for in
this Agreement. The aggregate price hereunder for each Holder shall be
equal to the exercise price as set forth in Section six (6) hereof
multiplied by the number of Warrants, Underlying Warrants or Shares
that are the subject of each Holder's Warrant (as adjusted as
hereinafter provided).
(ii) The Holder hereof may effect a cashless exercise of the
Common Stock Underwriter Warrants and/or the Underlying Warrants by
delivering the Warrant Certificate to the Company together with a
Subscription in the form of Exhibit "B" attached thereto, duly executed
by such Holder, in which case no payment of cash will be required. Upon
such cashless exercise, the number of Shares to be purchased by each
Holder hereof shall be determined by dividing: (i) the number obtained
by multiplying the number of Shares that are the subject of each
Holder's Warrant Certificate by the amount, if any, by which the then
Market Value (as hereinafter defined) exceeds the Purchase Price; by
(ii) the then per share Market Value or Purchase Price, whichever is
greater. In no event shall the Company be obligated to issue any
fractional securities and, at the time it causes a certificate or
certificates to be issued, it shall pay the Holder in lieu of any
fractional securities or shares to which such Holder would otherwise be
entitled, by the Company check, in an amount equal to such fraction
multiplied by the Market Value. The Market Value shall be determined on
a per Share basis as of the close of the business day preceding the
exercise, which determination shall be made as follows: (a) if the
Common Stock is listed for trading on a national or regional stock
exchange or is included on the NASDAQ National Market or Small-Cap
Market, the average closing sale price quoted on such exchange or the
NASDAQ National Market or Small-Cap Market which is published in THE
WALL STREET JOURNAL for the ten (10) trading days immediately preceding
the date of exercise, or if no trade of the Common Stock shall have
been reported during such period, the last sale price so quoted for the
next day prior thereto on which a trade in the Common Stock was so
reported; or (b) if the Common Stock is not so listed, admitted to
trading or included, the average of the closing highest reported bid
and lowest reported ask price as quoted on the National Association of
Securities Dealer's OTC Bulletin Board or in the "pink sheets"
published by the National Daily Quotation Bureau for the first day
immediately preceding the date of exercise on which the Common Stock is
traded.
3
<PAGE>
3.2 PARTIAL EXERCISE. The securities referred to in paragraph 3.1 above
also may be exercised from time to time in part by surrendering the Warrant
Certificate in the manner specified in Section 3.1 hereof, except that with
respect to a cash exercise, the Purchase Price payable shall be equal to the
number of securities being purchased hereunder multiplied by the per security
Purchase Price, subject to any adjustments provided for in this Agreement. Upon
any such partial exercise, the Company, at its expense, will forthwith issue to
the Holder hereof a new Warrant Certificate or Warrants of like tenor calling in
the aggregate for the number of securities (as constituted as of the date
hereof) for which the Warrant Certificate shall not have been exercised, issued
in the name of the Holder hereof or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct.
4. ISSUANCE OF CERTIFICATES.
Upon the exercise of the Warrants and/or the Underlying Warrants, the
issuance of certificates for the shares of Common Stock and/or other securities
shall be made forthwith (and in any event within three (3) business days
thereafter) without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall (subject to the provisions of Sections 5 and 7 hereof) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the shares
of Common Stock and/or other securities shall be executed on behalf of the
Company by the manual or facsimile signature of the then present Chairman or
Vice Chairman of the Board of Directors or President or Vice President of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or Assistant Secretary of
the Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5. RESTRICTION ON TRANSFER OF WARRANTS.
The Holder of a Warrant Certificate, by acceptance thereof, covenants
and agrees that the Warrants may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, for a period of one
(1) year from the Effective Date of the Public Offering, except (a) to officers
4
<PAGE>
of the Underwriter or to officers and partners of the Selected Dealers
participating in the Public Offering; (b) by will; or (c) by operation of law.
6. EXERCISE PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICES.
The initial exercise price of each Common Stock Underwriter Warrant
shall be $8.25 per share (165% of the public offering price). The initial
exercise price of each Warrant Underwriter Warrant shall be $.20625 per
Underlying Warrant (165% of the public offering price). The initial exercise
price of each Underlying Warrant shall be $8.25 per share. The adjusted exercise
price shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions of
Section 8 hereof. The Warrant Underwriter Warrants and the Underlying Warrants
are exercisable during the five (5) year period commencing on the Effective
Date.
6.2 EXERCISE PRICE.
The term "Exercise Price" herein shall mean the initial exercise price
or the adjusted exercise price, depending upon the context.
7. REGISTRATION RIGHTS.
7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933.
The Warrants, the Shares, the Underlying Warrants and the shares of
Common Stock issuable upon exercise of the Underlying Warrants (collectively the
"Registrable Securities") have been registered under the Securities Act of 1933,
as amended (the "Act"). Upon exercise, in part or in whole, of the Warrants,
certificates representing the Shares, the Underlying Warrants and/or the shares
of Common Stock issuable upon exercise of the Underlying Warrants shall bear the
following legend in the event there is no current registration statement
effective with the Commission at such time as to such securities:
The securities represented by this certificate may not be offered or
sold except pursuant to (i) an effective registration statement under
the Act, (ii) to the extent applicable, Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of securities),
or (iii) an opinion of counsel, if such opinion shall be reasonably
satisfactory to counsel to the issuer, that an exemption from
registration under such Act and applicable state securities laws is
available.
5
<PAGE>
7.2 PIGGYBACK REGISTRATION.
If, at any time commencing after the Effective Date of the offering and
expiring seven (7) years thereafter, the Company prepares and files a
post-effective amendment to the Registration Statement, or a new Registration
Statement under the Act, or files a Notification on Form 1-A or otherwise
registers securities under the Act, or files a similar disclosure document with
the Commission (collectively the "Registration Documents") as to any of its
securities under the Act (other than under a Registration Statement pursuant to
Form S-8), it will give written notice by registered mail, at least thirty (30)
days prior to the filing of each such Registration Document, to the Underwriter
and to all other Holders of the Registrable Securities of its intention to do
so. If the Underwriter and/or other Holders of the Registrable Securities notify
the Company within twenty (20) days after receipt of any such notice of its or
their desire to include any such Registrable Securities in such proposed
Registration Documents, the Company shall afford the Underwriter and such
Holders of such Registrable Securities the opportunity to have any Registrable
Securities registered under such Registration Documents or any other available
Registration Document.
Notwithstanding the provisions of this Section 7.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 7.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
7.3 DEMAND REGISTRATION.
(a) At any time commencing one (1) year after the Effective Date of the
Public Offering, and expiring four (4) years thereafter, the Holders of
Registrable Securities representing more than 50% of such securities at that
time outstanding shall have the right (which right is in addition to the
registration rights under Section 7.2 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Commission, on one
occasion, a registration statement and/or such other documents, including a
prospectus, and/or any other appropriate disclosure document as may be
reasonably necessary in the opinion of both counsel for the Company and counsel
for the Underwriter and Holders, in order to comply with the provisions of the
Act, so as to permit a public offering and sale of their respective Registrable
Securities for nine (9) consecutive months (or such longer period of time as
permitted by the Act) by such Holders and any other Holders of any of the
Registrable Securities who notify the Company within twenty (20) days after
being given notice from the Company of such request. A Demand Registration shall
not be counted as a Demand Registration hereunder until such Demand Registration
6
<PAGE>
has been declared effective by the SEC and maintained continuously effective for
a period of at least nine months or such shorter period when all Registrable
Securities included therein have been sold in accordance with such Demand
Registration, provided that a Demand Registration shall be counted as a Demand
Registration hereunder if the Company ceases its efforts in respect of such
Demand Registration at the request of the majority Holders making the demand for
a reason other than a material and adverse change in the business, assets,
prospects or condition (financial or otherwise) of the Company and its
subsidiaries taken as a whole.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by the majority of the Holders to
all other registered Holders of any of the Registrable Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time commencing one (1) year after
the Effective Date of the offering, and expiring four (4) years thereafter, the
Holders of a majority of the Registrable Securities shall have the right,
exercisable by written request to the Company, to have the Company prepare and
file, on one occasion, with the Commission a registration statement or any other
appropriate disclosure document so as to permit a public offering and sale for
nine (9) consecutive months (or such longer period of time as permitted by the
Act) by any such Holder of Registrable Securities; provided, however, that the
provisions of Section 7.4(b) hereof shall not apply to any such registration
request and registration and all costs incident thereto shall be at the expense
of the Holder or Holders participating in the offering pro-rata.
(d) Any written request by the Holders made pursuant to this Section
7.3 shall:
(i) specify the number of Registrable Securities which the
Holders intend to offer and sell and the minimum price at which the
Holders intend to offer and sell such securities;
(ii) state the intention of the Holders to offer such
securities for sale;
(iii) describe the intended method of distribution of such
securities; and
(iv) contain an undertaking on the part of the Holders to
provide all such information and materials concerning the Holders and
take all such action as may be reasonably required to permit the
Company to comply with all applicable requirements of the Commission
and to obtain acceleration of the effective date of the registration
statement.
7
<PAGE>
(e) In the event the Company receives from the Holders of any
Registrable Securities representing more than 50% of such securities at that
time outstanding, a request that the Company effect a registration on Form S-3
with respect to the Registrable Securities and if Form S-3 is available for such
offering, the Company shall, as soon as practicable, effect such registration as
would permit or facilitate the sale and distribution of the Registrable
Securities as are specified in the request. All expenses incurred in connection
with a registration requested pursuant to this Section shall be borne by the
Company. Registrations effected pursuant to this Section 7.3(e) shall not be
counted as registrations pursuant to Section 7.3(a) and 7.3(c) hereof.
7.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION.
In connection with the filing of any Registration Document by the
Company, the Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within forty-five (45) days of receipt of any demand pursuant to
Section 7.3, and shall use its best efforts to have any such registration
statement declared effective at the earliest practicable time. The Company will
promptly notify each seller of such Registrable Securities and confirm such
advice in writing, (i) when such registration statement becomes effective, (ii)
when any post-effective amendment to such registration statement becomes
effective and (iii) of any request by the SEC for any amendment or supplement to
such registration statement or any prospectus relating thereto or for additional
information.
The Company shall furnish to each seller of such Registrable Securities
such number of copies of such registration statement and of each such amendment
and supplement thereto (in each case including each preliminary prospectus and
summary prospectus) in conformity with the requirements of the Act, and such
other documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities by such seller.
(b) The Company shall pay all costs (excluding transfer taxes, if any,
and fees and expenses of Holder(s)' counsel and the Holder's pro-rata portion of
the selling discount or commissions), fees and expenses in connection with all
registration statements filed pursuant to Sections 7.2 and 7.3(a) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. The Holder(s) will pay all costs, fees and
expenses in connection with any registration statement filed pursuant to Section
7.3(c). If the Company shall fail to comply with the provisions of Section
7.3(a), the Company shall, in addition to any other equitable or other relief
available to the Holder(s), be liable for any or all special and consequential
8
<PAGE>
damages sustained by the Holder(s) requesting registration of their Registrable
Securities.
(c) The Company shall prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be reasonably necessary to keep such registration statement
effective for at least nine months (or such longer period as permitted by the
Act), and to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the seller or
sellers of Registrable Securities set forth in such registration statement. If
at any time the SEC should institute or threaten to institute any proceedings
for the purpose of issuing a stop order suspending the effectiveness of any such
registration statement, the Company will promptly notify each seller of such
Registrable Securities and will use all reasonable efforts to prevent the
issuance of any such stop order or to obtain the withdrawal thereof as soon as
possible. The Company will use its good faith reasonable efforts and take all
reasonably necessary action which may be required in qualifying or registering
the Registrable Securities included in a registration statement for offering and
sale under the securities or blue sky laws of such states as reasonably are
required by the Holder(s), provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction. The
Company shall use its good faith reasonable efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities of the United States
or any State thereof as may be reasonably necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities.
(d) The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify the Underwriter as contained in the Underwriting
Agreement.
(e) If requested by the Company prior to the filing of any registration
statement covering the Registrable Securities, each of the Holder(s) of the
9
<PAGE>
Registrable Securities to be sold pursuant to a registration statement, and
their successors and assigns, shall severally, and not jointly, indemnify the
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all loss, claim, damage or expense or liability (including
all expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject under the Act,
the Exchange Act or otherwise, arising from written information furnished by
such Holder, or their successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same effect as the
provisions contained in the Underwriting Agreement pursuant to which the
Underwriter has agreed to indemnify the Company, except that the maximum amount
which may be recovered from each Holder pursuant to this paragraph or otherwise
shall be limited to the amount of net proceeds received by the Holder from the
sale of the Registrable Securities.
(f) Nothing contained in this Agreement shall be construed as requiring
the Holder(s) to exercise their Warrants or Underlying Warrants prior to the
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other
than the Registrable Securities to be included in any registration statement
filed pursuant to Section 7.3 hereof without the prior written consent of the
Holders of the Registrable Securities representing a majority of such
securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(i) The Company shall deliver promptly to each Holder participating in
the offering requesting the correspondence and memoranda described below and the
10
<PAGE>
managing underwriter copies of all correspondence between the Commission and the
Company, its counsel or auditors and all non-privileged memoranda relating to
discussions with the Commission or its staff with respect to the registration
statement and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(j) With respect to a registration statement filed pursuant to Section
7.3, the Company, if requested, shall enter into an underwriting agreement with
the managing underwriter, reasonably satisfactory to the Company, selected for
such underwriting by Holders holding a majority of the Registrable Securities
requested to be included in such underwriting. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties and covenants
by the Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter. The Holders, if required by the
Underwriter to be parties to any underwriting agreement relating to an
underwritten sale of their Registrable Securities, may, at their option, require
that any or all the representations, warranties and covenants of the Company to
or for the benefit of such underwriters shall also be made to and for the
benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
(k) Notwithstanding the provisions of paragraph 7.2 or paragraph 7.3 of
this Agreement, the Company shall not be required to effect or cause the
registration of Registrable Securities pursuant to paragraph 7.2 or paragraph
7.3 hereof if, within thirty (30) days after its receipt of a request to
register such Registrable Securities (i) counsel for the Company delivers an
opinion to the Holders requesting registration of such Registrable Securities,
in form and substance satisfactory to counsel to such Holder(s), to the effect
that the entire number of Registrable Securities proposed to be sold by such
Holder(s) may otherwise be sold, in the manner proposed by such Holder(s),
without registration under the Securities Act, or (ii) the SEC shall have issued
a no-action position, in form and substance satisfactory to counsel for the
Holder(s) requesting registration of such Registrable Securities, to the effect
11
<PAGE>
that the entire number of Registrable Securities proposed to be sold by such
Holder(s) may be sold by it, in the manner proposed by such Holder(s), without
registration under the Securities Act.
(l) After completion of the Public Offering, the Company shall not,
directly or indirectly, enter into any merger, business combination or
consolidation in which (a) the Company shall not be the surviving corporation
and (b) the stockholders of the Company are to receive, in whole or in part,
capital stock or other securities of the surviving corporation, unless the
surviving corporation shall, prior to such merger, business combination or
consolidation, agree in writing to assume the obligations of the Company under
this Agreement, and for that purpose references hereunder to "Registrable
Securities" shall be deemed to include the securities which the Holders would be
entitled to receive in exchange for Registrable Securities under any such
merger, business combination or consolidation, provided that to the extent such
securities to be received are convertible into shares of Common Stock of the
issuer thereof, then any such shares of Common Stock as are issued or issuable
upon conversion of said convertible securities shall also be included within the
definition of "Registrable Securities".
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
8.1 ADJUSTMENT FOR DIVIDENDS, SUBDIVISIONS, COMBINATIONS OR
RECLASSIFICATIONS.
In case the Company shall (a) pay a dividend or make a distribution in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (b) subdivide its outstanding shares of Common Stock into a
greater number of shares, (c) combine its outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of its shares
of Common Stock any shares of capital stock of the Company; then, and in each
such case, the per share Exercise Price and the number of Warrant Securities in
effect immediately prior to such action shall be adjusted so that the Holder of
this Warrant thereafter upon the exercise hereof shall be entitled to receive
the number and kind of shares of the Company which such Holder would have owned
immediately following such action had this Warrant been exercised immediately
prior thereto. An adjustment made pursuant to this Section shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made pursuant to this Section, the Holder of this Warrant shall
become entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose determination shall be
conclusive) shall determine the allocation of the adjusted Exercise Price
between or among shares of such class of capital stock.
12
<PAGE>
Immediately upon any adjustment of the Exercise Price pursuant to this
Section, the Company shall send written notice thereof to the Holder of Warrant
Certificates (by first class mail, postage prepaid), which notice shall state
the Exercise Price resulting from such adjustment, and any increase or decrease
in the number of Warrant Securities to be acquired upon exercise of the
Warrants, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
8.2 ADJUSTMENT FOR REORGANIZATION, MERGER OR CONSOLIDATION.
In case of any reorganization of the Company or consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental Warrant Agreement providing that the Holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such warrant might have been
exercised immediately prior to such reorganization, consolidation, merger,
conveyance, sale or transfer. Such supplemental Warrant Agreement shall provide
for adjustments which shall be identical to the adjustments provided in Section
8 and such registration rights and other rights as provided in this Agreement.
The Company shall not effect any such consolidation, merger, or similar
transaction as contemplated by this paragraph, unless prior to or simultaneously
with the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing, receiving, or leasing such assets or other appropriate corporation
or entity shall assume, by written instrument executed and delivered to the
Holders, the obligation to deliver to the Holders, such shares of stock,
securities, or assets as, in accordance with the foregoing provisions, such
holders may be entitled to purchase, and to perform the other obligations of the
Company under this Agreement. The above provision of this Subsection shall
similarly apply to successive consolidations or successively whenever any event
listed above shall occur.
8.3 DIVIDENDS AND OTHER DISTRIBUTIONS.
In the event that the Company shall at any time prior to the exercise
of all of the Warrants and/or Underlying Warrants distribute to its stockholders
any assets, property, rights, evidences of indebtedness, securities (other than
a distribution made as a cash dividend payable out of earnings or out of any
earned surplus legally available for dividends under the laws of the
13
<PAGE>
jurisdictions of incorporation of the Company), whether issued by the Company or
by another, the Holders of the unexercised Warrants shall thereafter be
entitled, in addition to the shares of Common Stock or other securities and
property receivable upon the exercise thereof, to receive, upon the exercise of
such Warrants, the same property, assets, rights, evidences of indebtedness,
securities or any other thing of value that they would have been entitled to
receive at the time of such distribution as if the Warrants had been exercised
immediately prior to such distribution. At the time of any such distribution,
the Company shall make appropriate reserves to ensure the timely performance of
the provisions of this subsection or an adjustment to the Exercise Price, which
shall be effective as of the day following the record date for such
distribution.
8.4 ADJUSTMENT IN NUMBER OF SECURITIES.
Upon each adjustment of the Exercise Price pursuant to the provisions
of this Section 8, the number of securities issuable upon the exercise of each
Warrant and/or Underlying Warrant shall be adjusted to the nearest full amount
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of securities issuable upon exercise of the
Warrants and/or the Underlying Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
8.5 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES.
No adjustment of the Exercise Price shall be made if the amount of said
adjustment shall be less than 5 cents ($.05) per Share, provided, however, that
in such case any adjustment that would otherwise be required then to be made
shall be carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least 5 cents ($.05) per Share.
8.6 ACCOUNTANT'S CERTIFICATE OF ADJUSTMENT.
In each case of an adjustment or readjustment of the Exercise Price or
the number of any securities issuable upon exercise of the Warrants and/or
Underlying Warrants, the Company, at its expense, shall cause independent
certified public accountants of recognized standing selected by the Company (who
may be the independent certified public accountants then auditing the books of
the Company) to compute such adjustment or readjustment in accordance herewith
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to any Holder(s) of
the Warrants and/or Underlying Warrants at the Holder(s) address as shown on the
Company's books. The certificate shall set forth such adjustment or
14
<PAGE>
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including, but not limited to, a statement of (i) the
Exercise Price at the time in effect, and (ii) the number of additional or fewer
securities and the type and amount, if any, of other property which at the time
would be receivable upon exercise of the Warrants and/or Underlying Warrants.
8.7 ADJUSTMENT OF UNDERLYING WARRANT EXERCISE PRICE.
With respect to any of the Underlying Warrants whether or not the
Underlying Warrants have been exercised (or are exercisable) and whether or not
the Underlying Warrants are issued and outstanding, the Underlying Warrant
exercise price and the number of shares of Common Stock underlying such
Underlying Warrants shall be automatically adjusted in accordance with the
Warrant Agreement between the Company and the Company's transfer agent, upon
occurrence of any of the events relating to adjustments described therein.
Thereafter, the Underlying Warrants shall be exercisable at such adjusted
Underlying Warrant exercise price for such adjusted number of underlying shares
of Common Stock or other securities, properties or rights.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of securities in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTEREST.
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock upon the exercise of the Warrants and/or
Underlying Warrants, nor shall it be required to issue script or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests may be eliminated, at the Company's option, by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights, or in lieu thereof paying cash equal to such
fractional interest multiplied by the current value of a share of Common Stock.
15
<PAGE>
11. RESERVATION, VALIDITY AND LISTING.
The Company covenants and agrees that during the exercise period, the
Company shall at all times reserve and keep available out of its authorized
shares of Common Stock, solely for the purpose of issuance upon the exercise of
the Warrants and the Underlying Warrants, such number of shares of Common Stock
or other securities, properties or rights as shall be issuable upon the exercise
under this Warrant Certificate. The Company covenants and agrees that, upon
exercise of the Warrants and/or the Underlying Warrants, and payment of the
Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly authorized, validly issued, fully
paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the Warrants and/or Underlying Warrants shall be
outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon the exercise of the Warrants and the Underlying
Warrants to be listed and quoted (subject to official notice of issuance) on all
securities exchanges and systems on which the Common Stock and/or the Public
Warrants may then be listed and/or quoted, including Nasdaq.
12. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Agreement shall be construed as conferring
upon the Holders of the Warrants and/or Underlying Warrants the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and/or Underlying Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital stock
of the Company, or any option, right or warrant to subscribe therefor;
or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an
entirety shall be proposed;
16
<PAGE>
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date of the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notices shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. UNDERLYING WARRANTS.
The form of the certificate representing the Underlying Warrants (and
the form of election to purchase shares of Common Stock upon the exercise of the
Underlying Warrants and the form of assignment printed on the reverse thereof)
shall be substantially as set forth in the exhibits to the Warrant Agreement.
Subject to the terms of this Agreement, one (1) Underlying Warrant shall
evidence the right to initially purchase one (1) fully-paid and non-assessable
share of Common Stock at an initial purchase price of $8.25 during the five (5)
year period commencing on the Effective Date of the Registration Statement, at
which time the Underlying Warrants, unless the exercise period has been
extended, shall expire. The exercise price of the Underlying Warrants and the
number of shares of Common Stock issuable upon the exercise of the Underlying
Warrants are subject to adjustment, whether or not the Warrants have been
exercised and the Underlying Warrants have been issued, in the manner and upon
the occurrence of the events set forth in the Warrant Agreement, which is hereby
incorporated herein by reference and made a part hereof as if set forth in its
entirety herein. Subject to the provisions of this Agreement and upon issuance
of the Underlying Warrants, each registered holder of such Underlying Warrant
shall have the right to purchase from the Company (and the Company shall issue
to such registered holders) up to the number of fully-paid and non-assessable
shares of Common Stock (subject to adjustment as provided in the Warrant
Agreement) set forth in such Warrant Certificate, free and clear of all
preemptive rights of stockholders, provided that such registered Holder complies
with the terms governing exercise of the Underlying Warrant set forth in the
Warrant Agreement, and pays the applicable exercise price, determined in
accordance with the terms of the Warrant Agreement. Upon exercise of the
Underlying Warrants, the Company shall forthwith issue to the registered Holder
of any such Underlying Warrant in his name or in such name as may be directed by
him, certificates for the number of shares of Common Stock so purchased. Except
as otherwise provided herein and in this Agreement, the Underlying Warrants
17
<PAGE>
shall be governed in all respects by the terms of the Warrant Agreement. The
Underlying Warrants shall be transferrable in the manner provided in the Warrant
Agreement, and upon any such transfer, a new Underlying Warrant certificate
shall be issued promptly to the transferee. The Company covenants to send to
each Holder, irrespective of whether or not the Warrants have been exercised,
any and all notices required by the Warrant Agreement to be sent to holders of
Underlying Warrants.
14. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given when sent by
facsimile and delivered personally or by overnight courier, or mailed by
registered or certified mail, return receipt requested:
(a) If to the registered Holder of any of the Registrable
Securities, to the address of such Holder as shown on the books
of the Company; or
(b) If to the Company, to the address set forth below or to
such other address as the Company may designate by notice to the
Holders.
Raymond W. Lindstrom, President
Oregon Baking Company
2287 N.W. Pettygrove
Portland, Oregon 97210
With copies to: Brendan R. McDonnell, Esq.
Tonkon Torp LLP
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204
and
David A. Carter, P.A.
2300 Glades Road, Suite 210W
Boca Raton, Florida 33431
15. ENTIRE AGREEMENT: MODIFICATION.
This Agreement (and the Underwriting Agreement and Warrant Agreement to
the extent applicable) contain the entire understanding between the parties
hereto with respect to the subject matter hereof, and the terms and provisions
of this Agreement may not be modified, waived or amended except in a writing
18
<PAGE>
executed by the Company and the Holders of at least a majority of Registrable
Securities (based on underlying numbers of shares of Common Stock). Notice of
any modification, waiver or amendment shall be promptly provided to any Holder
not consenting to such modification, waiver or amendment.
16. SUCCESSORS.
All the covenants and provisions of this Agreement shall be binding
upon and inure to the benefit of the Company, the Holders and their respective
successors and assigns hereunder.
17. TERMINATION.
This Agreement shall terminate at the earlier of the public sale of all
of the Registrable Securities or at the close of business on ________, 2006.
Notwithstanding the foregoing, the indemnification provisions of Section 7 shall
survive such termination.
18. GOVERNING LAW; SUBMISSION TO JURISDICTION.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Florida and for all
purposes shall be construed in accordance with the laws of said State without
giving effect to the rules of said State governing the conflicts of laws. The
Company, the Underwriter and the Holders hereby agree that any action,
proceeding or claim arising out of, or relating in any way to, this Agreement
shall be brought and enforced in a federal or state court of competent
jurisdiction with venue only in the Fifteenth Judicial Circuit Court in and for
Palm Beach County, Florida or the United States District Court for the Southern
District of Florida, West Palm Beach Division, and irrevocably submits to such
jurisdiction, which jurisdiction shall be exclusive. The Company, the
Underwriter and the Holders hereby irrevocably waive any objection to such
exclusive jurisdiction or inconvenient forum. A party to this Agreement named as
a Defendant in any action brought in connection with this Agreement in any court
outside of the above named designated county or district shall have the right to
have the venue of said action changed to the above designated county or district
or, if necessary, have the case dismissed, requiring the other party to refile
such action in an appropriate court in the above designated county or federal
district.
19. SEVERABILITY.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
19
<PAGE>
20. CAPTIONS.
The caption headings of the Sections of this Agreement are for
convenience of reference only and are not intended, nor should they be construed
as, a part of this Agreement and shall be given no substantive effect.
21. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Underwriter and any other registered
Holder(s) of the Warrant Certificates or Registrable Securities any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company and the Underwriter and any
other Holder(s) of the Warrant Certificates or Registrable Securities.
22. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
OREGON BAKING COMPANY
BY: _________________________________
Raymond W. Lindstrom, President
Attest:
_______________________________
Howard J. Wasserteil, Secretary
BARRON CHASE SECURITIES, INC.
By: _________________________________
Robert Kirk, President
<PAGE>
OREGON BAKING COMPANY
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M, EASTERN TIME ON ___________, 2004
NO. W-________
_________ Common Stock __________ Warrant
Underwriter Underwriter
Warrants Warrants
or
__________ Underlying
Warrants
This Warrant Certificate certifies that___________ , or registered
assigns, is the registered holder of _________ Common Stock Underwriter Warrants
and/or ______ Warrant Underwriter Warrants and/or __________ Underlying Warrants
of OREGON BAKING COMPANY (the "Company"). Each Common Stock Underwriter Warrant
permits the Holder hereof to purchase initially, at any time from _______, 1999
("Purchase Date") until 5:30 p.m. Eastern Time on _______, 2004 ("Expiration
Date"), one (1) share of the Company's Common Stock at the initial exercise
price, subject to adjustment in certain events (the "Exercise Price"), of $8.25
per share (165% of the public offering price). Each Warrant Underwriter Warrant
permits the Holder hereof to purchase initially, at any time from the Purchase
Date until five (5) years from the Purchase Date, one (1) Underlying Warrant at
the Exercise Price of $.20625 per Underlying Warrant. Each Underlying Warrant
permits the Holder thereof to purchase, at any time from the Purchase Date until
five (5) years from the Purchase Date, one (1) share of the Company's Common
Stock at the Exercise Price of $8.25 per share.
21
<PAGE>
Any exercise of Common Stock Underwriter Warrants and/or Warrant
Underwriter Warrants and/or Underlying Warrants shall be effected by surrender
of this Warrant Certificate and payment of the Exercise Price at an office or
agency of the Company, but subject to the conditions set forth herein and in the
Underwriter's Warrant Agreement dated as of _______, 1999, between the Company
and Barron Chase Securities, Inc. (the "Underwriter's Warrant Agreement").
Payment of the Exercise Price shall be made by certified check or official bank
check in New York Clearing House funds payable to the order of the Company in
the event there is no cashless exercise pursuant to Section 3.1(ii) of the
Underwriter's Warrant Agreement. The Common Stock Underwriter Warrants, the
Warrant Underwriter Warrants, and the Underlying Warrants are collectively
referred to as "Warrants".
No Warrant may be exercised after 5:30 p.m., Eastern Time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Underwriter's Warrant
Agreement, which Underwriter's Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation or rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence
of certain events, the Exercise Price and the type and/or number of the
Company's securities issuable thereupon may, subject to certain conditions, be
adjusted. In such event, the Company will, at the request of the holder, issue a
new Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Underwriter's Warrant Agreement.
Upon due presentment for registration or transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Underwriter's
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
22
<PAGE>
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in the
Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of _______, 1999
OREGON BAKING COMPANY
BY:___________________________________
Raymond W. Lindstrom, President
Attest:
_______________________________
Howard J. Wasserteil, Secretary
23
<PAGE>
EXHIBIT "A"
FORM OF SUBSCRIPTION (CASH EXERCISE)
------------------------------------
(To be signed only upon exercise of Warrant)
TO: Raymond W. Lindstrom, President
Oregon Baking Company
2287 N.W. Pettygrove
Portland, Oregon 97210
The undersigned, the Holder of Warrant Certificate number _____ (the
"Warrant"), representing ________ Common Stock Underwriter Warrants and/or
_______ Warrant Underwriter Warrants and/or ______________ Underlying Warrants
of OREGON BAKING COMPANY (the "Company"), which Warrant Certificate is being
delivered herewith, hereby irrevocably elects to exercise the purchase right
provided by the Warrant Certificate for, and to purchase thereunder, _________
Shares and/or __________ Underlying Warrants of the Company, and herewith makes
payment of $________ therefor, and requests that the certificates for such
securities be issued in the name of, and delivered to, _____________________ ,
whose address is ________________________________________________________, all
in accordance with the Underwriter's Warrant Agreement and the Warrant
Certificate.
Dated: ___________________________
_______________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant Certificate)
________________________________________
________________________________________
(Address)
________________________________________
(Social Security Number of Tax
Identification Number)
24
<PAGE>
EXHIBIT "B"
FORM OF SUBSCRIPTION (CASHLESS EXERCISE)
----------------------------------------
TO: Raymond W. Lindstrom, President
Oregon Baking Company
2287 N.W. Pettygrove
Portland, Oregon 97210
The undersigned, the Holder of Warrant Certificate number________ (the
"Warrant"), representing ________________ Common Stock Underwriter Warrants
and/or ___________ Underlying Warrants of OREGON BAKING COMPANY (the "Company"),
which Warrant is being delivered herewith, hereby irrevocably elects the
cashless exercise of the purchase right provided by the Underwriter's Warrant
Agreement and the Warrant Certificate for, and to purchase thereunder, Shares of
the Company in accordance with the formula provided at Section three (3) of the
Underwriter's Warrant Agreement. The undersigned requests that the certificates
for such Shares be issued in the name of, and delivered to,
_______________________________________ , whose address is,
_____________________________________ , all in accordance with the Warrant
Certificate.
Dated: _______________________
________________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant Certificate)
________________________________________
________________________________________
(Address)
________________________________________
(Social Security Number of Tax
Identification Number)
25
<PAGE>
(FORM OF ASSIGNMENT)
(To be exercised by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ______________________________________________ hereby sells,
assigns and transfers unto
(Print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________________,
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, and full power of substitution.
Dated: Signature:
_______________________________ _____________________________________
(Signature must conform in all respects
to name of holder as specified on the
fact of the Warrant Certificate)
____________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
26
FINANCIAL ADVISORY AGREEMENT
This Agreement is made and entered into as of the ____ day of ________,
1999, between Oregon Baking Company (the "Company") and Barron Chase Securities,
Inc. (the "Financial Advisor").
W I T N E S S E T H :
---------------------
WHEREAS, The Company has engaged the Financial Advisor to act as the
Underwriter in connection with the public offering of the Company's securities;
and
WHEREAS, the Financial Advisor has experience in providing financial
and business advice to public and private companies; and
WHEREAS, the Company is seeking and the Financial Advisor is willing to
furnish business and financial related advice and services to the Company on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of, and for the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:
1. PURPOSE. The Company hereby engages the Financial Advisor on a
non-exclusive basis for the term specified in this Agreement to render financial
advisory and consulting advice to the Company as an investment banker relating
to financial and similar matters upon the terms and conditions set forth herein.
However, the advisory will only be rendered if specifically requested in writing
by the Chief Executive Officer of the Company.
2. REPRESENTATIONS OF THE FINANCIAL ADVISOR AND THE COMPANY. The
Financial Advisor represents and warrants to the Company that (i) it is a member
in good standing of the National Association of Securities Dealers, Inc.
("NASD") and that it is engaged in the securities brokerage business; (ii) in
addition to its securities brokerage business, the Financial Advisor provides
consulting advisory services; and (iii) it is free to enter into this Agreement
and the services to be provided pursuant to this Agreement are not in conflict
with any other contractual or other obligation to which the Financial Advisor is
bound. The Company acknowledges that the Financial Advisor is in the business of
providing financial services and consulting advice (of the type contemplated by
this Agreement) to others and that nothing herein contained shall be construed
to limit or restrict the Financial Advisor in conducting such business with
respect to others, or rendering such advice to others.
1
<PAGE>
3. DUTIES OF THE FINANCIAL ADVISOR. During the term of this Agreement,
the Financial Advisor will provide the Company with consulting advice as
specified below at the request of the Company, provided that the Financial
Advisor shall not be required to undertake duties not reasonably within the
scope of the consulting advisory service in which the Financial Advisor is
engaged generally. In performance of these duties, the Financial Advisor shall
provide the Company with the benefits of its best judgment and efforts. It is
understood and acknowledged by the parties that the value of the Financial
Advisor's advice is not measurable in any quantitative manner, and that the
amount of time spent rendering such consulting advice shall be determined
according to the Financial Advisor's discretion.
The Financial Advisor's duties may include, but will not necessarily be
limited to:
1) Advice relating to corporate financing activities;
2) Recommendations relating to specific business
operations and investments;
3) Advice relating to financial planning; and
4) Advice regarding future financings involving
securities of the Company or any subsidiary.
4. TERM. The term of this Agreement shall be for twelve (12) months
commencing on the first day of the month following the Company's receipt of the
proceeds from the contemplated public offering (the "Commencement Date");
provided, however, that this Agreement may be renewed or extended upon such
terms and conditions as may be mutually agreed upon by the parties hereto.
5. FEE. The Company shall pay the Financial Advisor a fee of $108,000
for the financial services to be rendered pursuant to this Agreement, all of
which shall be payable at the Closing Date of the Company's proposed public
offering.
6. EXPENSES. In addition to the fees payable hereunder, the Company
shall reimburse the Financial Advisor, within five (5) business days of its
request, for any and all reasonable out-of-pocket expenses incurred in
connection with the services performed by the Financial Advisor and its counsel
pursuant to this Agreement, including (i) reasonable hotel, food and associated
expenses; (ii) reasonable charges for travel; (iii) reasonable long-distance
telephone calls; and (iv) other reasonable expenses spent or incurred on the
Company's behalf. All such expenses in excess of $500 shall be pre-approved by
the Company.
7. USE OF ADVICE BY THE COMPANY; PUBLIC MARKET FOR THE COMPANY'S
SECURITIES. The Company acknowledges that all opinions and advice (written or
2
<PAGE>
oral) given by the Financial Advisor to the Company in connection with the
engagement of the Financial Advisor are intended solely for the benefit and use
of the Company in considering the transaction to which they relate, and the
Company agrees that no person or entity other than the Company shall be entitled
to make use of or rely upon the advice of the Financial Advisor to be given
hereunder, and no such opinion or advice shall be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose, nor may the Company make any public references to the Financial
Advisor, or use the Financial Advisor's name in any annual reports or any other
reports or releases of the Company without the prior written consent of the
Financial Advisor.
The Company acknowledges that the Financial Advisor makes no commitment
whatsoever as to making a public trading market in the Company's securities or
to recommending or advising its clients to purchase the Company's securities.
Research reports or corporate finance reports that may be prepared by the
Financial Advisor will, when and if prepared, be done solely on the merits or
judgment and analysis of the Financial Advisor or any senior corporate finance
personnel of the Financial Advisor.
8. COMPANY INFORMATION; CONFIDENTIALLY. The Company recognizes and
confirms that, in advising the Company and in fulfilling its engagement
hereunder, the Financial Advisor will use and rely on data, material and other
information furnished to the Financial Advisor by the Company. The Company
acknowledges and agrees that in performing its services under this engagement,
the Financial Advisor may rely upon the data, material and other information
supplied by the Company without independently verifying the accuracy,
completeness or veracity of same. In addition, in the performance of its
services, the Financial Advisor may look to such others for such factual
information, economic advice and/or research upon which to base its advice to
the Company hereunder as the Financial Advisor shall in good faith deem
appropriate.
Except as contemplated by the terms hereof or as required by applicable
law, the Financial Advisor shall keep confidential all non-public information
provided to it by the Company, and shall not disclose such information to any
third party without the Company's prior written consent, other than such of its
employees and advisors as the Financial Advisor determines to have a need to
know.
9. INDEMNIFICATION. The Company shall indemnify and hold harmless the
Financial Advisor against any and all liabilities, claims, lawsuits, including
any and all awards and/or judgments to which it may become subject under the
Securities Act of 1933, (the "Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act") or any other federal or state statute, at common law or
otherwise, insofar as said liabilities, claims and lawsuits (including costs,
3
<PAGE>
expenses, awards and/or judgments) arise out of or are in connection with the
services rendered by the Financial Advisor or any transactions in connection
with this Agreement, except for any liabilities, claims and lawsuits (including
awards and/or judgments), arising out of willful misconduct or willful omissions
of the Financial Advisor. In addition, the Company shall also indemnify and hold
harmless the Financial Advisor against any and all reasonable costs and
expenses, including reasonable counsel fees, incurred relating to the foregoing.
The Financial Advisor shall give the Company prompt notice of any such
liability, claim or lawsuit which the Financial Advisor contends is the subject
matter of the Company's indemnification and the Company thereupon shall be
granted the right to take any and all necessary and proper action, at its sole
cost and expense, with respect to such liability, claim and lawsuit, including
the right to settle, compromise and dispose of such liability, claim or lawsuit,
excepting therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
The Financial Advisor shall indemnify and hold the Company harmless
against any and all liabilities, claims and lawsuits, including any and all
awards and/or judgments to which it may become subject under the Act, the 1934
Act or any other federal or state statute, at common law or otherwise, insofar
as said liabilities, claims and lawsuits (including costs, expenses, awards
and/or judgments) arise out of or are based upon willful misconduct or willful
omissions of the Financial Advisor. In addition, the Financial Advisor shall
also indemnify and hold the Company harmless against any and all reasonable
costs and expenses, including reasonable counsel fees, incurred relating to the
foregoing.
The Company shall give the Financial Advisor prompt notice of any such
liability, claim or lawsuit which the Company contends is the subject matter of
the Financial Advisor's indemnification and the Financial Advisor thereupon
shall be granted the right to take any and all necessary and proper action, at
its sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise or dispose of such liability, claim or
lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
10. THE FINANCIAL ADVISOR AS AN INDEPENDENT CONTRACTOR. The Financial
Advisor shall perform its services hereunder as an independent contractor and
not as an employee of the Company or an affiliate thereof. It is expressly
understood and agreed to by the parties hereto that the Financial Advisor shall
have no authority to act for, represent or bind the Company or any affiliate
thereof in any manner, except as may be agreed to expressly by the Company in
writing from time to time.
4
<PAGE>
11. MISCELLANEOUS.
(a) This Agreement between the Company and the Financial Advisor
constitutes the entire agreement and understanding of the parties hereto, and
supersedes any and all previous agreements and understandings, whether oral or
written, between the parties with respect to the matters set forth herein.
(b) Any notice or communication permitted or required hereunder shall
be in writing and shall be deemed sufficiently given if hand-delivered or sent
by facsimile and postage prepaid by certified or registered mail, return receipt
requested, to the respective parties as set forth below, or to such other
address as either party may notify the other in writing:
If to the Company: Raymond W. Lindstrom, President
Oregon Baking Company
2287 N.W. Pettygrove
Portland, Oregon 97210
Copy to: Brendan R. McDonnell, Esq.
Tonkon Torp LLP
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204
If to the
Financial Advisor: Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real
Boca Raton, Florida 33433
Copy to: David A. Carter, P.A.
2300 Glades Road, Suite 210W
Boca Raton, Florida 33431
(c) This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and their respective successors, legal
representatives and assigns.
(d) This Agreement may be executed in any number of counterparts, each
of which together shall constitute one and the same original document.
(e) No provision of this Agreement may be amended, modified or waived,
except in a writing signed by all of the parties hereto.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida applicable to contracts made and to be
performed entirely within the State of Florida. The parties agree that any
action brought by any party against another party in connection with any rights
5
<PAGE>
or obligations arising out of this Agreement shall be instituted properly in a
federal or state court of competent jurisdiction with venue only in the
Fifteenth Judicial Circuit Court in and for Palm Beach County, Florida or the
United States District Court for the Southern District of Florida, West Palm
Beach Division. A party to this Agreement named as a Defendant in any action
brought in connection with this Agreement in any court outside of the above
named designated county or district shall have the right to have the venue of
said action changed to the above designated county or district or, if necessary,
have the case dismissed, requiring the other party to refile such action in an
appropriate court in the above designated county or federal district.
(g) This Agreement has been duly authorized, executed and delivered by
and on behalf of the Company and the Financial Advisor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
Very truly yours,
OREGON BAKING COMPANY
BY: _____________________________
Raymond W. Lindstrom, President
BARRON CHASE SECURITIES, INC.
BY: ______________________________
Robert T. Kirk, President
6
____________, 1999
Raymond W. Lindstrom, President
Oregon Baking Company
2287 N.W. Pettygrove
Portland, Oregon 97210
RE: MERGER AND ACQUISITION AGREEMENT
--------------------------------
Dear Mr. Lindstrom:
You have agreed that Barron Chase Securities, Inc., (the "Finder") may
act as a non-exclusive finder or financial consultant in various transactions in
which Oregon Baking Company (the "Company") may be involved, including but not
limited to, mergers, acquisitions, business combinations, joint ventures, debt
or equity placements or other on-balance sheet or off-balance sheet corporate
transactions. The Company hereby agrees that in the event that the Finder shall
first introduce to the Company another party or entity, and that as a result of
such introduction, a transaction between such entity and the Company is
consummated ("Consummated Transaction"), then the Company shall pay to the
Finder a finder's fee as follows:
a. Five percent (5%) of the first $1,000,000 of the consideration
paid in such transaction;
b. Four percent (4%) of the consideration in excess of $1,000,000
and up to $2,000,000;
c. Three percent (3%) of the consideration in excess of
$2,000,000 and up to $3,000,000;
d. Two percent (2%) of the consideration in excess of $3,000,000
and up to $4,000,000; and
e. One percent (1%) of any consideration in excess of $4,000,000.
The fee due the Finder shall be paid by the Company in cash and/or in
stock at the closing of the Consummated Transaction as mutually agreed between
the Company and the Finder, without regard to whether the Consummated
Transaction involves payments in cash, in stock, or a combination of stock and
cash, or is made on an installment sale basis. By way of example, if the
Consummated Transaction involves securities of the acquiring entity (whether
securities of the Company, if the Company is the acquiring party, or securities
of another entity, if the Company is the selling party) having a value of
$5,000,000, the finders fee to be paid by the Company to the Finder at closing
shall be $150,000.
However, both parties agree that it is the purpose of the
Company to use the proceeds of the offering in the acquisition, merger, purchase
<PAGE>
of shares or any other kind of association with foreign companies as described
in the prospectus. To the extent that the Company has any prior relationships
with such foreign companies these foreign companies are specifically excluded
from this Agreement.
In the event that for any reason the Company shall fail to pay to the
Finder all or any portion of the finder's fee payable hereunder when due,
interest shall accrue and be payable on the unpaid balance due hereunder from
the date when first due through and including that date when actually collected
by the Finder, at a rate equal to two (2) points over the prime rate of
Citibank, N.A. in New York, New York, computed on a daily basis and adjusted as
announced from time to time.
This agreement shall be effective on the date hereof and shall expire
on the fifth anniversary of the date hereof.
Notwithstanding anything herein to the contrary, if the Company shall,
within 180 days immediately following the termination of the five year period
provided above, conclude a Consummated Transaction with any party introduced by
the Finder to the Company prior to the termination of said five year period, the
Company shall also pay the Finder the fee determined above.
The Company represents and warrants to the Finder that the engagement
of the Finder hereunder has been duly authorized and approved by the Board of
Directors of the Company and this letter agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company.
This agreement has been executed and delivered in the State of Florida
and shall be governed by the laws of such state, without giving effect to the
conflicts of laws rules thereunder.
This agreement shall be binding upon, and enforceable against, the
successors and assigns of each of the undersigned.
Please sign this letter at the place indicated below, whereupon it will
constitute our mutually binding agreement with respect to the matters contained
herein.
Very truly yours,
BARRON CHASE SECURITIES, INC.
BY: _________________________________
Robert T. Kirk, President
Agreed to and Accepted:
OREGON BAKING COMPANY
BY:________________________________
Raymond W. Lindstrom, President
AGREEMENT TO PROVIDE GUARANTY
This Agreement to Provide Guaranty (this "Agreement") is entered into
between Oregon Baking Company, dba Marsee Baking, an Oregon corporation (the
"Company"), and Joseph F. Tanous ("Guarantor").
The Company has applied for an expansion of its credit facilities from
Silicon Valley Bank (the "Bank"). The Bank is unwilling to expand the Company's
line of credit without an additional personal guaranty from the Guarantor. With
an additional guaranty, the Bank is willing to expand its line of credit for the
Company by up to $750,000.
Guarantor is a current shareholder of the Company and a member of the
Board of Directors. Guarantor is willing to guaranty an additional $750,000 of
the Company's line of credit in consideration of the issuance to Guarantor of
150,000 shares of the Company's Common Stock.
In order to assist the Company in obtaining an expansion of its line
of credit from the Bank, Guarantor has agreed to sign a guaranty on the Bank's
standard form guaranteeing up to an additional $750,000 of indebtedness owed to
the Bank by Marsee (a "Guaranty"). The purpose of this Agreement is to set forth
the agreement between the Guarantor and the Company regarding Guarantor's
compensation for the Guaranty, the conditions of the Guaranty and the Company's
indemnity obligation in the event the Guaranty is enforced by the Bank.
Accordingly, the parties agree as follows:
1. AGREEMENT TO PROVIDE GUARANTY. Guarantor hereby agrees to provide a
personal guaranty of up to $750,000 to Silicon Valley Bank as security for the
Company's line of credit with the Bank. Guarantor shall have the right to assign
his rights and delegate his duties under this Agreement, to a qualified person
or persons, approved by the Company, which approval shall be at the Company's
sole discretion, who provides a personal guaranty on the Company's behalf for a
portion of the $750,000 line of credit with the Bank. Guarantor's right of
assignment is subject to the requirements of state and federal securities laws.
2. CONSIDERATION FOR GUARANTEES. In consideration of the Guaranty to
be provided by the Guarantor, and based upon the representations of the
Guarantor contained in Section 3 below, the Company hereby agrees to issue to
Guarantor One Hundred Fifty Thousand (150,000) shares of the Company's Common
Stock (the "Shares") which the Company and the Guarantor agree have a fair
market value of $0.50 per share.
3. INVESTMENT INTENT; INFORMED DECISION. Guarantor hereby acknowledges
and represents to the Company that Guarantor is acquiring the Shares for his own
account and not with a view to their resale or distribution and that Guarantor
is prepared to hold the Shares for an indefinite period and has no present
intention to sell, distribute or grant any participating interests in the
Shares. Guarantor hereby acknowledges that the Shares have not been registered
under the Securities Act of 1933, as amended, or the securities act of any
state, and that the Company is issuing the Shares to Guarantor in reliance on
the representations made herein by Guarantor. Guarantor represents to the
Company that, in his capacity as consultant and/or director of the Company, he
is familiar with the business of the Company, and has been afforded the
opportunity to meet with the management of the Company and to ask questions of,
and receive answers from, such management about the business and affairs of the
Company, and to obtain any additional information, to the extent that the
Company possessed such information or could acquire it without unreasonable
effort or expense, necessary to verify the accuracy of the information otherwise
obtained by or furnished to Guarantor. Guarantor acknowledges that the Company
has furnished to him all information that Guarantor considered necessary to form
a decision concerning the purchase of the Shares, including the Company's
business plan (and the risk factors therein contained), and no valid request to
the Company by Guarantor for information of any kind about the Company has been
refused or denied by the Company or remains unfulfilled as of the date hereof.
Guarantor represents that he is a sophisticated investor who, acting alone or
with a professional advisor who is unaffiliated with and who is not compensated
Agreement to Provide Guaranty
Page 1
<PAGE>
by the Company directly or indirectly, is familiar with the risks inherent in
speculative investments such the one undertaken hereby, and has such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of the investment in the shares, and is able to
bear the economic risk of the loss of the entire investment.
4. RESTRICTED SECURITIES. Guarantor hereby confirms that he has been
informed that the Shares may not be resold or transferred unless the Shares are
first registered under applicable federal and state securities laws or unless an
exemption from such registration is available. Accordingly, Guarantor hereby
acknowledges that he is prepared to hold the Shares for an indefinite period and
that he is aware that Rule 144 promulgated under the Securities Act is not
presently available to exempt the sale of the Shares from the registration
requirements of the Securities Act. If Rule 144 subsequently becomes available,
Guarantor is aware that any sale of the Shares effected pursuant to the Rule
may, depending upon the status of Guarantor as an "affiliate" or "non-affiliate"
under the Rule, be made only in limited amounts in accordance with the
provisions of the Rule, and that in no event may any Shares be sold pursuant to
the Rule until Guarantor has held the Shares for the requisite holding period.
5. RESTRICTIVE LEGEND. In order to reflect the restrictions on
transfer of the Shares, the stock certificates for the Shares will be endorsed
with the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES
ACT OF ANY STATE. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER SUCH ACT AND ANY
APPLICABLE STATE LAWS, (B) A `NO ACTION' LETTER OF THE SECURITIES AND
EXCHANGE COMMISSION AND APPROPRIATE STATE AUTHORITIES WITH RESPECT TO
SUCH SALE OR OFFER, OR (C) SATISFACTORY ASSURANCES TO THE CORPORATION
(WHICH MAY INCLUDE AN OPINION OF COUNSEL ACCEPTABLE TO THE
CORPORATION) THAT REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE
LAWS IS NOT REQUIRED WITH RESPECT TO SUCH SALE OR OFFER."
"THE SHARES REPRESENTED BY THIS CERTIFCATE ARE SUBJECT TO A RIGHT OF
ASSIGNMENT IN FAVOR OF THE COMPANY AS SET FORTH IN THAT CERTAIN
AGREEMENT TO PROVIDE GUARANTY BETWEEN THE COMPANY AND THE HOLDER
HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY WITHOUT
CHARGE."
6. MARKET STAND-OFF. (a) In connection with any underwritten public
offering by the Corporation of its equity securities pursuant to an effective
registration statement filed under the Securities Act, including the Company's
initial public offering, Guarantor shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Shares without the prior written consent of
the Company or its underwriters. Such limitations shall be in effect for a
period of fourteen months from and after the effective date of the final
prospectus for the Company's initial public offering.
(b) In the event of any stock split, stock dividend,
recapitalization, combination of shares, exchange or conversion of shares or
other change affecting the Company's outstanding Common Stock effected as a
class without the Company's receipt of consideration, then any new, substituted
or additional securities distributed with respect to the Shares shall be
immediately subject to the provisions of this Section 6, to the same extent the
Shares are at such time covered by such provisions.
Agreement to Provide Guaranty
Page 2
<PAGE>
(c) In order to enforce the limitations of this Section 6, the
Company may impose stop-transfer instructions with respect to the Shares until
the end of the applicable stand-off period.
7. ASSIGNMENT OF SHARES BACK TO THE COMPANY. In the event that
Guarantor does not provide a Guaranty in the full amount of $750,000 by July 31,
1999, and no other qualified person has provided a guaranty pursuant to
Guarantor's right of assignment under Section 1 of this Agreement, which
guaranty, together with the Guaranty provided by Guarantor equals $750,000,
Guarantor shall immediately assign to the Company, without cost to the Company,
that number of Shares determined by the following formula: For each $5.00
increment for which Guarantor (including his assignees) does not provide a
Guaranty, Guarantor shall assign one share of Common Stock to the Company.
8. REMOVAL OF GUARANTY. The Company shall remove the Guaranty upon the
consummation of a private or public equity financing raising in excess of
$5,000,000. Further, the Company agrees to use its best efforts to remove the
Guaranty by November 1, 2000.
9. INDEMNITY. If at any time and from time to time, Guarantor has paid
the Bank following any demand for payment under the Guaranty, upon written
notice from the Guarantor, the Company shall indemnify Guarantor against any and
all losses, liability and expense (including reasonable attorneys' fees) arising
out of or caused by such payment to the Bank. Each party will defend, hold
harmless, and indemnify the other party from and against all loss, damage,
injury or expense (including reasonable attorney fees) arising out of or caused
by any breach of any of the provisions of this Agreement by such party.
10. FURTHER UNDERTAKING. The Company and Guarantor hereby agree to
take whatever additional action and execute whatever additional documents the
Company may in its judgment deem necessary or advisable in order to carry out or
effect one or more of the obligations or restrictions imposed pursuant to the
express provisions of this Agreement.
11. WAIVERS AND AMENDMENTS. This Agreement may be amended, modified or
supplemented only by a written instrument executed by all parties hereto. The
waiver by any party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
12. NOTICES. All notices, requests, demands and other communications
which are required or permitted under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
first-class mail, postage prepaid:
If to Marsee: Ray Lindstrom, President and CEO
Oregon Baking Company
dba Marsee Baking
2287 NW Pettygrove
Portland, OR 97210
With a copy to: Brendan R. McDonnell
Tonkon Torp LLP
SW Fifth Avenue, Suite 1600
Portland, OR 97204
Agreement to Provide Guaranty
Page 3
<PAGE>
If to Tanous: Joseph F. Tanous
SW 72nd Avenue
Portland, OR 97224
or such other address as any party shall have specified by notice in writing to
the other.
13. NOTICES REGARDING DEMANDS. Guarantor will not make any payment
under the Guaranty unless and until a written demand for payment has been
received from the Bank. If Guarantor receives a demand for payment under the
Guaranty, notice of such demand will be promptly sent to the Company. The
Company shall promptly send to Guarantor any notice of default received from the
Bank.
14. BINDING EFFECT; BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
legatees or successors; nothing in this Agreement is intended to confer on any
third person any rights, remedies, obligations or a liability under or by reason
of this Agreement.
15. ATTORNEY FEES. If any action is brought with respect to this
agreement, or in any appeal therefrom, the prevailing party shall be entitled to
reasonable attorney fees as determined by the court or courts in which the
action or appeal is tried or heard.
16. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with Oregon law without regard to its choice of law provisions.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
EXECUTED as of the 29th day of April, 1999.
OREGON BAKING COMPANY
dba Marsee Baking
By: /s/ Raymond W. Lindstrom
-----------------------------------
Its: Pres. CEO
-----------------------------------
GUARANTOR:
/s/ Joseph F. Tanous
---------------------------------------
Joseph F. Tanous
Agreement to Provide Guaranty
Page 4
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Oregon Baking Company dba Marsee Baking:
We consent to the use of our reports included herein and to the reference to our
firm under the headings "Summary Financial Information" and of "Experts" in the
prospectus.
Our report dated February 23, 1999 contains an explanatory paragraph that states
that the Company has suffered recurring losses from operations which raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of that uncertainty.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
April 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheets and Statements of Operations found in pages F-3 and F-4, respectively, of
the Registration Statement and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> Year Year
<FISCAL-YEAR-END> Dec-31-1997 Dec-31-1998
<PERIOD-START> Jan-01-1997 Jan-01-1998
<PERIOD-END> Dec-31-1997 Dec-31-1998
<CASH> 91 129
<SECURITIES> 0 0
<RECEIVABLES> 114 263
<ALLOWANCES> 60 10
<INVENTORY> 64 269
<CURRENT-ASSETS> 255 785
<PP&E> 3,350 9,477
<DEPRECIATION> 716 1,966
<TOTAL-ASSETS> 3,007 8,674
<CURRENT-LIABILITIES> 1,742 4,933
<BONDS> 0 0
0 0
1,424 6,541
<COMMON> 476 626
<OTHER-SE> (2,058) (6,347)
<TOTAL-LIABILITY-AND-EQUITY> 3,007 8,674
<SALES> 4,948 12,656
<TOTAL-REVENUES> 4,948 12,656
<CGS> 2,887 7,579
<TOTAL-COSTS> 4,836 13,459
<OTHER-EXPENSES> 1,178 3,029
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 129 472
<INCOME-PRETAX> (1,195) (4,304)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,195) (4,304)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,195) (4,304)
<EPS-PRIMARY> (1.41) (5.07)
<EPS-DILUTED> (1.41) (5.07)
</TABLE>
